The FRS Pension Plan is a defined benefit plan. The monthly retirement benefit is calculated from years of service, average final compensation under the formula for the member’s class, and a class-specific accrual rate. Vesting requires 8 years of service for members initially enrolled on or after July 1, 2011, and 6 years of service for members enrolled before that date. The benefit pays as a lifetime monthly allowance.
The FRS Investment Plan is a defined contribution plan. Each member has an individual account funded by employer contributions and the mandatory 3 percent employee contribution. The member directs the investment of the balance among the menu of plan funds. Vesting is 1 year of service for both employer and employee contributions and the associated earnings. The account balance is portable at termination.
The three FRS distributions that are rollover-eligible
Three specific FRS distributions can move to an IRA, including a self-directed IRA holding IRS-eligible metals under 26 U.S. Code Section 408(m)(3). Each path has its own eligibility window and its own administrative process inside the FRS.
- Available at termination from all FRS-covered employment
- 3-month waiting period for full distribution
- Vesting at 1 year of service for both employer and employee contributions
- Direct rollover to a qualified plan or IRA, including a self-directed IRA holding metals
- 20 percent federal withholding applies to any portion paid directly to the member
- Available only after Pension Plan service retirement and DROP enrollment
- DROP accumulates monthly pension payments plus interest during the participant’s DROP window
- Lump sum paid at DROP termination
- Direct rollover to a qualified plan or IRA preserves tax deferral
- 20 percent federal withholding applies to any portion paid directly to the member
- Available only before vesting in Pension Plan retirement benefits
- Refund of personal employee contributions plus interest, paid as a lump sum
- Employer contributions stay in the FRS Trust Fund
- Forfeits Pension Plan retirement and survivor benefits tied to the forfeited service
- Direct rollover to a traditional IRA preserves tax deferral
- Lifetime annuity paid each month after retirement
- Four payment options at retirement, including survivor continuation elections
- The monthly payment is not an eligible rollover distribution
- The pension cannot be cashed out or transferred to an IRA after pay status begins
- This is true for all four FRS Pension Plan payment options
The lifetime monthly Pension Plan allowance is not on the eligible list because it pays as an annuity rather than an eligible rollover distribution. A Pension Plan retiree already in pay status cannot stop the pension and roll the underlying value to an IRA. The decision about which path applies depends on the member’s plan choice, vesting status, age, and DROP participation at the time of distribution.
FRS Investment Plan rollover process
The FRS Investment Plan is a defined contribution plan administered by the State Board of Administration of Florida through a third-party investment provider. The member’s balance at any time is the sum of employer contributions, employee contributions, investment earnings, less plan fees and any distributions taken. At termination from all FRS-covered employment, the member becomes eligible to take a distribution after the plan’s waiting period.
The FRS Investment Plan applies a 3-month waiting period before the member can take a full distribution. A 1-time hardship exception allows up to 10 percent of the balance (with a maximum dollar limit) to be distributed during the waiting period if specific hardship criteria are met. After the waiting period, the member can take a lump sum, periodic payments, leave the balance in the plan, or roll the balance to a qualified plan or IRA. The full set of distribution options is described in the member’s distribution package issued at termination.
A direct rollover to a traditional IRA, including a self-directed IRA holding IRS-eligible metals, follows the standard trustee-to-trustee process. The plan administrator sends the rollover check or wire to the receiving custodian. The check is made payable to the new custodian for the benefit of the participant. The receiving custodian credits the rollover to the new IRA. The rollover is reported on Form 1099-R with code G, indicating a direct rollover to another qualified plan or IRA (IRS Publication 590-A).
Federal law requires the plan administrator to withhold 20 percent federal income tax on any eligible rollover distribution paid directly to the member. The 20 percent withholding applies even if the member intends to complete a 60-day indirect rollover, because the withholding occurs at the time of distribution. The 60-day rule preserves rollover treatment for the gross distribution only if the member replaces the 20 percent withheld from other funds within the 60-day window. The direct rollover avoids the withholding entirely.
If the member is past the applicable Required Minimum Distribution age under IRS RMD rules as modified by SECURE Act 2.0, the RMD-calculated portion of the distribution is not rollover-eligible and must be paid as a direct distribution. Only the non-RMD portion can be rolled over. Rolling over an RMD by mistake creates an excess contribution in the receiving IRA, subject to additional excise taxes until corrected (IRS Publication 590-B).
DROP lump sum: rollover at DROP termination
The Deferred Retirement Option Program is available to eligible FRS Pension Plan members who have reached normal retirement and elect to enter DROP rather than separate. During the DROP window, the member’s monthly pension payment is calculated as if the member had retired and is deposited each month into a separate DROP account that earns a defined rate of interest. The member continues to work and receive salary for the duration of the DROP window, up to the program’s maximum participation period set by Florida statute.
DROP eligibility, the maximum DROP participation period, and the interest rate credited to DROP accounts are set by Florida law and the FRS administrative rules. The Special Risk Class and some other classes have specific DROP rules that differ from the standard Regular Class rules. Members considering DROP review the DROP enrollment package provided by the Division of Retirement before electing to participate, because the DROP election interacts with future Pension Plan accrual.
At DROP termination, the participant must separate from FRS-covered employment. The accumulated DROP balance is paid out. The participant can take the lump sum as a cash distribution, roll the balance to a qualified plan or IRA, or use a combination of cash and rollover. A direct rollover to a self-directed IRA holding IRS-eligible metals follows the standard trustee-to-trustee process described in the Investment Plan section. The same 20 percent federal withholding applies to any cash portion paid directly to the member.
After DROP termination, the participant’s regular monthly Pension Plan allowance begins. The pension allowance is paid for life under the payment option elected at the original retirement date. The pension allowance is not affected by the disposition of the DROP lump sum. A member who rolls the entire DROP balance to a self-directed IRA holding metals still receives the regular Pension Plan monthly allowance separately, governed by the original payment option.
Pension Plan refund of employee contributions: pre-vesting only
A Pension Plan member who terminates from all FRS-covered employment before vesting in retirement benefits can take a refund of personal employee contributions plus interest. Vesting is 8 years of service for members initially enrolled on or after July 1, 2011, and 6 years for members enrolled before that date. The refund is paid as a lump sum. Florida law does not allow a partial refund or a loan against accumulated contributions.
The decision is significant. Taking the refund forfeits all future Pension Plan retirement and survivor benefits tied to the forfeited service. Employer contributions are not refunded and remain in the FRS Trust Fund. If the member later returns to FRS-covered employment, prior service credit may be restored through a service credit redeposit, subject to the applicable rules. The refund is irrevocable once processed. Consult a licensed advisor before making retirement decisions.
The federal tax treatment matters. The Division of Retirement is required to withhold 20 percent federal income tax on a refund payment distributed directly to the member. A direct rollover to a traditional IRA, including a self-directed IRA holding IRS-eligible metals, avoids the mandatory 20 percent federal withholding because the funds move trustee to trustee and never reach the member personally. The rollover preserves the tax-deferred status under IRS Publication 590-A.
For Pension Plan members enrolled before July 1, 2011, the employee contribution was 0 percent (the plan was non-contributory for employees during that period). Refund amounts for those members reflect only the pre-1975 contributions if applicable, and are typically smaller. For members enrolled on or after July 1, 2011, the mandatory 3 percent employee contribution applies, and refund balances reflect the accumulated personal contributions plus interest. The refund forms and tax documents are provided by the Division of Retirement at the time of the refund request.
The FRS second election
The FRS second election lets an active member move from the Pension Plan to the Investment Plan, or from the Investment Plan to the Pension Plan, one time during the member’s career. The second election is irrevocable. The member is required to be actively employed in an FRS-covered position to use the second election. The second election is not the same as the initial plan election made at hire.
A Pension Plan member who uses the second election to move to the Investment Plan has the accumulated Pension Plan benefit valued and transferred as an opening account balance to a new Investment Plan account. The opening balance is calculated using actuarial assumptions defined by Florida statute and the FRS actuarial methodology. The transferred balance becomes part of the Investment Plan and is governed by Investment Plan rules going forward, including the 1-year vesting requirement applied to the transferred amount.
An Investment Plan member who uses the second election to move to the Pension Plan may be required to make a buy-in payment equal to the actuarial cost of the Pension Plan service credit being purchased. The buy-in is calculated under Florida statute. Members evaluate the buy-in cost against the projected Pension Plan benefit before electing. The second election from the Investment Plan to the Pension Plan is not always a balanced move and may require significant additional funds depending on the member’s age and service.
The second election is relevant for rollover planning because moving from the Pension Plan to the Investment Plan creates an account balance that becomes rollover-eligible at later termination. The decision to use the second election for rollover purposes alone is a significant one and depends on the actuarial value transferred, the member’s age, expected retirement date, and personal circumstances. Consult a licensed advisor before making retirement decisions.
Funding a self-directed gold IRA from an FRS source
A self-directed IRA holding IRS-eligible physical precious metals receives the rollover from the FRS Investment Plan, DROP, or a Pension Plan refund through the same trustee-to-trustee process used for any other qualified plan rollover. The receiving custodian is a qualified self-directed IRA custodian, not the FRS. The custodian accepts the rollover check or wire, credits the funds to the new IRA, and the participant then directs the purchase of eligible metals through a precious metals dealer. The metals are stored at an IRS-approved depository in the name of the custodian.
Eligible metals under IRC Section 408(m)(3) must meet purity standards. Gold must generally meet 99.5 percent fine, with a statutory carve-out for American Gold Eagles. Silver must meet 99.9 percent fine. Platinum and palladium must meet 99.95 percent fine. Collectible coins outside these standards are not eligible. The participant does not take physical possession until a qualifying distribution event. An in-kind distribution can ship the actual metal to the participant at that point, or the metal can be sold inside the IRA and the cash distributed.
The operational sequence for an FRS rollover into a gold IRA generally runs as follows. First, open the self-directed IRA with a chosen custodian. Second, submit the rollover request to the FRS plan administrator using the form for the path involved (Investment Plan distribution, DROP lump sum, or Pension Plan refund). Third, the FRS issues the rollover check made payable to the new custodian for the benefit of the participant. Fourth, the participant delivers the check or the FRS transmits the wire to the custodian. Fifth, the custodian credits the funds and the metals purchase is executed at the participant’s direction. A gold value calculator helps reconcile the dollar amount of the rollover with the spot value and premium of the eligible products being purchased.
If the rollover follows the year a Required Minimum Distribution applies, the RMD-calculated portion is not rollover-eligible and must be distributed first. The non-RMD portion is rollover-eligible. The same rule applies to a DROP lump sum and to an Investment Plan distribution. Rolling over an RMD by mistake creates an excess contribution in the receiving IRA, subject to additional excise taxes until corrected (IRS Publication 590-B).
Physical authentication of bullion received in an in-kind distribution is a separate concern. The custodian and the depository deliver the metal as documented in their records. The recipient is responsible for verifying weight, purity marks, and packaging integrity on receipt. Reference materials on how to verify physical gold describe the home tests and the limits of each. The in-kind distribution is then a taxable event reported on Form 1099-R, with the fair market value of the metal as the distribution amount. Consult your tax advisor for your specific situation.
Three scenarios for Florida public employees
The scenarios below illustrate the rules with hypothetical fact patterns common among FRS members. The scenarios are illustrative. They do not recommend a specific election or rollover decision. Tax outcomes depend on filing status, state of residence in retirement, other income, and timing. Consult your tax advisor and a licensed advisor before electing.
Scenario A: County employee, age 56, terminated with 12 years of FRS Investment Plan service
Anonymized profile based on a Regular Class county employee enrolled after July 1, 2011, who terminates FRS-covered employment to take a private sector position. FRS Investment Plan balance at termination: 187,500 dollars. The employee is vested in both employer and employee contributions because Investment Plan vesting is 1 year of service. The employee is under age 59 1/2.
Path 1 applies. After the 3-month waiting period, the full balance is available for distribution. A direct rollover to a traditional IRA, including a self-directed IRA holding IRS-eligible metals, preserves the tax-deferred status and avoids the 20 percent mandatory federal withholding. Subsequent IRA withdrawals before age 59 1/2 are governed by IRA early-distribution rules under Internal Revenue Code Section 72(t). The separation-from-service exception that may apply to direct cash distributions from the FRS Investment Plan does not extend to subsequent IRA withdrawals.
The employee remains a Florida resident. Florida does not impose a state income tax, so no Florida state income tax applies to subsequent IRA distributions. A move to a state with an income tax in retirement would change the state tax treatment of future IRA distributions.
Scenario B: School district employee, completing the DROP window, age 65
Anonymized profile based on a Pension Plan member who entered DROP at the normal retirement date and is now reaching DROP termination after the maximum DROP participation period for the class. Accumulated DROP balance: 245,000 dollars. The retiree elected a survivor continuation option at the original retirement date. The monthly Pension Plan allowance will begin at DROP termination at the amount calculated as of DROP entry, adjusted by the cost-of-living increases applicable to the class and period.
Path 2 applies for the DROP lump sum. The participant can take the lump sum as cash, roll the balance to a qualified plan or IRA, or split between cash and rollover. A direct rollover of the full 245,000 dollars to a self-directed IRA holding IRS-eligible metals follows the standard process and avoids the 20 percent federal withholding. The regular Pension Plan monthly allowance is a separate, lifetime annuity and is not part of the DROP rollover transaction. The pension allowance continues for life under the payment option elected at the original retirement date.
Florida residency continues. Florida does not impose a state income tax on the monthly pension or on later IRA distributions. The retiree’s tax position drives whether to roll over the full DROP balance or take some as cash, since cash withdrawals are ordinary income in the year received.
Scenario C: State agency employee, age 32, leaving FRS-covered employment with 4 years of Pension Plan service
Anonymized profile based on a Regular Class state agency employee enrolled after July 1, 2011, who leaves FRS-covered employment for the private sector with 4 years of Pension Plan service. The Pension Plan vesting threshold for this enrollment date is 8 years. The employee is not vested in Pension Plan retirement benefits. Accumulated mandatory 3 percent employee contributions plus interest: 9,200 dollars.
Path 3 applies. The Pension Plan refund of employee contributions is available because the employee is not vested. The full refund of 9,200 dollars is paid as a lump sum. Taking the refund forfeits all future Pension Plan retirement and survivor benefits tied to this period of service. A direct rollover of the refund to a traditional IRA, including a self-directed IRA holding IRS-eligible metals, avoids the 20 percent mandatory federal withholding.
The employee could also leave the contributions in the FRS, where they continue to accrue interest. If the employee returns to FRS-covered employment within the time limit defined by Florida statute, the prior service credit may continue to count toward Pension Plan vesting. The choice between rolling over the small refund and leaving the contributions in the FRS depends on long-term Florida public sector career plans. Consult a licensed advisor before making retirement decisions.
Sources and methodology
This guide describes the FRS distribution rules and federal tax treatment under the Internal Revenue Code and current IRS guidance. It does not give allocation, investment, tax, or retirement advice. Each factual claim links to a primary institutional source where one is available online. Individual circumstances and the state tax rules that apply to a non-Florida resident in retirement may modify the federal rules described here.
- Florida Department of Management Services, Division of Retirement: official administrator of the Florida Retirement System Pension Plan and the program-level oversight of FRS plans.
- State Board of Administration of Florida, FRS Investment Plan: official administrator of the FRS Investment Plan.
- IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs).
- IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs).
- IRS Required Minimum Distributions reference page.
- IRS Rollovers of Retirement Plan and IRA Distributions reference page.
- IRS Topic 558: Additional tax on early distributions from retirement plans.
- 26 U.S. Code Section 408 (Cornell Law), individual retirement accounts, including the precious metals carve-out at subsection (m)(3).
- 26 U.S. Code Section 72 (Cornell Law), annuities and certain proceeds of endowment and life insurance contracts, including the 10 percent additional tax on early distributions at subsection (t).