Attention Correctional Members: Important Plan Updates

Factors are subject to updates when changes occur to investment return assumptions, mortality rate assumptions, or plan provisions. The new factors include these updated assumptions:

>>Legislative change of the assumed rate of return from 7.5% to 7.0%, and

>>Updated mortality assumptions based on a recent actuarial experience study.

Retiring Soon?

These updated factors may impact your retirement decision if you are planning to retire early or select a survivor option with your Correctional benefit. There is a positive impact for benefits effective July 1 or later.

>>Retiring July 1 or later: Please review your myPERA account for updated estimates with benefit effective dates July 1, 2025 or later. Your next annual Personal Benefit Statement will also include updated estimates reflecting this change.

>>Retiring before July 1: You may want to compare estimates with a benefit effective date of July 1 or later to review all of your options. This change may impact when you choose to retire.

Thinking of Early Retirement?

You may want to reconsider and work up to your full retirement age. The Pension Protection Act of 2006 in conjunction with Secure 2.0 allows correctional officers to reduce their taxable income by up to $3,000 annually in costs paid for qualified insurance premiums, such as health, dental, and long-term care. During the year, you will pay your insurance premiums directly to your providers. When you file your federal income taxes for that year, you will apply for the reduction.

However, you are only eligible for this opportunity if you leave your correctional position after qualifying for a full, unreduced PERA benefit.

Contact a tax professional if you have any questions.

Understanding Refunds

As a member of PERA, you have options when you leave public employment.

If you are not vested and remain out of PERA service, you should apply for a refund within five years after your last member contribution was made. Refunds include your member contributions plus accumulated interest. Employer contributions are non-refundable and remain with PERA for retirement, disability, and survivor benefits.

>>If you choose to have your refund paid directly to you, your refund will be subject to federal and state taxes. Depending on your age and service when you separate employment, you may also be subject to an additional 10% withdrawal penalty when you are paid the refund. The 10% withdrawal penalty tax is now waived for correctional officers who separate from service at age 50 or older, or who have at least 25 years of service in the plan, whichever is earlier.

>>If you choose a direct rollover to a qualified plan, your refund will not be taxed at the time of the transfer. However, the funds will be taxed later when you take it out of the qualified plan.

If you are vested, you have enough service to qualify for a pension. Instead of applying for a refund, you can leave your money with PERA for a present or future lifetime monthly benefit.

Note: the additional 10% withdrawal penalty does not apply to pensions.

Learn more about refunds, taxes, and your options on our Refunds page on mnpera.org.

Disability Recipients

Some recent changes may apply to your disability benefit:

>>The Pension Protection Act of 2006 in conjunction with Secure 2.0 also allows correctional officers receiving disability benefits to reduce their taxable income by up to $3,000 annually in costs paid for qualified insurance premiums, such as health, dental, and long-term care. Contact a tax professional if you have any questions.

>>As of January 1, 2025, Correctional disability benefits will no longer be reduced by worker’s compensation. Recipients will receive their 2024 annual earnings form in the next month and will be required to report worker’s compensation received in 2024.

>>Beginning in 2027, Correctional duty disability benefits will remain non-taxable when they convert to retirement benefits. More information will be shared with impacted members when we get closer to this date.