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FRS members (except for reemployed retirees who were reemployed on or after July 1, 2017) who are actively earning salary and service credit have a one-time opportunity to change from their current FRS retirement plan to the other plan. That means they can transfer from the Pension Plan to the Investment Plan, or from the Investment Plan to the Pension Plan. This change is called a 2nd Election and it can be used only once during the member’s career.
While the 2nd Election gives members flexibility, it is a complex decision with important financial implications. For example, depending on which plan the member is changing to, there could be an out-of-pocket cost to the member.
If employees ask you about the 2nd Election, recommend that they call the MyFRS Financial Guidance Line to speak with an unbiased financial planner before making any decisions. You may also share with them the Is a 2nd Election Right for You flyer.
Eligibility For the 2nd Election to be considered valid, the member must be actively employed and earning salary and service credit when the enrollment form is received by the Plan Choice Administrator or when a valid online election is made.
A 2nd Election cannot be made if the member:
Getting Help With a 2nd Elections The FRS offers members a variety of services to help them make an informed decision about a 2nd Election. Refer members to these services:
How to Make a 2nd Election
Online MyFRS.com. Online enrollment via the 2nd Election Choice Service is available only to members changing from the Pension Plan to the Investment Plan. To enroll online, members should log in to MyFRS.com and select the 2nd Election Choice Service. The election will be processed the same day if it is entered before 4:00 p.m. ET each business day.
Online 2nd Election Retirement Plan Enrollment Form. This is an online enrollment form members can complete without logging in to MyFRS.com. Online enrollments submitted before 4:00 p.m. ET each business day are processed within 24 hours and are effective on the date the election is submitted (excluding holidays).
By Mail or Fax Members can download the 2ndElection EZ Retirement Plan Enrollment Form or the 2nd Election Retirement Plan Enrollment Form. Or, they can ask that the form be sent to them by contacting the FRS Plan Choice Administrator toll-free at 1-866-446-9377, Option 4 (TRS 711). The mailing address and fax number are on the form.
Canceling a 2nd Election The member has until 4:00 p.m. ET on the last business day of the election’s effective month to call the MyFRS Financial Guidance Line and cancel the election.
Reversing a 2nd Election Once the deadline for canceling a 2nd Election has passed, the 2nd Election will be final and irrevocable. The member must remain in the new plan until their FRS-covered employment ends and they retire.
How to Monitor Election Status Employers can monitor the status of their employees’ elections (both 1st Elections and 2nd Elections) via the Division of Retirement’s FRS Online Employer Services application. Elections are recorded by the Plan Choice Administrator and provided to the Division. Employers can view and download a file that lists members who have elected the Investment Plan or used their 2nd Election to change to the Pension Plan.
Changing From the Pension Plan to the Investment Plan The Process
Member submits a 2nd Election to the Plan Choice Administrator (by online form or hardcopy form only).
The Plan Choice Administrator processes the election and notifies the Division.
The amount to be transferred to the Investment Plan is “locked in” on the 1st of the month following the day the 2nd Election request form is received or the online request is confirmed by the Plan Choice Administrator.
The Division transfers the accrued value of the member’s Pension Plan benefit to the Investment Plan. This transfer occurs on the last business day of the month in which the 2nd Election is effective.
The 2nd Election takes effect on the 1st of the month following the month in which the election is made.
The transferred amount is reflected in the member’s account on the last business day of the effective month.
Opening Balance (Pension Plan Present Value) The present value of the member’s Pension Plan benefit will become their opening account balance in the Investment Plan. The present value calculation is an actuarial determination of the member’s service credit; it is not the total of the employee and employer contributions paid into the Pension Plan. This transfer amount will be “locked in” the 1st of the month following the day the 2nd Election request form is received or the online request is confirmed by the Plan Choice Administrator. The transfer amount is not segregated by employer and employee contributions. The member’s employee contribution total will be reset to zero and will begin accumulating again the month of their Investment Plan effective date. The transfer amount is subject to the Pension Plan vesting requirements.
There is no out-of-pocket cost to the member for transferring into the Investment Plan.
The member can get an estimate of the accrued value of their Pension Plan benefit from the Division by logging in to MyFRS.com and selecting the 2nd Election Choice Service, or by contacting the MyFRS Financial Guidance Line at 1-866-446-9377, Option 2.
How It Affects Vesting Members who take any distribution from the Investment Plan before completing their vesting requirement could forfeit the present value calculation transferred from the Pension Plan. The employee is not eligible for a refund of any employee contributions made under the Pension Plan prior to their transfer to the Investment Plan.
Money contributed to the member’s Investment Plan account after the transfer from the Pension Plan will vest once the member has earned one year of combined service credit. For members who completed one year of service before making their 2nd Election, new Investment Plan contributions will be 100% vested. Members who terminate with less than one year of total service are eligible to receive only a distribution of their Investment Plan employee contributions, plus earnings, paid after transferring to the Investment Plan.
Changing From the Investment Plan to the Pension Plan The Process
Buy-In Cost To change to the Pension Plan, members have to “buy in” using their Investment Plan balance. If the Investment Plan balance is not enough to satisfy the buy-in cost, the member will need to make up the difference with their own money from another source. Funds rolled over from another qualified retirement plan can be applied to the buy-in cost. The buy-in cost is calculated as of the 1st of the month following the month in which the member’s 2nd Election request form is received by the FRS Plan Choice Administrator.
If the member has previous Pension Plan service, the buy-in cost is a present-value calculation using all the member’s FRS-covered service. This is called a return accumulated benefit obligation, or return ABO. If the member does not have previous Pension Plan service, the buy-in cost is the total cost to provide a Pension Plan benefit up to the time of the buy-in. This is called an actuarial accrued liability.
In either case, the buy-in cost is an actuarial calculation; it is not the total of the employee and employer contributions paid into the Investment Plan. Many members fail to understand the calculation of the buy-in cost.
The buy-in cost could be significant, and the longer the member works in an FRS-covered position, the higher the cost typically becomes. A member whose Investment Plan balance does not cover the buy-in cost will receive an invoice for the balance owed.
Buy-In Cost Estimate A member can get a buy-in cost estimate from the Division or by logging in to MyFRS.com and selecting the 2nd Election Choice Service. The actual buy-in cost will be calculated by the Division after receiving notification from the FRS Plan Choice Administrator that the member’s 2nd Election request has been processed.
Failure to Pay the Buy-In Cost The member will have 60 days to remit payment of any additional amount needed to satisfy the buy-in cost. If the payment is not received within 60 days, the 2nd Election will be voided. The member will be returned to the Investment Plan and their 2nd Election restored. The amount of Investment Plan assets that were liquidated will be returned to the Investment Plan and reinvested at the current market value. The FRS is not responsible for any market gains or losses to the member’s account during this process.
Balances Exceeding the Buy-In Cost Any Investment Plan balance that exceeds the buy-in cost will remain in the Investment Plan. Members in this situation will continue to manage their Investment Plan accounts as they did before. However, the surplus remaining in the Investment Plan will not be available for a distribution until they retire from the Pension Plan and begin receiving their Pension Plan benefit. Conversely, the surplus may be used to purchase optional service in the Pension Plan via a direct rollover. The member should contact the Investment Plan Administrator for more information.
How It Affects Vesting The years of service the member completed while in the Investment Plan will count toward their Pension Plan vesting requirement. Members who terminate employment prior to meeting the Pension Plan vesting requirements will only be eligible to receive a refund of employee contributions (without interest) paid into the Pension Plan after the 2nd Election transfer was completed.
As a note, taking a refund of employee contributions, while in the Pension Plan, will cancel the service credit represented by those contributions. This refunded service can only be purchased once the member has earned one year of total service credit after the refund was taken. Refunded service cannot be purchased once the member enrolls in the Investment Plan. The amount due will include 6.5% interest, compounded annually. This is an important consideration if the member ever returns to work for an FRS employer to earn the service credit needed to fully satisfy the Pension Plan’s vesting requirement.
Choosing the Hybrid Option Choosing the Hybrid Option freezes a member’s Pension Plan benefit and directs future contributions into an Investment Plan account. The member cannot move frozen Pension Plan account funds into the Investment Plan account at a future date.
Eligibility To elect the Hybrid Option, the member must be a Pension Plan participant and have at least eight years of service (five years of service if initially enrolled in the FRS prior to July 1, 2011).
Buying Back Into the Pension Plan In certain circumstances, a member can participate in the Hybrid Option and still have a 2nd Election available. In this case, the member can choose to “buy back” into the Pension Plan at a “present value” cost. Because of the complex nature of the Hybrid Option, please encourage members to call the MyFRS Financial Guidance Line before electing this option.
While the 2nd Election gives members flexibility, it is a complex decision with important financial implications. For example, depending on which plan the member is changing to, there could be an out-of-pocket cost to the member.
If employees ask you about the 2nd Election, recommend that they call the MyFRS Financial Guidance Line to speak with an unbiased financial planner before making any decisions. You may also share with them the Is a 2nd Election Right for You flyer.
Eligibility For the 2nd Election to be considered valid, the member must be actively employed and earning salary and service credit when the enrollment form is received by the Plan Choice Administrator or when a valid online election is made.
A 2nd Election cannot be made if the member:
- Has already used their 2nd Election.
- Has retired.
- Is a member of DROP.
- Has terminated FRS-covered employment.
- Is on an unpaid leave of absence.
- Is an employee of an educational institution and is on summer break.
- Is a reemployed retiree hired on or after July 1, 2017.
Getting Help With a 2nd Elections The FRS offers members a variety of services to help them make an informed decision about a 2nd Election. Refer members to these services:
- 2nd Election Choice Service on MyFRS.com
- MyFRS Financial Guidance Line (1-866-446-9377, Option 2)
- 2nd Election Presentation (conducted by the employer)
How to Make a 2nd Election
Online MyFRS.com. Online enrollment via the 2nd Election Choice Service is available only to members changing from the Pension Plan to the Investment Plan. To enroll online, members should log in to MyFRS.com and select the 2nd Election Choice Service. The election will be processed the same day if it is entered before 4:00 p.m. ET each business day.
Online 2nd Election Retirement Plan Enrollment Form. This is an online enrollment form members can complete without logging in to MyFRS.com. Online enrollments submitted before 4:00 p.m. ET each business day are processed within 24 hours and are effective on the date the election is submitted (excluding holidays).
By Mail or Fax Members can download the 2ndElection EZ Retirement Plan Enrollment Form or the 2nd Election Retirement Plan Enrollment Form. Or, they can ask that the form be sent to them by contacting the FRS Plan Choice Administrator toll-free at 1-866-446-9377, Option 4 (TRS 711). The mailing address and fax number are on the form.
Canceling a 2nd Election The member has until 4:00 p.m. ET on the last business day of the election’s effective month to call the MyFRS Financial Guidance Line and cancel the election.
Reversing a 2nd Election Once the deadline for canceling a 2nd Election has passed, the 2nd Election will be final and irrevocable. The member must remain in the new plan until their FRS-covered employment ends and they retire.
How to Monitor Election Status Employers can monitor the status of their employees’ elections (both 1st Elections and 2nd Elections) via the Division of Retirement’s FRS Online Employer Services application. Elections are recorded by the Plan Choice Administrator and provided to the Division. Employers can view and download a file that lists members who have elected the Investment Plan or used their 2nd Election to change to the Pension Plan.
Changing From the Pension Plan to the Investment Plan The Process
Opening Balance (Pension Plan Present Value) The present value of the member’s Pension Plan benefit will become their opening account balance in the Investment Plan. The present value calculation is an actuarial determination of the member’s service credit; it is not the total of the employee and employer contributions paid into the Pension Plan. This transfer amount will be “locked in” the 1st of the month following the day the 2nd Election request form is received or the online request is confirmed by the Plan Choice Administrator. The transfer amount is not segregated by employer and employee contributions. The member’s employee contribution total will be reset to zero and will begin accumulating again the month of their Investment Plan effective date. The transfer amount is subject to the Pension Plan vesting requirements.
There is no out-of-pocket cost to the member for transferring into the Investment Plan.
The member can get an estimate of the accrued value of their Pension Plan benefit from the Division by logging in to MyFRS.com and selecting the 2nd Election Choice Service, or by contacting the MyFRS Financial Guidance Line at 1-866-446-9377, Option 2.
How It Affects Vesting Members who take any distribution from the Investment Plan before completing their vesting requirement could forfeit the present value calculation transferred from the Pension Plan. The employee is not eligible for a refund of any employee contributions made under the Pension Plan prior to their transfer to the Investment Plan.
Money contributed to the member’s Investment Plan account after the transfer from the Pension Plan will vest once the member has earned one year of combined service credit. For members who completed one year of service before making their 2nd Election, new Investment Plan contributions will be 100% vested. Members who terminate with less than one year of total service are eligible to receive only a distribution of their Investment Plan employee contributions, plus earnings, paid after transferring to the Investment Plan.
Changing From the Investment Plan to the Pension Plan The Process
- The member submits a 2nd Election to the FRS Plan Choice Administrator (by online form or hardcopy form only).
- The FRS Plan Choice Administrator processes the election and notifies the Division.
- The buy-in cost is calculated as of the 1st of the month following the month in which the member’s 2nd Election request form is received by the FRS Plan Choice Administrator.
- The Division communicates the actual buy-in cost to the FRS Plan Choice Administrator by automated file.
- The FRS Plan Choice Administrator sends the available Investment Plan balance to the Division.
- If there is an additional amount due, the Division invoices the member for any balance needed to satisfy the buy-in cost.
- Any balance needed to satisfy the buy-in cost is due within 60 days of receiving the invoice.
- If the member’s Investment Plan account balance covers the buy-in cost to the Pension Plan, or the buy-in cost is paid by the member, the Division will send the member a statement of account, indicating that the transfer is complete and the member’s total service credit.
Buy-In Cost To change to the Pension Plan, members have to “buy in” using their Investment Plan balance. If the Investment Plan balance is not enough to satisfy the buy-in cost, the member will need to make up the difference with their own money from another source. Funds rolled over from another qualified retirement plan can be applied to the buy-in cost. The buy-in cost is calculated as of the 1st of the month following the month in which the member’s 2nd Election request form is received by the FRS Plan Choice Administrator.
If the member has previous Pension Plan service, the buy-in cost is a present-value calculation using all the member’s FRS-covered service. This is called a return accumulated benefit obligation, or return ABO. If the member does not have previous Pension Plan service, the buy-in cost is the total cost to provide a Pension Plan benefit up to the time of the buy-in. This is called an actuarial accrued liability.
In either case, the buy-in cost is an actuarial calculation; it is not the total of the employee and employer contributions paid into the Investment Plan. Many members fail to understand the calculation of the buy-in cost.
The buy-in cost could be significant, and the longer the member works in an FRS-covered position, the higher the cost typically becomes. A member whose Investment Plan balance does not cover the buy-in cost will receive an invoice for the balance owed.
Buy-In Cost Estimate A member can get a buy-in cost estimate from the Division or by logging in to MyFRS.com and selecting the 2nd Election Choice Service. The actual buy-in cost will be calculated by the Division after receiving notification from the FRS Plan Choice Administrator that the member’s 2nd Election request has been processed.
Failure to Pay the Buy-In Cost The member will have 60 days to remit payment of any additional amount needed to satisfy the buy-in cost. If the payment is not received within 60 days, the 2nd Election will be voided. The member will be returned to the Investment Plan and their 2nd Election restored. The amount of Investment Plan assets that were liquidated will be returned to the Investment Plan and reinvested at the current market value. The FRS is not responsible for any market gains or losses to the member’s account during this process.
Balances Exceeding the Buy-In Cost Any Investment Plan balance that exceeds the buy-in cost will remain in the Investment Plan. Members in this situation will continue to manage their Investment Plan accounts as they did before. However, the surplus remaining in the Investment Plan will not be available for a distribution until they retire from the Pension Plan and begin receiving their Pension Plan benefit. Conversely, the surplus may be used to purchase optional service in the Pension Plan via a direct rollover. The member should contact the Investment Plan Administrator for more information.
How It Affects Vesting The years of service the member completed while in the Investment Plan will count toward their Pension Plan vesting requirement. Members who terminate employment prior to meeting the Pension Plan vesting requirements will only be eligible to receive a refund of employee contributions (without interest) paid into the Pension Plan after the 2nd Election transfer was completed.
As a note, taking a refund of employee contributions, while in the Pension Plan, will cancel the service credit represented by those contributions. This refunded service can only be purchased once the member has earned one year of total service credit after the refund was taken. Refunded service cannot be purchased once the member enrolls in the Investment Plan. The amount due will include 6.5% interest, compounded annually. This is an important consideration if the member ever returns to work for an FRS employer to earn the service credit needed to fully satisfy the Pension Plan’s vesting requirement.
Choosing the Hybrid Option Choosing the Hybrid Option freezes a member’s Pension Plan benefit and directs future contributions into an Investment Plan account. The member cannot move frozen Pension Plan account funds into the Investment Plan account at a future date.
Eligibility To elect the Hybrid Option, the member must be a Pension Plan participant and have at least eight years of service (five years of service if initially enrolled in the FRS prior to July 1, 2011).
Buying Back Into the Pension Plan In certain circumstances, a member can participate in the Hybrid Option and still have a 2nd Election available. In this case, the member can choose to “buy back” into the Pension Plan at a “present value” cost. Because of the complex nature of the Hybrid Option, please encourage members to call the MyFRS Financial Guidance Line before electing this option.
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