The funds you and your employer have contributed to your Unclassified Plan account are not available for withdrawal until you leave state service. Once you end your 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.
Lump-sum payment of entire account balance
If you select this option, the money you receive is considered taxable income during the year that it is withdrawn.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, there may be a 10% early withdrawal penalty. If you end your 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 due to the IRS. State law does not require MSRS to withhold taxes from your lump sum; however, we will withhold state taxes at your request.
Rollover to another qualified retirement plan
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 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 are now subject to the rules and restrictions of the new plan.
Lifetime, monthly benefits
You can begin to collect monthly benefits any time after you reach age 55. This monthly lifetime income is not subject to the IRS 10% penalty. If you are not age 55 when you end your state service, you may keep your money in the Unclassified Plan, continue to invest your account, and begin to collect your monthly benefits any time after you reach age 55. To learn more about how your monthly benefit is calculated, see Benefit Calculation.
Partial lump sum/partial monthly benefits
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.