Florida State, Major City & Public School Retirement Systems

In Florida, publicly employed individuals working for the state may qualify for participation in the Florida Retirement System (FRS). Like most pension plans, this system provides periodic payments to the retiree for life, as opposed to an individual retirement arrangement or 401k, which distributes payments from an account holding a specified balance.

Retirement assets are included in this, and when a marriage is ended, the disposition of these funds must be determined.

FRS benefits are a pension, and the court may rule that part of these payments be directed to an ex-spouse. However, the FRS allows beneficiaries to receive a lump-sum payment equivalent to the estimated value of the lifetime pension as another option.




QDRO Florida Retirement System Investment Plan (FRSIP)
(ERISA Qualified Domestic Relations Order)
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QDRO Florida Retirement System Pension Plan (FRSPP)
(ERISA Qualified Domestic Relations Order)
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Frequently Asked Questions:

Q. Must a participant share his or her FRS benefits in a divorce?
A. Depending on the divorce decree, a spouse may be awarded a portion of the pension benefits.
Q. Can a member cash out before retirement?
A. The option to cash-out the pension plan benefits in one lump sum is only available before retirement. Once a payment plan for retirement has been selected and the first payment deposited into a financial institution, it cannot be altered under any circumstances. So, this only applies to individuals who have not retired yet. If the employee hasnít yet retired, a formula can be used to take into account his or her length of service, pay grade, life expectancy and other factors and convert these into a specific cash value of the pension benefits for a lump sum payout.

Q. What are the drawbacks of a cash-out?
A. Withdrawal of retirement funds in a lump-sum payment usually incurs some significant penalties. If the employee is under the age of 59 1/2 years old, a 10 percent penalty is levied for the early withdrawal. All distributions on retirement funds (unless specifically exempted, like Roth IRAs) incur a tax burden for the year the funds are paid out, so this must be considered. Also, since a lump sum is a much larger amount than periodic distributions, the taxpayer may be subject to the higher rate of a higher tax bracket.

Q. Can adverse tax consequences be avoided?
A. The divorcing spouses can submit a Qualified Domestic Relations Order to the court and plan administrator for approval. This will mitigate some of the tax penalties for anyone rolling the funds over into another retirement account. Family law courts seldom force the cash-out of a retirement instrument that results in such a significant loss of value.
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