Everyone
1/60 a year
Annual benefit = years of creditable service x AFC x 1/60 (Montana TRS writes 1.6667%), paid in 12 equal monthly payments. Tier Two members retiring at 60 or older with 30 or more years get 1.85% instead (professional retirement option). The engine uses the exact fraction 1/60.
MCA 19-20-804; 19-20-703(1); Montana TRS web page: Understand Your Benefits (Standard Benefit Calculation Formula; Tier 2 Professional Option)Tier Two at 60 with 30 years
1.85% a year
Professional retirement option: age 60 with 30 or more years of creditable service, 1.85% x AFC x service. Service credited before becoming a Tier Two member (even if redeposited) and service transferred from PERS don't count for this option.
MCA 19-20-101(34), 19-20-801(2)-(3), 19-20-802(1)(b), 19-20-804, 19-20-805(1)(b); Montana TRS web page: Understand Your Benefits (Tier 2 Service Retirement; Tier 2 Professional Option); Actuarial Valuation (July 1, 2025), pp. 47-48, Appendix B; Montana TRS FY2025 ACFR, p. 19 (Summary of Benefits)Montana TRS's Understand Your Benefits web page says the 1.85% Tier Two professional option applies to 'Tier 2 members who retire with 30 or more years of creditable service' (no age). The statute, the actuarial valuation and the ACFR require age 60 as well. We follow the statute (the fact sheets say Montana TRS law supersedes them).
We follow the law: 1.85% needs age 60 and 30 years. A Tier Two member with 30 years who retires at 59 gets a full benefit at 1/60 ($2,500.00 a month on $60,000), not 1.85%.
Montana TRS web page: Understand Your Benefits (Tier 2 Professional Option); MCA 19-20-801(3), 19-20-804(2); Actuarial Valuation (July 1, 2025), p. 48; Montana TRS FY2025 ACFR, p. 19
Two examples
Our arithmetic on Montana TRS's formula, not Montana TRS examples: Montana TRS publishes none.
What each year is worth
Our engine on a $60,000 AFC, before any early-retirement reduction. Each year adds $83.33 a month at 1/60.
| Years | At 1/60 | At 1.85% |
|---|---|---|
| 10 | $833$10,000 a year | needs 30 years |
| 20 | $1,667$20,000 a year | needs 30 years |
| 25 | $2,083$25,000 a year | needs 30 years |
| 30 | $2,500$30,000 a year | $2,775Tier Two at 60+ |
| 35 | $2,917$35,000 a year | $3,238Tier Two at 60+ |
Your average final compensation (AFC)
- AFC is the average of your highest 3 consecutive fiscal years of full-time pay (Tier One) or highest 5 (Tier Two).MCA 19-20-805(1); Montana TRS web page: Understand Your Benefits
- A raise of more than 10% from one year to the next is capped at 110% for your AFC, unless it came from moving on your employer's salary schedule. The excess is spread over all your years of service instead.MCA 19-20-805(5); Montana TRS web page: Retirement Prep (FAQ)
- You can add termination pay (lump-sum sick and vacation leave, severance, retirement incentives) to your AFC. Option 1 gives the biggest increase but costs the most; Option 2 spreads it over all your years at regular contribution rates; Option 3 leaves it out.MCA 19-20-716; Termination Pay fact sheet (Mar. 26, 2026), pp. 1-2
- To have contributions on termination pay taken pre-tax, you and your employer must sign Form 129 at least 90 days before your last day. It can't be undone, so get an estimate from Montana TRS first.MCA 19-20-716(2); Termination Pay fact sheet (Mar. 26, 2026), p. 2; Montana TRS web page: Retirement Prep (FAQ)
Average final compensation (AFC) is the average earned compensation in the 3 (Tier One) or 5 (Tier Two) consecutive fiscal years of full-time service that give the highest average. If a member lacks 3 (5) consecutive full-time years in the last 5 (7), part-time pay is annualized. Each AFC year's earnings may not exceed 110% of the prior year's reported earnings, unless the raise came from movement on the employer's salary matrix; the excess is added in the same way as termination pay Option 2 (spread over total years of service). MCA 19-20-805; Montana TRS web page: Retirement Prep (FAQ); Actuarial Valuation (July 1, 2025), p. 47, Appendix B (Final Compensation)
MCA 19-20-805(5) caps each AFC year at 110% of the 'next prior year of service reported' and adds the excess like termination pay Option 2; the sources don't say whether the base is the reported or the capped prior year, or show an example.
Base = reported prior-year earnings; excess / total service added to AFC
What would settle it: Montana TRS's 'Ready, Set, Retire!' illustration of the 110% cap, or an EOB showing excess earnings.
MCA 19-20-715 applies the IRS limit to members who joined on or after July 1, 1996 but no source prints the dollar amount.
No cap applied; a note is shown
What would settle it: The current IRS limit as Montana TRS applies it.
Termination pay
Termination pay (lump-sum sick and vacation leave, severance, retirement incentives and other payments contingent on termination, paid within 60 days of termination at retirement) can be used to raise AFC. For pre-tax employer pick-up of the member contributions, member and employer must sign Form 129 (TPIEF) at least 90 days before the termination date; it is irrevocable. MCA 19-20-716; 19-20-101(32); Termination Pay fact sheet (Mar. 26, 2026), pp. 1-3
- Option 1: termination pay is divided by the number of AFC years and added to each AFC year (largest increase). Member and employer pay contributions set by the board to fund the increase; member contributions can exceed the termination pay ('pay to retire').
- Option 2: termination pay is divided by total years of creditable service and the yearly amount is added to each AFC year. Contributions at the regular rates (plus the state supplemental rate, paid by the employer).
- Option 3: termination pay is excluded from AFC; no contributions.
Our engine, not a Montana TRS example: $9,000 of termination pay on a $60,000 Tier One AFC with 30 years.
| Option | AFC | Monthly |
|---|---|---|
| Option 1÷ 3 AFC years | $63,000 | $2,625.00 |
| Option 2÷ 30 years of service | $60,300 | $2,512.50 |
| Option 3left out | $60,000 | $2,500.00 |
Option 1 costs the most: Montana TRS sets its contributions actuarially, and they can be more than the termination pay. Ask Montana TRS for an Estimate of Benefits with your termination pay before you sign Form 129. MCA 19-20-716; 19-20-101(32); Termination Pay fact sheet (Mar. 26, 2026), pp. 1-3
Retiring before your full-benefit age cuts the formula amount: see early retirement. Try your own numbers in the calculator.
Questions
What is the Montana TRS formula?
Years of creditable service × average final compensation (AFC) × 1/60 a year (Montana TRS writes 1.6667%), paid in 12 monthly payments.
Who gets 1.85%?
Tier Two members who retire at 60 or older with 30 or more years of service. Service from before you were Tier Two, or moved from PERS, doesn't count toward the 30 years.
Can termination pay raise my benefit?
Yes. Lump-sum sick and vacation leave, severance and retirement incentives paid when you retire can be added to your AFC under Option 1 or 2. Contributions are due on it.
Source: Montana TRS: Understand Your Benefits (web page) and fact sheets, Fetched Nov. 12, 2026; fact sheets revised 2019-2026, fact sheets: Termination Pay pp. 1-3, 1-2. Also: Montana TRS web page: Retirement Prep; Actuarial Valuation (July 1, 2025); FY2025 Annual Comprehensive Financial Report; MCA §§ 19-20-101, 19-20-703, 19-20-715, 19-20-716, 19-20-801, 19-20-802, 19-20-804, 19-20-805. Last reviewed .