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Minnesota Retirement System

Under its Minnesota State Retirement System (MSRS), Teachers Retirement Association and Public Employees Retirement Association, Minnesota offers retirement benefits through several different pension plans. A key fact to consider, however, is that all of Minnesota’s plans come with retirement benefits. But the state taxes all forms of retirement income. Therefore, you’ll want to make sure your pension plan’s eligibility requirements and the state’s tax law align with your savings goals. If you could use some additional retirement planning help , the SmartAsset financial advisor matching tool can help you find financial advisors in your area.

Types of Retirement Systems in Minnesota

The state of Minnesota offers a wide range of retirement systems and pension plans from which its diversely skilled employee population can select. In addition, MSRS also provides disability, survivor and retirement benefits across all of its pension plans. Though not its primary retirement systems, the MSRS also offers an employer-sponsored Health Care Savings Plan (HCSP) and the Minnesota Deferred Compensation Plan (MNDCP). However, certain Minnesota employees may also qualify for the Teachers Retirement Association (TRA) and the Public Employees Retirement Association (PERA).

July 1, 2010 or after:

  • Members eligible for monthly benefits after five years of service.
  • May be eligible for full retirement benefits at age 66.
  • Eligible for a reduced monthly benefit at age 55 or later.

July 1, 1989- June 30, 2010:

  • Eligible for monthly benefits after three years of service.
  • May be eligible for full retirement benefits at age 66.
  • Eligible for a reduced monthly benefit at age 55 or later.

Before July 1, 1989: 

  • Eligible for full retirement benefits if you are age 60, your age plus years of service equals 90 or more.
  • Eligible for a reduced monthly benefit if you’re at least 55 years old or have at least 30 years of service.

participation mandatory unless employees elect to be covered by the General Employees Retirement Plan. -Judges who were first appointed or elected after June 30, 2013.-Members age 55 or older who are vested in TRA’s system are eligible for a retirement benefit.

Minnesota Retirement Systems
Plan Title Eligible Employees
Minnesota State Retirement System: General Plan – Employee retirement eligibility is divided into three tiers of dates:
Minnesota State Retirement System: Correctional Plan -If first hired before July 1, 2010, employees are eligible for monthly benefits after three years of service.
-If hired first hired after June 30, 2010, employees are eligible for full benefits after five years of service.
Minnesota State Retirement System: Unclassified Plan – Membership is determined by Minnesota law;
Minnesota State Retirement System: State Patrol Plan -If first hired before July 1, 2013, employees are eligible for monthly benefits after at least three years of service.
-If first hired after June 30, 2013, employees are eligible for monthly benefits after 10 years of service.
Minnesota State Retirement System: Judges Plan -Judges who were first appointed or elected before July 1, 2013.
Minnesota State Retirement System: Legislators Plan -Membership mandatory for members elected before June 30, 1997.
-Legislators eligible after six years of service.
-Legislators who are at least 62 years old receive full benefits.
-Legislators who are at least 55 years old receive reduced benefits.
Teachers Retirement Association (TRA)
Public Employees Retirement Association (PERA): General Plan -Membership automatic for non-elected public employees with eligibility requirements set by Minnesota statute.
Public Employees Retirement Association (PERA): Correctional Plan -Membership automatic for non-elected public employees with eligibility requirements set by Minnesota statute
Public Employees Retirement Association (PERA): Police and Fire Plan -Membership automatic for non-elected public employees with eligibility requirements set by Minnesota statute
Public Employees Retirement Association (PERA): Statewide Volunteer Firefighter Retirement Plan (SVFRP) -Firefighters must be at least 50 years old; have at least five years in service credit; must have ended their employment relationship with the fire department for at least 30 days

Overview of Minnesota’s Retirement Systems

Minnesota Retirement System

Minnesota State Retirement System (MSRS): General Plan – Functioning as the largest plan MSRS offers, the General Plan serves a few different categories of employees. This includes state employees, civil service employees the University of Minnesota and employees of the Metropolitan Council. In addition, eligible employees receive retirement, disability and survivor coverage. Employees may also receive lifetime retirement benefits.

Minnesota State Retirement System (MSRS): Correctional Plan – Under the Correctional Plan, certain correctional officers and specified employees in the Department of Corrections and Human Services qualify for coverage. These employees receive retirement, survivor and disability coverage. However, they must contribute to Social Security.

Minnesota State Retirement System (MSRS): Unclassified Plan –The Unclassified Plan distributes retirement benefits based on the employee’s account balance at retirement. In addition, the plan is tax-advantaged and eligible employees must contribute to Social Security.

Minnesota State Retirement System (MSRS): State Patrol Plan – The State Patrol Plan provides retirement, survivor and disability coverage to eligible employees. This includes state troopers, crime bureau agents, gambling enforcement agents and conservation officers. Department of Commerce fraud investigators and members of the Department of Corrections fugitive apprehension unit also receive coverage.

Minnesota State Retirement System (MSRS): Judges Plan – Coverage for the Judges Plan goes to eligible judges or justices in courts established by the Minnesota Constitution. At retirement, eligible employees receive lifetime retirement benefits with possible post-retirement increases.

Minnesota State Retirement System (MSRS): Legislators Plan – The Legislators Plan offers full retirement benefits for eligible employees at age 62 and reduced benefits at age 55. While retirement comes with monthly benefits, eligible members’ survivors also stand to benefit from the plan. Upon your death, your survivors could potentially receive a lifetime survivor benefit.

Teachers Retirement Association (TRA) – TRA members receive lifetime retirement benefits, as well as death, disability or early retirement benefits. In addition, eligible members have access to counseling services which answer any questions they may have about pension benefits.

Public Employees Retirement Association (PERA): General Plan – PERA’s General Plan allows eligible members to save tax-deferred PERA contributions after retirement. In addition, members may also be eligible for benefits through Social Security.

Public Employees Retirement Association (PERA): Correctional Plan – Established in 1999, the Correctional Plan covers correctional officers working in county and regional adult and juvenile correctional facilities. The plan currently covers more than 1,000 retirees with 3,700 correctional officers.

Public Employees Retirement Association (PERA): Police and Fire Plan – This plan currently covers more than 11,000 active public safety officers and covers around 10,000 retirees and survivors. In addition, taxes on the plan are deferred.

Public Employees Retirement Association: Statewide Volunteer Firefighter Retirement Plan (SVFRP) – SVFRP offers retirement benefits to firefighters and local police officers. Although it doesn’t provide disability coverage, it offers survivor benefits and supplemental benefits.

Retirement Taxes in Minnesota

Federal

Lucky for you, any funds you place in your pension plan are tax-deferred. This means your contributions won’t be subject to federal income tax. Still, you must pay federal tax on any withdrawals you make. So if you withdraw from your earnings or receive any distributions, you’ll have to claim them on your federal tax return. But how do you do this? You can either make an estimated tax payment or choose to pay the IRS directly.

If you’d like to make estimated tax payments, you’ll have to calculate the money you owe and pay it on a quarterly basis. For regular withholdings, however, you’ll have set amounts of income pulled from your regular checks as taxes.

Furthermore, in some cases, your retirement plan may allow you to rollover your pension benefits into another retirement account. This basically protects your earnings from federal income taxes. But you’ll still fall victim to taxes if you withdraw any of those funds. So while you may initially avoid taxes with a rollover to an account like the individual retirement account, you’ll still have to pay taxes on any money you withdraw.

State

When it comes to state taxes, Minnesota isn’t one of the best places for retirees. Unlike most states, Minnesota taxes both Social Security income and all other forms of retirement income. In addition, the state doesn’t offer any exemptions or deductions on pension income or retirement compensation.

Because all retirement income is fully taxable in Minnesota, you should consider whether it’s the best place for you to retire. For instance, if you receive at least $156,900, your income will be taxed at a 9.85% rate (if you’re married and filing separately).

Current Financial Health of the Georgia Retirement System

Minnesota Retirement System

The MSRS currently holds more than $23.9 billion in total assets, according to the 2017 Board Chairperson’s Report. In addition, Minnesota experienced an unexpectedly high rate of investment returns in 2017. This ultimately boosted its funding for retirement plans. However, its 2017 legislation to create more secure and lasting pension plans wasn’t as successful.

Nonetheless, the MSRS still earned investment returns which grew its funding and total assets. But what investment types contributed to this increase in funding? Minnesota uses domestic and international equity, domestic bonds, private markets and cash. Despite the state’s unrewarding tax system, it still generates a good amount of its funding from such investments.

Tips to Prepare for Retirement

  • We all know the savings you accrue will most influence the quality of your retirement, but another factor also affects the quality of your golden years: location. When planning for retirement, you should consider the state taxes associated with whichever state you hope to settle in. All states tax differently, and some aren’t as friendly toward retirement income as others. It may help you to consider SmartAsset’s list of the most tax-friendly states before making a final decision.
  • If you’re not sure where to begin or which pension plan to select, you should seek the professional advice of a financial advisor. SmartAsset’s financial advisor matching tool will help you find the most suitable advisor in your area.

Photo credit: ©iStock.com/artisteer, ©iStock.com/shapecharge, ©iStock.com/adamkaz

Rickie Houston Rickie Houston writes on a variety of personal finance topics for SmartAsset. His expertise includes retirement and banking. He graduated from Boston University where he received a bachelor’s degree in journalism. He’s contributed to work published in the Boston Globe and has worked alongside award-winning faculty for the New England Center of Investigative Reporting at Boston University. Rickie also enjoys playing the guitar, traveling abroad and discovering new music. He is originally from Wilmington, North Carolina.
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