Minnesota MSRS Retirement Options: Payment Options and Refund

Updated October 2, 2026. Quick answer: A Minnesota State Retirement System (MSRS) member chooses single-life or survivor coverage when applying, and once payments begin that choice cannot be changed. Single life pays the highest monthly benefit; the 100%, 75% and 50% joint and survivor options and Life Income 15-Year Certain reduce it. MSRS cannot accept an application more than 60 days before the benefit start date. A refund of contributions forfeits all service credit, and the default federal withholding on a refund paid to the member is 20%.

Minnesota police officers and firefighters belong to a separate PERA plan with its own rules: Minnesota PERA Police and Fire retirement decisions.

The first decision: single life or a survivor

MSRS puts the choice at the point of application. “When you apply to receive monthly retirement or disability benefits, you will have to decide whether you want to choose single-life or survivor coverage. Your choice will affect your monthly retirement benefit.” The cost shows up as a smaller check every month, and the benefit is a lifetime promise to someone else. MSRS adds that “You can name a single or multiple survivors to receive a monthly payment after your death.” For the general trade between the two ideas, see single life versus joint and survivor.

The payment options and what each does to a survivor

The MSRS comparison page says: “The chart below is a comparison of the options available to participants covered under all plans except Judges and Legislators.” Judges and Legislators have their own descriptions, so a member of either plan should read the chart for that plan. For everyone else the options are single life, joint and survivor at 100%, 75% and 50%, and Life Income 15-Year Certain.

Single life: “Provides you the highest monthly benefit compared to other options.” “Monthly payments end. Any remaining account balance is paid to your beneficiary.” The higher check comes without a monthly benefit for a survivor. The statute sets that balance. When a retired employee who chose neither an optional nor a bounce-back annuity dies, Minn. Stat. 352.12, subd. 7, provides that “a refund must be paid in an amount equal to the excess, if any, of the accumulated contributions to the credit of the retired employee immediately before retirement in excess of the sum of (1) all annuities, retirement allowances, and disability benefits that had been received and had accrued in the lifetime of the decedent”, and of any month-of-death annuity payable to a surviving spouse. Accumulated contributions are the member’s own payments, exclusive of interest (352.01, subd. 4), so the balance is what annuity payments have not yet used up, and it can be zero. Minn. Stat. 352.115, subd. 8, provides: “The retirement annuity shall cease with the last payment which had accrued during the lifetime of the retired employee unless an optional annuity provided in section 352.116, subdivision 3, had been selected and had become payable.”

The 100% option: “Provides maximum survivor coverage, but reduces your monthly payments.” “Survivor will receive monthly payment equal to your payments for their lifetime.” For the 75% and 50% options: “Survivor will receive monthly payment that is 75% of your payments for their lifetime.” “Survivor will receive monthly payment that is 50% of your payments for their lifetime.”

How much the reduction is depends on ages. “The reduction is based on the age difference between you and your survivor. The younger the survivor, the greater your monthly benefit is reduced.” The pages read do not give the reduction factors, so the monthly effect of each option has to come from an MSRS estimate, not from this page. The statute fixes the standard but not the factors: Minn. Stat. 352.116, subd. 3, says “Except as provided in subdivision 3a, the optional forms must be actuarially equivalent to the normal single life annuity forms provided in sections 352.115 and 352.116, whichever applies.” Minn. Stat. 356.46, subd. 2, requires the plan to give each applicant “a calculation of the actuarial reduction in the amount of the retirement annuity which would be required for each optional annuity form”, so a member can ask MSRS for that calculation for every option before choosing.

The bounce-back and the 15-year certain period

Every joint and survivor election carries a protection against the survivor dying first. “Joint-and-Survivor options automatically have a bounce-back feature. If you are predeceased by your survivor, your monthly payment reverts to the single-life benefit amount.” Members of one plan have a choice: “Those covered under the Judges Retirement Plan can choose whether or not to include a bounce-back feature.” That means a member who elects a survivor and outlives that person is not left on the reduced amount permanently.

Life Income 15-Year Certain works differently. “Reduces your monthly benefit, but provides survivor coverage if you die before collecting payments for 15 years.” The chart gives the payout rule in two lines: “15 years or more, payments will end.” “Less than 15 years, your beneficiary will receive payments for balance of 15-year term.” Naming is open: “Has no impact on your benefit payment. You can name another beneficiary.” Note that this option covers a period of years rather than a person’s lifetime, so it does not replace lifetime income for a surviving spouse who lives past the term. That is MSRS’s description of how it administers the option. The statute is broader: Minn. Stat. 352.116, subd. 3, says “The board may also establish an optional annuity in the form of an annuity payable for a period certain and for life thereafter.”

Spousal consent and the 50% default

A married member cannot treat the survivor choice as private. “State law requires that you provide at least a 50% J&S option for your spouse unless they waive survivor coverage.” The application itself reflects that: “You must sign the application in the presence of a notary. If you are married, your spouse must sign the application in the presence of a notary to acknowledge your benefit election.” If the paperwork is not completed, the default applies: “If your spouse does not sign the application and no survivor option is selected, MSRS is required by state law to pay the 50% Joint-and-Survivor option.” A spouse’s signature is how consent is recorded. The rule is in Minn. Stat. 356.46, subd. 2(a): “unless the spouse waives any rights to an optional annuity by a notarized statement on the annuity application or other form provided by the pension plan administration, the public pension plan administration shall assume that the member selected the 50 percent joint and survivor optional annuity form.” The default is not automatic on a missing signature. Subd. 3(b) requires the plan to send a second notice to the spouse and says “the executive director of the public pension plan must notify the member and the member’s spouse that the 50 percent joint and survivor annuity form, or a higher joint and survivor form if selected, shall be paid if the spouse does not acknowledge the annuity form selected by the member by responding to the second notice sent to the spouse within 30 days.” A member who chose a higher survivor form therefore gets that form, not the 50 percent form. For the general rules around a spouse waiving survivor rights, see spousal consent to waive a joint and survivor annuity.

Naming someone other than a spouse is allowed, with conditions. “Anyone can be named as your survivor; however, if you choose a non-spouse survivor:” “Your survivor’s age may limit the survivor options available to you.” “Your spouse must agree to waive his/her survivor coverage. This is done when the spouse signs the application for retirement (in the presence of a notary) acknowledging your choice of survivor.” In plain terms, a married member who names a non-spouse survivor needs both the spouse’s signed waiver and a survivor whose age fits the option sought.

What cannot be undone, and the deadlines

The central rule is permanence. “Once payments begin, you cannot change your survivor option or the person(s) you elect to cover.” That covers both the option and the person, so the choice deserves a staff estimate for each alternative before the form is signed.

The application window is short. MSRS says it is “unable to accept your application for retirement more than 60 days prior to the retirement benefit start date you indicate on the form”. After filing, “You will receive your first benefit payment approximately six weeks after your retirement date”, and “The first payment is typically higher because it includes retroactive payments back to your benefit start date.” The retroactive months have a limit set by statute. Minn. Stat. 352.115, subd. 8, says “An annuity shall begin to accrue no earlier than 180 days before the date the application is filed with the director, but not before the day following the termination of state service or before the day the employee is eligible to retire by reason of both age and service requirements.” A late filing therefore forfeits any month older than 180 days before the application.

The mechanics of the application: “Mail your form to MSRS. We are unable to accept an application by fax or email.” “if you select a survivor option, you must provide a photocopy of your survivor’s birth record.” Members who have divorced: “you must provide MSRS with a certified copy of any divorce decrees and/or DRO before you can collect a retirement or disability benefit.”

To retire, “Meet the age and years of service requirements for the pension plan you are covered under.” and “End all State of Minnesota covered employment.”

When a member qualifies to retire

Eligibility depends on when membership began. For a person who joined after June 30, 1989, Minn. Stat. 352.01, subd. 25, defines normal retirement age: “For a person who first becomes a covered employee after June 30, 1989, normal retirement age means the higher of age 65 or “retirement age,” as defined in United States Code, title 42, section 416(l), as amended, but not to exceed age 66.” The statute gives the early-retirement reduction too. For a member under the pre-1989 formula who retires before normal retirement age with at least three but less than 30 years of service, Minn. Stat. 352.116, subd. 1(b), applies the reduction in these words: “reduced by one-quarter of one percent for each month that the employee is under normal retirement age at the time of retirement.” With 30 or more years, the same paragraph measures it from age 62 instead: “reduced by one-quarter of one percent for each month that the employee is under age 62 at the time of retirement.” A member who joined after June 30, 1989 is reduced actuarially instead, as quoted in the section on deferring a benefit. For those who joined on or after July 1, 1989: “Full retirement benefit: Typically at age 66.” and “Reduced retirement benefit: age 55 or later, assuming you are vested.” For membership before that date, MSRS lists a different set of ages and a Rule of 90, so a long-serving member should read the General Plan page for the exact test. The statute is more specific on two points. Minn. Stat. 352.116, subd. 1(c), which applies only to a member first covered before July 1, 1989, sets the Rule of 90 this way: “Any person whose attained age plus credited allowable service totals 90 years is entitled, upon application, to a retirement annuity in an amount equal to the normal annuity provided in section 352.115, subdivisions 2 and 3, paragraph (a), without any reduction by reason of early retirement.” Minn. Stat. 352.115, subd. 1(5), also qualifies a member who “has received credit for at least 30 years of allowable service regardless of age.”

What drives the amount: “The first piece we consider is the length of service. Then we calculate the high-five average salary.” “Other factors that determine the monthly benefit are the retirement age and the survivor benefit option selected at retirement.” The survivor option is therefore one of the inputs to the monthly figure. The statute states the multiplier that the MSRS page leaves out. For a member covered by the post-1989 formula, Minn. Stat. 352.115, subd. 3(b)(2), reads: “the employee’s retirement annuity is equal to the employee’s average salary multiplied by 1.7 percent for each year of allowable service through June 30, 2025, and 1.9 percent for each year of allowable service after June 30, 2025” For the earlier formula, subd. 3(a)(2) reads: “the employee’s retirement annuity is equal to the employee’s average salary multiplied by 1.2 percent per year of allowable service for the first ten years and 1.7 percent for each later year of allowable service through June 30, 2025, and 1.9 percent for each year of allowable service after June 30, 2025”

Leaving before retirement: defer the benefit

A member who ends state employment has a second path besides a refund. “If you end state employment, you can delay receiving a monthly benefit until a later date.” “You qualify for a deferred benefit if you meet the vesting requirements for the plan you are covered by.” Timing and cost: “You can apply for your monthly retirement benefit to begin at age 55 or later (or as early as age 50 if covered under the Correctional or State Patrol Retirement Plan).” “You can apply for your benefit 60 days prior to the date you are eligible to receive the monthly benefit.” “If you receive the deferred benefit before normal retirement age, it is reduced for each year and month you are under full retirement age” The MSRS pages read do not give the reduction per month, but the statute states the rule: Minn. Stat. 352.116, subd. 1a(b), “For covered employees who retire on or after July 1, 2019, the reduced annuity is the actuarial equivalent of the annuity that would be payable to the employee if the employee deferred receipt of the annuity until normal retirement age” The same paragraph augments that deferred amount at an applicable annual rate, which for a retirement after June 30, 2024 is “zero percent.” Ask MSRS for the figure at your own age. The deferred annuity also no longer grows while it waits. Minn. Stat. 352.22, subd. 3a, provides that “after December 31, 2018, the deferred annuity must not be augmented.”

Vesting is the gate for a deferred benefit, and it depends on when membership began. “Eligibility to collect a monthly retirement benefit (or what we call vesting) is based on years of service.” For General Plan members: from July 1, 2023 or after, “Eligible (vested) after three years of service.” For membership beginning July 1, 2010 to June 30, 2023, vesting is “three years of service if an active employee on July 1, 2023”, or “five years of service if not an active employee on July 1, 2023.” For membership between July 1, 1989 and June 30, 2010, the vesting rule is three years of service.

The refund: what is in it and what it costs

The other path out is a refund. “If you end employment with the State of Minnesota, you can request a refund of your MSRS retirement contributions.” The money “can be paid to you or rolled to another qualified retirement plan”. On the contents: the refund “includes your contributions plus interest.” and it “does not include employer contributions to your retirement account.” The employer’s share is therefore not part of what a leaving member can take. The MSRS page does not state the interest rate. Minn. Stat. 352.22, subd. 2, sets it at these annual rates, in the statute’s own words, (1) “six percent per year compounded daily from the date that the contribution was made until June 30, 2011; (2) four percent per year compounded daily from the date that the contribution was made or July 1, 2011, whichever is later, until June 30, 2018; and (3) three percent per year compounded daily from the date that the contribution was made or July 1, 2018, whichever is later.”

The price is permanent. A refund “forfeits all of your service credit and any rights to an MSRS retirement benefit.” For a general framework on that choice, see pension refund versus leaving it in.

The process: “The application cannot be signed and dated until the day after you terminate employment, and must be signed in the presence of a notary.” “It generally takes about 30 days to process your request.” The MSRS pages read do not state a deadline for requesting a refund. For a leaver without enough service for a deferred annuity there is one: Minn. Stat. 352.22, subd. 8(a), provides “If a former employee covered by the system does not apply for refund within five years after the last deduction was taken from salary for the retirement fund, and does not have enough service to qualify for a deferred annuity, accumulated member and employer contributions must be credited to and become a part of the retirement fund.” Subd. 8(b) restores the amount if the person returns to state service: “If the former employee returns to state service and becomes a state employee covered by the system, the amount credited to the retirement fund, if more than $25, must be restored to the individual account.”

Refund paid to you or rolled over: the withholding gap

MSRS describes the tax outcome of each route. For money paid to the member: “A refund paid to you is subject to state and federal taxes.” “If no instructions are provided, the default withholding will apply.” On the federal side: “The default rate is 20%. In addition, if you are under age 59 1/2, you may be subject to a 10% tax penalty (paid when you file your income tax returns).” A member who wants more held back can ask: “To choose a withholding amount greater than 20%, complete an IRS Form W-4R and submit to MSRS with your refund application.” Minnesota’s share: “The default rate is 6.25%.” and to change it, “complete a Form W-4MNP and submit to MSRS with your refund application.”

The alternative: “A rollover to another qualified retirement plan is not subject to the state and federal taxes or early withdrawal penalties.” That is the reason the choice of route matters more than the size of the refund. See the 20 percent withholding rule for how the withholding works and why it creates a gap on a rollover.

A computed example from an assumed $30,000, not an MSRS figure: at the default federal rate of 20%, withholding is 20 percent of $30,000, or $6,000, so the computed amount the member receives is $24,000 before any Minnesota withholding. Rolling the full $30,000 into another plan from that payment would require finding the missing $6,000 from other funds within the rollover window, which is the point of the IRS statement in the next section. A direct rollover to another qualified plan avoids the gap, and confirming the mechanics with MSRS before signing is sensible.

What the IRS adds on tax

A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of MSRS’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. MSRS’s own page says a rollover to another qualified plan avoids the state and federal taxes and early withdrawal penalties on the refund. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.

On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.

Repaying a refund to restore service

A member who took a refund and later returns has one route back. “you may be able to reinstate forfeited service. This can be done by repaying the refund amount plus interest.” The reason to do it: “Repaying of a refund will restore your service credit, which may increase the monthly payment you receive in retirement.” The figure is not on the page: “Contact the retirement plan from which you received the refund to discuss the repayment amount” Whether repayment pays for itself is a calculation to run with that quoted amount. The statute adds the conditions. Minn. Stat. 352.23(b) provides that “Terminated service credits and rights must not again be restored until the former employee acquires at least six months of allowable service credit after taking the last refund and repays all refunds previously taken from the retirement fund with interest” Under 352.23(d), “Repayment may be made in a lump sum during employment or up to six months after termination from service.” For the interest, Minn. Stat. 356.59, subd. 2, lists the MSRS rate in a table whose last row reads “after June 30, 2023 7.0 percent 0.583 percent”, the annual and the monthly rate for repayments after June 30, 2023. See the pension buyback calculator for a general way to test it.

After retirement: the annual increase

MSRS describes an annual adjustment. “Each January, eligible MSRS benefit recipients receive an increase in their monthly payment amount.” “MSRS will send you notification in December of the post-retirement benefit increase that will occur in January.” In the first year: “The increase is prorated the first year after retirement and is based on the number of full months you were retired during the previous fiscal year, which ends June 30.” For the General Plan the page lists “1.75% (effective 1/1/2026)”. That figure is tied to the stated effective date, and the December notice is where MSRS reports the January increase that applies. Minn. Stat. 356.415, subd. 1(a)(1), is the source of the General Plan figure: “effective January 1, 2026, and thereafter, a postretirement increase of 1.75 percent must be applied each year to the amount of the monthly annuity or benefit of each annuitant or benefit recipient who has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of the calendar year immediately before the adjustment” For the Correctional Plan, subd. 1a sets “a postretirement increase of 1.5 percent must be applied each year to the monthly annuity or benefit of each annuitant or benefit recipient who has been receiving an annuity or a benefit for at least 12 full months”

Taxes and the 1099-R

For monthly benefits, MSRS says “Your benefit is taxable income.” with an exception for a portion where “Payroll deductions were contributed to the plan before January 1983.” The default withholding when no form is filed: federal “Single with no adjustments (regardless of your marital status).” and Minnesota “6.25% (MN residents only; we cannot withhold taxes for other states).” A retiree can adjust it: “For monthly benefit recipients, you may change your tax withholding at any time.”

MSRS points to IRS withholding forms, one “for monthly pension benefits” and one “for pension refunds”. Each year “Annually, by January 31, MSRS will mail you a 1099-R tax statement to report the total benefit payments you received during the previous tax year, the amount that is taxable income, and the amount withheld for federal and/or state income taxes, if any.” MSRS also cautions: “MSRS retirement representatives are not tax advisors.” For how Minnesota treats public pensions, see Minnesota retirement taxes and does Minnesota tax pensions.

Getting an estimate before electing

The survivor choice is easier with numbers, but MSRS is clear about the limit: “An estimate gives you a general idea of your pension benefit amount. We can’t provide your actual monthly payment amount until after you retire.” For a staff estimate, MSRS asks for “Your survivor’s name, date of birth, and relationship to you”. Online estimates carry a caveat: MSRS calls them “unaudited”, meaning not reviewed by staff for accuracy.

What this page could not settle

• The pages read and the statute do not give the reduction factors for any joint and survivor option or for Life Income 15-Year Certain, only that the optional forms must be actuarially equivalent; 352.116, subd. 4, leaves the procedure to the board on its actuary’s written recommendation, so no survivor payment can be computed from a source formula here.
• The pages read do not state a lump sum payable at retirement.
• The MSRS pages read do not state a way to purchase service credit beyond repaying a refund, but the statute lets a member buy some: Minn. Stat. 352.017, subd. 2(a), says “An employee covered by a plan specified in this chapter may purchase credit for allowable service in that plan” for a period specified in subdivision 1, which covers authorized leaves. The other purchase routes in chapter 352 were not read here.
• The MSRS pages read do not state a deadline for repaying a refund, but the statute does: it allows repayment in a lump sum during employment or up to six months after termination from service, and refunds carry interest at the statutory rates quoted above.
• The MSRS pages read do not state the benefit multiplier or the exact reduction for each year or month of early deferred retirement; the statute does, as quoted above, and the factor at your own age should come from an MSRS estimate.
• Plans other than the General Plan (Correctional, State Patrol, Judges, Legislators) have differences noted only where the pages say so, and a member of one should confirm with MSRS.

Common mistakes

• Treating the survivor election as changeable later; once payments begin, neither the option nor the person covered can be changed.
• Assuming a spouse’s signature can be skipped; without it and without a survivor option selected, MSRS must pay the 50% joint and survivor option.
• Sending the retirement application too early; MSRS cannot accept one more than 60 days before the benefit start date.
• Taking a refund without weighing that it forfeits all service credit and any rights to an MSRS retirement benefit.
• Taking a refund paid to the member and expecting to roll over the full amount, when 20% federal withholding applies by default.
• Assuming Life Income 15-Year Certain pays a survivor for life; it pays for the balance of a 15-year term.

Related on this site: Minnesota retirement taxes, does Minnesota tax pensions, single life versus joint and survivor, public pension retirement decisions by system and pension refund versus leaving it in.

Sources

• MSRS, Retirement Benefit Options: https://www.mnretire.gov/survivor-options
• MSRS, Refund or Rollover After Leaving Employment: https://www.mnretire.gov/refunds-rollover
• MSRS, Estimate of Pension Benefit: https://www.mnretire.gov/estimate-benefit
• MSRS, General Plan: https://www.mnretire.gov/general-plan
• MSRS, Comparison of Retirement Benefit Options: https://www.mnretire.gov/Comparison-of-Retirement-Benefit-Options
• MSRS, Post-Retirement Increases: https://www.mnretire.gov/post-retirement-increases
• MSRS, Tax Information: https://www.mnretire.gov/tax-information
• MSRS, Apply for Retirement: https://www.mnretire.gov/apply-for-retirement
• Office of the Revisor of Statutes, Minnesota Statutes chapter 352 and sections 356.415, 356.46 and 356.59, read on October 24, 2026: https://www.revisor.mn.gov/statutes/cite/352
• MSRS, Defer Your Benefit: https://www.mnretire.gov/defer-your-benefit
• IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
• IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558

Sources: the primary documents linked above, read on October 2, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.