FRS DROP Death Benefit: What Happens to the Account When a Participant Dies

DROP creates a unusual situation when a participant dies: there are two entirely separate claims to file. The accumulated DROP account balance—monthly deferred pension payments plus interest—goes to whoever is named on the DROP beneficiary form. The ongoing monthly pension goes wherever the retirement option (1 through 4) directs it. These are different pots of money handled by different processes.

Many families discover this split the hard way, filing for one and not realizing the other exists.

The DROP Account Balance

Since Senate Bill 7024 took effect, most DROP participants can stay in the program for up to 96 months (8 years), while eligible K-12 employees can participate for up to 120 months (10 years). The account earns 4.0% annual interest compounded annually. The balance can become substantial; the amount depends on the member's pension benefit and time in DROP.

When the participant dies, the designated DROP beneficiary claims this balance using Form FST-11g, submitted to the Division of Retirement.

A surviving spouse has three distribution options: take the full amount as a cash lump sum, execute a direct trustee-to-trustee rollover to an IRA or qualified plan (401(k), 403(b), 457(b)), or split the balance between partial cash and partial rollover.

A non-spouse beneficiary can only receive the DROP accumulation as a lump-sum distribution—no rollover option is available.

The Monthly Pension Benefit

Because entering DROP constitutes effective retirement, the participant already selected one of the four pension payment options (Option 1, 2, 3, or 4) at DROP entry. That selection controls what happens to the monthly pension:

• Option 1: Monthly payments stop at death. Any remaining employee contributions are refunded to the named beneficiary.
• Option 2: Payments continue to the beneficiary for whatever remains of the original 120-month guarantee period.
• Option 3: The joint annuitant receives 100% of the monthly pension amount for life.
• Option 4: The survivor receives two-thirds (66.67%) of the monthly amount for life.

The DROP beneficiary and the pension beneficiary can be different people. Check Form FST-12 for the DROP/retiree beneficiary designation and the original retirement application for the option selection.

Tax Consequences of DROP Distributions

The tax treatment depends entirely on how the surviving spouse or beneficiary takes the money:

• A direct cash lump sum triggers mandatory 20% federal income tax withholding at the time of distribution.
• A direct trustee-to-trustee rollover to an IRA defers all taxation until future withdrawals.
• A combination approach applies the 20% withholding only to the cash portion.

The Division of Retirement issues Form 1099-R for DROP distributions.

Filing the Claim

Contact the Division of Retirement at 844-377-1888 to report the death and request the claim packet. You'll need a certified death certificate, proof of your identity and relationship, and the member's Social Security number.

The Florida FRS Survivor Benefits Guide walks through both the DROP balance claim and the pension continuation process, with a distribution decision worksheet to compare the tax impact of lump-sum versus rollover options.

See more Florida guides →