Actively Managed Funds

These funds try to predict market changes in order to beat a market index. These funds carry a higher fee than passively managed funds.

Actuarial

An adjective that describes statistical elements, assumptions, and techniques used by actuaries. An "actuary" is an expert who computes insurance or pension risks and plan costs based upon plan membership, experience, and other factors. Actuaries determine the level of funding required to provide the benefits promised to you under the Florida Retirement System.

Annual Fees

The current fees an investment fund charges to cover management, operating and marketing expenses. Actual fees are proportional to the amount you invest in that fund. For example, if the annual fee for a $10,000 investment in a fund is $2 but you only invest $1,000, you would be charged ($1,000 ÷ $10,000) x $2, or 20 cents for a year. Fees may change in the future. Fees and expenses are only one of several factors that you should consider when making investment decisions.

Annuity

An insurance contract that guarantees you monthly income for the rest of your life, or for the period of time you choose.

Average Final Compensation or AFC

The average of the 8 highest years of salary (or 5 highest years of salary if initially enrolled in the FRS before July 1, 2011) earned during covered employment. Salaries are counted by fiscal year (July 1 - June 30).

Average Market Result

An estimate in "Today's Dollars" of what an investment of $10,000 might grow to over a 10-year period. There is a 50% chance that $10,000 would grow to this amount or more in 10 years.

Beneficiary

The joint annuitant or any other person, estate, organization, or trust fund designated by you to receive any benefits which may be payable upon your death.

Benefit

Any payment—lump sum or periodic—to you, a retiree, or a beneficiary, based partially or entirely on employer contributions.

Blended Rate, Blended Retirement Contribution Rate

One uniform contribution rate paid by an FRS employer on behalf of each employee, regardless of retirement plan, and based on percentage of pay and FRS membership class.

Bond Funds

Funds that invest primarily in bonds, which are similar to IOUs. A company or government agency borrows money and pays it back with interest to the bondholder (the person making the loan). The quality of a bond is reflected in the credit rating of the company or agency that issues the bond. The short-term risk of bond funds is relatively low. However, over time, the value of a bond is affected by interest rates, inflation, and other factors. When inflation or interest rates go up, the value of a bond goes down because bonds pay a fixed rate of interest. In other words, the market sees other investments as being more attractive than bonds. Therefore, bonds and bond funds don't always protect the value of your retirement savings against inflation.

Buy Back, Buy-Back Amount

The total amount of money needed to buy back into the Pension Plan after switching to the Investment Plan; the buy-back amount is equal to the "present value" of an employee's accumulated benefit in the Pension Plan (assuming the employee had previous service in that plan). If the employee did not have previous Pension Plan service, the buy-back amount is the Actuarial Accrued Liability (AAL) or total cost of the accumulated FRS Pension Plan benefit.

Calendar Month

One of the 12 divisions of a year as determined by the Gregorian calendar (e.g., January, April, etc.).

Choice

An employee's selection of one of two retirement plan options offered by the FRS (with eligibility based on date of hire): the FRS Pension Plan or the FRS Investment Plan. Also called Election. See also "Second Election".

Choice Period, Enrollment Period

The period of time following your hire date in which you can choose to participate in either the FRS Investment Plan or the FRS Pension Plan. If your date of hire is prior to January 1, 2018, your enrollment period will end at 4:00 p.m. Eastern Time, on the last business day of the fifth month following your month of hire. If your date of hire is on or after January 1, 2018, your enrollment period will end at 4:00 p.m. Eastern Time, on the last business day of the eighth month following your month of hire. Your initial election will be considered your initial choice or first election. If your date of hire is prior to January 1, 2018 and you do not make an active plan election, you will be automatically enrolled in the Pension Plan; this automatic enrollment (or default) is considered your initial choice or first election. If your date of hire is on or after January 1, 2018 and you do not make an active plan election, you will be automatically enrolled as follows; this automatic enrollment (or default) is considered your initial choice or first election.

Closed Retirement Systems

The separate state-administered retirement systems that existed before the Florida Retirement System was created on December 1, 1970, and have since been closed to new members (also called "Existing Systems"). These systems were consolidated under the Florida Retirement System by chapter 121 of the Florida Statutes, and include the State and County Officers and Employees' Retirement System, the Teachers' Retirement System, the Highway Patrol Pension System and the Judicial Retirement System established by chapters 122, 238, 321, and 123, Florida Statutes, respectively.

Compensation

Regular payment of salary by your employer to you for work performed, including certain overtime payments. By law, certain fees, bonuses, and other amounts are not considered "compensation" under the Florida Retirement System. (See s. 121.021(22) and (47), Florida Statutes, or see subsection (16) of rule 60S-6.001, Florida Administrative Code, for details.)

Contribution

The retirement contributions paid by employers on behalf of the employee. The 2002 legislative session resulted in a new method for paying contributions by employers, called a "blended contribution rate". Under this law, employers will pay the same contribution rate for each employee regardless of whether he or she is in the Pension Plan or the Investment Plan.

Contribution Rate

The percentage of compensation required to fund your promised Florida Retirement System benefits (through employer contributions). This rate varies, depending on your membership class and other factors.

Core Funds

Investment funds that invest in a very broad portion of an asset class and can help you form the "core" of your portfolio.

Cost-of-Living Adjustment or COLA

An annual increase in your Florida Retirement System Pension Plan retirement benefit paid to you after you retire. The COLA percentage increase is determined as follows:

• If all of the service used in the calculation of your retirement benefit was prior to July 1, 2011, you will receive a 3 percent COLA.
• If the service used in the calculation of your retirement benefit consists of both service prior to July 1, 2011, and service on and after July 1, 2011, your COLA is individually calculated by dividing your years of service before July 1, 2011, by your total years of service at retirement and multiplying by 3 percent.
• If all of your service at retirement is on or after July 1, 2011, you are not eligible for a COLA.

Covered Employment or Covered Position

Employment in a regularly established position with an employer participating in the Florida Retirement System or in a state-administered retirement system.

Creditable Service

Service for which you earn retirement credit by being paid for work in a regularly established position with an employer participating in the Florida Retirement System, as well as any additional service for which you may purchase retirement credit.

Date of Participation

The date you become a plan participant.

Deferred Retirement Option Plan or DROP

An elective program available for Florida Retirement System Pension Plan members who are eligible for normal retirement. Under the Deferred Retirement Option Program, you may effectively retire and defer receipt of your retirement benefits while you continue employment with a Florida Retirement System employer for up to 8 years (10 years for instructional personnel). While in the program, your deferred monthly benefits, plus interest and applicable cost-of-living adjustments, are credited to your program account in the Florida Retirement System Trust Fund. When your program participation ends, you terminate employment and begin receiving your predetermined normal monthly retirement benefits, as well as your lump sum Deferred Retirement Option Program benefits, which you may invest or spend as you choose. Disability retirees may not participate in the Deferred Retirement Option Program, and program participants may not qualify for disability retirement.

Defined Benefit Plan

Under a defined benefit plan (e.g., FRS Pension Plan), you are promised a benefit at retirement if you meet certain criteria (usually involving your length of service and/or age). The amount of your future benefit is determined by a formula, often based on your salary, length of service, and membership class, and may be adjusted for inflation. Your benefit is prefunded by contributions. Your plan sponsor or employer, who must ensure that sufficient funds are available when benefits are due, bears the market risk (must make up investment losses through increased contributions and may utilize investment gains to lower contribution rates when the gains result in surplus assets).

Defined Contribution Plan

Under a defined contribution plan (e.g., FRS Investment Plan), no set benefit is promised to you. Instead, contributions are paid into your individual employee investment account. Your plan sponsor or employer controls the contribution rates. Investments are directed by you, the employee, among investment products offered by the plan. You bear the market risk, realizing interest and/or investment earnings on your accumulated contributions. Your retirement benefit is based on the amount of money that accumulates in your investment account. Your final benefit could be more or less than you would have realized under a defined benefit plan, depending upon your investment skills, luck, and market conditions.

Division

Division of Retirement within the Florida Department of Management Services

Downside Market Result

An estimate in "Today's Dollars" of how poorly an investment of $10,000 today might do over a 10-year period. There is a 5% chance that $10,000 would grow or decline to this amount or less in 10 years.

Early Retirement

Under the Florida Retirement System Pension Plan, "early retirement" is an elective, service-based retirement that occurs when you choose to retire before you reach your normal retirement date. If you retire early, you will receive a reduced retirement benefit because you have not yet reached your normal retirement date. You must be vested to take an early retirement. Disability benefits are not reduced for early retirement, and vesting is not required for in-line-of duty disability retirement.

Effective Day, Effective Date

The date on which an employee's election was received and made effective. Eligible new employees are automatically enrolled in the Pension Plan on their first day of employment and may, within five months (if date of hire is prior to January 1, 2018) or eight months of their month of hire or eight months (if date of hire is on or after January 1, 2018), elect to participate in the Investment Plan instead of the Pension Plan. Enrollment in the Investment Plan will be retroactive to the date of hire, but the effective date of the Investment Plan contributions will be the first of the month following the month in which the enrollment form is received or the online enrollment is processed by the Investment Plan Administrator.

If your date of hire is prior to January 1, 2018 and you do not make an active plan election, you will be automatically enrolled in the Pension Plan; this automatic enrollment (or default) is considered your initial choice or first election. If your date of hire is on or after January 1, 2018 and you do not make an active plan election, you will be automatically enrolled as follows; this automatic enrollment (or default) is considered your initial choice or first election.

Election

An employee's selection of one of three retirement plan options offered by the FRS (with eligibility based on date of hire): 1.) the Pension Plan; 2.) the Investment Plan (or 100% Transfer Option into the Investment Plan, if currently in the Pension Plan); and 3.) the Investment Plan's Hybrid Option (participation in both the Pension Plan and the Investment Plan). See also "Second Election".

Eligible Employee

An officer or employee who is a participant of or is eligible for participation in the Florida Retirement System, participates in or is eligible to participate in the Senior Management Service Optional Annuity Program, or is eligible to participate in (but does not participate in) the State University System Optional Retirement Program or the State Community College System Optional Retirement Program. An eligible employee does not include Deferred Retirement Option Program (DROP) participants.

Employer

Any agency, branch, department, institution, university, institution of higher education, or board of the state, or any county agency, branch, department, district school board, or special district of the state, or any city of the state that participates in the Florida Retirement System for the benefit of certain of its employees, or a charter school or charter technical career center that participates as provided in s. 121.051.(2)(d), F.S.

Enrollment

The act by an employer agency of establishing membership in the Florida Retirement System for all or any of its employees.

Existing Systems

See definition for "Closed Retirement Systems".

Fiscal Year

For the Florida Retirement System, a 12-month period beginning July 1 and ending on June 30.

Florida Retirement System Investment Plan

This plan is a defined contribution plan created under part II of chapter 121, Florida Statutes, and began enrolling members in July 2002. (See also definitions for "Defined Contribution Plan," and "Florida Retirement System.")

Florida Retirement System or FRS

The retirement system established in December 1970 to consolidate the existing state-administered retirement systems and provide a retirement, disability, and survivor benefit program for participating state and local government employees. Today, the Florida Retirement System is a single retirement system consisting of two primary retirement plans and other nonintegrated programs administered under chapter 121, Florida Statutes. The primary plans are a defined benefit plan established under part I and a defined contribution plan established under part II. Members under both plans participate in the following membership classes: The Regular, Special Risk, Special Risk Administrative Support, Senior Management Service, and Elected Officers' Classes. In addition to these two primary plans, alternative optional defined contribution programs are available for specified employee groups under part I, including the State University System Optional Retirement Program, the State Community College System Optional Retirement Program, and the Senior Management Service Optional Annuity Program.

Florida Retirement System Pension Plan

This plan is a defined benefit plan administered under part I of chapter 121, Florida Statutes. The benefits to be paid at retirement are guaranteed by the plan, and are based on a formula determined by the plan. (See also definitions for "Florida Retirement System" and "Defined Benefit Plan.")

Foreign Stock Funds

Funds that invest primarily in stocks issued by foreign companies. Compared to U.S. stocks, foreign stocks are affected by additional risk factors such as foreign laws and regulations, differences in accounting practices, political risk (foreign governments are sometimes unstable), and currency risks (differences in the relative value of domestic and foreign money). Over the long-term, foreign stocks have provided additional diversification benefits

Guaranteed Benefit

An assured monthly payment at retirement if an employee stays under FRS employment long enough to vest in his or her plan.

Health Insurance Subsidy or HIS

A supplementary benefit that may be paid to you after you retire under the Florida Retirement System to help you cover the cost of health insurance premiums. The amount you receive is based on your length of service. The subsidy is $7.50 per month for each year of creditable service, with a minimum subsidy payment of $45 per month (if your benefit is based on just 6 years of creditable service) and a maximum subsidy payment of $225 per month (if your benefit is based on 30 or more years of creditable service).

Hybrid Option, Hybrid Plan

The option to participate in the Investment Plan for all future employer contributions, while keeping current accrued Pension Plan benefit frozen in that plan (must have 8 years of Pension Plan service to participate or 5 years if initially enrolled in the FRS before July 1, 2011).

In-Line-of-Duty

In the performance of the duties required by your employer.

Individual Retirement Account (IRA)

A retirement savings account that gives tax benefits for delaying withdrawal until retirement age.

Interest

The amount charged on money owed to the Florida Retirement System Trust Fund, or, if you are a participant of the Deferred Retirement Option Program, the amount earned on retirement benefits that accrue on your behalf, as established by law. Interest owed is charged from the date required for the type of service purchased and is compounded annually each June 30, while Deferred Retirement Option Program interest is earned from the month following deposit and is compounded monthly.

Investment Earnings

The increase in the value of an Investment Plan account that comes from an increase in the price of investments and an increase in the value of reinvested earnings in the account.

Investment Manager(s)

The private-sector companies responsible for the day-to-day operation of buying and selling the investments held inside the FRS Investment Plan funds. These private-sector companies are banks, insurance companies, brokers and firms that advise and help run mutual funds and institutional investment funds. The FRS Select funds use multiple specialist investment managers to control risk.

Investment Plan

See definition for "Defined Contribution Plan"

Joint Annuitant

A joint annuitant is a type of beneficiary who is eligible to receive certain continuing benefits upon your death. If you retire under the Florida Retirement System Pension Plan and choose benefit payment option 3 or 4, your beneficiary must be your joint annuitant to receive continuing benefits after you die. To qualify as a joint annuitant, your beneficiary must be: your spouse; your natural or legally adopted child who is either under age 25 or is physically or mentally disabled and incapable of self-support (regardless of age); or a person who is financially dependent upon you for one-half or more of his or her support, and who is your parent, grandparent, or a person for whom you are the legal guardian.

NOTE: Special provisions may apply if you die prior to retirement.

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Local Agency Employer

The board of county commissioners or other legislative governing body of a county, including that of a consolidated or metropolitan government; a clerk of the circuit court, sheriff, property appraiser, tax collector, or supervisor of elections, provided such officer is elected or has been appointed to fill a vacancy in an elective office; a community college board of trustees or district school board; or the governing body of any city or special district of the state which participates in the system for the benefit of certain of its employees.

Long-Term Fees

The value in "Today's Dollars" of the total fees that would be charged by an investment fund over 30 years, assuming a $10,000 initial investment.

Lump Sum Annual Leave Payment

The amount of payment (equal to up to 500 hours of pay) able to be applied toward an employee's Pension Plan benefit calculation. In the Investment Plan, the retirement contributions paid on these payments are deposited in the Investment Plan account.

Lump Sum Distribution

One of your options for receiving benefit distribution under the Investment Plan. Once vested, you may cash out your account, but you may incur tax penalties in doing so.

Marketing Companies

The private-sector companies that market and/or distribute the investment funds to pension funds, separate from their investment management. The marketing companies also provide some back-office services. The FRS Select funds do not have a marketing company because the investment managers are under direct contract with the FRS and a separate company (Hewitt Associates) performs all back-office functions. Unlike other funds, the FRS Select funds are available only through the FRS Investment Plan.

Money Market Funds

Funds that invest in short-term securities (financial instruments or obligations) that are high quality and can be sold quickly with little loss of value. The funds have limited risk of declining in value. However, over the long-term, the returns may be modest and may not keep pace with inflation. Money market funds are not FDIC insured or guaranteed.

Net Asset Value (NAV)

The current dollar value of one share of a fund. It is equal to the current value of a fund's assets minus its liabilities, including management fees, divided by the number of outstanding shares. The NAV is calculated at the end of each business day.

Normal retirement for FRS Pension Plan members
"Normal retirement" for FRS Pension Plan members:

• If enrolled in the FRS prior to July 1, 2011, age 62 and six years of service or 30 years of service or, if Special Risk age 55 and six years of service or 25 years of Special Risk service.
• If enrolled in the FRS after July 1, 2011, age 65 and eight years of service or 33 years of service or, if Special Risk age 55 and eight years of service or 25 years of Special Risk service.

Normal Retirement or Normal Retirement Date for the Investment Plan
"Normal retirement" for FRS Investment Plan members is the later of either the date the member attains normal retirement under the provisions of the Pension Plan or the date the member is vested under the Investment Plan. The following chart spells out when a member achieves normal retirement depending on their class of membership and first date of hire:

Investment Plan Normal Retirement

Nullify, Nullifying

The act of making legally null and void or invalidating, as in nullifying an employee's joint annuitant or beneficiary from receiving benefits from his or her FRS retirement plan account.

Other Personal Services or OPS

See definitions of "Temporary Position" and "Regularly Established Position."

Passively Managed (or Index) funds

These funds are designed to produce the same level and pattern of investment returns generated in a market index. These funds carry a very low fee.

Pension Plan

See definition for "Defined Benefit Plan".

Personal Investment Performance, PIP

A measurement of the performance of an employee's entire account for the time invested in the plan during the statement period.

PIN

Personal Identification Number, the number used to uniquely identify an employee as a member of the FRS.

Plan year

The period of time beginning July 1 and ending on the following June 30, both dates inclusive, for all State-administered retirement systems.

Present Value

The amount of money an employee would need to invest today to give approximately the same monthly benefit he or she would have received from the Pension Plan.

No glossary items found for this letter.

Reemployment after Retirement

This term means employment after retirement under the Florida Retirement System and refers to employment with employers participating in the system. However, if you are a disability retiree under the Florida Retirement System, proscribed reemployment occurs whenever you are gainfully employed by any employer, public or private. Also called Re-employment.

Regular Class

A class of FRS membership to which most employees belong.

Regularly Established Position

In state government, a regularly established position is a full-time or part-time position authorized by law and paid from a salary appropriation or salary account (not a temporary position, such as one paid from an "other personal services" or "OPS" account). At the local level, a regularly established position is one that will last beyond 6 consecutive months. Regularly established positions are covered for retirement under the Florida Retirement System.

Rehire, Rehired Employee

An employee who previously left FRS employment, did not draw retirement benefits, and is now returning to FRS employment.

Retirement

Under the Investment Plan, this term means the point at which you are vested, have terminated all FRS-covered employment, and have taken a distribution from the Plan.

Retirement Date Funds

Funds that invest in a diversified portfolio of other FRS Investment Plan funds and use an asset allocation concept called "target date funds." The mix of funds in each Retirement Date Fund is based on the amount of time you have before retirement, and the mix gradually changes as your retirement gets nearer. This gradual change follows a careful investment strategy called a "glide path."

Rollover

To take the amount in which you have vested as a member of the Investment Plan and move it to another qualified retirement fund. For example, upon terminating from state employment, you could rollover your vested funds to a qualified IRA or to your new employer's retirement program (if it is qualified).

Salary

Regular payment of compensation by an FRS employer to an employee for work performed, including certain overtime payments. Bonus payments are not considered compensation. [By law, certain fees and other amounts are not considered "compensation" under the FRS. See s. 121.021(22), F.S., or see subsection (15) of rule 60S-6.001, F.A.C., for details.]

Second Election

The one-time opportunity during an employee's employment with the FRS to switch retirement plans, or make a "second choice", after the initial choice has been made.

Service Credit

See definition for "Creditable Service".

Special District

An independent special district as defined in s. 189.012, Florida Statutes.

Special Risk Class

A class of FRS membership whereby employees have unique job functions that place them in special risk, as determined by the Florida State Legislature (eligible positions include such personnel as law enforcement officers, firefighters, correctional officers, emergency medical technicians and paramedics). To compensate these employees for their dedication and service, it was decided by the Legislature to increase their contribution percentage under the various retirement plan options and to allow Special Risk Class members to retire at an earlier age.

Specialty Funds

Investment funds that invest in a portion of an asset class and can help you "fine-tune" your portfolio.

State Agency

Any agency, branch, department, institution, university, institution of higher education, or board of the state that participates in the Florida Retirement System.

State Board or Board

The State Board of Administration of Florida

Temporary Position

In state government, a temporary position is one that is authorized under s.110.131, Florida Statutes, and is paid from an "other personal services" or an "OPS" account (not a regularly established position). These positions are subject to durational restrictions specified by law. At the local level, a temporary position is one that will not last beyond 6 consecutive months, or a position that is listed in rule 60S-1.004(5)(d), Florida Administrative Code, regardless of whether it will exist beyond 6 consecutive months. Temporary positions are not covered for retirement under the Florida Retirement System.

Termination

This refers to the termination of employment, which occurs when you end all employment with all FRS employers for at least 1 calendar month. Service-based retirees will cancel their retirement if they are reemployed by any FRS employer in the calendar month following their termination date (except that they may retire on disability while on a leave of absence for medical reasons). Disability retirees will cancel their retirement if any employer gainfully reemploys them at any time following their termination date.

U.S. Stock Funds

Funds that invest primarily in stocks issued by U.S. companies. The short-term risk of investing in stocks has been much higher than bonds. However, over long periods of time, stocks have generally done better than bonds, which is one of the main reasons that stocks are typically recommended for retirement investing. Some risk is necessary to achieve long-term investment growth.

Unit

The measurement of participation in a particular fund. It is similar to the common stock concept for a company where the number of shares held is described as a percent of the total number of outstanding shares and entitles the stockholder to the equivalent portion of the net worth of the company.

Unit Value

The total dollar value of the securities held in each fund, divided by the accumulated units in the fund.

Unitized Accounting

A record keeping method used in the FRS Investment Plan whereby assets of a fund are reflected as "units of ownership" in the underlying assets, such as stocks, bonds, etc. It allows the change in market value, whether from interest, dividends and/or price changes of the underlying investments or distributions, to be reflected for all participants on a daily basis.

Upside Market Result

An estimate in "Today's Dollars" of how well an investment of $10,000 today might do over a 10-year period. There is a 5% chance that $10,000 would grow to this amount or more in 10 years.

Vest, Vested or Vesting

These terms refer to the assurance of a future benefit after you work a specified number of years and earn creditable service in a regularly established position with an employer participating in the Florida Retirement System. Once you are vested, your vested status is not affected by terminating covered employment before retirement; however, being vested does not entitle you to a disability benefit based on a disability caused by an injury or disease that occurs after you terminate employment.

Work Year

The period of time you must work to receive a full year of service credit for retirement purposes. A year of service credit consists of 12 months of service credit in a fiscal year, unless your approved work year is less than 12 months, as is the case with employees of educational institutions (for details, see rule 60S-2.002(4), Florida Administrative Code).

No glossary items found for this letter.

Year of Service or Work Year

The period of time you are required to work to receive a full year of creditable service.

No glossary items found for this letter.