April 2014

A quarterly publication for MNDCP participants
A D M I N I S T E R E D B Y M I N N E S O TA S TAT E R E T I R E M E N T S Y S T E M ( M S R S )
April 2014
Want to reduce your current taxes?
Contribute to your retirement plan
Every pre-tax dollar you contribute to a retirement plan, like
MNDCP, lowers your federal taxable income for that year
(see chart below).
below). Reducing your taxable income means lower
taxes paid to the IRS. It’s that simple. You may also see savings
in your state income taxes.
Of course, this does not eliminate your tax liability. You are
merely “deferring” the taxation of your money until you take
a withdrawal from your retirement plan account. At that time,
you may be in a lower tax bracket.
Taxation
without
contribution
Gross Income
Pre-Tax Annual Contribution
$ 50,000
$ 50,000
0
– $ 5,000
(at 25% tax rate)
= $ 50,000
x 25%
= $ 45,000
x 25%
Income Tax
$ 12,500
$ 11,250
$
$ 1,250
Taxable Income
Current Tax Savings
– $
Taxation
WITH
contribution
0
And while the
current tax
break provides
an immediate
savings, the
more significant
benefit comes in
the long-term — your investment earnings, if any,
are also tax deferred. The benefit of deferring tax
on the earnings could add up to more than the tax
deduction you gained from your contributions.
Consider saving as much as you can. You’ll reduce
your taxable income, meaning lower taxes, and
more importantly, you’re building a nest egg with
the potential to provide more financial support in
retirement. Call MSRS to change your contribution
amount. You can do this anytime of the year and as
often as you like.
Are you eligible for the Saver’s Tax Credit?
You may be eligible for an income tax credit up to $1,000 just by contributing
to your MNDCP account. It’s called the Saver’s Tax Credit.
The amount of the credit is determined by your:
• filing status;
• your adjusted gross income (AGI); and
• contributions to a qualifying retirement plan, like your MNDCP account.
You may not take the credit if, during the year, you were under age 18, a full-time
student, or claimed as a dependent on someone else’s 2014 tax return.
To determine the percent of your credit, visit www.mndcplan.com/?FAQTaxIncentives/htm
If you qualify, complete IRS Form 8880 and attach it to your federal tax return. Form 8880 includes
instructions to calculate the credit correctly. Download IRS publications and tax forms at www.irs.gov.
The basics
of designating
beneficiaries
You work hard to accumulate
money in your retirement account.
Make sure you control who
inherits your savings in the event
of your death through the
designation of beneficiaries.
Your MNDCP beneficiary
designation begins immediately after
your death and overrides a will. That
means your assets will not have to go
through probate, a legal proceeding
that can be expensive. But it also means
that you need to ensure that your
beneficiary designation reflects your
most recent wishes because your will
or trust cannot override them.
If you do not name a beneficiary
or if your designated beneficiary does
not survive you, your MNDCP account
automatically defaults to your current
spouse. If you do not have a current
living spouse, a lump sum payment
will be made to your estate.
Beneficiaries can include a spouse,
children and other relatives. Or they
can include friends, trusts, charities
and institutions.
Your beneficiary is listed on the
last page of your quarterly statement.
Or, you can view your beneficiary
designation online. Whenever
something happens in your life, such
as a marriage, the birth of a child,
a divorce or the death of a spouse,
be sure to update your beneficiary
designation.
A word about naming
a minor beneficiary
Minor children (under age 18
in Minnesota) lack the legal
capacity to exercise account
rights, enter into contracts, or
sign for the receipt of proceeds.
Unless you’ve named a legal
guardian through a trust or
specific designation, MNDCP will
require that a guardian/custodian
guardian/custodian
be appointed by the court before
benefits can be paid.
Update your Beneficiary Designation
Primary beneficiaries inherit first.
• Log on to your Account Online
If your primary beneficiary predeceases
you, your MNDCP assets go to any
secondary/contingent beneficiaries.
• Complete a Beneficiary form. You may download the form
at www.mndcplan.com (under the Forms tab) or call
MSRS at 1-800-657-5757, option 3 to request the form
For more information regarding beneficiary designations,
contact MSRS to request Your Guide to Beneficiary
Designations. Or you can find it online at
www.mndcplan.com/DesignatingBenef.htm
A D M I N I S T E R E D B Y M I N N E S O TA S TAT E R E T I R E M E N T S Y S T E M ( M S R S )
1-800-657-5757 | 651-296-2761 | 60 Empire Drive | Suite 300 | St. Paul, MN 55103-3000 | www.msrs.state.mn.us
This newsletter can be made available in alternate formats such as Braille, large print, or cassette tape.
Teletypewriter and TDD users should call the Minnesota Relay Service at 1-800-627-3529 and ask to be connected to 651-296-2761
CN0304-15948-0416
April 2014