Refund of contributions
If you leave teaching, you may opt for a refund. The refund consists of all your employee contributions plus interest, compounded annually. Partial refunds are not permitted. Your employer’s matching contributions remain with TRA and are not included in the refund.
By taking a refund, you forfeit all service credit and future TRA benefits. Prior to taking a refund, consult with TRA to better understand your options. If you are vested, be sure to request estimates for a deferred annuity in order to make an informed decision.
How to Apply
Application for a refund may only be made 30 days after termination of service. Apply online by logging into MyTRA or call to request a refund application. Please note, you are not eligible for a refund if you are teaching summer school, actively substitute teaching, on leave, or have signed a contract for the next school year with a TRA-covered employer.
Taxation of Refunds
Please review the detailed tax information enclosed with your refund application to better understand the tax implications of taking a refund.
If you decide to have your refund paid directly to you, TRA is required by federal law to withhold 20 percent of the tax-deferred portion of your refund for federal income tax. In addition, if you are under the age of 59 ½, you will be subject to a 10 percent additional federal income tax on early distributions, unless an exception applies. TRA does not automatically withhold state tax from your refund. However, you have the option to elect Minnesota tax withholding of 6.25 percent.
There are changes coming to the IRS and Minnesota Department of Revenue tax withholding requirements. Later this year, we will be discontinuing the use of the TRA Federal and State Tax Withholding Certificate and will be requiring recipients use IRS Form W-4P, IRS Form W-4R and Form W-4MNP when making future tax withholding elections. Prior tax withholding elections on file with TRA will remain in effect until a new election is made.
We are currently updating our system to accommodate the required tax withholding changes, and will provide additional information when the effective date is known.
Your refund will not be subject to federal and state taxes if you choose to rollover the funds to a traditional IRA or an eligible employer plan.
Repayment of Refunds
To repay a refund, you must return to work and accumulate two years of allowable service credit with TRA or another Minnesota public pension fund. Repaying a refund restores the forfeited service credit. If you wish to repay a refund, all refunds previously taken must be fully repaid in a single, lump sum payment, which includes interest at the applicable rate, compounded annually. Partial refund repayments are not permitted and all repayments must be paid prior to your effective date of retirement. Contact TRA for an estimate of the cost to repay your refund.
You may repay a refund with personal funds or through a direct rollover of funds from a traditional IRA or a qualified tax-deferred employer plan under the Internal Revenue Code such as a 401(k), 403(b), governmental 457(b), profit-sharing, defined-benefit, stock bonus, or money purchase plan. Roth IRA rollovers are not permitted.