The Hennepin County 1% Supplemental Retirement Plan is a voluntary, non-qualified plan created for Hennepin County employees. 

The plan is written in Minnesota Statute 383B.46.

The plan is administered by Minnesota State Retirement System (MSRS).

Plan Overview & Features

The 1% Supplemental Retirement Plan applies to Hennepin County employees hired or re-hired before April 14, 1982, who qualified for and elected to participate in the plan. Enrollment closed to new participants on April 14, 1982.

Contribution rates for the Hennepin County 1% Supplemental Retirement Plan are established by Minnesota State law.

Employee Contributions

  • 1% of after tax-salary.
  • Taxed when deducted from the paycheck; therefore, not subject to taxation when withdrawn from the account.


Employer Contributions

  • 1% of employee's pre-tax  salary.
  • Contributions are pre-tax, meaning that portion is taxable income when withdrawn from the account. For more detail, see the Distributions section on this page.

Administrative Fee
Each participant shares in the cost of the services the Plan offers. The annual administrative fee is 0.05% of your account balance. The fee is deducted pro rata from your investment options the middle of each month and is calculated on the average daily account balance for the prior 30-day period.   

Annual Investment Expenses
Annual investment expenses are charged by the State Board of Investment (SBI) and are subject to change. This fee is deducted before the calculation of the daily price per share or the fund's performance return. The investment expenses are disclosed on the Investment Performance (pdf) report.

Contributions are automatically invested in the Vanguard Total Bond Market Index Fund. You can change how future contributions are invested or transfer all or a portion of your existing account balances at any time to any of the options offered by the plan. You can choose an investment mix that balances your risk tolerance with the opportunity for investment returns.

Please consider investment objectives, risks, fees, and expenses carefully before investing.  Neither MSRS nor the State of Minnesota guarantees investment performance or assumes any liability for any investment losses.

Withdrawals (redemption of shares) can begin any time after you end employment with Hennepin County. Your contributions, the county’s contributions, and the earnings are withdrawn proportionately. Funds remaining in the account continue to be invested.

You have several options to choose from. In the event of your death, your surviving spouse may choose from these options as well.

To request an Application for Redemption of Shares form, call MSRS at 651-296-2761 or 1-800-657-5757.

Lump sum payment

Withdrawal of all shares credited to the account in a single lump sum payment.


Annual payments

You can choose to receive an annual payment for two to five years. You may designate the month in which to receive the following year's payment.

# of annual payments

  % of account balance that will be paid

2

  50% of account first year, then balance

3

  33.3% of account first year, then 50%, then balance

4

  25% of account first year, then 33.3%, then 50%, then balance

5

  20% of account first year, then 25%, then 33.3%, then 50%, then balance

 

Monthly payments

Monthly payments occur on the 1st or 15th day of the month. Payment options are as follows:

  • 24 monthly payments
  • 36 monthly payments
  • 48 monthly payments
  • 60 monthly payments

 

Rollovers

The special, non-qualified status of the Hennepin County Supplemental Retirement Plan does not allow for any type of rollover.

In the event of an unforeseen emergency, you may be eligible to discontinue participation in the Supplemental Retirement Plan and withdraw the entire value of your account.

Unforeseeable emergency defined: A severe financial hardship resulting from a sudden and unexpected illness or accident of the participant or a person dependent upon the participant, loss of participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising from events beyond the participant's control.

To apply:

  1. Call MSRS at 651-296-2761 or 1-800-657-5757 to request an Application to Discontinue Program Participation and Redeem Shares form.

  2. When MSRS receives your completed form, we will forward to the Hennepin County plan administrator to review and approve your request.

  3. If approved by the Hennepin County administrator, the form will be returned to MSRS to process your request.

In the event of your death, the account balance will be paid in the following order as specified by MN Statute 383B.49:

a.   to surviving spouse
b.   if no spouse, to surviving minor children (under the age of 18)
c.   if no spouse or minor children, to participant’s estate

MSRS should be notified as soon as possible of the death of a participant. Notification may be made by a family member, friend, employer, funeral home, or others. After the heir has been determined, MSRS will send them the required paperwork to complete.


Redemption of shares
Upon the death of the participant, shares will be redeemed to the spouse, minor child(ren), or representative of the estate after MSRS receives the appropriate written request.

  • If survived by a spouse, the shares will be transferred to an account in the spouse's name after MSRS receives a written request from the spouse. Payments to the spouse can begin immediately or at a later date. Spouse can choose to receive a 1-time lump sum payment or multiple year payments over a 5-year period. If the participant was already receiving payments from the account over a multiple year period, that payment schedule will continue when the spouse takes ownership of the account. For example, if the participant chose to receive annual payments for a 5-year period and died after three payments, the spouse will continue to receive payments for the remaining two years.
     
  • If NOT survived by a spouse, the remaining account balance will be paid to the surviving minor child or the participant's estate in one lump sum payout. This payment will be made after MSRS receives a completed Application for Redemption of Shares form.


Taxation
Payments to the heir are taxable income in the year received. MSRS reports withdrawals on an IRS 1099-MISC form. The tax document will be mailed by January 31 of the year following the withdrawal.

Contributions made by Hennepin County and all investment earnings associated with those contributions are subject to federal and state income tax the year in which the shares are redeemed and withdrawn from the account.

Contributions the employee makes to the plan are taxed when deducted from the paycheck; therefore, are not taxed when the shares are redeemed and  withdrawn. However, investment earnings associated with employee contributions are subject to federal and state income taxes the year in which they are withdrawn.
 

Tax withholding

  • Federal withholding
    The taxable portion of the withdrawal is taxed at a flat rate of 22%.

    The Hennepin County 1% Supplemental Retirement Plan follows the tax reporting rules consistent with a non-qualified deferred compensation plan. You cannot request an alternate federal tax withholding rate.
     
  • State withholding - Minnesota residents*
    The default withholding rate is 6.25%. We assume Minnesota residency if address of record is in Minnesota. To choose an alternate withholding rate (specified percentage, dollar amount, or no withholding), complete a Form W-4MNP and submit to MSRS with the redemption form. The W-4MNP form is available to download on the MN Dept of Revenue website.
     
  • State withholding - Resident of state other than Minnesota
    If employee resides in a state that mandates state income tax withholding, it will be withheld on the taxable portion of the distribution at the required rate. If employee resides in a state that does not mandate state income tax withholding, no state taxes will be withheld from the distribution.
     
    * Due to a recent law change, the MN Department of Revenue has determined that the default MN state tax withholding rate is 6.25%. 
    Previously the default withholding rate was based on a marital status of single and no allowances (regardless of your marital status).

    If you already have a Form W-4MNP on file with MSRS for a multi-year distribution (periodic payments), you do not need to make a new election. We will continue to withhold MN state taxes based on your existing election. However, if you want to change your state tax withholding, you must complete and submit to MSRS the 2024 version of the W-4MNP form.

     

Contributions made by Hennepin County and all investment earnings associated with those contributions are subject to federal and state income tax the year in which the shares are redeemed and withdrawn from the account.

  • If payment is made to the participant (employee), MSRS will report tax information for a withdrawal on an IRS Form W-2. The tax form will be mailed by January 31 of the year following the withdrawal.
     
  • If payment is made to a surviving spouse or estate after the death of the participant (employee), MSRS will report tax information on a Form 1099-MISC. The tax form will be mailed by January 31 of the year following the withdrawal.

MSRS retirement representatives are not tax advisors. If you have questions about tax reporting or withholding, contact your tax advisor, an IRS district office, or the Minnesota Department of Revenue at 651-296-3781 or 1-800-652-9094. For teletypewriter users or telecommunications-device-for-the-deaf users, call the Minnesota Relay Service at 1-800-627-3529 and ask to be connected to Revenue's Taxpayers' Assistance Office at 651-296-3781.

MSRS Telephone: 651-296-2761 or 800-657-5757  (office hours: Monday through Friday, 8:00 a.m.- 4:30 p.m.)

Participant inquiries: Complete this form to email MSRS your questions, comments or feedback

Request appointment with MSRS retirement specialists

Address:  60 Empire Drive, Suite 300
                 St Paul  MN 55103


Representatives of GWFS Equities, Inc. are not registered investment advisors and cannot offer financial, legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor as needed.