This section in statutes was enacted in 1988 as part of that legislative session s tax bill. Our understanding is that the supplemental benefit in current Minnesota volunteer fire law was intended to reimburse retiring volunteer firefighters for a ten percent federal income tax surcharge imposed on individuals who receive lump sum distributions from pension plans prior to age 59 and one-half. Presumably, the federal tax provision was intended to encourage individuals to avoid withdrawing assets from a retirement plan until a reasonable retirement age was reached.
Assets withdrawn at relatively young ages are more likely to be used for non-retirement purposes.
Information from State Auditor report provides an indication of the number of relief associations paying lump sum pensions, and the approximate percentage of these relief associations that pay pensions sufficiently large that a supplemental benefit, if it is payable, is capped. There are five plans which pay monthly service pensions. Every volunteer fire relief association providing lump sum benefits presumably is paying supplemental benefits to at least some of its retirees. However, there are also many relief associations paying supplemental benefits which are restricted. Implementation, Targeting Issues.