FRS Pension Plan

FRS Investment Plan

Plan type

Defined benefit retirement plan.

Defined contribution retirement plan.

Who contributes

Monthly contributions are employer-employee paid.

Monthly contributions are employer-employee paid.

How it works

Monthly contributions based on a percent of salary and FRS membership class - paid to a trust fund for all FRS members.

Benefits are based on a formula (years of service, highest 5 years of salary, FRS membership class).

Monthly contributions based on a percent of salary and FRS membership class - paid to employees' accounts.

Benefits are based on employees' account value (contributions plus investment earnings less expenses and losses).

Who invests

The State Board of Administration (SBA) invests the Pension Plan Trust Fund by choosing investment strategies and investment firms.

Employees choose how contributions are allocated among various investment funds.

The SBA chooses private investment firms to manage the investment funds.

Who assumes the investment risk and rewards

FRS and employers.

You.

Other factors influencing employees' benefit levels

The length of an employee's FRS service is the most important, but so are other factors, including salary growth, FRS membership class, vesting, inflation and DROP participation.

Vesting (benefit ownership)

After six years of FRS service.

After one year of FRS service.

Amount of benefit paid at retirement

Amount fixed by formula and employee's choice of payment option.

Amount based on employee's account value and employee's choice of payment option.

Will benefits continue to grow if employee changes employers?

Yes, if an employee moves to another public sector employer participating in the FRS.

Otherwise, benefit is frozen until retirement.

Yes, employee's account can be left in the plan or rolled over to another retirement plan.

Either way, employee's account remains invested.

Retirement income options

Monthly lifetime payments, guaranteed by the FRS.

Benefit reduction for early retirement.

Other lifetime options provide for payments to surviving beneficiary.

Under current law, benefits increase 3% each July.

Employee decides how and when the account balance is withdrawn after termination.

Employee can use some or all of account to buy monthly lifetime payments guaranteed by a private sector insurance firm.

Payments include survivor benefit options and a 3% annual benefit increase option.

Deferred Retirement Option Program (DROP) participation

Employees are eligible to participate in DROP after reaching normal retirement eligibility.

Employees are not eligible to participate in DROP.