Refund of contributions
If your employment ends with your TRA-covered employer, you may opt for a refund of your contributions plus 3% interest compounded annually. Partial refunds are not permitted, and the employer’s contributions remain with TRA.
By taking a refund, you forfeit all service credit and future TRA benefits. Prior to taking a refund, you should consult with TRA to understand your options. If you are vested, be sure to request estimates for a deferred retirement annuity to make an informed decision.
Refund options and taxation
Rollover
If you transfer your refund to a tax qualified plan that accepts rollovers, your refund will not be taxed at the time of the transfer. Your refund will be mailed directly to the financial institution managing the tax qualified plan along with documentation on how to apply the rollover correctly.
Lump-sum
If you decide to have your refund paid directly to you, TRA is required by federal law to withhold 20% of the tax-deferred portion for federal income tax. Additionally, if you are under the age of 59 ½, you may be subject to a 10% additional federal income tax on early distributions unless an exception applies. For Minnesota residents, a 6.25% default state tax withholding will be applied to the taxable portion of your refund unless you specifically elect otherwise using Form W-4MNP.
For further details about potential tax implications, contact the IRS, the Minnesota Department of Revenue, or your personal tax adviser.
How to apply for a refund
Application for a refund may only be made 30 days or more after your termination of service. You may apply online using myTRA, or you may call TRA to request a paper application.
You are not eligible for a refund if you are actively teaching (including summer school or substitute teaching), on a leave of absence, or have signed a contract for the next school year with a TRA-covered employer.
Refund repayment
To repay a refund and restore forfeited service credit, you must return to work and accumulate two years of allowable service credit with TRA or another Minnesota public pension fund. All refunds you wish to repay must be repaid in a single, lump-sum payment including interest compounded annually at the applicable rate, which is currently 7%. Partial repayments are not permitted, and your repayment must be completed prior to your effective date of retirement.
You may repay a refund with personal funds or through a direct rollover from a traditional IRA or a qualified tax-deferred plan, 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.
Contact us
For detailed information regarding your specific circumstances, contact TRA.
