FRS participants have a choice among two retirement plan options:
- The Investment Option, which is a defined contribution plan (DC)
- The Pension Option, which is a defined benefit plan (DB)
In previous posts, I covered both the FRS Pension Option and the DROP (Deferred Retirement Option Program). In this post, I’m presenting the FRS Investment Option.
The salient feature of any DC plan is the amount of contributions that can go into an individual’s account. On the other hand, with a defined benefit plan (also known as a pension plan) there is a pension formula. The inputs are usually based on years of service and average or final compensation. The formula calculates a pension amount that is guaranteed over the pensioner’s lifetime or lifetimes of the pensioner plus spouse. Here, though, I’m focusing in on the FRS Investment Option, which is the FRS defined contribution plan.
How Much Money Goes In?
ERISA statutes define limits to contributions. ERISA is the Employee Retirement Income Security Act of 1974, which governs much of what goes on in the retirement account world. Under ERISA rules, the maximum that an individual can defer into a DC account is 100% of pay up to the IRS annual limit. For 2025, that employee deferral limit is $23,500. For 2026 it rises to $24,500.
There is an additional overall total additions limit from all sources (your deferrals, forfeitures, and your employer’s contributions). For 2025 that combined limit is $70,000; for 2026 it is $72,000.
For example: if you defer $23,500 of your salary before tax in 2025, that leaves up to $46,500 for employer contributions before hitting the $70,000 combined maximum. If you are age 50 to 59 or 64 and older, you have an additional “catch-up” contribution available of $7,500 in 2025, bringing your personal maximum to $31,000. If you are age 60, 61, 62, or 63 – a new “super catch-up” provision under SECURE 2.0 allows a higher contribution of $11,250 in 2025, for a personal maximum of $34,750. Note: beginning in 2026, high earners (those with prior-year FICA wages over $150,000) must make catch-up contributions on a Roth basis.
FRS Investment Plan: Your Specific Contributions
As a participant in the FRS Investment Plan, you make a mandatory 3% employee contribution from your pretax salary each month, regardless of membership class. The employer’s contribution depends on your FRS membership class and is set by the Florida Legislature. The original article cited a 3.3% employer match – that figure is no longer current.
Under the FRS Investment Plan Summary Plan Description (effective July 2025), total contribution rates by membership class are as follows:
| FRS Membership Class | Employee Contribution | Employer Contribution (to member account) | Total |
|---|---|---|---|
| Regular Class | 3.0% | 8.3% | 11.3% |
| Special Risk Class | 3.0% | 16.0% | 19.0% |
| Senior Management Service Class (SMSC) | 3.0% | Varies by class | See FRS.fl.gov |
| Elected Officers’ Class (EOC) | 3.0% | Varies by class | See FRS.fl.gov |
Note: The blended employer contribution rate shown above is the portion deposited into your Investment Plan account. The Florida Legislature sets these rates and may adjust them. Always confirm current rates at MyFRS.com.
You are vested in your employer’s contributions after only one year of service. Your own employee contributions are immediately vested. Consequently, if you leave your FRS employer after one year, you take the entire account with you – both your deferrals and the employer contributions.
How Do You Invest Your Money?
Within the FRS Investment Option, you have a selection of investment funds called “core” funds. Currently there are 19 core funds, including U.S. equity funds, bond funds, and international funds. There are also a number of target-date retirement funds (called Retirement Date Funds). These target your anticipated retirement date and become progressively more conservative as that date draws near.
Self-Directed Brokerage Account (SDBA)
Another alternative within your FRS Investment Option is a self-directed brokerage account (SDBA). Here you open a separate account and choose from a much wider universe of options – mutual funds, ETFs, and individual stocks and bonds. For the experienced investor, the SDBA can be opened with a $5,000 investment minimum and $1,000 minimum for subsequent transfers.
You open the account online and initiate a transfer to a money-market-like fund. Once the money is there, you reallocate as you see fit. To redeem money from the brokerage account, the process works in reverse: close investment positions, transfer funds back to the money market account, then move from the brokerage account back to the main FRS account.
Note: The FRS and its financial guidance line can assist you with decisions about the 19 core funds, but are not able to provide guidance on the broader SDBA investment options. For SDBA guidance, working with an independent registered investment adviser is advisable.
Who Bears the Risk?
From a risk point of view, all the investment risk rests with the participant. The FRS Investment Option offers no fixed retirement income. Whatever you’ve saved and earned is what you have for retirement. You will have an option to purchase a commercial annuity (provided through MetLife) at retirement, however, which offers a payment rising at 3% per year. This may be an attractive choice for the more conservative investor who wants to convert a portion of their account balance into guaranteed lifetime income.
Switching Between Plans
Participants in the FRS system can make a one-time election to switch to the other plan. That is, once during your employment you can move from the Defined Contribution (Investment) plan to the Defined Benefit (Pension) plan, or vice versa. For example: say you started teaching right out of college expecting a full career in education. After a few years you realize you’d like to work only a few more years. You might switch from the Pension Option to the Investment Option, in order to have a portable account balance to take with you when you leave.
Using the Money at Retirement
What do you do with your money at retirement? That depends – and our advice is, of course, to work with a financial planner to make wise decisions that are fully in your best interests. It pains us to hear of so many FRS employees who have taken unsuitable advice and put retirement funds into high-cost annuities. Our work is always custom and focuses on the individual needs of the client.
As registered investment advisers we have no product to sell you. We’re not pushing to make a sale so we can generate a commission. And as CERTIFIED FINANCIAL PLANNER™ professionals, you can count on us for a fiduciary standard of care – meaning unbiased financial advice, always in the client’s best interests.
Here are the FRS pension related articles:
