Updated October 30, 2026. Quick answer: A Montana Municipal Police Officers’ Retirement System (MPORS) member does not choose a payment option at retirement: the handbook says the retirement benefit is paid to the surviving spouse on the member’s death. The benefit is 2.5% of final average compensation for each year of service credit, available at 20 years of membership service at any age or at five years and age 50. The irrevocable choice at retirement is the Deferred Retirement Option Plan (DROP), for one to 60 months. A refund gives up every MPORS benefit, and 20% is withheld from a direct payment.
More on public pension COLAs for 2027: the Montana MPORS COLA for 2027 and the fixed 3% GABA.
What this page covers and what it does not
This page works from the MPORS Member Handbook (Revision 01/2025) from the Montana Public Employee Retirement Administration (MPERA), and from the 2025 online Montana Code Annotated pages for Title 19, chapter 9, parts 8, 10, 11 and 12, read on October 30, 2026. The handbook says “Information in this handbook is based on the 2023 Montana Code Annotated”. The statute pages are an internet compilation of the sections in each part, not a printed code volume. Disability retirement is not worked through. Montana’s other state-level systems are on Montana PERS retirement decisions and Montana TRS retirement decisions.
The short version: no option election, one irrevocable choice
Many pension systems ask a retiring member to pick a single-life or joint-and-survivor payment. The handbook and statute pages read describe no such election for MPORS. What they describe instead is a fixed survivor rule: “Your retirement benefit will be paid to your surviving spouse upon your death”. The statute adds that “the member’s surviving spouse, if there is one, must receive a benefit equal to the amount of the member’s benefit at the time of the member’s death”. The decision a member actually makes is about timing and about the Deferred Retirement Option Plan, covered below.
| Path | What it pays | What a survivor receives |
|---|---|---|
| Service retirement | A monthly benefit for life, 2.5% of final average compensation for each year of service credit | The same monthly amount to a surviving spouse; if none, to dependent children |
| Death of an active member, under 20 years of membership service | Not applicable | Half of final average compensation each month to a surviving spouse or dependent child |
| Death of an active member, over 20 years of membership service | Not applicable | 2.5% of final average compensation for each year of service credit |
| DROP, one to 60 months while working | The monthly accrual builds in a DROP account instead of being paid | A surviving spouse (or dependent children) receives the DROP benefit and the monthly benefit |
| Refund of contributions | Accumulated contributions plus interest; 20% withheld from a direct payment over $200 | Gives up every other MPORS benefit |
Where the handbook describes payments after death, the order it gives is spouse, then dependent children, then a designated beneficiary: “If you do not have a surviving spouse, or your surviving spouse dies while receiving the benefit, the benefit will be paid to your surviving dependent child(ren)”, and if neither exists, “your designated beneficiary will receive your remaining account balance”. The related decision for systems that do offer a choice is at survivor benefit with a government pension.
When a benefit can start and how it is figured
On eligibility the handbook says: “You are eligible for service retirement benefits when you complete 20 years of membership service at any age, or you have five years of membership service and are 50 years of age”. The statute describes the same two tests: “the member has completed 20 years or more of membership service”, or “the member is vested and has reached 50 years of age”.
The formula the handbook prints is “Retirement Factor x Years of Service Credit x FAC”, where final average compensation is “the average of your monthly compensation for the last 36 months of service”. The statute sets the factor: the member “must receive a retirement benefit equal to 2.5% of the member’s final average compensation for each year of service credit”. For members hired on or after July 1, 2013, a cap applies: “compensation included in the calculation of each year of your FAC is capped at 110% of the compensation you earned the prior year”. The handbook’s own sample reads “0.025 x 20 x $3,000 = $1,500”.
A computed example from an assumed $4,000 final average compensation and an assumed 25 years of service credit, not an MPORS figure: 2.5% of $4,000 is $100 for each year, so 25 years gives a computed $2,500 a month before any increases. At 20 years with the same pay the same formula gives a computed $2,000 a month.
Applying, and when the benefit begins
The handbook sets a sequence: “At least three months before you plan to retire, contact us for an official Defined Benefit Estimate Request”, and “At least 30 days before you plan to retire, you must complete the retirement application forms that accompanied your benefit estimate and return them to MPERA”. The documents read describe no payment option form, so the estimate request is where a member checks the amount.
The DROP election: irrevocable
The one choice the handbook labels irrevocable is joining the DROP. It says “The DROP provides MPORS members who have at least 20 years of membership service with an additional retirement option”, and “Participation in the DROP is optional and your decision to participate is irrevocable”. The glossary defines the DROP period as “The period of time that a member irrevocably elects to participate in the DROP”. The statute says a member eligible to retire on 20 years of service “may elect to participate in the DROP by filing a one-time irrevocable election with the board on a form prescribed by the board”. Two limits sit on the election: the handbook says “You may elect a DROP period that can last from one to 60 months”; the statute adds “A member may participate in the DROP only once”.
Under it, “your monthly benefit payment (also known as the DROP accrual), remains in the MPORS trust fund in a separate DROP account”, with the monthly DROP accrual defined as “The amount equal to the monthly benefit that would have been payable to the participant had the participant terminated and retired”.
The costs of choosing it are in the handbook’s own words: “you will not earn additional membership service or service credit”, and “As a DROP participant, you cannot receive a disability retirement, purchase service, receive service credit or a refund”. Whether the DROP suits a particular career is a question for an MPERA benefit estimate, not something the documents answer.
A computed example from an assumed $2,500 monthly benefit and an assumed 36-month DROP period, not an MPORS figure: 36 monthly accruals of $2,500 come to a computed $90,000 before interest and any increases the DROP account earns. The documents give no figure for what a real account would hold.
DROP deadlines and how the account is paid out
A member who decides to join must “complete the application and return it to us at least two weeks before the first day of the month you would like to start your DROP, along with a certified copy of your birth certificate”.
When employment ends, “If you terminate MPORS-covered employment during the DROP period, your DROP benefit will be paid to you”. The choice: “your DROP benefit will be distributed to you as a lump-sum or a direct rollover to an eligible retirement plan”. The deadline: “If you do not designate a rollover within 60 days after termination of employment, your DROP benefit will be paid directly to you in a lump-sum”. On tax, “Required federal and state tax withholding will be withheld”. For how withholding works on a lump sum, see 20% withholding on a pension lump sum.
After the DROP period: staying on the job
A member can “continue to work in MPORS-covered employment after your DROP period ends”, but “You will not receive your service retirement benefit or your DROP benefits while you continue to work”. The earlier benefit is fixed to the earlier pay: “Your DROP benefit will remain based on your final average compensation before the DROP period began”. On increases, the handbook says “If you continue to work after the DROP period, you will not receive GABA increases during your period of post DROP employment”.
If the member dies during the DROP
The handbook says “If you die while participating in the DROP, your surviving spouse (or dependent children if you do not have a spouse), will receive your DROP benefit”. With no such survivors, “If you have no surviving spouse or dependent children, then your designated beneficiary will receive the balance of your DROP account”. The statute is fuller on that last case: the designated beneficiary receives the DROP benefit and “the member’s accumulated contributions minus any benefits paid from the member’s account, including monthly DROP payments”, with interest credited.
Leaving before retirement: leave the money or take a refund
For a vested member who ends employment the handbook says “you can leave your money on account to continue to earn interest and later receive a retirement benefit; or you can receive a refund of your accumulated contributions (your contributions plus interest)”. “Employer contributions are not refundable”. The cost of a refund is stated plainly: “If you withdraw your accumulated contributions, you are no longer vested, and you will give up your right to any MPORS benefits”. Vesting comes from the member’s own service: a member is vested after “accumulate five years of membership service”. Interest on a left balance does not enlarge the pension, since “The interest credited to your account will not affect the amount of your monthly retirement benefit”. The related general decision is at pension refund versus leaving it.
The refund rules depend on the balance. The handbook’s mandatory-refund rule for a member who is not vested has tiers: “If you have less than $200 in accumulated contributions, you will be sent a lump sum refund to the address we have on file”; and “If you have between $200 and $1,000 in accumulated contributions, you can request a refund application from MPERA”. Its optional-refund rule says “If you have more than $1,000 in accumulated contributions, you may leave your contributions on account and continue to earn interest”. For the middle tier, “The application must be returned within 90 days of your termination”, and “If you do not request a rollover within 90 days, your contributions will be refunded directly to you with the required federal income tax withheld”. The pages read do not describe a spousal consent step for a refund, so MPERA should be asked.
How a refund is taxed, and what a rollover does
The handbook says “If you receive a refund greater than $200 directly, the IRS requires us to withhold 20% for federal income tax purposes”. It also says “You may also be subject to an additional 10% penalty if you withdraw your account before you reach age 59 ½”, and “Montana state income tax can be withheld if requested”. To avoid the withholding and the penalty the handbook describes rolling “the taxable part of your refund into an IRA or other eligible retirement plan immediately, as a direct rollover, or within 60 days”.
A computed example from an assumed $10,000 taxable refund paid directly to a member under 59 and a half, not an MPORS figure: 20% withholding is a computed $2,000, leaving a computed $8,000 in cash. If no exception applies, the 10% additional tax on $10,000 would be a computed $1,000 more at tax time. See 20% withholding on a pension lump sum.
Returning after a refund and buying service credit
A refund does not end the story if the member returns: “We will consider you a new member without credit for the refunded service”. The price of reinstating it: “To purchase the refund, you must repay the accumulated contributions you received and pay the interest that would have been credited to your account had the refund not taken place”. The handbook does not give a rate for that interest.
Another purchase type is a ratio: “For each five-year period of membership service, you can buy one year of service credit”. A cap applies: “Current law limits the purchase of active military, reserve military, additional, and other public service to a combined total of five years”. Payment terms: “Service purchases are subject to interest if not paid as a lump sum”; “If you do not complete payments on your service purchases before you retire, the service credit will be prorated based on the amount paid”. The break-even on a purchase can be tested at the pension buyback calculator.
Cost-of-living adjustments: GABA
The handbook says “The Guaranteed Annual Benefit Adjustment (GABA) will increase your retirement benefit every year if you are eligible”. It adds “When you have received your benefit for at least 12 months, you will become eligible for a GABA increase”. The statute puts the size at 3%, subject to its own adjustment rule for a recipient who also received other increases: the benefit “must be increased by 3%” each January for an eligible recipient. Eligibility depends on when the member began: the statute covers a member who “first became an active member on or after July 1, 1997” (or who filed the election the statute describes), while the handbook says “MPORS members hired before July 1, 1997, could elect to be covered by GABA or a minimum benefit adjustment”.
Other points a family should know
Statutory beneficiaries are narrow: “If you are married, your spouse or dependent children are your statutory beneficiaries”, and “A non-statutory beneficiary is eligible to receive any balance in your account but cannot receive a monthly benefit”. For an active member who dies, “If you have not completed 20 years of membership service, the monthly survivorship benefit will be equal to half of your final average compensation”; the statute adds that “If the deceased member has completed over 20 years of membership service, the survivorship benefit must equal 2.5% of the member’s final average compensation for each year of service credit”.
A computed example from an assumed $4,000 final average compensation, not an MPORS figure: an active member with an assumed 22 years of service credit would leave a survivor 2.5% of $4,000 for each of 22 years, a computed $2,200 a month, against a computed $2,000 a month under the half-of-compensation rule for under 20 years.
What the IRS adds on tax
A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of MPORS’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that “If you do roll it over and want to defer tax on the entire taxable portion, you’ll have to add funds from other sources equal to the amount withheld”. The MPORS handbook describes the same 20% federal withholding on a direct refund and offers a direct rollover as the way around it. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.
On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan (within in the meaning of section 414(d)) provided that the qualified public safety employee has separated from service during or after the year in which they attained age 50 or 25 years of service under the plan, whichever is earlier”. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.
Handbook and statute: how they line up
The handbook is based on the 2023 code and the statute pages read are the 2025 compilation. The handbook also says “If the context of this handbook conflicts with state law or administrative rules, the law or rules will apply”. On the points compared (the 20 years or age 50 tests, the 2.5% factor, the one to 60 month DROP length, and the irrevocable DROP election) the two read the same, so no conflict is reported. The refund rules come from the handbook alone; the statute pages read point to Title 19, chapter 2, part 6 for the right to a refund, and that part was not read.
What this page could not settle
- The pages read do not describe a member-elected payment option or a joint-and-survivor election; the survivor rule above is what they describe.
- No active-member count is given: the Annual Comprehensive Financial Report that carries membership counts was too large to archive as a source for this page.
- The pages read describe no lump-sum retirement option apart from the DROP benefit and refunds.
- The pages read do not state the refund rules in statute form, the member contribution rate, or the interest rate credited on regular accounts.
- The pages read do not say whether a spouse must consent to a refund or to joining the DROP.
- The pages read do not state the interest rate on a service purchase paid over time, the cost of a given purchase, or a dollar value of any DROP account.
- The DROP application form, the retirement application and the Tax Withholding Certificate were not examined.
- Disability retirement, family law order mechanics, the pre-1997 minimum benefit adjustment and the effect of city-county consolidation were not examined in depth.
Common mistakes
- Treating the DROP as reversible; the handbook and statute both call the election irrevocable.
- Expecting a survivor-option choice at retirement; the documents read describe a statutory survivor benefit instead.
- Taking a refund without weighing that it gives up every MPORS benefit and the right to a pension.
- Expecting the full refund check; 20% is withheld from a direct payment over $200.
- Assuming the DROP keeps adding service credit; the handbook says none is earned while participating.
Related on this site: Montana PERS retirement decisions, Montana TRS retirement decisions, survivor benefit with a government pension, pension refund versus leaving it, 20% withholding on a pension lump sum, pension buyback calculator and public pension retirement decisions by system.
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Answer againSources
- MPERA, MPORS Member Handbook (Montana Municipal Police Officers’ Retirement System, Rev. 01/2025): https://mpera.mt.gov/_docs/Handbooks/MPORS.pdf
- Montana Legislature, Montana Code Annotated 2025, Title 19, chapter 9, part 8, Service Retirement Benefits (online statute compilation, sections combined): https://mca.legmt.gov/bills/mca/title_0190/chapter_0090/part_0080/sections_index.html
- Montana Legislature, Montana Code Annotated 2025, Title 19, chapter 9, part 10, Postretirement Benefits and Benefit Increases (online statute compilation, sections combined): https://mca.legmt.gov/bills/mca/title_0190/chapter_0090/part_0100/sections_index.html
- Montana Legislature, Montana Code Annotated 2025, Title 19, chapter 9, part 11, Survivorship Benefits and Death Payments (online statute compilation, sections combined): https://mca.legmt.gov/bills/mca/title_0190/chapter_0090/part_0110/sections_index.html
- Montana Legislature, Montana Code Annotated 2025, Title 19, chapter 9, part 12, Deferred Retirement Option Plan (online statute compilation, sections combined): https://mca.legmt.gov/bills/mca/title_0190/chapter_0090/part_0120/sections_index.html
- IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
- IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558
Sources: the primary documents linked above, read on October 30, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.