If you’re a member of the FRS Investment Plan, retiring means more than just walking away from work — it means making decisions about your account, timing termination, and understanding how your benefit is paid. Unlike the Pension Plan, which offers a formula-based lifetime benefit, the Investment Plan is a defined contribution vehicle. Your account value depends on contributions, investment returns, and how you choose to withdraw or roll over your funds. This means there are a few more decisions and considerations to be made when planning retirement from the Investment Plan.
Here’s how the process works, a few things to look out for, and how the Health Insurance Subsidy (HIS) ties in.
Before you can begin to take a distribution from your Investment Plan account, you must terminate all FRS-covered employment and not return to an FRS employer for 6 months from the date of your first distribution.
Definition: “FRS employment” includes paid or unpaid service for any employer participating in the FRS (including OPS, adjunct roles, election poll work, etc.).
Your employer must report your termination date on the monthly retirement contribution file so the plan administrator can process distributions.
Vesting: For the Investment Plan, you are generally vested in your contributions after 1 year of service.
“Normal retirement” for Investment Plan purposes: It is defined as the later of the Pension Plan normal retirement age/service rule or the date you are vested in the Investment Plan.
For example:
If you were hired prior to July 1, 2011: Regular Class – Age 62 with 6+ years service, or 30 years regardless of age.
If hired on/after July 1, 2011: Regular Class – Age 65 with 8+ years service, or 33 years regardless of age.
If you meet the normal retirement requirements when you leave service, you unlock a more favorable distribution timeline (see next step). If you do not meet them, a longer waiting period applies.
Once you’ve terminated FRS employment and are ready to take distributions, the timeline depends on whether you met the normal retirement requirements when you separated. The rules include:
You may take a one-time distribution of up to 10% of your account balance after one full calendar month of no FRS employment.
The remainder of the account can be withdrawn after an additional two calendar months (i.e., total of three full calendar months since termination) if not employed by an FRS employer.
Example: If your termination date is April 20, you would be eligible for up to 10% on June 1 (after one full calendar month) and the remainder on or after August 1 (after three calendar months).
You must wait until the first business day of the month following three full calendar months from your termination date before you can begin distributions.
Example: If you terminate on April 20, then May is the first full calendar month, June the second, July the third – you would be eligible for distributions on August 1 (the first business day after three full months).
Once eligible, you’ll need to decide how you will receive your vested account balance. Options include:
Lump-sum distribution (subject to tax and possible penalties).
Periodic withdrawals (quarterly, semiannual, annual) or a payout schedule.
Rollover into another qualified plan (IRA, 401(k), 457(b)) — which may preserve tax-deferred status.
Purchasing a lifetime payment option (annuity).
Be aware: once you take a distribution (or rollover) you are considered “retired” under FRS and certain reemployment restrictions may apply.
If you are eligible, you may receive the FRS Health Insurance Subsidy (HIS), which helps offset retiree health coverage costs. Key points:
The HIS is $7.50 per month for each year of creditable service, up to $225 per month.
You must submit proof of eligible health insurance coverage.
The subsidy is added to your retirement benefit or distribution — it does not pay your insurance premiums directly.
Once you initiate a distribution, that action may trigger FRS to view you as a retiree — affecting your reemployment rights, renewal of membership, etc.
Taxes and penalties: If you take a distribution before age 59½ (or under certain other conditions) you may be subject to a 10% federal early withdrawal penalty (unless an exception applies).
Required Minimum Distributions (RMDs) apply once you reach the IRS required beginning age.
If you return to FRS covered employment after distribution, you could become a “reemployed retiree” with restrictions.
Be sure to leave adequate time before your termination so that your employer files the termination date timely and you meet the full calendar-month or three-month rules.
Retiring from the FRS Investment Plan involves more than simply stopping work — it requires careful timing of your termination, understanding the waiting period, choosing a distribution approach, and applying for the HIS if you’re eligible. The rules around the one-month vs. three-month wait and the 10% early distribution option (when normal retirement criteria are met) make a meaningful difference. By planning these steps in advance, you can better align your timing, avoid unnecessary delays, and have a clearer path into your next chapter.
This material is provided for educational purposes only and is not intended to provide investment, tax, or legal advice. Individuals should consult with their financial or tax professional regarding their specific situation