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S riontana. Teachers'
331.252 Retlrenent System
Tlhoi Handbook of
1981 Inforwatlon

ivkjjniaNA
Teachers'
Retirement
System STATE DOCUMENTS COLLECTION

MAR G 4 1992

Handbook of MONTANA STATE LIBRARY

1515 E. 6th AVE.
HELENA, MONTANA 59620
Information
July 1, 1981

OFFICE LOCATION
Teachers' Retirement System Building
1500 Sixth Avenue
Helena, Montana 59620

^
406/449-3134
9 ir^
 MONTANA STATE LIBRARY.

3 0864 0014 9213 4

 THE TEACHERS' RETIREMENT BOARD
MEMBER TERM EXPIRES

LEROY CORBIN July 1, 1982

Teacher, Butte

DR. HAROLD WENAAS July 1, 1983

Superintendent, Great Falls

JAMES E. BURKE July 1, 1984

Realtor, Livingston

J. THOMAS RYAN July 1, 1985

Retired Member, Helena

J. WILLIAM KEARNS July 1, 1985

Banker, Townsend

EDWARD F. ARGENBRIGHT Ex Officio

Superintendent of Public Instruction

ADMINISTRATIVE OFFICERS
F. ROBERT JOHNSON Executive Secretary

MARY L. ANDRIDGE Asst. Executive Secretary

 FORWARD
The Montana Teachers' Retirement System was
established by state law in 1937. The System has grown
from its initial enrollment of 3,367 members to over 13,000
active members, and now has assets in excess of
$219,000,000. A total of 4,682 members and beneficiaries
receive retirement, disability, or survivor benefits of over
$20,000,000 each year.

The benefits provided by the System are jointly funded

by each member and his employer. Over the years many
changes and improvements have been enacted through
legislation. In order to maintain the actuarial soundness
of the System, increases in the employer's contribution

rate has increased with each major improvement since

1945 to the current rate of 6.432%. Effective October 1,
1981 this will increase to 6.463%. The employee rate re-
mained at 5% from 1937 to 1973 when it increased to 5
1/8%. Effective July 1, 1975, the employee contribution
rate increased to 6 1/8%, and on July 1, 1977 to 6 3/16%.
 TABLE OF CONTENTS
Administration 1

Membership 3
Exemption from Membership 4
Full-time Service 4
Part-time Service 4
Contributions 4
Interest Credits and Charges 5
Vested Right 5
Benefits 6
FinalAverage Compensation 6
Earned Compensation 6
Creditable Service 7
(1) Membership Service 8
(2) Prior Service 8
(3) Military Service 8
(4) Out-of-state Teaching Service 9
(5) Service While On Leave 9
(6) Repayment of Withdrawals 10
(7) Transfer of Membership 10
(8) Private School Employment 10
Retirement Benefits 11
Effective Retirement Date 12
Earnings After Retirement 13
Disability Benefits 13
Death Benefit 14
Optional Forms of Benefits 15
Normal Form Benefit Table 17
Option Benefits Table 18
Refunds 19
Social Security Coverage 20
Tax-Deferred Annuity Program 20
Taxation of Benefits 25
Questions and Answers 27
 ADMINISTRATION
The governing body of the Teachers' Retirement System of the
State ofMontana is the Retirement Board whose names are listed
on page of this booklet.
i

The Board is composed of the Superintendent of Public Instruc-

tion,two members appointed from the teaching profession who are
members of the System, two persons appointed as representatives
of the public, and one person who is a retired teacher.

The Board employs administrative officers and a staff to conduct

the business of the System.

The State Investment Board invests the funds of the System in

various securities permitted by law. These investments are
segregated from other state funds. The Treasury Division of the
Department of Administration is the custodian of the securities
owned by the System, and of the collected Retirement System
monies.

The powers and duties of the Retirement Board are as follows:

(1) Establish rules and regulations necessary for the

proper administration and operation of the Retire-
ment System.

(2) Elect a chairman from its membership.

(3) Appoint a secretary who may be one of its

members.

(4) Employ technical or administrative employees

who are necessary for the Retirement System.

(5) Approve or disapprove all expenditures necessary

for the proper operation of the Retirement

System.

(6) Keep a record of all its proceedings which shall be

open to public inspection.
 (7) Publish a biennial report by January 1 of each year
the legislature meets, which reports in detail the
fiscal transactions for the two fiscal years im-
mediately preceding the report due date, the
amount of accumulated cash and securities of the
System, and the last fiscal year balance sheet
showing the assets and liabilities of the Retire-
ment System, and submit the biennial report to
the Governor and furnish copies to the legislature.

(8) When the Retirement Board considers it

necessary, designate a medical board to be com-
posed of three physicians who are not eligible to
participate in the Retirement System to in-
vestigate and report to the Retirement Board on
all medical matters relating to the administration

of the Retirement System.

(9) Keep in convenient form that data which is

necessary for actuarial valuation of the various
funds of the Retirement System and for checking
the experience of the Retirement System.

(10) Designate an actuary to assist the Retirement

Board with the technical actuarial aspects of the
Retirement System, which includes establishing
mortality and service tables and making an ac-
tuarial investigation at least once every five years
and compensation ex-
into the mortality, service,
perience of the members and beneficiaries of the
Retirement System.

(11) Prepare an annual valuation of the assets and

the Retirement System.
liabilities of

(12) Determine the eligibility of a person to become a

member of the Retirement System in accordance
with the provisions of 19-4-302 MCA.

(13) Prescribe a form for membership application

which will provide adequate and necessary infor-
mation for the proper operation of the Retirement
System.
 (14) Adopt policies for the determination of creditable
service in the Retirement System implementing
the following guidelines:

(a) One year's creditable service shall be awarded

for each year of full-time service, outside of vaca-
tion periods, but no more than one year's
creditable service shall be awarded for service
during the same school fiscal year.
(b) Not more than one month's creditable service
shall be awarded for one or more continuous
months of absence without pay.

(15) Grant retirement, disability, and other benefits

under the provisions of 19-4-701 MCA.

(16) Annually determine the rate of regular interest as

prescribed in 19-4-501 MCA.

(17) Establish and maintain the funds of the Retire-

ment System in accordance with the provisions of
19-4-601 MCA.
(18) Perform such other duties and functions as are re-
quired to properly administer and operate the
Retirement System.

MEMBERSHIP
Membership in the Retirement System is compulsory. Excuse
from membership can be applied only to a person who teaches less
than 30 days during the absence of a regular teacher.

Membership applies to all persons employed as teachers,

librarians, physical education directors, school nurses, principals,
vice-principals, supervisors, superintendents, county
superintendents of schools, and any other member of the teaching
or professional staff of any public school, elementary school, or
high school in the State of Montana, and any member of the ad-
ministrative, instructional, or scientific staff of the units of the
University System. Effective October 1, 1981, employees in an in-
structional services capacity by special education cooperatives are
required to be members. It also applies to any person employed in
the office of, or by, the State Superintendent of Public Instruction in
duties pertaining to instructional services, and any member of the
instructional staffs of various state custodial institutions.
 EXEMPTION FROM MEMBERSHIP
At the time of passage of the original law in 1937 and its later
amendments to admit the University System, a teacher was permit-
ted to choose membership or nonmembership. In each case, the
period of option lasted only three months. Those exercising the op-
tion of nonmembership are the only teachers exempt from member-
ship. A list of these teachers is maintained at the Retirement Office.

FULL-TIME SERVICE

"Full-time service" means service which is full-time and which

extends over a normal academic year of at least nine months. With
respect to those members employed by the Office of the
Superintendent of Public Instruction, any other state agency or in-
stitution, or the office of a county superintendent, "full-time serv-
ice" means service which is full-time and which totals at least nine
months in any one year.

PART-TIME SERVICE

"Part-time service" means service which is less than full-time or

which totals less than nine months in any one year. Part-time serv-
ice shall be credited in the proportion that the actual time worked
bears to full-time service.

CONTRIBUTIONS
MEMBER'S SHARE

Six and three-sixteenths (.06187) percent of your monthly salary is

deducted by your employer and is sent to the Retirement System to
be credited to your individual account.

EMPLOYER'S SHARE

Your employer currently pays 6.432% of your salary to the Retire-

ment System and on October 1, 1981 this will increase to 6.463%.
This contribution is not allocated to the member, but is placed in a
fund which provides that portion of your benefit not funded by your
retirement account.
 INTEREST CREDITS AND CHARGES
Effective July 1, 1981, interest will be computed on each monthly
balance at the rate of eight percent, compounded annually. The in-
terest rate is not fixed by law, but is set by the Retirement Board an-
nually in direct relation to the interest earnings of the System.

On redeposit of withdrawals, interest will accrue from July 1,

1971, or from the date of withdrawal, if it was after July 1, 1971.

On the purchase of out-of-state service, interest will accrue from

July 1971, or from the date you become eligible to purchase this
1,

service, if after July 1, 1971.

On purchase of creditable service while on leave and on military

service, interest will accrue from July 1, 1973, or from the date you
become eligible to purchase the service, if after July 1, 1973.

On purchase of private school employment, interest will accrue

from October 1, 1981 or from the date you become eligible to pur-
chase the service, if after October 1, 1981.

If payment withdrawals or purchase of additional

for redeposit of
creditable service is made
before June 30 of the fiscal year in
in full
which interest began to accrue, the interest will not be charged.

The chargeable rate of interest will be the same rate set by the
Retirement Board to be credited to your retirement account.

VESTED RIGHT
You have a vested right in the Retirement System after the com-
pletion of five years of service or part time service which totals 5
years of full time service in Montana for which contributions have
been paid. With a vested right, you are entitled to retirement,
disability, and death benefits as described below, if you are other-
wise qualified.

Ifyou cease to be employed in a position which would qualify you

formembership in the System, you will retain your vested right, pro-
vided you do not withdraw your contributions from the System.
 BENEFITS
The Teachers' Retirement System provides not only retirement
and disability benefits. The for-
benefits, but also substantial death
mula from which these three benefits are calculated is:

ANNUAL BENEFIT = CREDITABLE SERVICE x FINAL AVERAGE COMPENSATION

60

(This annual benefit will be paid in 12 equal monthly installments.)

The formula is independent of sex, age, and the amount of your

retirement account, and depends only on your creditable service
and final average compensation, which are determined as follows:

Final Average Compensation means the average of the "earned

compensation" of a member during the three consecutive years of
full-time service which yield the highest average and on which con-
tributions have been made.

Earned Compensation means the full compensation, pay, or salary

actually paid to a member and reported to the Retirement System,
including irregular forms of remuneration, such as amounts paid for
special duty or under a salary reduction agreement, and amounts
paid in kind, such as maintenance. The employer shall fix the value
of any compensation paid in kind. The earned compensation of a
member who had less than three consecutive years of full-time serv-
ice during the five years preceeding his retirement is the compensa-
tion, pay, or salary which he would have earned had his part-time
service been full-time service. The earned compensation of a
member who has been awarded a disability retirement allowance
prior to the completion of a full year is the compensation, pay, or
salary which he would have received had he completed the full year.

If the earned compensation includes any 'termination pay the

employee has 3 options:

I. Use the total termination pay in the calculation of

the average final compensation. The member and
the employer shall pay such contributions to the
Retirement System as are determined by the
Retirement Board to adequately compensate the
System for the additional retirement benefit. The
 contributions must be made at the time the ter-
mination pay is received and are calculated as
follows:

Employee cost - 2.80% x termination pay x

years of creditable service.
Employer cost 2.95% x termination pay x
-

years of creditable service.

II. Use a yearly amount of termination pay added to

each of the 3 consecutive year's salary used in the
calculation of the "final average compensation."
The amount of such compensation must be divid-
ed by the total number of years of creditable ser-
vice with the employer from whom this type of
compensation was received to determine a yearly
amount. The member and the employer must pay
the regular contributions on this termination pay.
Example - Assuming $3,000.00 in termination
pay and 30 years of service, 25 of which were with
the present employer $3,000.00 ^ 25 = $120.00.
$120.00 would be added to each of the three
salaries used in the calculation of benefits.

III. Exclude the termination pay from the average final

compensation. No contribution is required of
either the employee or employer.

'
Termination pay includes any form of termination pay, or any lump sum payment for
deferred compensation, sick leave or accumulated vacation credit or any other pay-
ment for time not worked other than compensation received while on sick leave or
authorized leave of absence.

CREDITABLE SERVICE

Creditable service can be obtained from eight sources. It will

generally be to your advantage to obtain as much credit as possible
from each of these sources. All years of service may be credited un-
til you attain 70 years of age.
(1) MEMBERSHIP SERVICE
Membership service consists of all teaching serv-
ice in Montana since 1937 for which contributions
have been paid and which remain on deposit. As
noted earlier, five years of such service gives you
a vested right in the System.

(2) PRIOR SERVICE

Prior service includes all teaching in Montana
prior to September 1, the date of the
1937,
establishment of the System. Credit for this serv-
ice can be obtained at no cost to you provided you
have a vested right. Verification of this service is
required. Please request forms from this office.

(3) MILITARY SERVICE

Ifyou were a member prior to July 1, 1971, active
service in the Army, Air Force, Navy, Marines, Mer-

chant Marine, or Red Cross during World War II

from October, 1940, through June, 1947, and the
Korean Conflict from June, 1950, through January,
1955, may be credited as prior service without
cost, provided you have a vested right. In order to
receive credit for this service, you must provide
this office with a copy of your military papers
showing your dates of entry on active duty and
separation from service.
If you became a member after July 1, 1971, or if

your military service was not performed during the

above periods, up to two (2) years of active military
service may be purchased after you have a vested
right with the System. The cost is an amount
equal to the combined employee-employer rate in
effect at the time you become eligible to purchase
such service of your first full year's teaching
salary earned in Montana following the active
service for each year purchased. Interest will be
charged on the purchase of this service from the
time you become eligible for this purchase.
Effective October 1, 1981, members with a vested
rightcan receive free military service credit of up
to four (4) years for active service in the Army,
 Navy, Marine Corp, Air Force and Coast Guard dur-
ing the Vietnam Conflict between August 5, 1964
and May 7, 1975, both dates inclusive. Again, you
must provide this office with a copy of your
military papers indicating the date of entry on ac-
tive duty and the date of separation.

(4) OUT-OF-STATE TEACHING SERVICE

When you have been credited with five (5) years of
membership service following out-of-state
teaching service, you may purchase a maximum
of five (5) years of out-of-state service provided
such service would have been acceptable under
the provisions of the law if such service were per-
formed in Montana. The cost is an amount equal
to the employee contribution rate in effect at the
time you become eligible to purchase such ser-
vice of your first full year's teaching salary after
returning to Montana for each year you wish to
receive credit. If you were employed in Montana
prior to July 1, 1967, and have not withdrawn your
account, you may purchase up to ten (10) years of
out-of-state teaching credit provided you have ten
(10) years of Montana service following the out-of-
state service. Interest will be charged on purchase
of this service from the time you become eligible
for purchase.

Individuals who become members of the System

on or after July 1, 1979 and have completed five
years of membership service following their out-
of-state teaching service may purchase the out-of-
state service at a cost equal to the combined
employee-employer contribution rate in effect at
the time of eligibility. This rate would then be
multiplied by the first full year's teaching salary in
Montana following the out-of-state teaching serv-
ice to determine the cost per year.

(5) SERVICE WHILE ON LEAVE

You may purchase up to two (2) years service
while on leave, conditional upon your having been
a member prior to the leave and upon completing
five (5) years of active membership in Montana
 subsequent to your return. The cost is an amount
equal to the combined employee-employer rate in
effect at the time you become eligible to purchase
such service of your first full year's teaching
salary following your return for each year pur-
chased. Interest will be charged on the purchase
from the time you become eligible for purchase.

(6) REPAYMENT OF WITHDRAWALS

If you were a member of the System and withdrew

your contributions on one or more occasions, you

may redeposit the amounts withdrawn and receive
credit for the service represented. All withdrawals
must be redeposited before credit can be
reinstated. You must be a member of the System
to redeposit previous withdrawals. Should you
desire to repay amounts previously withdrawn,
write to this office. You will be notified of the
redeposit required and the service that will be
reinstated after completing payment. Interest will
be charged on redeposits. (See "Interest Credits
and Charges" on page 5.)

Periodic payments for all purchasable service will

be accepted. Arrangements for payroll deduction
must be made through your payroll department.

(7) TRANSFER OF MEMBERSHIP

If you cease teaching and take a position covered

by the Public Employees' Retirement System, you

may transfer your retirement coverage from the
Teachers' Retirement System to the Public
Employees' Retirement System, or vice-versa.
Upon application to the System in which your ac-
count is maintained, your account will be transfer-
red from the other System.

(8) PRIVATE SCHOOL EMPLOYMENT

When you have been credited with five full time
years of membership service following employ-
ment in a private elementary or post secondary
school you may purchase up to five (5) years pro-
vided the service was of an instructional nature, or
employment as an administrative officer or a

10
 member of the scientific staff. This does not in-
clude students employed by a private elementary,
secondary or post secondary school. The cost is
an amount equal to the combined employee and
employer contribution rate multiplied by your first
full years teaching salary in Montana following the

private school employment for each year of

creditable service. Interest will be charged from
the time you become eligible for purchase.
Those members joining the System after July 1,
1973, maynot exceed a total of five (5) years
creditable service for out-of-state service, military
service, private school employment, or service
while on leave.

RETIREMENT BENEFITS
If you have ceased teaching in Montana, you may apply for retire-
ment benefits provided:

(1) You have been credited with full or part-time serv-

ice of 30 or more years, in which case you are eligi-
ble for retirement regardless of age.

(2) You have at least five (5) years of creditable serv-

ice, the last five of which shall have been in Mon-
tana.

(3) Any member who has more than five (5) full years
but less than 30 years of creditable service, can
retire as early as age 50. The normal retirement
age is 60, however, a member with less than 30
years of creditable service can retire at age 50 at a
reduced benefit. The reduction is one-half of one
percent (.5%) for each of the first 60 months the
retirement date precedes age 60 or 30 years of ser-
vice and three-tenths of one percent (.3%) of each
month the early retirement is in excess of the first
60 months the early retirement precedes age 60 or
30 years of service.

(4) Retirement is compulsory on the first day of

September following your 70th birthday, unless
you are a member of the University System and ex-
tension of your service has been recommended by

11
 the President of the unit to the Board of Regents.
In this case you cannot contribute further to the
System nor receive any additional retirement
credits beyond the year in which you attain age 70.

Please note there is no minimum retirement age for a member

who has 30 or more years of creditable service. A member who has
less than 30 years of service must wait until age 50 to retire, then at
a reduced benefit. For example, an individual age 50 who retired at
with 28 years of service would have his/her benefit reduced 12%. (30
years minus 28 years = 2 years or 24 months x .005 or 12%). A
member who retires at age 50 with 19 years of service would ex-
perience a reduction of 48%. (Age 60 minus age 50 = 10 years or
120 months. 1st 60 months x .005 = 30%. 2nd 60 months x .003 =
18%. Total reduction = 48%). (30% + 18%).

Also, a member receives credit for ail service up to the time of

retirement. For example, a member who has 40 years of creditable
service at the time of retirement would be allowed to use 40 years of
creditable service in the calculation of benefits.

The retirement benefit is determined by the for-

mula:

RETIREMENT BENEFIT = CREDITABLE SERVICE x FINAL AVERAGE

60 COMPENSATION

(see page 17)

The minimum benefit is $3,600.00 with 30 years of

service, and a proportionate reduction for lesser
service. This benefit will be payable during your
lifetime. Other options may be elected (as describ-
ed later).

EFFECTIVE RETIREMENT DATE

The effective date of your retirement will be:

(1) July 1 if you retire at the end of a school year,

since the school term is considered to be July 1 to
June 30.

(2) The first of the month following the cessation of

your teaching if you retire during the school term.

12
 (3) The first of the month following your 60th birth-
day, or the first month following your 55th
of the
birthday if you elect early retirement.

Although retirement benefits accrue from the first of the month,

they are paid at the end of the month. Payments are always mailed
from Helena on the last working day of each month.

EARNINGS AFTER RETIREMENT

Any member may be employed as a part-time or substitute
retired
teacher Montana and may earn, without loss of retirement
in
benefits, the greater of: 1) an amount not to exceed V4 of his average
final compensation, or 2) V4 of the median of the average final com-
pensation for members retired during the preceding fiscal year as
determined by the Retirement Board.
You are not limited to the amount you earn in any employment
that would not qualify you as a member of the System.

DISABILITY BENEFITS
If you become disabled and cannot continue to teach, you may be
eligible for disability benefits provided:

(1) You have a vested right in the System.

(2) You were an active member at the time of your

disability.

(3) You are declared physically or mentally in-

capacitated for the further performance of your
duties, and that such disability is likely to be per-
manent. A physician's statement is required.

(4) The Retirement Board has approved the disability

application.

The effective date of the disability benefit will be the first of the
month following the date the member terminates membership ser-
vice. The benefits will continue throughout the continuance of the
disability.

The disability benefit is determined by the formula:

DISABILITY BENEFIT = CREDITABLE SERVICE x FINAL AVERAGE
60 COMPENSATION

13
The minimum disability benefit will be V4 of the final average com-
pensation. This benefit will be payable during your lifetime while
disabled, if the Normal Form benefit is elected. However, in the
event of your death prior to receiving benefits equal to your retire-
ment account, the balance would be payable in a lump sum to your
beneficiary. Optional forms of payments may be elected (as describ-
ed later).

If you are receiving disability benefits, you may return to employ-

ment provided your earnings do not exceed your final average com-
pensation, in which event your disability benefits will cease. If your
earnings are less than your final average compensation, the disabili-
ty benefits willbe adjusted, such that, in no event will your disabili-
ty benefits plus earnings exceed your final average compensation.

From time to time the Retirement Board may require a

physician's certification of your continued disability.

DEATH BENEFIT

If member dies, whether or not he had a vested right, his

an active
beneficiary may elect to receive a lump sum refund of his personal
contributions plus interest. If the member has a vested right, his
beneficiary may elect to receive, in lieu of the refund, a survivor's
benefit.

The effective date of the survivor's benefit will be the first of the
month following the date of the member's death.

For members of the System prior to July 1, 1973, the survivor's

benefit determined by the following formula with adjustment for
is

the age of the beneficiary in relation to the member's age at death. If

the beneficiary is older, the amount will be larger. If the beneficiary
is younger, the amount will be less:

SURVIVOR'S BENEFIT = CREDITABLE SERVICE x FINAL AVERAGE

60 COMPENSATION

The members of the System on July 1, 1973

survivor's benefit for
or after,and who have a vested right would be determined by the
above formula and then adjusted for the factors shown under Op-
tion A on page 18.

This benefit will be payable during the beneficiary's lifetime and

cease upon his death. No optional forms are available.

14
 In addition to this benefit, each surviving child of a deceased
member with a vested right who was an active member in the State
of Montana within one (1) year prior to his death will receive a
child's benefit of $100.00 per month until the child has attained age
18. The last payment will be made in the month in which age 18 is at-
tained. This also applies to minor children of a retired member.

If a member was active within one (1) year of his death, and has a

vested right, his beneficiary will receive a five hundred dollar

($500.00) death benefit in addition to all other benefits payable.

A beneficiary of a retired member is also entitled to receive a

$500.00 death benefit. In the absence of a designated beneficiary
the death benefit will be payable to the estate.

OPTIONAL FORMS OF RETIREMENT BENEFITS

There are many forms in which you may elect to receive your
retirement or disability benefits. Once the benefit is in effect, the
form elected is permanent and cannot be changed. Therefore, it is
important that a careful study be made prior to retirement regarding
your future financial commitments. The staff of The Teachers'
Retirement Division is available to assist as much as possible in
making the best decision, but will not recommend a choice.

There are several facts to consider regarding the optional forms

available to you:

(1) The survivor's benefits described earlier are

available only to active members.

(2) The amount of your monthly retirement benefit

will depend upon the optional form you elect.
Usually the largest amount is payable under the
Normal Form which is the basic formula il-
lustrated earlier. Under the Options, the amount of
the reduced benefit will depend on both your age
and your beneficiary's age.

(3) Estimates of the amount payable under each of

the options can be requested from this office.
Please provide your beneficiary's birthdate as well
as your current salary.

15
NORMAL FORM: Life Only Annuity
This benefit will be payable during your lifetime. In the
event of your death prior to receiving benefits equal to
your account balance at retirement (your contributions
plus interest) the remainder will be refunded to your
beneficiary.

OPTION A: Joint and Full to Beneficiary

This benefit will be payable during your lifetime. Upon
your death, your beneficiary, if living, will continue to
receive the same amount during the remainder of his
lifetime.

OPTION B: Joint and One-Half to Beneficiary

This benefit will be payable during your lifetime. Upon
your death, your beneficiary, if living, will receive V2 of
that benefit during the remainder of his lifetime.

OPTION C: Joint and Two-Thirds to Beneficiary

This benefit will be payable during your lifetime. Upon
your death, your beneficiary, if living, will receive 2/3 of
that benefit during the remainder of his lifetime.

OPTION D: Joint and One-Half to Survivor

This benefit will be payable while both you and your
beneficiary are living. Upon the death of either, the sur-
vivor will receive V2 of that benefit during the remainder
of his lifetime.

OPTION E: Joint and Two-Thirds to Survivor

This benefit will be payable while both you and your
beneficiary are living. Upon the death of either, the sur-
vivor will receive 2/3 of that benefit during the remainder
of his lifetime.

OPTION F: Special Plan

Any actuarial equivalent mutually agreed upon between
the member and the Retirement Board.

TABLE A under NORMAL FORM

illustrates the benefits payable
of retirement. TABLE B payable under Op-
illustrates the benefits
tions A, B, 0, D, and E and are expressed as percentages of the
NORMAL FORM.

16
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18
 Examples of monthly benefits paid under Options A, C, and E,
with the following assumptions:

(1) YEARS OF SERVICE 30

(2) FINAL AVERAGE SALARY $12,000
(3) MEMBER'S AGE 60
(4) BENEFICIARY'S AGE 57
(5) MONTHLY BENEFIT— NORMAL FORM $500
(30/60 X $12,000 -^ 12)

OPTION A: Monthly Benefit

$500.00 X 85.24* = $426.20
Upon the death of the member, the same amount
($426.20) would continue throughout the lifetime
of the beneficiary.

OPTION C: Monthly Benefit

$500.00 X 89.65* = $448.25
$448.25 is payable as long as the member is living.
Upon the death of the member, the beneficiary
would receive two-thirds, or $298.85, throughout
the lifetime of the beneficiary.

OPTION E: Monthly Benefit

$500.00 X 92.88* = $464.40
$464.40 is payable as long as both the member
and the beneficiary are living. Upon the death of
either the member or the beneficiary, the survivor
would receive 2/3, or $309.61.

*From Table B.

REFUNDS
If you are no longer employed in a position which would qualify

you as a member of the System, you may request a refund of your

personal contributions. Termination of a contract does not
automatically qualify you for a refund. If you leave a school district
for employment in another, you are not eligible for a refund.

Interest will be paid upon withdrawals after July I, 1973.

19
 If you are eligible and request a refund, you will be sent the
necessary application form. No refund will be made until all con-
tributions have been received from the employer.

Ifyour account represents at least five years of service, you may

not wish to withdraw. (See "Vested Right" on page 5.)

SOCIAL SECURITY COVERAGE

Most teachers in Montana have social security coverage.
Benefits provided by the Teachers' Retirement System are indepen-
dent of, and in addition to, any social security benefits you may be
entitled to receive.

Information regarding social security benefits should be obtained

from your local social security office.

TAX-DEFERRED ANNUITY PROGRAM

INTRODUCTION

In 1958 the Internal Revenue code was amended to permit certain

tax-exempt employers to deduct a portion of an employee's salary

to be contributed to a tax-deferred annuity contract. Sums so
deducted were considered nontaxable to the employee at the time
the deduction was made. In 1967, the Internal Revenue Service ruled
that contributions on your behalf to a separate fund maintained by a
state teachers' retirement system for the purchase of additional
retirement benefits unrelated to the basic benefits may constitute
contributions toward a tax-deferred annuity contract. The Teachers'
Retirement System has established a separate fund for this pur-
pose.

The tax-deferred annuity program is not a program of tax

forgiveness, but rather it is designed to delay taxation on a portion
of your current income until such time as benefits are received from
the program.

20
ELIGIBILITY

(1) You must be an active member of the Retirement

System.

(2) Ttie Board of Education, Board of Regents, or

other governing body must have adopted an of-
ficial resolution extending to its employees the
opportunity to participate in this program.

(3) You must enter into a "salary reduction agree-

ment" with the governing board authorizing the
board to reduce your salary by a stated amount.
The contributions to the program must be made
by the employer; it is not possible for you to make
the contributions directly. You are not permitted
to make more than one agreement with the same
employer during the same tax year; however, you
may be permitted to terminate the agreement for
amounts not yet earned.

CONTRIBUTIONS

The maximum amount which you may contribute will vary with
each individual situation. The Internal Revenue Service establishes
the rules and regulations concerning maximum contributions, and
we suggest you contact that agency for assistance.

INTEREST

Interest is credited each year on June 30 and is computed on

each monthly balance. The current rate is 8 percent, compounded
annually. The interest rate is not fixed by law, but is set by the Board
annually in direct relation to the interest earnings of the System.

ADMINISTRATIVE EXPENSE

There are no administrative charges or initiation fees required for

participationin this program. The expenses are paid from invest-
ment income.

21
RIGHTS NONFORFEITABLE

Your rights under this program are non-forfeitable. There are no

contingencies which would cause you to lose your rights to any
benefits provided by your contributions. If you should elect to
discontinue your participation in the program, or become employed
in a position which would not qualify you as a member of the

System, you may elect to leave your contributions in your account

and continue to enjoy a tax shelter on them. Your contributions
would continue to earn interest and benefits would be payable at
retirement age.

BENEFITS

The amount of benefits provided by your tax-deferred annuity pro-

gram will depend upon your age at retirement, your account balance
at retirement, and the form of benefit payment which you elect. The
benefits will be determined from actuarial tables approved by the
Retirement Board. The optional forms of payment under the retire-
ment program are available under the Tax Deferred Annuity Pro-
gram. Typical examples of amounts payable and accumulated ac-
counts are given at the end of this section.

WITHDRAWALS

There are no loan provisions under this tax-deferred annuity pro-

gram. Because of restrictions placed on the program by the Internal
Revenue Service, it is not possible for a participant to receive a full
or partial refund of his account and still participate in the program.
In the event you wish to discontinue your participation in the pro-
gram, you may elect to receive a lump sum refund of your account
balance including your personal contributions plus interest accrued
to date.

22
 TABLE I

MONTHLY PAYMENT AT RETIREMENT

PER OF ACCUMULATED CONTRIBUTIONS
$1,000

REFUND ANNUITY— Benefits payable during your lifetime. Upon

your death, balance of account will be payable to your beneficiary.

RETIREMENT AGE
 TABLE II

Projected Account Balance at Age 60 and 65

Assuming $1,000 Annual Contributions

VARIOUS INTEREST RATES

AGE 60

CURRENT AGE
 TAXATION OF YOUR BENEFITS
Retirement, disability, and death benefits payable under provi-
sion of the Retirement System are subject to federal income tax
laws. The information provided below is general and may not apply
in your individual case. You should contact your attorney, account-
ant, or local internal revenue office to obtain tax information regar-
ding your benefits.

STATE TAXES

The retirement law provides that any benefits accrued or accruing

under the provisions of the Retirement System are exempt from any
state, county, or municipal tax of the State of Montana.

FEDERAL INCOME TAX

All benefits, except those provided by your personal contribu-

tions, are subject to federalincome tax as ordinary income in the
year received. Since your personal contributions have already been
taxed, benefits provided by them are not subject to tax.

The Internal Revenue Service has two methods of determining

the taxable benefits:

(1) THREE YEAR COST RECOVERY RULE

If the benefits received in the first three years

equal or exceed your cost (total personal contribu-
tions), all benefits until they equal your cost are
excludable from gross income. All benefits receiv-
ed thereafter are fully taxable as ordinary income.
Most members will recover their cost within three
years, and this method will apply.

(2) REGULAR ANNUITY RULE

If the benefits received in the first three years are

less than your cost, a portion of each benefit
received during your lifetime will be excluded
from your gross income. If this method applies,
you should contact your local Internal Revenue of-
fice for their rules and schedules.

25
 Additional tax exemptions may be available for disability
benefits. Again, you should contact your local Internal Revenue of-
fice for this information.

The tax treatment noted above applies only to the retirement pro-
gram. Any benefits received under a tax-deferred annuity program
are normally taxed in full since your contributions will usually have
been made with "before-tax" dollars.

The Teachers' Retirement System will not advise you as to when

or how much of your retirement benefit is subject to federal income
tax. This the responsibility of the retired member. One time only
is

you will receive an informational tax letter which ex-

after retiring,
plains the taxation of your benefit as well as giving you the total
amount of your personal contributions (cost basis). The contribu-
tion amount is not equal to your account balance, since your ac-
count balance includes interest which has been credited to your ac-
count and the interest is not excludable for federal income tax pur-
poses.

In addition, by January 31 of each year, you will receive Form

W-2P, which gives you the total benefit you have received during the
preceding calendar year. Therefore, the tax letter and Form W-2P
provide you with the information necessary to calculate when and
how much of your benefit will be subject to federal income tax.

Federal income tax is not automatically withheld from your retire-

ment benefit. Upon authorization by the retired member on the pro-
per form, a specified amount can be withheld from your retirement
benefit. These forms are available from the Teachers' Retirement
System upon request.

26
 QUESTIONS AND ANSWERS
YOUR RETIREMENT ACCOUNT

(1) MAY BORROW FROM MY ACCOUNT?

I

No, the retirement law has no provision for per-

sonal loans. Your account can be withdrawn only
upon termination. (See "Refunds" on page 19).

(2) CAN MY BENEFITS BE GARNISHEED?

No, the retirement law provides that any benefits
accrued or accruing are not subject to garnish-
ment, execution, or attachment.

(3) IF HAD PREVIOUSLY WITHDRAWN MY AC-

I

COUNT AND REDEPOSITED THAT AMOUNT,

WILL THE INTEREST WHICH HAD FORFEITED I

BE REINSTATED?

Yes.

SERVICE

(1) WHAT ADVANTAGES ARE THERE IN TAKING IM-

MEDIATE STEPS TO OBTAIN CREDIT FOR ALL
SERVICE TO WHICH MAY BE ENTITLED?I

the event of your death, the survivor's benefit

(a) In

willbe based on the number of years which has

been credited to your account at the time of your
death. If you die prior to completing payment for
out-of-state service or redeposit of withdrawals,
the service represented by payments received
prior to your death will be credited.

(b)If your previous withdrawals are redeposited,

the years represented may be used to determine

your vested right.

(c) Interest charged will accrue each year the pur-

chase of out-of-state service and redeposit of
withdrawals is delayed.

27
 (2) CAN RECEIVE CREDIT FOR MILITARY SERVICE
I

DURING THE VIET NAM WAR?

Effective October 1, 1981, vested members can

receive free service credit of up to 4 years for ac-
tive military duty for the periods August 5, 1964
through May 7, 1975.

(3) WHAT IS THE MAXIMUM AMOUNT OF SERVICE

WITH WHICH CAN BE CREDITED?
I

You may receive credit for all years of creditable

service until you reach seventy (70) years of age.

FINAL AVERAGE COMPENSATION

(1) MAY USE ANY OUT-OF-STATE TEACHING

I

SALARY IN DETERMINING MY FINAL AVERAGE

COMPENSATION?

No, only salaries earned in Montana upon which

contributions have been made can be used.

BENEFITS
(1) ARE BENEFITS PAID TO ME AUTOMATICALLY
WHEN BECOME I ELIGIBLE?

No, you must request the proper application

forms from this office, complete them, and return
them to this office to become eligible for retire-
ment benefits.

(2) WHEN SHOULD APPLICATION FORMS BE RE-

QUESTED?

You should notify this office at least 30 days prior

to your retirement. Applications should be re-
quested immediately in the event of your death or
disability.

(3) WHEN WILL I RECEIVE MY BENEFIT CHECKS?

The benefit checks are normally mailed the last
business day of each month.

28
 (4) MUST DESIGNATE A BENEFICIARY OF MY AC-
I

COUNT?

No, but it is recommended because in the

absence of a designated beneficiary, any death
benefit will be payable to your estate and, as such,
will be subject to estate taxes.

(5) MAY I DESIGNATE MORE THAN ONE

BENEFICIARY?

Only you elect payments under the Normal Form

if

retirement. If an option is elected at the time of ap-

plication for benefits, only one beneficiary can be

designated.

TAX-DEFERRED ANNUITIES
(1) HOW MAY PARTICIPATE IN I THE TAX-
DEFERRED ANNUITY PROGRAM?

Application must be made at the school where

you are currently employed. You will be requested
to sign a "salary reduction agreement" with your
employer.

(2) MAY TRANSFER MY TAX-DEFERRED ACCOUNT

I

TO MY RETIREMENT ACCOUNT FOR THE

REDEPOSIT OF PREVIOUS WITHDRAWALS OR
THE PURCHASE OF CREDITABLE SERVICE?

No, only a lump sum refund payable to you is

availableif you discontinue your participation.

(3) IF DISCONTINUE MY PARTICIPATION, MAY

I I

REJOIN THE PROGRAM AT A LATER DATE?

Yes.

(4) WHAT BECOMES OF MY ACCOUNT IN THE

EVENT OF MY DEATH?

The balance of your account including interest ac-

crued to the date of your death will be payable in a
lump sum to your beneficiary.

29
o
 Montana State Library
Records Digitization Project

COVER SHEET

This page is not part of the original document and was inserted for
formatting purposes