Some or all of your MSRS pension benefit is subject to federal and state income taxes. Tax withholding is based on a default established by the IRS and Minnesota Department of Revenue or your instructions. You have two options to consider when applying for a payout from your MSRS pension plan.
Option 1 – Default Tax Withholding
If no tax forms are submitted with your application for a pension benefit or refund, the default withholding will apply.
- Federal: Single, no adjustments (20% for refunds)
- Minnesota State (MN residents only): Single, 0 allowances
We can withhold state taxes for Minnesota residents only; if you are a non-Minnesota resident, contact your state for tax withholding requirements.
Option 2 – Complete Tax Form(s) to Choose Withholding
To withhold a tax amount other than the default, you will need to submit a completed withholding certificate to MSRS.
- W-4P (Federal) - Use for monthly pension benefits
- W-4R (Federal) - Use for pension refunds
- W-4MNP (State of MN residents only) - use for monthly pension benefits and refunds
Change tax withholding after benefit payments begin
For monthly benefit recipients, you may change your tax withholding at any time.
Online: Login to your account online (this assumes you already have a monthly pension benefit payment established).
Please note: MSRS retirement representatives are not tax advisors. If you have questions on how to complete the tax forms, please contact your tax professional.
Pension benefit payments subject to income taxes
Federal taxes: Your benefit is taxable income. Exception: A portion of your benefit is not taxable if:
Payroll deductions were contributed to the plan before January 1983.
Voluntary payments were made to the plan to obtain retirement credit (such as for a leave of absence) using after-tax monies (for example, a personal check or money from a Roth IRA account).
Federal law allows you to exclude the portion of your monthly benefit that is not subject to income taxes until the excluded amount equals the taxes you already paid. MSRS calculates the number of months to which the exclusion applies and reports the remaining amount to you on Form 1099-R. For federal tax questions, contact the IRS at 1-800-829-1040.
State taxes: You must pay state taxes on the portion of your monthly benefit that is subject to federal taxes. Some states do not require state income tax withholding.
Tax form 1099-R sent to you by January 31
Annually, by January 31, MSRS will mail you a 1099-R tax statement to report the total benefit payments you received during the previous tax year, the amount that is taxable income, and the amount withheld for federal and/or state income taxes, if any. The 1099-R is also available online.
For further information about tax withholding
Call 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.