As you’ve probably heard by now, The Florida House and Senate have approved and Governor DeSantis has signed into law the FRS Special Risk Retirement bill as part of the General Appropriations Act that directly affects and amends some of the provisions in the FRS retirement program for Special Risk class members.

In this video we’ll look at how those changes might impact you and your career and maybe a few things you need to know now that the landscape has changed a bit.

1. Retirement Date

To begin with, the new law brings in line everyone in the special risk class’s retirement eligibility date. It no longer matters when you were hired, whether it was before July 11th, 2011 or after. The new law modifies the normal retirement date for Special Risk Class members initially enrolled on or after July 1, 2011, to be the earlier of 25 years of creditable service, or age 55.

That’s a big deal. As most of you are aware, previous to this, if you were hired on or after July 1st, 2011 normal retirement eligibility wasn’t until 30 years of service or age 60. As someone who works and talks to FRS retirees every day who are approaching retirement, I can tell you that’s a big difference on the toll on not only your body, but your head as well. 25 years in your career, for a lot of you, is not like 25 years for a lot of other folks in far less stressful jobs. I’m glad to see this change.

It also signals a real shift in thinking toward special risk. More on that later.

2. DROP Entry Window

The next big change is your DROP eligibility window. Up until now, retiring special risk personnel had a very specific window in which they were eligible to start the DROP. Once that window closed, DROP was no longer an option for them. Now, a participant can enter the DROP at any age as long as years of service or age and vesting requirements are met.

This, is wonderful. So many folks I’ve known over the years had this undue pressure to enter DROP or lose it and I believe it caused people to enter retirement prematurely… before they really wanted to.

3. DROP Participation Time

The new law also extends the time a special risk class member can participate in the DROP, from 60 months to a whopping 96 months. On top of that, it increases the DROP interest rate from 1.3% to 4%.

What does that mean to you in dollars? Assume a special risk participant started DROP prior to this law being on the books and he or she had a monthly pension amount of $8,000. After 60 months at 1.3% annual interest rate, accrued monthly, that participant would have a DROP account worth $495,666. This also assumes no COLA on that pension… more on that later. After this law, that same participant would have $530,392 or about 7% more after 60 months and $903,348 after 96 months. Want a million dollars in your DROP? About $9,000/month of pension would do that over 96 months under the new law.

That goes a long way to making retirements more secure and more enjoyable.

4. Health Insurance Subsidy

The retiree health insurance subsidy got a big increase under this new law. Previously, the subsidy was $5 for each year of service with a minimum amount of $30 and a maximum amount of $150 per month of subsidy. That was nice and a big help in retirement. But now, it’s even better with $7.50 for each year of service and a minimum benefit of $45 per month and a maximum benefit of $225.

Not a lot of folks have a benefit like this offered to them in retirement.

5. Investment Plan

For those of you in the Investment Plan, or considering the Investment Plan, you also got a nice bump in employer contribution by 2%. Doesn’t sound like a lot but consider a whole career with 2% more going into your Investment Plan.

We ran the numbers and even with very modest earnings and annual increases just adjusted for inflation, that can mean an additional couple of hundred thousand dollars at retirement.

I don’t think that’ll be enough to persuade anybody to do the Investment Plan who wasn’t attracted to it before, but for those people who are right for the Investment Plan and the Investment Plan is right for them, it’s going to be a very nice increase. Wondering if the Investment Plan is right for you? We’d be glad to have that discussion with you and point out a few things that you really need to consider… both pro and con.

6. Important State Interest

The last thing this new law does is in my mind, one of the most important of all. Although I doubt a lot of people see it. A lot of you old-timers will know what I’m talking about.

Over the years we’ve seen the pendulum of public and legislative support toward you and your careers as peace officers and firefighters swing back and forth. It wasn’t too long ago… well, just prior to July, 2011 in fact, that there was a lot of public outcry that your benefits package was too rich and that it was going to bankrupt the state. Obviously, with this law and its overwhelming support in both the House and Senate, that public sentiment has done a 180 and is at the other extreme of the arc.

I have no doubt that in some future legislative session, not too long from now, we’ll see that shift going back the other way again. That’s politics and that’s what happens. However, this law has language in it that states, and I quote, “that the act fulfills an important state interest. It provides that a proper and legitimate state purpose is served by the amendment, which includes providing benefits that are managed, administered, and funded in an actuarially sound manner.”

I see that as the current state House and Senate’s attempt to tell future legislative bodies to keep your hands off this. Will it work? Only time will tell. Remember… it’s politics.

7.  What’s Not In This New Law?

What’s not in this new law that maybe should have been there? Something huge and I bet you know what it is. A cost-of-living increase.  

The reality is, it’s inflation that implodes more retirement plans than just about anything else I can think of. It gradually and almost silently erodes your ability to maintain your world in your current environment until one day, you realize you just can’t make ends meet anymore and you’re forced to make a downward lifestyle change.

But its cost-of-living benefits that cost retirement plans big money and have a tendency to really make state balance sheets look ugly in a hurry. Politicians and employers really hate COLA benefits because the costs are huge.

Careful planning on your part is a must and if you’re smart you’ll look at those increases in your DROP as part of the solution as well as a career long focus in your 457 plan… if you’re smart.

8.  Epilogue

This new law… it’s truly a home-run for FRS Special Risk participants. If they had kept the COLA benefits in it would have been an out-of-the-park, bases-loaded, walk-off home-run, but hey, a win’s a win.

None-the-less, take it from someone who’s been around for a while and seen how things change from one extreme to the other. This is good… for now. And I hope it stays this way or even improves a bit with some COLA benefits added. But I won’t be overly surprised if 10 or a dozen years from now things change yet again.

We’re here to help you with sound guidance and good ideas to make your retirement a successful one. A retirement where you minimize your worries about money and make good choices. We don’t sell retirement products or earn commissions of things like annuities, life insurance or investments so we remain unbiased on our advice… suggesting only what’s best for you. Not us.

Never had an experience like that with a financial advisor? Give us a call and lets talk. I expect you’ll be glad you did.