REFUNDS

Refund of contributions

If you leave teaching, you may opt for a refund of your employee contributions plus interest (currently 3 percent). However, if you are vested, we encourage you to consider a deferred annuity instead of a refund because of the potential greater value of a lifetime annuity.

 

How to apply

Application for a refund may be made 30 days after termination of service. Apply online by logging into MyTRA or call to request an application (form TRA-7000). You are not eligible for a refund if you are teaching summer school, substitute teaching, on leave, or have signed a contract for the next school year with a TRA-covered employer.

Taxation of refunds

The federal rules governing the taxation of refunds are complex.  Under current federal law, we must withhold 20 percent of your taxable distribution.  You may avoid the federal withholding only if the distribution is transferred directly to another qualified plan or IRA.

In addition to normal income taxes due, 10 percent federal excise tax may apply to distributions made before age 59½ unless one of several Internal Revenue Service (IRS) exemptions apply.  The option for Minnesota withholding of 6.25 percent is available.

For further details about the tax consequences, contact the IRS, the Minnesota Department of Revenue or your personal tax adviser.

Repayment of refunds

You may repay a refund using personal funds or by transferring funds from a Roth IRA, or by transferring tax-sheltered funds from a traditional IRA or another qualified pension plan.

To repay a refund, you must return to work and accumulate two years of allowable service credit with TRA or another Minnesota state public pension fund.

The repayment must include interest compounded annually at the rate of 7.5 percent, computed from the date of the refund to the date of repayment, and be repaid prior to your retirement.

The restored service credit is allocated based on the relationship the restored service bears to the total service credit period for all refunds taken from a single public pension plan.

You may repay a refund using personal funds or by transferring funds from a Roth IRA, or by transferring tax-sheltered funds from a traditional IRA or another qualified pension plan. More information can be found in this handout: Paying with Tax-Sheltered Dollars or from a Roth IRA. Members repaying a refund must send documentation to demonstrate that the amounts to be rolled over or transferred are eligible for rollover or transfer.

Contact TRA for an estimate of the cost to repay your refund.

Partial repayment

You may repay a portion of the refund under certain conditions:

  • You forfeited at least two years of service from a single public pension plan.
  • You must repay at least one-third of the total cost of the refund.
  • The cost of the partial repayment is the cost of the total repayment multiplied by the ratio of the restored service credit to the total forfeited service credit
  • The total repayment amount includes interest at the rate of 7.5 percent, compounded annually, from the refund date to the date repayment is received.
Prior or uncredited military service credit purchase

If you are an active, vested TRA member who has been honorably discharged and have prior military service before becoming a teacher or have failed to obtain service credit for a military leave of absence during your teaching career, you are eligible to purchase service credit for the initial period of enlistment, induction or call to active duty.

The purchase is based on actuarial cost, which is determined by current salary, service credit, age and date you make the purchase. The cost is not related to when the service was performed or your salary at the time.

Payment for prior military service must be made before your effective date of retirement date. TRA statutory authorization to accept prior military service credit payment is outlined Minnesota Statute Section 356.543.

Contact TRA for an estimate of the cost to purchase service.