The funds you and your employer have contributed to your Unclassified Retirement Plan are not available for withdrawal until you leave state service. Once you end state service, you have several options to consider. You may leave your money in the Unclassified Plan, or you can select from various withdrawal options.
The Unclassified Plan provides a lifetime benefit. You can begin collecting monthly benefits at any time after you terminate public employment and reach age 55. If you are not yet age 55 when you end state employment, you may keep your money in the Unclassified Plan, continue to manage the account and collect monthly benefits at age 55 or later.
Formula used to determine your retirement benefit:
Account balance ÷ life expectancy factor (age at retirement) ÷12 = monthly retirement benefit.
Age at Retirement: Your age at retirement determines the factor used to calculate your benefit. This factor is based on your life expectancy.
Account Balance: The balance includes amounts contributed to the account by you and your employer, plus or minus any investment gains or losses. We divide your account balance by your life expectancy factor to determine your monthly retirement benefit.
The factors and a retirement calculation worksheet are located in the Unclassified Retirement Plan Handbook (pdf).
If you select this option, the money you receive is considered taxable income during the year that it is withdrawn. In addition, if you withdraw your money before age 59 1/2, a 10% IRS early withdrawal penalty may apply.
If you end state service after age 55 and decide to take a lump-sum benefit, you are not subject to the 10% penalty.
Federal law requires MSRS to withhold 20% of your lump-sum amount for federal taxes. Since the lump-sum payment is subject to ordinary income tax, the 20% may or may not cover the tax liability owed to the IRS. State law does not require MSRS to withhold taxes from your lump sum; however, we will withhold Minnesota state taxes at your request.
Following termination and after reaching age 55, you can elect to receive a partial lump sum payment and collect monthly benefits on the remaining value of your account. You can determine how much you would like to receive under each payout option. If you select this option, you must immediately collect monthly benefits on the remaining value of your account after taking the partial withdrawal.
A rollover allows you to consolidate all of your pre-tax retirement plans into one account, which may make it easier to manage your investments. You may roll over your funds directly to a qualified retirement plan such as the Minnesota Deferred Compensation Plan (MNDCP) or an Individual Retirement Account (IRA).
When you transfer your Unclassified Plan account to another qualified retirement plan, the assets take on the features of the new plan. For example, if you leave state government employment and go to work for a different employer, you may be able to roll your Unclassified Plan account to your new employer's retirement plan. The Unclassified Plan assets would subject to the rules and restrictions of the new plan.
Service credit -- or allowable service -- is the credit you earn each month retirement deductions are withheld from your salary. Service credit does not impact your monthly retirement benefit if you elect benefits under the Unclassified Retirement Plan. However, if you convert to the General Employees Retirement Plan, service credit is an important part of how we determine your retirement benefit.
To learn more about the options below, see the Unclassified Retirement Plan handbook (pdf).
State law allows certain legislative employees to purchase prior service credit from MSRS. An employee is qualified if:
You must purchase service credit prior to terminating employment.
Many state employees have worked, or will someday work, for a Minnesota public employer including a city, county, or school district. If you are covered by another Minnesota public retirement plan, this may combine with your service as a state employee. We call this a Combined Service Annuity (CSA). Under CSA law, various public retirement plans work together so you get credit for all of your service including:
You can take a leave of absence for various reasons such as education, illness, or pregnancy. If you take a leave, you may not earn service credit because you did not earn salary from which deductions were taken. Once you return to work after a leave, you can make a payment to receive service credit for the leave.
If you leave state service to serve in the military and return to state employment within 90 days of discharge, you may buy your service credit for that time. There is a limited amount of time to purchase this service credit, so it is important to contact us as soon as you return.