Florida Retirement System
Your FRS Investment Plan
Distribution Options and
Special Tax Notice
WHEN YOUR FLORIDA
RETIREMENT SYSTEM
EMPLOYMENT ENDS
For Investment Plan Members:
July 2024
Contents
What’s Your Next Step? .................................................................... 1
When Your FRS Employment Ends .....................................................2
Vesting .............................................................................................3
Other Things to Think About Before Choosing a Distribution ...............4
Normal Retirement ............................................................................ 5
Taxes and Penalties ...........................................................................7
Distribution Options...........................................................................8
How to Request a Distribution ..........................................................11
How to Earn Credit Toward Another Retirement ...............................13
Automatic Distributions ....................................................................13
Required Minimum Distributions ......................................................14
Keeping Your Contact Information Up to Date .................................. 15
How to Access Your Check Advice and 1099-R Form .......................15
The Health Insurance Subsidy ..........................................................16
Special Tax Notice ..........................................................................18
Este Folleto Está
Disponible en
Español
Visite MyFRS.com, haga clic
en Publicaciones y busque el
enlace debajo de Retirees.
What’s Your Next Step?
Below is a high-level overview of the decisions you have to make regarding taking distributions
from your Investment Plan account. This booklet is here to help you along the way by defining
terms you need to know, explaining your options, and walking you through your choices.
If you have any questions or would like further guidance about what to do next, call the MyFRS
Financial Guidance Line to speak with an experienced EY financial planner free of charge.
1-866-446-9377, Option 2 (TRS 711)
8:00 a.m. to 6:00 p.m. ET, Monday through Friday, except holidays.
1
If you are not vested, you are eligible to receive your employee contributions and any earnings.
2
See definition of “FRS employment” on page 2.
Start Here:
Your termination date
Are you
vested?
Has all
FRS employment
been
terminated?
2
Is your
Investment Plan
balance over
$1,000?
You may be subject to
an automatic distribution
of your account. Read
“Automatic Distributions”
on page 13 first.
You’re not eligible
to take a distribution
from your Investment
Plan account.
The IRS requires you to
take a minimum distribution
each year. Read “Required
Minimum Distributions”
on page 14 first.
Will you
still be under age
73 at the end of
this year?
You can choose when and
how to receive distribution
of your vested Investment
Plan account benefit.
Read “Vesting”
on page 3 first.
NO
1
YES
YES
NO
YES
YES
NO
NO
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 1
When Your FRS Employment Ends
You can’t plan for your retirement without first understanding when your FRS employment
really ends.
Below are definitions of terms used in this booklet to describe when you can withdraw your
retirement savings from the Investment Plan and what would happen to distributions you’ve
requested if you are reemployed at a later date.
FRS employer:
Any agency that participates in the Florida Retirement
System.
FRS employment:
• Being actively employed by any FRS employer in
any capacity; and/or
• Providing any service to any FRS employer that
may create an employment relationship through
any arrangement (paid or unpaid), including OPS,
adjunct, election poll work, temporary employment,
or working through a third party that provides
service to an FRS employer, etc.
FRS-covered employment:
A position that is eligible to be reported for FRS
contributions.
Page • 2 Visit MyFRS.com • Call 1-866-446-9377, Option 2
Vesting
Vesting refers to gaining ownership of your Investment Plan benefit. You can only request a
distribution of the vested portion of your Investment Plan account.
Do you have
at least one year
of FRS-covered service
in the
Investment Plan?
You are vested in all contributions (yours and your
employer’s) to your Investment Plan account and any
earnings on those contributions.
Do you have
less than one year
of FRS-covered service
in the
Investment Plan?
You are vested only in
your
contributions to your
Investment Plan account and any earnings on
your contributions.
Did you
transfer a benefit
from
the Pension Plan into the
Investment Plan?
You must have eight or more years of total FRS-covered
service (six or more years if initially hired prior to
July 1, 2011) to be vested in the transferred Pension
Plan benefit and any earnings on that transferred
benefit.
What Happens to Your Unvested Balance
After Termination
If you do not have enough FRS-covered service to be fully vested in your Investment Plan
account when your FRS employment ends — and you do not take a distribution from your
vested balance — your unvested balance will be moved to a suspense account.
If you return to FRS-covered employment (see page 2) within five years from your date of
termination, your unvested balance, plus earnings, will be reinstated from the suspense
account.
Warning! You will permanently forfeit the unvested portion of your balance, and its
associated service credit, if you:
1. Do not return to FRS-covered employment within five years of your termination
date or the date you were no longer in an FRS-covered position; or
2. Choose to take a distribution of your vested balance (whether from the Investment
Plan or Pension Plan), or a refund of your employee contributions, while you have an
unvested balance in a suspense account.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 3
Other Things to Think About Before
Choosing a Distribution
In addition to being sure your FRS employment has ended (see page 2) and that you are vested
(see page 3), here are some other things to consider.
1. You can request a distribution only under these two circumstances:
1. All FRS employment (see page 2) has been terminated for at least three full calendar
months. Here’s an example:
Month
terminated
1
st
full month 2
nd
full month 3
rd
full month
Eligible for
distribution
JANUARY FEBRUARY MARCH APRIL MAY
2. You have reached normal retirement. See “Normal Retirement” on page 5.
2. If you choose to take a distribution, the FRS will consider you to be “retired” and
reemployment restrictions would apply.
See “When You Are Officially Retired” on page 5.
3. Your distribution will be subject to taxes and possibly to penalties.
See “Taxes and Penalties” on page 7.
4. A distribution could affect your eligibility to continue your current health insurance
coverage with your employer.
Before taking a distribution from your Investment Plan account, be sure to contact your
employer’s personnel office to verify your eligibility to continue your health insurance and
other types of insurance coverage.
5. Will you have enough money in retirement?
The Investment Plan was designed to help you save money for your retirement. Before
taking any distributions, consider how much money you have in your account and how
long that money has to last.
6. You will lose future potential earnings on the money you withdraw.
The money you withdraw from the Investment Plan will lose its potential to gain investment
earnings, unless you roll it over into another investment account.
Page • 4 Visit MyFRS.com • Call 1-866-446-9377, Option 2
Normal Retirement
You qualify for normal retirement upon reaching a certain combination of age and/or years of
service. Once you’ve achieved the Investment Plan’s normal retirement requirements and have
been terminated for one full calendar month, you can take a one-time distribution of up to 10% of
your Investment Plan account balance. If you haven’t achieved normal retirement, you must wait
until you have been terminated for three full calendar months before you can take a distribution.
The table below explains when you reach normal retirement, according to the Investment
Plan’s rules.
Special Risk Class All Other Membership Classes
• Age 55 or older and one or more
years of FRS-covered service
• Age 52 or older and 25 or more
years of Special Risk and military
service
• Any age and 25 or more years of
Special Risk service
Hired after July 1, 2011
• Age 65 or older and one or more years of FRS-covered service
• Any age and 33 or more years of FRS-covered service
Hired prior to July 1, 2011
• Age 62 or older and one or more years of FRS-covered service
• Any age and 30 or more years of FRS-covered service
When You Are Ofcially Retired
Once you take any distribution from the Investment Plan, including a withdrawal of only your
employee contributions or a rollover to another plan, the FRS will consider you to be retired.
Once you are considered retired:
• You will lose any non-vested Investment Plan or prior Pension Plan service.
• You can eventually be reemployed by any FRS employer but, as the timeline on
page 6 shows, you might not be eligible to receive additional distributions from your
Investment Plan account.
Receiving a required minimum distribution (RMD) or an automatic distribution (de minimis
distribution) will not cause you to be considered retired.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 5
This Benefit Can Help Pay Your Health Insurance Premiums
If the FRS considers you to be retired, you may be eligible for the Health Insurance Subsidy (HIS) benefit.
The HIS is a monthly supplemental payment that offsets the cost of your health insurance premiums. This
is an extra benefit; it does not come from your Investment Plan account balance. To be eligible to receive
the HIS, you must meet the Pension Plan’s normal retirement age and service requirements for your class
of membership, provide proper documentation certifying that you have health insurance coverage, and
apply for the HIS.
For more information about the HIS and how to apply for and take advantage of this benefit, read
“The Health Insurance Subsidy” on page 16.
Reemployment After Retirement
Returning to FRS employment after retirement includes providing any service to any FRS employer
through any arrangement, whether paid or unpaid. See page 2 for the complete definition of FRS
employment.
Calendar Months Following
Your First Distribution
0
Month of First Distribution
1
Reemployment Blackout Period
If you return to any employment with an FRS employer during this period, you (and
possibly your employer) will be required to repay any benefits you received.
You must notify the Investment Plan Administrator of employment during this period by
calling the MyFRS Financial Guidance Line at 1-866-446-9377, Option 4 (TRS 711).
Retirees may provide volunteer services with an FRS employer without violating the
termination requirements (must comply with Section 121.091(15), Florida Statutes).
2
3
4
5
6
After
6
months
No Reemployment Restrictions
There are no restrictions on working for an FRS employer after you have been retired
for 6 calendar months. You can keep any distributions you’ve received and receive
further Investment Plan distributions even if you are reemployed by an FRS employer.
Page • 6 Visit MyFRS.com • Call 1-866-446-9377, Option 2
Taxes and Penalties
The money in your Investment Plan account is pretax money,
meaning it has never been taxed. When you take a distribution, you
will be responsible for paying the taxes you owe on that money.
Your age and personal financial situation will determine the amount
of tax you’ll be required to pay.
A mandatory 20% will be withheld from the taxable amount of
your distribution, unless you roll over the entire distribution into
another tax-deferred account. The withheld amount will be credited
against any income tax you owe for that year. If the tax amount you
owe is higher than the 20% withheld, you will be responsible for
any additional taxes when you file your income tax return. If you
receive payment before you reach age 59½, the IRS may impose an
additional 10% penalty tax for early withdrawal.
Before you take money out of your account, contact the MyFRS
Financial Guidance Line at 1-866-446-9377, Option 2 (TRS 711),
to discuss the impact that taxes will have on your benefit. For
additional information, see the Special Tax Notice on page 18.
A mandatory 20% will be
withheld from the taxable
amount of your distribution,
unless you roll over the entire
distribution into another tax-
deferred account.
Taxes and Penalties: An Example
$30,000 distribution
– $6,000 20% withholding
– $3,000 10% early withdrawal penalty
if under age 59½
$21,000 net payment to you
If You’re Living Outside the
United States
If your address is outside the United States when you receive your
distribution, you may be subject to a higher 30% withholding rate,
unless you qualify for a lower rate.
If you’re a U.S. citizen living outside the U.S. and want the U.S.
withholding rate of 20% applied to your payment, you must
complete a Form W-9.
If you’re not a U.S. citizen and your country of residence qualifies for a
tax withholding rate of less than 30%, you may request the lower rate
by completing a Form W-8BEN. Your form must be submitted and
approved prior to your payment request.
Withholding rates and forms can be found on www.irs.gov. For more
information, refer to IRS Publication 519, U.S. Tax Guide for Aliens, and
IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign
Entities. If you have questions, call the MyFRS Financial Guidance Line
toll-free at 1-866-446-9377, Option 4 (TRS 711).
Annuity Income Tax
Considerations
Annuity income payments
made over time allow you
to spread out your tax
obligations. The purchase
of an annuity is not a
taxable event. When you
receive your monthly benefit
payments, they are taxed as
ordinary income in the year
they are received. Every
year you will receive a Form
1099-R for the payments
received in the prior year.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 7
Distribution Options
Once you are eligible to take a distribution, you have a variety of
options, including leaving your money in the plan. If you take any
distribution from the Investment Plan, including a withdrawal of only
your employee contributions or a rollover to another plan, the FRS will
consider you to be retired.
One-Time Distribution for Normal
Retirement
If you meet the Investment Plan’s normal retirement requirements
(see page 5), you may receive a one-time distribution of up to 10% of
your account balance.
Leave Your Money in the Plan
As long as you have an account balance of more than $1,000, you
can keep your money in the Investment Plan. You will not receive any
employer contributions, but you will still enjoy all the benefits of FRS
membership, including:
• Continued potential for investment growth and earnings.
• Access to MyFRS Financial Guidance Line services (online and
telephone).
• The ability to monitor and change your investment elections.
• Deferring taxes and avoiding penalties associated with withdrawals.
• Low investment management fees.
• The option to roll over into your Investment Plan account any
other qualified plans you may have, such as a 401(k) from another
employer or an individual retirement account (IRA).
After contributions to your Investment Plan account have stopped
for three consecutive months, you will be charged a low account
maintenance fee of $6 per quarter.
Balances below $1,000
are subject to automatic
distribution. See page 13
for more information.
While it may be tempting to
tap your retirement savings
for today’s expenses, the
Investment Plan is intended
to provide you with income
you’ll need in your retirement.
Plus, taxes and early
distribution penalties could
cost you 30% to 40% or more
of your account value.
Page • 8 Visit MyFRS.com • Call 1-866-446-9377, Option 2
Fixed Guaranteed Retirement Income
A fixed income annuity provides you with a guaranteed monthly paycheck (offered by
MetLife, the FRS’s approved lifetime income provider). These payments are not subject to
market fluctuations; they are the same month to month. You can choose to receive these
payments for your lifetime, for the lifetime of a spouse/loved one, or for a specified period.
Some payment features and options include:
Single Life Annuity. This option guarantees that you will receive fixed payments for as long
as you live. Payments will cease upon your death.
Joint and Survivor. This option pays you guaranteed monthly payments during your lifetime.
After you die, a continuing benefit of either 100% or a reduced percentage of the original
benefit will continue to be paid to your survivor, depending on the election you select on
your annuity election form.
Return of Premium Guarantee. This feature ensures that your beneficiary gets back the
amount you used to purchase this option, minus any payments you received.
There are two types of annuity products available:
Immediate Guaranteed Retirement Income. This option provides a guaranteed monthly
payment that can start right away (within 12 months of purchase).
Deferred Guaranteed Retirement Income. This option lets you delay guaranteed monthly
payments until as late as age 85, which means higher monthly income payments due to
starting later in life. Purchasing this option can reduce the amount of your Investment Plan
balance that may be subject to required minimum distribution (RMD) rules. You may use
up to $200,000 of your Investment Plan balance to purchase this option.
Flexible Payment Schedule
A flexible payment schedule lets you decide how much money to withdraw and how often.
You can set up monthly, quarterly, semiannual, or annual payments. Unlike the guaranteed
retirement income options, these payments are not guaranteed to last for your lifetime, but a
flexible payment schedule allows you to change payment amounts and frequency at any time.
Rollover
Rolling over your vested account balance into another qualified retirement plan, such as an
IRA, 401(k), 403(b), or 457, is a great way to keep your retirement savings invested and to
defer taxes and penalties. However, other plans may charge higher investment management
and administrative fees, and they may not offer the same distribution options as the
Investment Plan. Some plans may even pressure you to buy other products or services.
If you intend to open another qualified retirement plan so you can continue saving for
retirement, and you would like to keep all your retirement savings in one place, you do have
the option of leaving your balance in the Investment Plan and rolling over funds from your
other account into the Investment Plan at a later date.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 9
Lump-Sum Payment
You can choose to have a full or partial lump-sum distribution of your Investment Plan
account balance paid directly to you.
You should think twice about taking a lump-sum payment. While it may be tempting to tap
your retirement savings for today’s expenses, the Investment Plan is intended to provide you
with income you’ll need in your retirement. Plus, taxes and early distribution penalties could
cost you 30% to 40% or more of your account value. For more information, please see the
Special Tax Notice on page 18.
Before you choose a lump-sum payment, call the MyFRS Financial Guidance Line to speak
with an unbiased financial planner at no cost, or contact another tax advisor of your choosing
at your own expense.
Combination
You can choose any combination of distribution options allowed under the Investment
Plan: fixed guaranteed retirement income, flexible payment schedule, rollover, and/or
lump-sum distribution. Let a financial planner help you determine what may be best for
you. For assistance, call the MyFRS Financial Guidance Line toll-free at 1-866-446-9377,
Option 2 (TRS 711).
Page • 10 Visit MyFRS.com • Call 1-866-446-9377, Option 2
How to Request a Distribution
The Investment Plan is designed to provide you income in your
retirement. You cannot receive a distribution during your FRS
employment (see page 2) and you should not request a distribution
if you intend to return to FRS employment (see page 6).
Be sure to review the Special Tax Notice on page 18. You will be
required to acknowledge you’ve read it before your distribution will
be processed.
By Phone: 1-866-446-9377, Option 4 (TRS 711)
You will need to provide your PIN.
Online: MyFRS.com > Investment Plan
(user ID and password required)
Once you’ve made your request, you can make changes to it up until
4:00 p.m. ET on the distribution date.
Forgot Your PIN?
Request a PIN reminder on MyFRS.com or call the MyFRS Financial
Guidance Line at 1-866-446-9377, Option 2 (TRS 711).
When You Can Request a Distribution
You can submit a request by phone or online for a distribution from
your Investment Plan account up to one and a half months prior
to the date you are eligible to take the distribution. Known as a
“pended” distribution, this option can help you avoid long wait times
that sometimes occur on the first date you are eligible to take your
distribution (first business day of the month). Here’s an example:
You should not request a
distribution if you have any
intention of returning to work
for an FRS employer.
If your termination
date Is:
You’re eligible for distribution
on the first business day of:
You would be eligible to
make a pended request on:
May 20 September July 15
1
1
Requests can be made no earlier than the 15th calendar day of the month. You can make changes to your pending
distribution up until 4:00 p.m. ET on the pending distribution date.
To make your request online, log in to MyFRS.com. Select Investment Plan,
FRS Investment Plan > Withdrawals and Rollovers Out, and then select a
payment type.
To make your request by phone, call 1-866-446-9377, Option 4 (TRS 711).
You will need your PIN.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 11
When You Will Receive Your Distribution
Monthly Payments
Monthly checks and direct deposits are issued on the last business day of each month.
Allow three business days for a direct deposit to appear in your bank account, or five to
seven days for a check to arrive by mail.
Lump-Sum Payments
For direct deposit, allow three business days from the day your request is received.
For a check, allow five to seven days from the time your request is received for the check to arrive by
mail. Expedited delivery of checks is available by request.
How You Can Receive Your Distribution
Installment payments or lump-sum distributions from your Investment Plan account can be
deposited directly into your personal banking account. ACH deposit information can be set up
at any time at MyFRS.com by logging in and going to Investment Plan > Personal Information >
Financial Institutions.
If you want to receive your distribution as a check, the check will be mailed to your address on file
with the Investment Plan Administrator. If you fail to cash or deposit a check within 180 days, it will
be voided; a replacement check must be requested for the same amount as the voided check.
How Your Distribution Amount Is Calculated
Distributions will be based on your total account balance at the close of business on the day that the
distribution is processed, provided the request is completed by 4:00 p.m. ET. If the distribution is
processed after 4:00 p.m. ET or on a non-business day, the distribution amount will be based on the
account balance at the close of business on the next business day the financial markets are open.
Pending distributions are processed on the first business day of the month.
Once a distribution is taken from your Investment Plan account, no additional interest earnings are
earned on those funds.
Distributions will be taken on a pro-rata basis from each of the investment funds in your Investment
Plan account, or, if you have an adequate balance in the FRS Stable Value Fund (350), you can
request the distribution be paid solely from that fund.
Do You Have a Self-Directed Brokerage Account?
If you have funds in the self-directed brokerage account (SDBA), you must have sufficient funds in
your Investment Plan primary account to satisfy your distribution request.
1
If there are insufficient
funds in your primary account to process the distribution request, you will need to liquidate funds
from your SDBA and transfer the funds to your primary account prior to processing a distribution.
For additional information, review the SDBA Access Guide on MyFRS.com.
1
To participate in the SDBA you must maintain a minimum balance of $5,000 in your Investment Plan primary account.
If You Return to FRS Employment
If you request a distribution and then return to FRS employment (see page 2) with any FRS employer
before receiving it, you must notify the Investment Plan Administrator to cancel your request. Also, if
your employment status on the FRS database changes from “Terminated” to “Active” during this period,
the Investment Plan Administrator will cancel any pending distribution.
Page • 12 Visit MyFRS.com • Call 1-866-446-9377, Option 2
How to Earn Credit Toward Another
Retirement
If you return to FRS-covered employment (see page 2) after taking a distribution (effective
for reemployed service on or after July 1, 2017), you are considered a “reemployed retiree” or
“renewed member.” As a reemployed Investment Plan retiree, you are required to participate in
the Investment Plan, unless you are reemployed in a position eligible to participate in the State
University System Optional Retirement Program (SUSORP) or State Community College System
Optional Retirement Program (SCCSORP). However, you are not eligible for the following:
• A 2
nd
Election to switch to the Pension Plan;
• Pension Plan membership or DROP participation; or
• Disability benefits.
Automatic Distributions
If your vested account balance is $1,000 or less when your FRS employment ends, it will be
subject to an automatic distribution. This is known as a “de minimis distribution.” However,
this distribution won’t be made until your FRS employment has been terminated for at least six
calendar months.
If your balance is subject to an automatic distribution, you can choose to receive it as a lump-
sum payment or roll it over to another qualified retirement plan, such as an individual retirement
account or another employer’s 401(k) plan.
Receiving an Automatic Distribution Does Not
Mean You’re “Retired”
The FRS will not consider you to be retired if you receive an automatic de minimis distribution
of your Investment Plan balance. This means you will not be subject to the same termination
requirements as a retiree. If you are rehired by an FRS employer in an FRS-covered position after
receiving a de minimis distribution, you will be placed back in the Investment Plan.
If you request a distribution prior to the automatic de minimis distribution being paid, you will be
considered retired and will forfeit any unvested account balance and associated service credit. If
you return to FRS-covered employment in the future (effective for reemployed service on or after
July 1, 2017), you will be enrolled in the Investment Plan as a reemployed retiree, unless you are
reemployed in a position eligible to participate in the SUSORP or SCCSORP. (See “How to Earn
Credit Toward Another Retirement” for more information and exceptions.)
An Automatic Distribution Does Not Make You
Eligible for the Health Insurance Subsidy
Because you will not be considered “retired” after receiving an automatic de minimis distribution,
you will not be eligible for the Health Insurance Subsidy (HIS). To be eligible for the HIS, you must
be retired and must meet the Pension Plan’s normal retirement age and service requirements for
your class of membership.
For more information about the HIS and how to take advantage of this benefit, read “The Health
Insurance Subsidy” on page 16.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 13
Required Minimum Distributions
The Internal Revenue Service (IRS) requires that you begin taking distributions from your Investment Plan
account in the calendar year you reach age 73 or terminate employment, whichever is later. These are
known as required minimum distributions (RMDs).
The Investment Plan Administrator will notify you if you are required to take an RMD. You will continue
to receive a notice by mail in January of each year an RMD is required.
You Can Delay Your First RMD
You can defer your first RMD payment until April 1
of the following year. To request a deferral, you
must call the Investment Plan Administrator by
November 30.
How Much Is an RMD?
The amount of an RMD changes from year to year.
It is based on your age and your account balance at
the end of the previous year. Any distributions you
receive during the year will be applied to your RMD
amount. If by December you have not satisfied your
RMD requirement for that year, the balance needed
to satisfy the requirement will be sent to you as an
additional benefit payment.
Receiving an RMD Does Not Mean
You’re “Retired”
The FRS will not consider you to be retired if you
receive an RMD. This means you will not lose any
unvested service credit nor will you be subject to
the same termination requirements as a retiree.
If you are rehired by an FRS employer in an FRS-
covered position after receiving an RMD, you will
be placed back in the Investment Plan.
However, if you receive benefit payments that
exceed the required RMD, you will be considered
retired and will forfeit any unvested account
balance and associated service credit. If you return
to FRS-covered employment in the future (effective
for reemployed service on or after July 1, 2017),
you will be enrolled in the Investment Plan as a
reemployed retiree, unless you are reemployed
in a position eligible to participate in the SUSORP
or SCCSORP. (See “How to Earn Credit Toward
Another Retirement” for more information and
exceptions.)
If You Return to FRS Employment
If you return to FRS employment after receiving
notice that an RMD is required, you will be paid
the RMD for the year. Future RMDs will not be
calculated and paid until you again terminate
employment.
If it is later determined that you received an
ineligible RMD payment, the Investment Plan
may request that the RMD be returned to your
Investment Plan account.
An RMD Does Not Make You Eligible
for the Health Insurance Subsidy
Receiving an RMD does not make you eligible for
the Health Insurance Subsidy (HIS). To be eligible
for the HIS, you would have to request a distribution
above any required RMD amount.
For more information about the HIS and how to
take advantage of this benefit, read “The Health
Insurance Subsidy” on page 16.
Annuity Distributions
You may reduce/eliminate your future RMD
requirements by converting some or all of your
Investment Plan balance into lifetime income.
You are required to satisfy your current RMD
(if applicable) before an annuity purchase.
How You Can Reduce Your
Future RMDs
Purchasing the Deferred Guaranteed Retirement
Income option may reduce/eliminate the future
amount of your Investment Plan balance that may
be subject to RMD rules.
Please contact EY for further guidance at
1-866-446-9377, Option 2 (TRS 711), Monday
through Friday between 8:00 a.m. and 6:00 p.m. ET.
Page • 14 Visit MyFRS.com • Call 1-866-446-9377, Option 2
Keeping Your Contact Information
Up to Date
Your checks, member quarterly statements, year-end tax forms, and any other Investment Plan
communications will be sent to you via electronic delivery or mailed to your address on file
with the Investment Plan Administrator, so be sure to keep your information up to date. While
you’re an active employee, you can make these changes through your employer.
For name changes, request a Name Change Form from the Investment Plan Administrator
by calling 1-866-446-9377, Option 4 (TRS 711). Or send a letter, including your old name,
your new name, the last four digits of your Social Security number, and a copy of the court
order, marriage certificate, or driver’s license, to the Investment Plan Administrator by mail
(Investment Plan, P.O. Box 785027, Orlando, FL 32878-5027) or by fax (1-888-310-5559).
For address changes, log in to MyFRS.com or call the Investment Plan Administrator at
1-866-446-9377, Option 4 (TRS 711). A confirmation statement will be mailed within two
business days to both your current address on file and the new address.
If you are receiving the Health Insurance Subsidy, complete and submit Form ADDCH
1, Address Change Request, available on the Division of Retirement’s website at
www.frs.myflorida.com.
How to Access Your Check Advice
and 1099-R Form
You can access your Check Advice (distribution verification) and 1099-R tax forms online.
Log in to MyFRS.com and click “Investment Plan.” Click on the tile labeled “1099-R
Reprints/Check Advice.”
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 15
The Health Insurance Subsidy
Once you are considered retired and have reached the Pension Plan’s normal retirement requirements,
you may be eligible for a supplemental payment of $45 to $225 per month toward your health
insurance premiums. This payment is known as the Health Insurance Subsidy (HIS). To receive this
benefit, you must meet certain eligibility requirements and you must take action to apply.
How Much Your HIS Is Worth
If you qualify, your HIS benefit will equal $7.50 for each year of creditable FRS-covered service you
completed, with a minimum benefit of $45 per month and a maximum benefit of $225 per month.
HIS Eligibility Requirements
To be eligible to receive monthly HIS payments, you must meet the following requirements:
1
• The FRS must consider you to be retired. See “When You Are Officially Retired” on page 5.
• You must have eight or more years of FRS-covered service (six or more years if hired prior
to July 1, 2011) or be eligible for an FRS disability benefit.
• You must have met the Pension Plan’s normal retirement age and service requirements for
your class of membership — even if you’ve already taken a distribution from the Investment
Plan. See “Normal Retirement” on page 5. NOTE: If you currently do not meet the Pension
Plan’s normal retirement requirements, it is your responsibility to apply for the HIS once you
meet these requirements.
• You must have current health insurance. Cover Florida Health Care Access Program, Medicare,
and TRICARE coverage are accepted.
• You must have successfully applied for the HIS.
1
If you elected the Investment Plan Hybrid Option, you must apply to receive the HIS. Your HIS payments will begin when
you begin receiving your Pension Plan benefit.
When the HIS Will Begin
It is your (or your surviving spouse’s) responsibility to obtain certification of health insurance
coverage and to apply for the HIS. HIS payments will begin the month in which you attain normal
retirement under the Pension Plan, provided you are retired and the Division of Retirement has
received Forms HIS-IP and HIS-IP-2 and birth certification.
HIS payments are retroactive up to a maximum of six months. This allows you up to six months from
the date you attain normal retirement to submit your completed forms without missing any payments.
When the HIS Will End
Your HIS payments will continue until you are no longer eligible. When you die, your surviving spouse
will be entitled to your HIS. Only a spouse is eligible to be a beneficiary under the HIS program.
Important Note
The HIS is subject to available funding and continued approval by the Florida Legislature.
HIS payments shall not be subject to assignment, execution, or attachment, or to any legal
process whatsoever.
Page • 16 Visit MyFRS.com • Call 1-866-446-9377, Option 2
How to Apply for the HIS
It is your or your surviving spouse’s responsibility to obtain certification of health insurance
coverage and to apply for the HIS by submitting the following documentation to the Division of
Retirement.
• Application for Health Insurance Subsidy for Investment Plan Members (HIS-IP)
This form must be completed after your distribution date.
• Health Insurance Subsidy Certification for Investment Plan Members (HIS-IP-2)
This form must be completed after your distribution date.
• Copy of one of the following forms for proof of birth date.
– Birth certificate
– Delayed birth certificate
– Valid, unexpired U.S. passport
– Census report more than 30 years old
– Life insurance policy more than 30 years old
– Letter from the Social Security Administration stating the date of birth it has established for
the payment of benefits
– Certificate of naturalization
– Florida driver’s license issued after January 1, 2010, that indicates compliance with the federal
REAL ID Act.
Photocopies of the above are accepted.
If you cannot provide one of the forms of proof listed above, you may provide copies of two of
the following forms of proof.
– Birth certificate of a child, showing your age (limit one)
– Baptismal certificate more than 30 years old
– Hospital record of birth
– School record at time you entered grammar school
– A copy of the retiree’s death certificate if the spouse is applying for the subsidy
Original documents are not required. Legible copies are accepted. Be sure to write the last four digits of your
Social Security number and current name on your submitted documentation. If providing verification for your
beneficiary or joint annuitant, please include your information and the individual’s relationship to you. For
example, for your spouse, write: Spouse of [your name and last four digits of your Social Security number].
Questions?
If you have any questions about the HIS, call the Division at 1-844-377-1888, or write to the
Division of Retirement, P.O. Box 9000, Tallahassee, FL 32315-9000.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 17
Special Tax Notice – Governmental Plan Payments
(other than 457 Plans)
This notice explains how you can continue to defer federal income
tax on your retirement savings in your Plan and contains important
information you will need before you decide how to receive your
Plan benefits. This notice does not address any applicable state or
local tax rules that may apply.
This notice is provided to you because all or part of the payment
that you will soon receive from the Plan may be eligible for
rollover by you or your Plan Administrator to an IRA or an
eligible employer plan. A rollover is a payment by you or the Plan
Administrator of all or part of your benefit to another plan or IRA
that allows you to continue to postpone taxation of that benefit
until it is paid to you, or in the case of a Roth conversion, to
obtain tax-free investment returns. Your payment may be rolled
over to a SIMPLE IRA but not to a Coverdell Education Savings
Account. An “eligible employer plan” includes a plan qualified
under section 401(a) of the Internal Revenue Code, including
a 401(k) plan, profit-sharing plan, defined benefit plan, stock
bonus plan, and money purchase plan; a section 403(a) annuity
plan; a section 403(b) tax-sheltered annuity; and an eligible
section 457(b) plan maintained by a governmental employer
(governmental 457 plan).
An eligible employer plan is not legally required to accept a
rollover. Before you decide to roll over your payment to another
employer plan, you should find out whether the plan accepts
rollovers and, if so, the types of distributions it accepts as a
rollover. You should also find out about any documents that
are required to be completed before the receiving plan will
accept a rollover. Even if a plan accepts rollovers, it might not
accept rollovers of certain types of distributions, such as after-
tax amounts. If this is the case, and your distribution includes
after-tax amounts, you may wish instead to roll your distribution
over to a traditional IRA or split your rollover amount between
the employer plan in which you will participate and a traditional
IRA. If an employer plan accepts your rollover, the plan may
restrict subsequent distributions of the rollover amount or may
require your spouse’s consent for any subsequent distribution. A
subsequent distribution from the plan that accepts your rollover
may also be subject to different tax treatment than distributions
from this Plan. Before making the rollover, check with the
administrator of the plan that is to receive your rollover.
If you have additional questions after reading this notice, you
should contact your Plan Administrator at 1-866-446-9377,
Option 4.
Summary
There are two ways you may be able to receive a Plan payment
that is eligible for rollover:
• A certain type of payment — called a “DIRECT ROLLOVER” —
can be made directly to a traditional or Roth IRA that you
establish or to an eligible employer plan that will accept it and
hold it for your benefit; or
• The payment can be PAID TO YOU.
If you choose a DIRECT ROLLOVER:
• You choose whether your payment will be made directly to
your IRA (traditional or Roth) or to an eligible employer plan
that accepts your rollover. Your payment may be rolled over
to a SIMPLE IRA but not to a Coverdell Education Savings
Account. A distribution of non-Roth amounts can be rolled
over to an eligible employer plan, to a traditional IRA or, by
paying taxes on the non-Roth amounts and converting them
to Roth amounts, to a Roth IRA.
• You can roll the payment to a traditional IRA or an eligible
employer plan and the taxable portion of your payment will
be taxed later when you take it out of the traditional IRA or
the eligible employer plan. Depending on the type of plan, the
later distribution may be subject to different tax treatment than
it would be if you received a taxable distribution from this Plan.
• You may elect to pay income taxes now, and then roll the
payment to a Roth IRA. Later distributions from the Roth IRA
(including a distribution of earnings) will not be taxed, provided
that the distribution is a “qualified distribution” from the Roth IRA.
If you choose to have a Plan payment that is eligible for rollover
PAID TO YOU:
• You will receive only 80% of the taxable amount of the
payment, because the Plan Administrator is required to
withhold 20% of that amount and send it to the IRS as income
tax withholding to be credited against your taxes.
• The taxable amount of your payment will be taxed in the current
year or in accordance with Plan guidelines unless you roll it over.
Under limited circumstances, you may be able to use special
tax rules that could reduce the tax you owe. However, if you
receive the payment before age 59½, you may have to pay an
additional 10% early withdrawal tax. The additional tax would be
assessed when you file your 1040 tax return.
• You can possibly roll over all or part of the payment by paying
it to your traditional IRA or to an eligible employer plan that
accepts your rollover within 60 days after you receive the
payment. The amount rolled over will not be taxed until you
take it out of the traditional IRA or the eligible employer plan.
• If you want to roll over 100% of the payment to a traditional
IRA or an eligible employer plan, you must find other money
to replace the 20% of the taxable portion that was withheld.
If you roll over only the 80% that you received, you will be
taxed and possibly subject to an additional 10% penalty on the
20% that was withheld and that is not rolled over.
Special options are available to eligible retired public safety
employees and are described below under “Payment Paid to You.”
Your Right to Waive the
30-Day Notice Period
Generally, neither a direct rollover nor a payment paid to you can
be made from the Plan until at least 30 days after your receipt
of this notice. Thus, after receiving this notice, you have at least
30 days to consider whether or not to have your withdrawal
directly rolled over. If you do not wish to wait until this 30-day
notice period ends before your election is processed, you can
waive the notice period by making an affirmative verbal election
over the Plan Administrator’s recorded telephone line indicating
whether or not you wish to continue with the transaction and
waive the waiting period. Your withdrawal will then be processed
in accordance with your election as soon as practical after it is
received by the Plan Administrator.
More Information
I. PAYMENTS THAT CAN AND CANNOT BE
ROLLED OVER
II. DIRECT ROLLOVER
III. PAYMENT PAID TO YOU
IV. SURVIVING SPOUSES, ALTERNATE PAYEES, AND
OTHER BENEFICIARIES
Page • 18 Visit MyFRS.com • Call 1-866-446-9377, Option 2
I. PAYMENTS THAT CAN AND CANNOT
BE ROLLED OVER
Payments from the Plan may be “eligible rollover distributions.”
This means that they can be rolled over to an IRA or to an eligible
employer plan that accepts rollovers. Payments from a plan may
be rolled over to a SIMPLE IRA but not to a Coverdell Education
Savings Account. The portion of a payment (if any) that is drawn
from an after-tax contributions account can be rolled over to a
Roth IRA or to an eligible employer plan that accepts after-tax
rollover contributions. The portion of a payment (if any) that is
drawn from other types of accounts can be rolled over to an
eligible employer plan, to a traditional IRA, or, if you make a Roth
conversion, to a Roth IRA. Your Plan Administrator should be able
to tell you what portion of your payment is an eligible rollover
distribution.
After-Tax Contributions. If you made after-tax contributions to
the Plan, these contributions can be rolled into either a traditional
IRA or to certain employer plans that accept rollovers of the after-
tax contributions. The following rules apply:
Roll Over Into a Traditional IRA. You can roll over your
after-tax contributions to an IRA either directly or indirectly.
Your Plan Administrator should be able to tell you how much
of your payment is the taxable portion and how much is
the after-tax portion. After- tax contributions included in
a payment are not taxed. If a payment is only part of your
benefit, an allocable portion of your after- tax contributions
is included in the payment, so you cannot take a payment of
only after- tax contributions. However, if you have pre-1987
after-tax contributions maintained in a separate account, a
special rule may apply to determine whether the after-tax
contributions are included in a payment. In addition, special
rules apply when you do a rollover, as described below.
If you roll over after-tax contributions to an IRA, it is your
responsibility to keep track of, and report to the Internal
Revenue Service on the applicable forms, the amount of
these after-tax contributions. This will enable the non-
taxable amount of any future distributions from the IRA to be
determined. Once you roll over your after-tax contributions
to an IRA, those amounts CANNOT later be rolled over to
an employer plan. You may roll over to an IRA a payment
that includes after- tax contributions through either a direct
rollover or a 60-day rollover. You must keep track of the
aggregate amount of the after-tax contributions in all of your
IRAs (in order to determine your taxable income for later
payments from the IRAs). If you do a direct rollover of only
a portion of the amount paid from the Plan, and at the same
time the rest is paid to you, the portion directly rolled over
consists first of the amount that would be taxable if not rolled
over. For example, assume you are receiving a distribution
of $12,000, of which $2,000 is after- tax contributions. In
this case, if you directly roll over $10,000 to an IRA that is
not a Roth IRA, no amount is taxable because the $2,000
amount not directly rolled over is treated as being after- tax
contributions. If you do a direct rollover of the entire amount
paid from the Plan to two or more destinations at the same
time, you can choose which destination receives the after- tax
contributions.
Similarly, if you do a 60- day rollover to an IRA of only a
portion of a payment made to you, the portion consists, first,
of the amount that would be taxable if not rolled over. For
example, assume you are receiving a distribution of $12,000,
of which $2,000 is after- tax contributions, and no part of the
distribution is directly rolled over. In this case, if you roll over
$10,000 to an IRA that is not a Roth IRA in a 60- day rollover,
no amount is taxable because the $2,000 amount not rolled
over is treated as being after- tax contributions.
Roll Over Into an Employer Plan. You can roll over your after-
tax contributions to an eligible employer plan using a DIRECT
ROLLOVER if the other plan agrees to accept the rollover
and provide separate accounting for amounts rolled over,
including separate accounting for the after-tax employee
contributions and earnings on those contributions. You can
roll over after-tax contributions to either a qualified defined
contribution or defined benefit plan under Code section
401(a) or a tax-sheltered annuity under Code section 403(b).
You cannot roll over after-tax contributions to a governmental
457 plan. If you want to roll over your after-tax contributions
to an employer plan that accepts these rollovers, you cannot
have the after-tax contributions PAID TO YOU first. You
must instruct the Plan Administrator of this Plan to make a
DIRECT ROLLOVER on your behalf. Also, you cannot first roll
over after-tax contributions to an IRA and then roll over that
amount into an employer plan. You can do a 60- day rollover
to an employer plan of part of a payment that includes after-
tax contributions, but only up to the amount of the payment
that would be taxable if not rolled over.
Conversion of Non-Roth Amounts by Means of a Rollover
Into a Roth IRA. If you roll over a payment to a Roth IRA, a
special rule applies under which the amount of the payment
rolled over (reduced by any after-tax amounts) will be taxed. In
general, the 10% additional income tax on early distributions
will not apply (unless you take the amount rolled over out of
the Roth IRA within 5 years, counting from January 1 of the year
of the rollover). If you roll over the payment to a Roth IRA, later
payments from the Roth IRA that are qualified distributions will
not be taxed (including earnings after the rollover). A qualified
distribution from a Roth IRA is a payment made after you have
had a Roth IRA for at least 5 years and (1) you are age 59½ or
(2) after your death or disability or (3) you qualify for another
IRS-approved exception. In applying this 5-year rule, you count
from January 1 of the year for which your first contribution was
made to a Roth IRA. Payments from the Roth IRA that are not
qualified distributions will be taxed to the extent of earnings
after the rollover, including the 10% additional income tax on
early distributions (unless an exception applies). You do not have
to take required minimum distributions from a Roth IRA during
your lifetime. You cannot roll over a payment from the Plan to
a designated Roth account in another employer plan. For more
information, see IRS Publication 590- A, Contributions to Individual
Retirement Arrangements (IRAs), and IRS Publication 590- B,
Distributions from Individual Retirement Arrangements (IRAs).
Payments That Cannot Be Rolled Over. The following types of
payments cannot be rolled over:
Payments Spread Over Long Periods. You cannot roll over
a payment if it is part of a series of equal (or almost equal)
payments that are made at least once a year and that will
last for (1) your lifetime (or a period measured by your life
expectancy), or (2) your lifetime and your beneficiary’s
lifetime (or a period measured by your joint life expectancies),
or (3) a period of 10 years or more.
Required Minimum Payments. Beginning when you reach
your Required Beginning Date (typically attainment of age 73
or after separation from service, whichever is later), a certain
portion of your payment cannot be rolled over, because it is a
“required minimum payment” that must be paid to you.
Inherited Accounts. You generally cannot roll over payments
made from tax-advantaged accounts that have been inherited
from another individual.
The Investment Plan Administrator should be able to tell you if your
payment includes amounts that cannot be rolled over.
II. DIRECT ROLLOVER
A Direct Rollover is a direct payment of the amount of your Plan
benefits to an IRA or an eligible employer plan that will accept it.
You can choose a DIRECT ROLLOVER of all or any portion of your
payment that is an eligible rollover distribution, as described in
Part I of this notice. If your DIRECT ROLLOVER is into a traditional
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 19
IRA or an eligible employer plan, you are not taxed on any taxable
portion of your payment until you later take it out of the traditional
IRA or eligible employer plan. If your DIRECT ROLLOVER is into a
Roth IRA, you are taxed on the taxable portion of your payment
in the conversion to Roth treatment, and if the later distribution
from the Roth IRA is a “qualified distribution,” you are not taxed
when you take it out of the Roth IRA (including earnings after the
rollover). In addition, no income tax withholding is required for
any taxable portion of your Plan benefits for which you choose
a DIRECT ROLLOVER — to avoid unwanted tax consequences
when filing, you may want to consider establishing withholding
independently. This Plan might not let you choose a DIRECT
ROLLOVER if your distributions for the year are less than $200.
However, you can do a 60-day rollover. Any eligible rollover
distribution that you receive from the Plan that is otherwise non-
taxable, and that you wish to roll over to an eligible employer plan,
can be rolled over only in a DIRECT ROLLOVER.
Direct Rollover to a Traditional IRA. You can open an IRA to
receive the DIRECT ROLLOVER. If you choose to have your
payment made directly to an IRA, contact an IRA sponsor (usually
a financial institution) to find out how to have your payment
made in a DIRECT ROLLOVER to an IRA at that institution. If you
are unsure of how to invest your money, you can temporarily
establish an IRA to receive the payment. However, in choosing
an IRA, you may wish to make sure that the IRA you choose
will allow you to move all or a part of your payment to another
IRA at a later date, without penalties or other limitations. (See
IRS Publication 590-A, Contributions to Individual Retirement
Arrangements (IRAs), for more information on IRAs, including
limits on how often you can roll over between IRAs).
Direct Rollover to a Plan. If you are employed by a new employer
that has an eligible employer plan, and you want a DIRECT
ROLLOVER to that plan, ask the plan administrator of that plan
whether it will accept your rollover. An eligible employer plan
is not legally required to accept a rollover. Even if your new
employer’s plan does not accept a rollover, you can choose a
DIRECT ROLLOVER to an IRA. If the employer plan accepts your
rollover, the plan may provide restrictions on the circumstances
under which you may later receive a distribution of the rollover
amount or may require spousal consent to any subsequent
distribution. Check with the plan administrator of that plan before
making your decision.
Direct Rollover of a Series of Payments. If you receive a payment
that can be rolled over to an IRA or an eligible employer plan that
will accept it, and it is paid in a series of payments for less than
10 years, your choice to do or not do a DIRECT ROLLOVER for
a payment will apply to all later payments in the series until you
change your election. You are free to change your election for any
later payment in the series.
Change in Tax Treatment Resulting From a DIRECT ROLLOVER.
The tax treatment of any payment from the eligible employer plan
or traditional IRA receiving your DIRECT ROLLOVER might be
different than if you received your benefit in a taxable distribution
directly from the Plan. For example, if you were born before
January 2, 1936, you might be entitled to 10-year averaging or
capital gain treatment, as explained below. However, if you have
your benefit rolled over to a section 403(b) tax-sheltered annuity,
a governmental 457 plan, or an IRA in a DIRECT ROLLOVER, your
benefit will no longer be eligible for that special treatment. See the
sections on the following page titled “Additional 10% Tax if You
Are Under Age 59½” and “Special Tax Treatment if You Were Born
Before January 2, 1936.”
Physical Payment of the Direct Rollover. The Investment Plan
Administrator does not currently process electronic direct
rollovers to other retirement plan providers. A direct rollover is
accomplished by making the distribution check payable to the
new retirement plan provider for the benefit of the member. This
type of distribution still qualifies for the direct rollover provisions
outlined above.
III. PAYMENT PAID TO YOU
If your payment can be rolled over (see Part I of this notice) and the
payment is PAID TO YOU in cash, it is subject to 20% federal income
tax withholding on the taxable portion (state tax withholding may
also apply). The payment is taxed in the year you receive it unless,
within 60 days, you roll it over to an IRA or an eligible employer
plan that accepts rollovers (or unless you are an eligible retired
public safety employee who makes the election to pay health care
or long-term care premiums, described in this section below). If you
do not roll it over, special tax rules may apply.
Income Tax Withholding
Mandatory Withholding. If any portion of your payment can be
rolled over under Part I of this notice and you do not elect to make
a DIRECT ROLLOVER, the Plan is required by law to withhold 20%
of the taxable amount. This amount is sent to the IRS as federal
income tax withholding. For example, if you can roll over a taxable
payment of $10,000, only $8,000 will be paid to you, because the
Plan must withhold $2,000 as income tax. However, when you
prepare your income tax return for the year, unless you make a
rollover within 60 days (see “Sixty-Day Rollover Option” below),
you must report the full $10,000 as a taxable payment from the
Plan. You must report the $2,000 as tax withheld, and it will be
credited against any income tax you owe for the year. There will
be no income tax withholding if your payments for the year are
less than $200.
Voluntary Withholding. If any portion of your payment is
taxable but cannot be rolled over under Part I of this notice, the
mandatory withholding rules described above do not apply. In this
case, you can elect not to have withholding apply to that portion.
If you do nothing, an amount will be taken out of this portion of
your payment for federal income tax withholding. To elect out of
withholding, ask the Plan Administrator for the election form and
related information.
Sixty-Day Rollover Option. If you receive a payment that can be
rolled over under Part I of this notice, you can still decide to roll
over all or part of it to an IRA or to an eligible employer plan that
accepts rollovers. If you decide to roll over, you must contribute
the amount of the payment you received to an IRA or eligible
employer plan within 60 days after you receive the payment
(assuming you have not completed a similar 60-day rollover
within the last 12 months). The portion of your payment that is
rolled over will not be taxed until you take it out of the traditional
IRA or the eligible employer plan. This 60-day rollover option is
also available for converting to a Roth IRA.
You can roll over up to 100% of your payment that can be rolled
over under Part I of this notice, including an amount equal to the
20% of the taxable portion that was withheld. If you choose to roll
over 100%, you must find other money within the 60-day period
to contribute to the traditional IRA or the eligible employer plan,
to replace the 20% that was withheld. On the other hand, if you
roll over only the 80% of the taxable portion that you received,
you will be taxed on the 20% that was withheld, including
potentially being subject to a 10% tax penalty if younger than
age 59½.
Example: The taxable portion of your payment that can be rolled
over under Part I of this notice is $10,000, and you choose to
have it PAID TO YOU. You will receive $8,000, and $2,000 will
be sent to the IRS as income tax withholding. Within 60 days
after receiving the $8,000, you can roll over the entire $10,000
to an IRA or an eligible employer plan. To do this, you roll over
the $8,000 you received from the Plan, and you will have to find
$2,000 from other sources (your savings, a loan, etc.). In this
case, the entire $10,000 is not taxed until you take it out of the
traditional IRA or an eligible employer plan. If you roll over the
entire $10,000, when you file your income tax return you may
get a refund of part or all of the $2,000 withheld.
Page • 20 Visit MyFRS.com • Call 1-866-446-9377, Option 2
If, on the other hand, you roll over only $8,000, the $2,000 you did
not roll over is taxed (and potentially subject to penalty) in the year
it was withheld. When you file your income tax return, you may
get a refund of part of the $2,000 withheld. However, any refund is
likely to be larger if you roll over the entire $10,000.
Additional 10% Tax if You Are Under Age 59½. If you receive
a payment before you reach age 59½ and you do not roll it
over, then, in addition to the regular income tax, you may have
to pay an extra tax equal to 10% of the taxable portion of the
payment. The additional 10% tax generally does not apply to
(1) payments that are paid after you separate from service with
your employer during or after the year you reach age 55, (2)
payments that are paid because you retire due to disability, (3)
payments that are paid as equal (or almost equal) payments over
your life or life expectancy (or your and your beneficiary’s lives
or life expectancies), (4) payments that are paid directly to the
government to satisfy a federal tax levy, (5) payments that are paid
to an alternate payee under a qualified domestic relations order,
(6) payments made to the extent you have deductible medical
expenses that are greater than 7.5% of your adjusted gross income,
(7) payments from a defined benefit, defined contribution, or other
governmental plan to a qualified public safety employee following
separation from service in the year in which they attain age 50 or
25 years of service, whichever comes first (see IRS Form 5329
for more information on the additional 10% tax), (8) payments
of up to $5,000 made to you from a defined contribution plan
if the payment is a qualified birth or adoption distribution, or (9)
payments excepted from the additional income tax by federal
legislation relating to certain emergencies and disasters.
The additional 10% tax will not apply to distributions from a
governmental 457 plan, except to the extent the distribution is
attributable to an amount you rolled over to that plan (adjusted
for investment returns) from another type of eligible employer
plan or IRA. Any amount rolled over from a governmental 457
plan to another type of eligible employer plan or to an IRA will
become subject to the additional 10% tax if it is distributed to you
before you reach age 59½, unless one of the exceptions applies.
Special Tax Treatment if You Were Born Before January 2, 1936.
If you receive a payment from a plan qualified under section
401(a) or a section 403(a) annuity plan that can be rolled over
under Part I and you do not roll it over to a traditional IRA or an
eligible employer plan, the payment will be taxed in the year
you receive it. However, if the payment qualifies as a “lump-
sum distribution,” it may be eligible for special tax treatment.
A lump-sum distribution is a payment, within 1 year, of your
entire balance under the Plan (and certain other similar plans
of the employer) that is payable to you after you have reached
age 59½ or because you have separated from service with your
employer (or, in the case of a self-employed individual, after
you have reached age 59½ or have become disabled). For a
payment to be treated as a lump-sum distribution, you must
have been a participant in the plan for at least 5 years before
the year in which you received the distribution. The special tax
treatment for lump-sum distributions that may be available to
you is described below.
Ten-Year Averaging. If you receive a lump-sum distribution
and you were born before January 2, 1936, you can make a
one-time election to figure the tax on the payment by using
“10-year averaging” (using 1986 tax rates). Ten-year averaging
often reduces the tax you owe.
There Are Other Limits on the Special Tax Treatment for
Lump-Sum Distributions. For example, you can generally elect
this special tax treatment only once in your lifetime, and the
election applies to all lump-sum distributions that you receive
in that same year. You cannot elect this special tax treatment if
you rolled amounts into this Plan from a 403(b) tax-sheltered
annuity contract, from a governmental 457 plan, or from an
IRA not originally attributable to a qualified employer plan. If
you have previously rolled over a distribution from this Plan (or
certain other similar plans of the employer), you cannot use this
special averaging treatment for later payments from the Plan. If
you roll over your payment to an IRA, governmental 457 plan, or
403(b) tax-sheltered annuity, you will not be able to use special
tax treatment for later payments from that IRA, plan, or annuity.
Also, if you roll over only a portion of your payment to an IRA,
governmental 457 plan, or 403(b) tax-sheltered annuity, this
special tax treatment is not available for the rest of the payment.
See IRS Form 4972 for additional information on lump-sum
distributions and how you elect the special tax treatment.
Special Election by Eligible Retired Public Safety Employees.
If you are an “eligible retired public safety employee,” you can make
an election to exclude up to $3,000 of your otherwise taxable
payment from your gross income, and not be taxed on the amount
you exclude. The $3,000 can be used to pay for health insurance
premiums for accident and health insurance plans, as well as for
a qualified long-term care insurance contract covering you, your
spouse, or your dependents. All distributions are combined from
all of your eligible retirement plans — section 401(a), 457(b), 403(a)
and 403(b) plans — for purposes of the $3,000 limit. You are an
“eligible retired public safety employee” if you separated from
service as a public safety employee of the employer maintaining
the plan, and your separation from service was due to your
disability or attainment of normal retirement age. Contact the Plan
Administrator for more information about this special election.
IV. SURVIVING SPOUSES, ALTERNATE
PAYEES, AND OTHER BENEFICIARIES
In general, the rules summarized in this notice that apply to
payments to employees also apply to payments to surviving
spouses of employees and to spouses or former spouses who are
“alternate payees.” You are an alternate payee if your interest in
the Plan results from a “qualified domestic relations order,” which
is an order issued by a court, usually in connection with a divorce
or legal separation.
If you are a surviving spouse or an alternate payee, you can
choose to have a payment that can be rolled over, as described
in Part I of this notice, paid in a DIRECT ROLLOVER to a traditional
or Roth IRA or to an eligible employer plan or paid to you. If
you have the payment paid to you, you can keep it or roll it over
yourself to a traditional IRA or to an eligible employer plan. Thus,
you have the same choices as the employee.
The Plan allows non-spouse beneficiaries to make a DIRECT
ROLLOVER of their share of an employee’s account. If the account
owner passed away prior to January 1, 2020, there are several
flexible payment options for non-spouse beneficiaries. If the
account holder passed away after December 31, 2019, and the
non-spouse is not an eligible designated beneficiary, the total
account balance must be distributed within 10 years.
If you are a surviving spouse, an alternate payee, or another
beneficiary, your payment is generally not subject to the
additional 10% tax described in Part III of this notice, even if you
are younger than age 59½.
How to Obtain Additional Information
This notice summarizes only the federal (not state or local) tax
rules that might apply to your payment. The rules described
in this notice are complex and contain many conditions and
exceptions that are not included in this notice. Therefore, you
may want to consult with the Plan Administrator, an EY financial
planner, or a professional tax advisor before you take a payment
of your benefits from your Plan. Also, you can find more specific
information on the tax treatment of payments from qualified
employer plans in IRS Publication 575, Pension and Annuity
Income, and IRS Publications 590-A and 590-B, Contributions to
and Distributions from Individual Retirement Arrangements (IRAs),
respectively. These publications are available from your local IRS
office, on irs.gov, or by calling 1-800-TAX-FORMS.
Visit MyFRS.com • Call 1-866-446-9377, Option 2 Page • 21
Florida Retirement System
This guide is a summary of the Investment Plan termination options
available to FRS-covered employees and is written in non-technical terms.
It is not intended to include every program detail. Complete details can
be found in Chapter 121, Florida Statutes, the rules of the State Board
of Administration of Florida in Title 19, Florida Administrative Code, and
in the Investment Plan Summary Plan Description. In case of a conflict
between the information in this guide and the statutes and rules, the
provisions of the statutes and rules will control.
©2024 MyFRS Florida Retirement System — all rights reserved.
• July 2024 •
H000275740
