FRS DROP Program Rules 2026: 96 Months, 4% Interest, and SB 7024 Changes

What SB 7024 Changed

Senate Bill 7024, effective July 1, 2023, rewrote the core DROP parameters that had been in place for years. If you're reading older articles or advisor materials that mention 60-month limits or 1.3% interest, those numbers are wrong. Here's what actually applies in 2026:

Maximum participation: 96 calendar months (8 years) for all membership classes — Regular, Special Risk, Senior Management, and Elected Officers. The old 60-month cap is gone.

Interest rate: 4.0% effective annual rate, compounded monthly. Your monthly pension deposits into the FRS Trust Fund earn interest throughout your DROP participation. The previous 1.3% rate no longer applies.

No more restrictive entry windows. Before SB 7024, members had to enter DROP within 12 months of reaching normal retirement age or lose eligibility entirely. That cliff is eliminated. You can enter DROP at any time after reaching normal retirement age. The 96-month maximum counts your actual DROP participation, starting when you enter the program.

K-12 extensions. Eligible instructional personnel employed by district school boards, the Florida School for the Deaf and the Blind, or qualifying developmental research schools can extend DROP participation by up to 24 months beyond the standard 96, with employer authorization and Division approval. They must remain in an eligible position and end participation on the last day of the school year. This extension provision expires June 30, 2029.

How DROP Actually Works

When you enter DROP, you're technically retired — but you keep working and collecting your salary. Your monthly pension benefit, calculated using the payout option you selected at DROP entry, is deposited into the FRS Trust Fund instead of being paid to you directly. Those deposits earn 4.0% annual interest plus any applicable pre-July 2011 COLAs.

During DROP, your 3% employee retirement contributions stop entirely. You still pay Social Security and Medicare taxes on your salary.

Your base pension benefit is calculated when you enter DROP. Additional years of service during DROP do not increase it, and salary increases during DROP do not change your AFC. Applicable COLAs can still increase the monthly benefit during DROP. This is the fundamental trade-off: you accumulate a lump-sum balance at a guaranteed rate, but add no service credit to the pension calculation.

What Happens When DROP Ends

After DROP ends, the Division processes your payout after it receives your payout instructions and your employer verifies your termination. It cannot be paid before the calendar month following your termination. Three payout options:

Direct rollover to a Traditional IRA, 401(k), 403(b), or 457(b) deferred compensation plan. This preserves tax-deferred status and avoids immediate taxes.

Lump-sum cash payout. The Division withholds 20% for federal taxes automatically. If you're under age 59½, you may also owe a 10% early withdrawal penalty (the age-55 separation exception applies to some members).

Partial rollover, partial cash. You can split the balance between a rollover and a cash distribution in any proportion.

Simultaneously, your monthly pension benefit begins paying directly to you under the option you chose at DROP entry. You then enter the mandatory 6-calendar-month termination period — no employment relationship or services with an FRS employer during that period. Volunteer services defined in Section 121.091(15), Florida Statutes, are excluded.

DROP vs. Working Without DROP

Members who reach normal retirement age but don't enter DROP keep accruing service credit and potentially increasing their AFC. Their eventual monthly benefit will be higher than the amount frozen at DROP entry. The question is whether the guaranteed 4.0% accumulation on the lump-sum balance outweighs the incremental monthly benefit increase.

There's no universal answer — it depends on your salary trajectory, years of service at entry, and what you'd earn on the lump sum after distribution. The Florida FRS Retirement Guide includes a DROP distribution matrix worksheet to model both paths with your actual numbers, plus the Form DP-11 and DP-ELE filing instructions.

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