Three paths when you leave
When you separate from FRS employment before reaching normal retirement, three paths exist. The contribution refund returns your 3% employee contributions (without interest in most cases) and forfeits all employer-funded benefit; it is available to anyone who separates. The 2nd Election to the Investment Plan is a one-time, free opportunity to switch from the Pension Plan to the Investment Plan. Leaving your benefit in the Pension Plan — collecting a reduced amount immediately or deferring until normal retirement — requires that you are vested. For the reduced-vs-deferred pension decision, see Early retirement explained. This page focuses on the 2nd Election and the contribution refund.
What is the 2nd Election?
Every FRS member gets one opportunity during their career to switch between the Pension Plan and the Investment Plan — the 2nd Election under s. 121.4501(4)(f), F.S. The election must be received by the third-party administrator while you are actively employed and earning service credit. It cannot be filed after termination, and it cannot be filed during an unpaid leave of absence or while in DROP. The election becomes effective the first day of the month following the date the administrator receives it, so the request must reach the administrator before your separation date. The 2nd Election is irrevocable in the sense that switching back to the Pension Plan later requires a separate paid buyback. The Pension Plan to Investment Plan direction has no out-of-pocket cost.
What transfers to the Investment Plan?
When you exercise the 2nd Election from the Pension Plan to the Investment Plan, FRS transfers the present value of your accumulated benefit obligation. This is an actuarial figure determined by the Division of Retirement using the plan's assumptions about interest rates, mortality, and retirement timing — it is not the total of employee and employer contributions paid into the Pension Plan, and it is not contributions plus interest. The transferred amount depends on your years of service, salary history, age, and the actuarial factors in effect at the time of the transfer. PensionForge does not estimate this number. The plan's actuarial assumptions are set by the Division of Retirement and are revised periodically, so any third-party estimate risks being wrong in a consequential way. For your personal transfer value, log in to MyFRS or contact the Division of Retirement directly.
Not vested in the Pension Plan? Read this carefully.
A member who separates before Pension Plan vesting (6 years for pre-July-2011 enrollees, 8 years for those enrolled on or after July 1, 2011) has no pension rights. Without the 2nd Election, they receive only a refund of their 3% employee contributions, without interest in most cases. The 2nd Election is available to a not-vested Pension Plan member — vesting is not a prerequisite for the election itself. But a critical detail makes this less useful at separation than it sounds: the transferred present-value amount remains subject to the Pension Plan's 6/8-year vesting schedule even after it lands in the Investment Plan account. A 4-YOS member who exercises the 2nd Election and immediately separates has 4 years of service and is not vested in the transferred PV — they forfeit it on distribution and end up with the same contribution refund they would have gotten without switching plans. Where the 2nd Election does help a not-yet-vested member is when the member intends to remain in FRS-covered employment until they reach 6 or 8 years of total service. Once vested, the transferred PV — plus any new Investment Plan contributions made after the transfer, which follow the Investment Plan's 1-year vesting — is theirs to control as a lump sum, instead of becoming a deferred Pension Plan annuity collected in their 60s. What the 2nd Election does not do is let a separating not-vested member walk away with employer-funded money they would not otherwise receive.
Vested members: a third option beyond reduced or deferred
A vested member who separates before normal retirement already has two pension paths covered on the Early retirement explained page: take a permanently reduced benefit immediately, or defer collection to age 55 (Special Risk normal retirement age) for the full amount. The 2nd Election adds a third — switch to the Investment Plan, take the transferred present value as a lump sum, and manage it yourself or roll it into another qualified account. This is a fundamentally different kind of decision. Choosing the pension keeps you in a guaranteed lifetime income stream with COLA on the pre-July-2011 portion of service. Choosing the Investment Plan transfer hands you a lump sum whose long-term value depends on how it is invested. The variables that matter include your age at separation, the size of the early retirement reduction, your risk tolerance and investment confidence, your other retirement assets and income sources, and your health and longevity expectations. This is the decision where consulting a qualified financial advisor matters most, because the tradeoff is individual in ways a calculator cannot capture.
Tax and penalty implications of Investment Plan distributions
Once you are in the Investment Plan and separated from service, distributions follow federal income tax rules. A lump-sum cash distribution is fully taxable as ordinary income in the year received, plus a 10% early withdrawal penalty under IRC §72(t) if you are under age 59½ — unless the §72(t)(10) public safety officer exception applies (described below). A direct rollover to a governmental 457(b) is not taxable at the time of rollover; later distributions from a governmental 457(b) are penalty-free at any age after separation under §72(t)(9). A direct rollover to a Traditional IRA is not taxable at rollover; later IRA distributions are subject to §72(t), and the §72(t)(10) PSO exception does not survive the rollover — IRA distributions are excluded from the carve-out. A Roth conversion is fully taxable as ordinary income in the year of conversion; no §72(t) penalty applies to the conversion itself; later Roth distributions follow the 5-year rule and the age-59½ requirement for earnings. The §72(t)(10) PSO exception was expanded by the Defending Public Safety Employees' Retirement Act of 2015 to cover all governmental plans, including the FRS Investment Plan (it was previously limited to defined benefit plans). A qualified public safety employee — firefighters, law enforcement, corrections, and EMS personnel — who separates from service in or after the year they turn 50, or after 25 years of service under the plan (whichever is earlier, per SECURE 2.0), can take direct distributions from the FRS Investment Plan without the 10% early withdrawal penalty. This applies only to direct distributions from the IP; rolling the balance to a Traditional IRA forfeits the protection. PensionForge's DROP decision tool covers these rollover paths in detail — see your results page after running a scenario.
What PensionForge shows (and doesn't)
PensionForge explains the mechanics of separating from FRS and helps you understand the tradeoffs between keeping your pension benefit and switching to the Investment Plan via the 2nd Election. It does not estimate your Investment Plan transfer value — that number comes from FRS and is calculated by the Division of Retirement using actuarial assumptions only the plan controls. It does not model Investment Plan fund performance. It does not tell you whether to switch plans or how to take distributions. For a personal transfer value estimate, log in to MyFRS or contact the Division of Retirement (contact information is on page 3 of the FRS member handbook). For personalized guidance on which path fits your situation, consult a qualified financial advisor.