Retiring on FRS: What Happens to Your Health Insurance

Roughly twenty-two thousand people in Polk County work for the school district, the county, the sheriff's office, or a city. Most of them are in the Florida Retirement System, and most of them have a reasonably clear picture of what their pension will pay.

Far fewer have a clear picture of what happens to their health insurance on the day they stop working. That gap is where the expensive surprises live, and it is worse for public employees than for almost anyone else, for a reason I will get to.

The Health Insurance Subsidy is smaller than you think

FRS provides a Health Insurance Subsidy, usually called HIS. Here is the entire formula:

$7.50 per month for each year of creditable service. Minimum $45 a month at six years. Maximum $225 a month at thirty years.

Four things about HIS that catch people:

It is a cash payment, not a plan. The money is added to your monthly benefit. There is no FRS health insurance policy behind it. You still have to go buy coverage.

You have to apply for it. It is not automatic. You file Form HIS-1, and you have to show proof that you actually have health coverage — at application and again when they re-verify. People leave this money on the table by assuming it just starts.

It is taxable. Budget the net, not the gross.

Only a surviving spouse named as your beneficiary can continue it. Other beneficiaries cannot.

It applies to both Pension Plan and Investment Plan members, though Investment Plan members have to have taken a distribution first.

Continuing your employer's plan: the rule everyone misreads

This is the most important section in this article.

Florida law — section 112.0801 of the statutes — requires local government employers to let retirees stay on the group health plan. It says the retiree must be offered continued participation at "a premium cost of no more than the premium cost applicable to active employees," with retiree claims experience pooled together with active employees rather than rated separately.

People read that and hear: my premium stays the same.

It does not. The statute caps the rate. It does not say who pays it. The same section states plainly that the cost of continued participation may be paid by the employer or by the retired employee — and in practice most Florida local governments have the retiree pay the entire thing.

What you do get is real, and worth naming: you pay the active-employee blended rate rather than a rate priced for a 58-year-old. That is a genuine benefit — an implicit subsidy from being pooled with a younger workforce. But it is often worth less than a marketplace premium tax credit, and that comparison is the whole decision.

So run the comparison

Two numbers, side by side.

Number one: what your employer's retiree continuation actually costs — for you, and for your spouse if applicable. Get this from your employer's benefits office in writing, with the current year's tier rates. Do not rely on what a colleague told you.

Number two: what a marketplace plan costs you after the premium tax credit, based on your projected retirement income.

That second number is the one people get wrong, in both directions. Your income in retirement is usually well below your working income, and the subsidy is calculated on the income you will actually have. Plenty of retirees who assumed the marketplace was unaffordable find the credit changes the picture substantially.

Ask your benefits office one more question while you have them, and get the answer in writing: if I decline the retiree plan now, can I come back to it later? Many of these plans are a one-way door. Once you are off, you are off.

Want the second number before you talk to your benefits office? Run your projected retirement income through the subsidy estimator.

DROP gives you something rare: a known date

If you are in the Deferred Retirement Option Program, you have an advantage almost nobody else gets. You know the exact month your employment ends, sometimes eight years ahead.

Most members can now participate for up to eight years, and law enforcement officers and instructional personnel for up to ten, following the 2023 changes that also raised the guaranteed interest rate on DROP accounts to 4%. Statewide there were about 29,000 active DROP participants as of mid-2025.

Use the date. Work backward from it:

• If your DROP end date falls before you turn 65, count the months between. That is how long you are buying your own coverage, and it is a number you can plan against rather than discover.
• If your DROP end date falls after 65, your transition is to Medicare — and the eight-month Part B Special Enrollment Period runs from when your active employment ends, not from when any retiree coverage ends.
• Either way, do the comparison above a year out, not the month you retire.

Special Risk members: the longest gap in the state

If you are a deputy, a firefighter, a corrections officer, or in another Special Risk class position, you accrue benefits faster — 3.0% per year of service — and you can retire considerably earlier. That is the point of the class, and it is well earned.

It also creates the largest pre-Medicare coverage gap of anyone in the system.

• Enrolled before July 1, 2011: normal retirement at age 55 with six years of service, or at any age with 25 years of Special Risk service.
• Enrolled on or after July 1, 2011: age 60 with eight years, or any age with 30 years.

Do the arithmetic on the first one. Someone who started at 22 under the pre-2011 rules reaches 25 years of service at 47. Even under the current rules, thirty years at any age puts a lot of people out in their early fifties.

That is thirteen to eighteen years of health coverage to buy before Medicare, against a Health Insurance Subsidy that maxes out at $225 a month. It is, in dollar terms, very likely the largest single expense of your retirement — larger than what most people budget for anything else — and it is the one least often modeled before the retirement date is set.

If you are Special Risk and within five years of eligibility, this deserves a real planning session, not a rule of thumb.

A note for City of Lakeland employees

If you work for the City of Lakeland, including Lakeland Electric, your situation is different from everyone else described above, and it is worth understanding early.

City of Lakeland employees are not in the Florida Retirement System. The city administers its own pension plans. That means no FRS Health Insurance Subsidy — the $7.50 per year of service does not apply to you at all.

The city also states on its own human resources pages that City of Lakeland employees do not contribute to Social Security. That has implications well beyond your paycheck, because Medicare Part A eligibility without premium is normally earned through Medicare-covered employment. Depending on when you were hired, and on a spouse's or prior employer's work record, this may be a non-issue or it may be something you need to confirm well before 65.

Do not assume either way. Contact the city's retirement services office and ask specifically about your Medicare-qualified employment status and your Part A eligibility. Do it years ahead, not months.

What to do

In order, starting about eighteen months out:

1. Confirm your exact last day of active employment, and your DROP end date if you are in DROP.
2. Calculate your Health Insurance Subsidy: years of creditable service times $7.50, capped at $225.
3. Get your employer's retiree continuation rates in writing, for every tier that applies to your household.
4. Ask, in writing, whether declining now forfeits the option later.
5. Project your retirement-year household income and find out what a marketplace plan actually costs after the credit.
6. Compare the two totals over the full stretch of years to 65, not month by month.
7. File Form HIS-1. Nobody files it for you.

I do this comparison for people in Polk County regularly, and the answer genuinely goes both ways — sometimes the employer plan wins, sometimes the marketplace does by a wide margin. What does not work is guessing.

Bring your service years, your retirement date, and a realistic income projection, and we can put both numbers on the table in about twenty minutes.