Congressional House Republican tax plan proposals could affect the state pension system.
Section 5101 of the bill expands the unrelated business income tax to specifically include state public pension plans, which are currently exempt. MSRS is specifically concerned that the changes will increase operational costs and lower returns for Minnesota pension funds, as well as erode constitutional protections for state assets being taxed by the federal government.
Some positive provisions in the tax bill would allow Minnesota Deferred Compensation Plan (MNDCP) participants who are still employed to withdraw money from their MNDCP account starting at age 59 ½ instead of 70 ½. A separate section allows members to continue normal contributions to their MNDCP after taking a hardship withdrawal from their account instead of waiting six months to restart their contributions. Previous versions that would have applied a burdensome additional 10 percent tax penalty on early withdrawals from their MNDCP account have been removed from the bill.
MAPE will continue to monitor the legislation as is moves through the process.