If you're an FRS member thinking about switching from the Pension Plan to the Investment Plan (or the other way around), the term "buyback cost" has probably come up. It's one of the most misunderstood parts of the FRS 2nd Election process, and getting it wrong can change your retirement picture in ways you didn't expect.
This article breaks down how the FRS 2nd Election buyback cost is calculated, what determines the number you'll see on your estimate, and why the timing of your decision matters more than most members realize.
The Florida Retirement System (FRS) gives every active member a single opportunity to change retirement plans after their initial enrollment choice. This one-time switch is called the 2nd Election. You can move from the Pension Plan to the Investment Plan, or from the Investment Plan to the Pension Plan.
To use your 2nd Election, you must be actively employed by an FRS-participating employer and earning salary and service credit. Members who have already retired, entered the Deferred Retirement Option Program (DROP), or terminated employment are not eligible.
Once finalized, the 2nd Election is irrevocable. You remain in the new plan until you retire. That makes understanding the financial implications, especially the buyback cost, essential before submitting any paperwork.
The buyback cost applies when you switch from the Investment Plan to the Pension Plan. It represents the actuarial cost of purchasing the Pension Plan benefit you would have earned had you been in the Pension Plan all along.
If you had previous Pension Plan service before joining the Investment Plan, the buyback cost is calculated as a "return accumulated benefit obligation" (return ABO). This is the present value of your total accrued Pension Plan benefit, including both your old and new service.
If you have no prior Pension Plan service, the buyback cost is calculated as an "actuarial accrued liability." This reflects the total cost of providing the Pension Plan benefit up to the point of the buyback.
In both cases, the calculation is an actuarial determination. It is not simply the sum of employee and employer contributions paid into the Investment Plan. Many members expect the number to match their account balance, and it rarely does.
When moving from the Pension Plan to the Investment Plan, there is no out-of-pocket cost. Instead, the present value of your accrued Pension Plan benefit becomes your opening Investment Plan account balance.
This present value is locked in on the first of the month following the day your 2nd Election form is received by the Plan Choice Administrator. The calculation is based on your years of service credit, your Average Final Compensation, your membership class, and current actuarial assumptions.
The transfer amount is not separated by employer and employee contributions. After the transfer, your employee contribution total resets to zero and begins accumulating again under the Investment Plan.
The buyback cost and present value calculations both rely on actuarial assumptions set by the FRS. These assumptions, detailed in the FRS 2025 Funding Actuarial Valuation Report, include the Pension Plan's projected investment return rate, inflation rate, payroll growth rate, mortality tables, and DROP retirement patterns.
When the FRS updates these assumptions (as it did following the 2014 Actuarial Assumptions Conference), the resulting 2nd Election calculations can shift modestly or significantly compared to earlier estimates. A calculation run under one set of assumptions may look very different six months later if the assumptions change.
This is one reason members who delay running their numbers can be caught off guard. The estimate you received last year may no longer reflect what you'll actually owe or receive today.
FRS Special Risk Class members (law enforcement, firefighters, correctional officers, and similar public safety roles) often face a notably higher buyback cost than Regular Class members. The reason is the Special Risk accrual rate.
Special Risk members earn benefits at 3% of Average Final Compensation per year of service, compared to roughly 1.6% for Regular Class members. That higher accrual rate produces a substantially larger Pension Plan benefit, and the actuarial cost of purchasing that benefit through a 2nd Election buyback rises accordingly.
For a Special Risk member with 20 or more years of service, the buyback cost can be a significant figure. Understanding Special Risk retirement timelines and benefit formulas is critical before evaluating whether the switch makes financial sense.
When you switch from the Investment Plan to the Pension Plan, your Investment Plan balance is applied toward the buyback cost first. If your balance covers the full amount, the transfer proceeds automatically.
If your Investment Plan balance is less than the buyback cost, you will receive an invoice for the remaining amount. You have 60 days to pay the difference from personal funds or by rolling in money from another qualified retirement plan.
If you do not pay within 60 days, the 2nd Election is voided. You'll be returned to the Investment Plan, and your 2nd Election opportunity is restored. However, the Investment Plan assets that were liquidated will be reinvested at current market value, and the FRS does not guarantee against any market gains or losses during that period.
If your Investment Plan account balance is greater than the buyback cost, the excess remains in your Investment Plan account. You'll have benefits in both plans going forward.
There's a detail many members miss here. That surplus sitting in the Investment Plan is not available for distribution until you actually retire from the Pension Plan and begin receiving your monthly benefit. You can continue managing the investments in that account, but you cannot withdraw the funds early.
One option: the surplus can be used to purchase optional service in the Pension Plan through a direct rollover, which could increase your eventual monthly benefit.
Vesting rules change depending on the direction of your switch.
If you move from the Pension Plan to the Investment Plan, your opening account balance vests once you complete the required combined service credit (eight years if enrolled on or after July 1, 2011, or six years for earlier enrollees). Taking a distribution before meeting the vesting requirement could mean forfeiting the transferred amount.
If you move from the Investment Plan to the Pension Plan, your Investment Plan service years count toward the Pension Plan vesting requirement. But if you leave employment before vesting in the Pension Plan, you may only receive a refund of employee contributions paid after the transfer, without interest.
The 2nd Election is not a decision to rush. Because it is irrevocable once finalized, timing and preparation matter enormously.
Members who are nearing retirement eligibility should carefully weigh the tradeoffs. Switching to the Investment Plan gives you more control over your assets and portability, but you lose the guaranteed lifetime monthly income of the Pension Plan. Switching to the Pension Plan provides that guaranteed income, but the buyback cost may require significant out-of-pocket funds.
Florida Retirement Resources works with FRS members to compare both plans side by side, running the actual numbers specific to your service history, membership class, and retirement goals. Having those figures in hand before you submit anything makes a meaningful difference.
The FRS 2nd Election buyback cost is an actuarial calculation, not a simple account transfer. It reflects the true cost of the Pension Plan benefit you're purchasing or the present value of the benefit you're giving up. Actuarial assumptions can shift those numbers over time, and Special Risk members often face higher costs because of their enhanced accrual rate.
Understanding exactly what you'll owe or receive before you commit is usually the most important step in the process. If you're an FRS member evaluating a plan switch, reviewing your full retirement picture with a specialist who understands FRS mechanics can help you move forward with confidence.
The buyback cost is the actuarial amount you must pay to transfer from the FRS Investment Plan to the Pension Plan. It represents the cost of purchasing your accrued Pension Plan benefit and is not the same as your total contributions.
No. When you switch from the Pension Plan to the Investment Plan through a 2nd Election, the present value of your accrued Pension Plan benefit transfers into your Investment Plan account at no out-of-pocket cost. Florida Retirement Resources can help you understand what that transfer value means for your retirement income.
You can cancel until 4:00 p.m. ET on the last business day of the month your election becomes effective. After that deadline passes, the election is final and cannot be reversed. Florida Retirement Resources recommends having a clear plan before submitting your election form.
Special Risk Class members earn benefits at 3% per year of service, roughly double the Regular Class rate. That higher accrual means the Pension Plan benefit is larger, which makes the buyback cost substantially higher. Florida Retirement Resources provides detailed plan analysis to help you evaluate the full cost.
You can log in to MyFRS.com and use the 2nd Election Choice Service to generate an estimate based on current actuarial assumptions. For a more comprehensive review that factors in your full retirement goals, working with a planning resource like Florida Retirement Resources gives you context the estimate alone cannot provide.