The FRS DROP program lets a Florida Retirement System Pension Plan member officially retire, keep working the same job, and bank the monthly pension in a separate account instead of collecting it. Since July 1, 2023, that account can run as long as 96 months and earns 4 percent interest, up from 60 months at 1.3 percent. The old rule that gave you a single 12-month window to sign up is gone. That last change matters most in Pasco County, because a lot of the guides still sitting online were written before it happened.
This corridor is full of people this applies to. Pasco County Schools, Pasco County government, the Sheriff’s Office, the cities of Zephyrhills and Dade City, and USF over in Temple Terrace are all FRS employers. If you’ve worked at one of them long enough to be thinking about retirement, DROP is probably on your list of decisions.
What is the FRS DROP program?
DROP stands for Deferred Retirement Option Program. When you enter it, you’re treated as retired for pension purposes on paper while you keep showing up to the same job for the same paycheck. Your monthly retirement benefit gets calculated and frozen at that moment. Instead of being mailed to you, it goes into a DROP account each month and collects interest until you actually leave.
At the end, you get the accumulated balance plus interest, and your regular monthly pension starts arriving for the first time. So you walk away with two things instead of one: the lump sum that built up during DROP, and the lifetime monthly benefit.
Who’s eligible for DROP in Pasco County?
You have to be in the FRS Pension Plan and you have to have reached your normal retirement date. This is the part that surprises people: if you chose the FRS Investment Plan, you can’t participate in DROP at all. The Investment Plan works more like a 401k with a balance you control, and it has no DROP equivalent. Investment Plan members can only receive DROP money in one direction, as a rollover coming in from a Pension Plan member.
Your normal retirement date depends on when you were first enrolled:
- Enrolled before July 1, 2011: age 62 with at least 6 years of service, or 30 years of service at any age.
- Enrolled on or after July 1, 2011: age 65 with at least 8 years of service, or 33 years of service at any age.
- Special Risk Class members, which covers a lot of Sheriff’s Office and fire service employees, hit those milestones earlier, at age 55, or at 52 with the specified years of service.
Confirm your own date through your MyFRS account rather than working from a general chart, since transfers between plans and purchased service credit can move it.
The 12-month entry window is gone
For years, the rule was that you had a 12-month window after reaching your normal retirement date to elect DROP, and every month you waited cost you a month of participation. Miss the full year and you lost DROP entirely.
Senate Bill 7024 eliminated that window in 2023 for all membership classes. Pasco County Schools said so plainly to its own employees when it summarized the bill: all employees can choose to enter DROP at any time after their normal retirement date.
This is worth being blunt about, because it’s the single most common piece of outdated advice on this topic. District handouts, union PDFs, and national retirement articles written before mid-2023 still describe the old window, and some of them are still the top results people find. If someone told you that you already missed your DROP window, that guidance was based on a rule that no longer exists. Check your current status before you accept it.
How long can you stay in DROP?
Up to 96 calendar months, which is eight years, for every membership class. That’s up from the 60 months, or five years, that applied before 2023.
K-12 instructional personnel get more room. Teachers can participate for up to 120 calendar months, a full ten years. Instructional personnel also keep the option to extend their DROP period to the last day of the last calendar month of the school year when their termination date would otherwise land mid-year, which keeps a teacher from having to walk out in the middle of a term.
For a Pasco County Schools teacher, the practical effect of the 2023 changes is significant: five extra years of participation compared to the old rules, at more than triple the old interest rate.
What the 4 percent interest rate actually changes
Before July 1, 2023, DROP accounts earned 1.3 percent a year. They now earn 4 percent. On a balance built from years of monthly pension deposits, that’s a meaningfully different number at the end, and it’s the reason the arithmetic on staying longer looks different than it did under the old program.
It’s still a fixed, guaranteed rate rather than a market return, which is the trade-off. The money isn’t invested in anything, and it doesn’t go down. What a planner can actually help with is comparing what your DROP account will hold at various exit dates against what leaving earlier and starting your pension sooner would give you, using your real numbers rather than a general rule.
What you give up while you’re in DROP
Your service credit stops. Once you enter DROP, you’re no longer accruing time toward a larger future benefit, and the pension amount calculated at entry is the amount that will be paid for life, subject to whatever cost-of-living adjustment applies to your class. Raises you earn during DROP don’t increase the frozen benefit.
That’s the core trade. You’re exchanging further pension growth for a pot of money that builds on the side. Whether that trade favors you depends on how much your benefit would still have grown, which comes down to your salary trajectory and how close your service years are to the next threshold. It’s a real calculation, not a preference, and it’s the main reason people in this situation sit down with a retirement income planner before signing the paperwork.
How the DROP payout works when you leave
When your participation ends, you and your employer submit Form DP-TERM to verify that you’ve terminated employment with all FRS employers. Your accumulation stops earning interest in the month participation ends, so the timing at the back end matters too.
You then choose one of three ways to take the money:
- A lump-sum payment, with 20 percent withheld for federal income taxes.
- A direct rollover into an eligible retirement plan or a traditional IRA.
- A combination, taking part as cash and rolling over the rest.
If you don’t make a choice within 60 days, the decision gets made for you: the Division issues a lump sum and withholds 20 percent. That default is a poor outcome for most households, and it happens to people who simply didn’t return a form on time.
Rolling into the FRS Investment Plan is one of the available destinations. That rollover has to be more than $1,000, and the Investment Plan charges a quarterly administrative fee of $6, which is $24 a year, on top of the fees for whichever funds you pick. If you already took a cash lump sum and then decide you’d rather have rolled it over, you have 60 days from the date of the distribution check to fix it. After that, the window closes.
The mechanics here are close to what happens with an old 401k after a job change, and planners who handle 401k rollovers regularly handle DROP distributions the same way.
Why the payout year is the part worth planning
Florida has no state income tax, so a DROP lump sum isn’t taxed by the state. Federal tax still applies in full, and this is where a large payout can cause problems that have nothing to do with the payout itself.
Taking eight years of accumulated pension as cash in a single tax year can push a household into a higher federal bracket for that year. It can also raise Medicare Part B and Part D premiums about two years later, because those premiums are set using income from two years prior. A retiree who takes a large lump sum at 63 can find their Medicare premium adjusted upward at 65 without ever connecting the two events.
None of that is a reason to avoid the lump sum. It’s a reason to decide the split between cash and rollover on purpose, in coordination with your other income for that year. This is where tax planning coordination with a CPA earns its keep, and it connects directly to Medicare enrollment timing and to the required minimum distributions that will eventually apply to whatever you roll over.
The other decision landing in the same window is Social Security timing, since a DROP exit date, a pension start date, and a Social Security claiming date all interact. Households in Temple Terrace and across East Pasco most often ask us for a planner precisely at this moment, when several irreversible dates have to be set at once.
Frequently asked questions
Can I still enter DROP if I passed my normal retirement date years ago?
Yes. The 12-month entry window that used to apply was eliminated by Senate Bill 7024 in 2023, and FRS Pension Plan members in every membership class can now enter DROP at any time after reaching their normal retirement date. If you were told years ago that you’d missed your chance, confirm your current eligibility through MyFRS before accepting that.
Can I join DROP if I’m in the FRS Investment Plan?
No. DROP is only available to FRS Pension Plan members. The Investment Plan has no DROP equivalent, because it’s an account-balance plan rather than a defined monthly benefit. Investment Plan members can receive a DROP rollover coming in, but they can’t participate themselves.
How long can a Pasco County teacher stay in DROP?
Up to 120 calendar months, which is ten years. That’s the K-12 instructional personnel maximum, compared to 96 months for all other membership classes. Instructional personnel can also extend to the last day of the last month of the school year if their termination date would otherwise fall mid-year.
What happens if I don’t pick a payout method?
If you don’t select a distribution method within 60 days, the Division of Retirement issues your entire DROP accumulation as a lump-sum payment and withholds 20 percent for federal income taxes. It’s the default, not a recommendation, and it removes the chance to roll any of it over tax-deferred.
Does the DROP lump sum get taxed by Florida?
No. Florida has no state income tax, so the payout isn’t taxed at the state level. It’s still fully subject to federal income tax in the year you receive it, which is why the size and timing of the cash portion is worth planning rather than defaulting.
Do I need a financial planner to enter DROP?
Not to enroll, no. The paperwork goes through your employer and the Division of Retirement. What a licensed planner adds is the modeling around it: comparing exit dates, deciding the cash and rollover split, and coordinating the payout year with Social Security, Medicare, and your other income.
Getting matched with a planner who knows FRS
DROP is one of the few retirement decisions where the deadlines are hard, the paperwork is unforgiving, and the rules changed recently enough that a lot of the advice in circulation is out of date. If you’d like to be matched with an independent, licensed financial planner in the Wesley Chapel corridor who works with FRS members regularly, call Wesley Chapel Wealth Pro at (813) 680-3195. We’re a free matching service, we don’t manage money or give investment advice, and the planner you’re matched with handles every recommendation from there.