Post-Retirement Work and Your Pension
TRA retirees may return to work in a TRA-covered position and earn up to the earnings limitation of $46,000 without reducing their TRA pension benefit. If you exceed the limit, your pension will later be redirected to your Earnings Limitation Savings Account, or ELSA.
- Any non-TRA covered employment is not subject to an earnings limitation.
- A return to work agreement is only needed if you have a written or oral agreement in place before retiring. You must be at least age 62 when retiring to have this agreement in place.
- If working in retirement, TRA contributions will not be withheld from your new paycheck.
How is the earnings limitation calculated?
- The earnings limitation is applied to salary earned on a fiscal year basis (July 1 to June 30).
- If you are under normal retirement age for the entire fiscal year, as defined by the Social Security Administration, the earnings limitation is $46,000.
- If you are under normal retirement age and are retired for only a portion of the year, the earnings limitation amount will be prorated ($46,000 x number of months retired during the fiscal year ÷ 12). The year you turn your Social Security normal retirement age, the limit is $46,000 for the portion of the year you are under normal retirement age.
- If you are a Minnesota State retiree on the Annuitant Employment Program (AEP), the earnings limitation is $62,000 for the fiscal year. It is not prorated for the first year of retirement or for the year you reach your normal retirement age.
If I go over the limit, how will it be withheld?
If you earn salary over the limit, your annuity payment is reduced the following year by $1 for each $2 above the limit. Your benefit will be reduced or stopped beginning in January of the following year until the entire amount has been withheld. It is put into an Earnings Limitation Savings Account (ELSA).
Each year, you will receive an ELSA annual statement, which is a comprehensive report of your savings plan for each calendar year. At any time, you can log into your MyTRA online account and view your ELSA account.
How Your Earnings Limitation Savings Account Works
Process repeats every fiscal year you work and earn over $46,000.
How do I access my ELSA refund?
- You may apply for a refund of your ELSA account beginning one year after the last deferred amount was redirected to your ELSA account.
- If you have chosen an accelerated annuity, the accelerated portion is not withheld.
- No interest is earned on ELSA account balances.
- You must submit an ELSA refund application to TRA to receive your account balance.
- When you request a refund, you will receive the full, eligible amount; partial refunds are not available.
- You may elect to have all or any portion of your ELSA refund payment rolled over to a traditional IRA or an eligible employer plan. You can also convert your refund to a Roth IRA; some tax implications will apply.
- You may also elect to receive a lump sum refund, minus applicable taxes.
- We suggest you consult your tax adviser regarding any tax implications. If you choose to receive a lump sum, the distribution will be reported on IRS Form 1099-R as a normal annuity payment.
- If you apply for a refund and then return to work, the earnings limit will apply to that reemployment salary as well. You will need to apply for another refund one year after the second period of deduction ends.
What if I die before receiving my ELSA account balance?
Your ELSA account is separate from your TRA pension benefit.
The beneficiary designation you make for your ELSA account is a separate designation from the beneficiary designation you have made for your retirement account.
In the event of your death prior to receiving a distribution from your ELSA account, and upon application by your beneficiary(ies), a lump sum payment of your ELSA balance will be distributed.
As outlined in Minnesota Statutes 356.47, payment will be made to:
- a surviving spouse, or if none,
- designated beneficiary(ies), or if none,
- your estate.
If you are not married and wish to designate a beneficiary, or if you wish to designate a beneficiary in the event of your spouse’s death, you may designate any person(s), trust(s) or organization(s) as your beneficiary(ies).
It is important to keep your beneficiary designation up to date.
Contact TRA to request an Earnings Limitation Savings Account Beneficiary Designation form.
This example assumes the retiree:
- Has been retired for more than one year
- Is more than one year younger than full Social Security normal retirement age
- Has a monthly TRA benefit payment of $2,000
- Has post-retirement fiscal-year earnings of $56,000 with a TRA-covered employer
|Arithmetic Operation||Line Amount||Line Description|
|$56,000||Fiscal Year Earnings after retirement – this will not match W2|
|=||$10,000||Earnings in excess of the limit|
|÷||2||Offset is 1/2 of excess earnings|
|=||$5,000||Pension amount withheld to ELSA beginning in January of the following year.|
|Date||Monthly Benefit Payment||Transferred to Savings Account|
This individual is first eligible to apply for a refund of the $5,000 that was transferred to the ELSA savings account one year after March 1, 2022.
Watch an explanation of Working in retirement: Your Earnings Limitation Savings Account