Public Pension Subtraction

Payments from these Minnesota pension plans qualify for the subtraction: 

• Chapter 353 (basic member of the Public Employees Retirement Association)  
• Chapter 353, sections 353.63 to 353.666 (Public Employees Police and Fire plan) 
• Chapter 353E (basic member of the Local Government Correctional Service Retirement Plan)  
• Chapter 354 or 354A (basic member of the Teachers’ Retirement Association and St.    Paul Teachers Retirement Fund Association) 
• Chapter 3A (basic member of the Legislators plan) 
• Chapter 352B (State agency law enforcement retirement fund) 

Payments from these non-Minnesota pension plans may also qualify: 

• Any federal government plan based on service for which you did not earn Social Security benefits  
• A plan created by another state or its political subdivisions, or the District of Columbia, if the other state allows a similar subtraction or exemption for the Minnesota pension plans listed 

If your adjusted gross income is greater than these amounts based on your filing status, you do not qualify for this subtraction:

You may have started or suspended Social Security payments while working a job where you also paid into a qualified pension. If you earned a portion of your pension while also paying into Social Security through the same job, you can only subtract the portion of your pension income for the years you were not also paying into Social Security. 

To determine the percentage of your income subject to Social Security Tax, you may need to contact the Social Security Administration or your pension plan administrator.  

You may use this example to determine the portion of your pension income you can subtract from your Minnesota income. 

Example: An employee worked for the federal government as a mechanic for 32 years (384 months), during which they contributed to a federal government retirement plan. In four of those years (48 months), they paid into only their pension. In the remaining 28 years (336 months), they paid into both their pension and Social Security. They received federally taxable pension income of $10,000 from their qualified retirement plan. They take 48 months of pension payments and divide it by the total 384 months to get 0.125. Then, they multiply this percentage by $10,000 to get $1,250, the maximum amount they can claim for the qualified retirement benefits subtraction. They will use this amount when determining their subtraction amount on Schedule M1M.  

Whether or not you are receiving Social Security benefits does not determine your eligibility for the subtraction. 

If you contributed to both Social Security and a qualified pension for the entire length of your job, you are not eligible for this subtraction, whether or not you are receiving Social Security benefits. For details, see these examples. 

Example 1: You worked for the Minnesota Department of Natural Resources and contributed to both Social Security and the pension plan for your entire service. You have begun receiving your pension distributions but have delayed receiving Social Security benefits until next year. You are not eligible for the qualified retirement benefit subtraction because you were contributing to Social Security based on all these earnings and are eligible to receive Social Security benefits from them.  

Example 2: You worked as a teacher and contributed to the St. Paul Teachers Retirement Fund’s pension plan, but did not contribute to Social Security through this job. You worked separate summer jobs and contributed to Social Security through them. Distributions from the pension plan would be eligible for the subtraction since you did not contribute to Social Security on these earnings and are not eligible for Social Security benefits based on your teaching earnings. Depending on your income level, you may also be eligible for the Social Security subtraction on Social Security benefits you received based on earnings from your summer jobs. 

Public Pension Information 

See the chart below to determine when eligible public pensions changed from “basic” (not earning Social Security benefits) to “coordinated” plans (earning Social Security benefits):