Montana TRS Retirement Options: Payments, Refund and Buyback

Updated October 2, 2026. Quick answer: Montana Teachers’ Retirement System (TRS) members choose a retirement allowance before the first monthly payment, and Montana law makes the election irrevocable once TRS processes that first payment. The Normal Form is the largest benefit and gives a surviving spouse no continuing monthly benefit, though the code separately pays $200 a month to each minor child of a deceased retiree. A refund of contributions forfeits the member’s creditable service and ends membership. A member is vested at 5 years of creditable service, and the standard formula is one-sixtieth of average final compensation for each year of service, which TRS prints as 1.6667%.

What this page covers and what it does not

This page works from four documents: two pages published by the Montana Teachers’ Retirement System (Understand Your Benefits and Retirement Prep) and two sections of the Montana Code Annotated, 2025 edition, one on optional allowances and one on withdrawal and refund of accumulated contributions. It covers the decisions made on the way out. Where those pages leave a question open, this page also quotes other sections of Montana Code Annotated title 19, chapter 20 (teachers’ retirement), read on October 24, 2026.

The TRS pages read do not describe a lump sum retirement option or the TRS rollover forms, so this page does not state how those work beyond what the code says about them below. Confirm anything consequential with TRS before a form is signed. For the state tax side, see Montana retirement taxes and does Montana tax pensions.

Which tier you are in, and when you can retire

Eligibility depends on tier, and TRS defines the tiers by date. For Tier 1, TRS says “you became a member of TRS before July 1, 2013”, and “you have not subsequently withdrawn your TRS member account balance”. For Tier 2: “you became a member of TRS on or after July 1, 2013”. A Tier 1 member who takes a refund and returns does not come back as Tier 1, as covered below.

For Tier 1 service retirement TRS lists: “age 60, if vested (5+ years of creditable service)”; “any age with 25+ years of creditable service”; or “any age as long as service was reported within 25 fiscal years”. Tier 1 early retirement: “Receive a reduced benefit as young as age 50, if vested (5+ years of creditable service)”. For Tier 2 service retirement: “age 60, as long as you are vested (5+ years of creditable service)”, or “age 55 with 30+ years of creditable service”. Tier 2 early retirement: “Receive a reduced benefit as young as age 55, if vested (5+ years of creditable service)”. The pages read do not state the size of the early reduction. Section 19-20-802(3) says only how it is set: “the allowance will be reduced using actuarially equivalent factors based on the most recent actuarial valuation of the system.” A member near the early ages needs a TRS estimate. Vesting is the gate: “When you have accrued 5.00 years of creditable service with TRS”, and “it means you are eligible for a future lifetime retirement benefit”.

How the benefit is calculated, with a computed example

The benefit rests on service and pay, not on the account balance. TRS says “Did you know that your TRS member account balance will not determine how much you will receive as a TRS retiree?” The credited interest rate is stated as 2.00% effective July 1, 2025, and “The TRS Board reviews the interest rate in May each year.”

The standard formula applies to every Tier 1 member who qualifies for service retirement and to a Tier 2 member who qualifies for service retirement but not for the 1.85% option described below. TRS prints it as “Years of Creditable Service x Average Final Compensation (AFC) x 1.6667%”. Section 19-20-804(1) states the multiplier exactly: the allowance is “one-sixtieth of the member’s average final compensation, as limited by 19-20-715, multiplied by the sum of the number of years of creditable service.” The result is the gross annual benefit, “which is distributed in 12 equal monthly payments”. “AFC for Tier 1 is based on the 3 highest consecutive fiscal years of earned compensation.” “AFC for Tier 2 is based on the 5 highest consecutive fiscal years.” A Tier 2 member with 30 or more years of creditable service who has reached age 60 has a second formula, which TRS prints as “Years of Creditable Service x Average Final Compensation (AFC) x 1.85%”. The code ties it to age as well as service (section 19-20-801(3)): “A tier two member who has been credited with 30 or more years of creditable service and has attained the age of 60 is eligible for a professional retirement option allowance calculated under 19-20-804 (2).”

A computed example from assumed inputs, not a TRS figure: a Tier 2 member with 30 years of creditable service, all of it earned as a Tier 2 member, and an assumed average final compensation of $60,000. Under the standard formula, 30 times $60,000 divided by 60 is a computed $30,000 gross per year, or a computed $2,500 a month over 12 payments (the rounded 1.6667% would show $30,000.60). Under the Professional Option, which needs age 60, 30 times $60,000 times 1.85% is a computed $33,300 per year, or a computed $2,775 a month, a computed $3,300 a year more. These are before any survivor reduction and before taxes.

The 1.85% formula also counts less service than the standard one. Section 19-20-804(2)(b) says: “For the purpose of calculating the professional retirement option, creditable service does not include: (i) service credited before the member became a tier two member even if the member redeposits the member’s withdrawn contributions pursuant to 19-20-427; or (ii) service credit transferred under 19-20-409.”

Only two inputs drive the result. “Your creditable service and your average final compensation are the only two factors used to calculate your retirement benefit.” One rule can trim pay: “a significant pay increase (greater than 10%) from one fiscal year to the next”, and then “TRS is required by law to cap those earnings to 110% of the previous fiscal year’s reported earnings for purposes of calculating the member’s retirement benefit”. A computed example from assumed earnings, not TRS figures: 110% of an assumed $50,000 prior year is a computed $55,000, so an assumed $58,000 year would have a computed $3,000 above the cap. The code limits the cap in two ways (section 19-20-805(5)). First: “This limitation does not apply to an increase that results from movement on the employer’s adopted salary matrix but does apply to an increase that results from additions to or adjustments of the employer’s salary matrix or initial implementation of a salary matrix.” Second, the excess is not simply dropped: “Earned compensation in excess of the amount specified in subsection (5)(a) must be included in the calculation of average final compensation in the same manner as termination pay option 2 as provided in 19-20-716 (1)(b).”

Choosing the allowance: what each pays a survivor

TRS describes six allowances and says only the member can pick: “Only you can determine which retirement option will be best for you and your family.” The page frames the question this way: “you might consider choosing a Joint and Survivor annuity option or a Period Certain and Life option”. The cost of the largest option: “The Normal Form allowance (largest benefit) does not provide a continuing monthly benefit to survivors.” The code adds two payments, and the first does not depend on the election. Section 19-20-1002(1)(b), which is subject to section 19-20-1009 on how a payment to a minor is made, says “the sum of $200 a month must be paid to each minor child of the deceased retiree until the child reaches 18 years of age.” And for a Normal Form retiree, section 19-20-1002(2) says: “If the member was receiving a normal form retirement allowance, a lump-sum refund of the member’s account balance, if any, must be paid to the eligible beneficiary or beneficiaries in equal shares.”

The pages read give no reduction percentages, so the table has none. The statute says “A joint and survivor annuity optional allowance is the actuarial equivalent of the member’s service retirement or disability retirement allowance at the time of the member’s retirement effective date”. The Estimate of Benefits shows actual figures. See single-life versus joint-and-survivor pension for the general trade.

The three joint and survivor options

Option A: “The optional allowance will be paid to the member throughout the member’s lifetime and, upon the member’s death, continue throughout the lifetime of the member’s joint annuitant.” Option B: “upon the member’s death, one-half of the optional allowance will continue throughout the lifetime of the member’s joint annuitant”. Option C: “upon the member’s death, two-thirds of the optional allowance will continue throughout the lifetime of the member’s joint annuitant”.

A computed example from an assumed $2,400 optional allowance, not a TRS figure: Option A would continue all $2,400, Option B a computed $1,200 a month, and Option C a computed $1,600 a month. The reduced $2,400 itself would come from TRS’s actuarial calculation, which the pages read do not give.

On the joint annuitant, the statute says “The joint annuitant will receive both the continuing retirement allowance and the one-time death benefit”, and “The two benefits may not be allocated separately.” The amount of the one-time benefit is in section 19-20-1002(1)(a): “a lump-sum death benefit of $500 is payable to the joint annuitant or in equal shares to the deceased retiree’s eligible beneficiary or beneficiaries receiving benefits under either subsection (2), (3), or (4) and is in addition to those benefits or, if there is no continuing benefit payable, to the deceased retiree’s designated or alternate beneficiary”. The election also replaces earlier paperwork: “any prior or subsequent designation of a beneficiary by the retired member is void”. See also survivor benefit with a government pension.

Period certain allowances

The statute describes eligibility: “a 10-year period certain may be elected if the member is 75 years of age or younger at the time of retirement”, and “a 10-year or 20-year period certain may be elected if the member is 65 years of age or younger at the time of retirement”. The allowance “must be paid for the member’s lifetime and then to the member’s beneficiary”, “for the remainder of the period certain if the member dies before receiving monthly benefit payments for the period certain”.

A computed example, not a TRS figure: a 10-year period certain is 10 times 12, or 120 monthly payments. After an assumed 70 payments, a computed 50 months would remain. The pages read do not state the pricing against the Normal Form. The code does say what the beneficiary receives. Section 19-20-1002(4): “If the retired member was receiving a 10-year or 20-year period certain retirement allowance, until the period has expired: (a) if the eligible beneficiary is one or more individuals, the monthly benefits must continue to be paid to the eligible beneficiary or beneficiaries in equal shares.” And where the beneficiary is the retiree’s estate or trust: “if the eligible beneficiary is the deceased retiree’s estate or trust, a lump-sum amount actuarially determined to be the present value of all monthly benefits remaining to be paid over the period must be paid to the eligible beneficiary.”

What is irrevocable, and the deadlines around it

On timing: “Until the first payment on account of any benefit becomes normally due, any member may elect to receive one of the allowances described in subsection (2) or (3) in lieu of the normal form retirement allowance.” After that: “Upon the retirement system’s processing of a retired member’s first monthly benefit payment, the member’s benefit election and designation of a joint annuitant if the member elected a joint and survivor annuity allowance is irrevocable”. The TRS page says it plainly: “once you have received your first monthly payment, you cannot choose a different allowance”.

The exceptions are narrow and concern joint and survivor allowances. For a retirement effective on or after October 1, 1993, a retiree “may select a different actuarially equivalent optional allowance and designate a different joint annuitant or to revert the optional retirement allowance to the normal form retirement allowance available at the time of retirement” if the original joint annuitant has died or the member has been divorced from that person. The divorce route carries a condition (section 19-20-702(5)(b)): “the member has been divorced from the original joint annuitant and the original joint annuitant has not been granted the right to receive any ongoing or future distribution of any portion of the retiree’s benefits as part of the divorce settlement.” The application must be received “no later than the date that is 18 months after the date of the death of or divorce from the joint annuitant”. The pages read give no reversal route for a Normal Form or period certain election.

Spouse signature and the retirement packet

A married member cannot elect alone: “TRS will need your spouse to sign the form, acknowledging they understand how your choices may affect them.” “Signatures on the Application for Retirement Allowance must be notarized.” The pages read do not say a spouse can block an allowance, only that the signature acknowledges the effect.

Section 19-20-801(4) sets two conditions for any service retirement allowance: “the member must have terminated employment in all positions reportable to the retirement system and must file a written application with the retirement board.” The timeline starts early. Two years out a member should “Talk to a TRS Benefit Officer about the benefit options available to you”. Six months out: “Request a Retirement Application packet from TRS”. “TRS asks that you return the packet at least 60 days prior to your planned retirement date.” The decision guide is the estimate: “The Estimate of Retirement Benefits that you received from TRS should be the basis of all decisions.”

Termination pay and the 90 day form

A separate irrevocable choice is “Form 129, Termination Pay Irrevocable Election”, which lets a member direct termination pay into TRS to raise average final compensation. The deadline: “both you and your employer must have signed the form at least 90 calendar days prior to your last day of work or PIR day”. “This is an IRS requirement.” Missing that date does not remove the choice. Section 19-20-716(5): “If a member and the member’s employer fail to sign the written election within the time period required in subsection (1), the member may contribute for the purposes specified in subsections (1)(a) and (1)(b) on all or any part of the termination pay received. A contribution made pursuant to this subsection may not be picked up by the employer and is subject to the limitations of section 415 of the Internal Revenue Code.”

The code lists a third termination pay option as well, Option 3 (section 19-20-716(1)(c)): “The member may exclude the termination pay from the average final compensation. A contribution is not required of either the member or the employer.” On reversal: “your election on Form 129 is irrevocable”. The cost: “if you want to use termination pay to increase your retirement benefit, you and your employer will owe contributions to TRS to fund that benefit increase”. For members with Termination Pay Option 1 and 30 or more years, the cost can exceed the pay because “their termination pay is not enough to cover their share of contributions”.

Refund of contributions versus leaving them in the system

Under Montana law, “An inactive member may apply at any time to withdraw from membership in the retirement system and receive a refund of the member’s accumulated contributions.” For someone still working, “An active member may apply to withdraw from membership in the retirement system and receive a refund of the member’s accumulated contributions no sooner than 30 days before the date of the member’s termination from employment in all positions reportable to the retirement system.” An application is cancelled by returning to work: “The withdrawal application of a member is void if the member is reported to the retirement system for current employment in a position reportable to the retirement system before the refund is processed.” Section 19-20-603(1)(c) adds: “The application must be made on a form or in a manner prescribed by the retirement system and is not complete until all required supporting documentation is provided. The application is void if the documentation is not provided within 60 days after the application date.”

The consequences are permanent. A withdrawal and refund “is irrevocable after the refund has been processed by the retirement system”, “constitutes forfeiture of the member’s creditable service and any right to a benefit pursuant to that service”, “terminates the member’s membership in the retirement system”, and “terminates a withdrawn tier one member’s status as a tier one member”. A member vested at 5 years is therefore weighing cash against a future lifetime benefit. The general framework is on pension refund versus leaving it.

There is a way back: “An individual who has withdrawn and later returns to employment in a position reportable to the retirement system may purchase the forfeited creditable service”. For Tier 1: “a tier one member who withdraws and returns to employment in a position reportable to the retirement system must return as a tier two member even if the member purchases the forfeited creditable service”. A computed example from an assumed salary, not a TRS figure: Tier 2 contributions at 8.15% on $50,000 of earned compensation are a computed $4,075 in one year before interest. The code states the price of forfeited service in section 19-20-427(1), subject to the retirement board’s approval: “a member may redeposit in the annuity savings account, by a single payment or by an increased rate of contribution, an amount equal to the accumulated contributions that the member has previously withdrawn, plus interest paid as follows: (a) if a written application to purchase service is signed prior to July 1, 2012, at the rate the contributions would have earned had the contributions not been withdrawn; or (b) if a written application to purchase service is signed on or after July 1, 2012, at the actuarially assumed interest rate in effect on the date the written application is signed.”

One limit applies to the redeposit above. Section 19-20-427(3): “A member may not redeposit contributions previously withdrawn under this chapter after retirement benefit payments to the member have started, even if the member returns to active member status.”

Buying service

TRS lists common cases. A member may qualify if “They previously taught out of state or in a private school setting”; if “They took unpaid in-service leave”; if “They previously worked in positions reportable to PERS”; or if “They were active-duty military”.

“In most cases, a member must be vested with TRS before they are eligible to purchase additional service.” “a member cannot purchase service to attain vested status”. Section 19-20-101(35) defines the term: vested “means that a member has been credited with at least 5 full years of membership service upon which contributions have been made and has a right to a future retirement benefit.” Service moved over from PERS is the exception to the purchase rule; section 19-20-409(1)(d)(ii): “The transferred service credit must count toward vesting in a benefit with the teachers’ retirement system.” “Service purchases are limited to five years total, with shorter limits by type of service purchase.” The code’s cap names its sections (section 19-20-405): “The aggregate years of service that may be credited under 19-20-402 through 19-20-404, 19-20-408, 19-20-410 (1), and 19-20-426 may not exceed 5 years.” The PERS transfer is in section 19-20-409, a separate section. The price is individual: “There is no set dollar amount for purchasing a given amount of service.”

“Service purchases must be completed before TRS processes your application for retirement.” “TRS can provide you a quote, based on your specific circumstances.” The pension buyback calculator gives a general sense, but the TRS quote governs.

Cost-of-living increases, tax withholding and working after retirement

The optional allowances section mentions post-retirement adjustments in one provision: “The normal form retirement allowance available must be increased by the value of any postretirement adjustments received by the member since the effective date of retirement.” The TRS menu lists a page called What is GABA?, which was not among the pages read. The code section on the guaranteed annual benefit adjustment, 19-20-719, states the rule. For Tier 1: “On January 1 of each year, the retirement allowance payable to each tier one member or benefit recipient of a tier one member who is eligible under subsection (3) must be increased by 1.5%.” For Tier 2: “On January 1 of each year, the retirement allowance payable to each tier two member or benefit recipient of a tier two member who is eligible under subsection (3) must be increased by the amount provided in either subsection (2)(a) or (2)(b) as follows: (a) if the most recent actuarial valuation of the retirement system shows that retirement system liabilities are less than 90% funded, 0.5%; or (b) if the most recent actuarial valuation of the retirement system shows that retirement system liabilities are at least 90% funded and the provision of the increase is not projected to cause the system’s liabilities to be less than 85% funded, an amount greater than 0.5% but no more than 1.5%, as set by the retirement board.”

Eligibility for that adjustment is set in section 19-20-719(3): “A benefit recipient is eligible for and must receive the annual benefit adjustment provided for in this section if at least 36 monthly retirement benefit payments have been made prior to January 1 of the year in which the adjustment is to be made.”

On state tax, TRS says “No Montana income tax will be withheld without your explicit instruction to do so.” and “TRS also cannot withhold income tax for any state other than Montana.” See Montana retirement taxes. On returning to work, the Retirement Prep page cites an IRS rule that requires a separation in which “the employment relationship has been completely severed”. The code defines the separation in section 19-20-810(2): a member has terminated when “the employment relationship with the employer has been fully and completely severed and all, if any, payments due upon termination of employment, including but not limited to payment of accrued sick and annual leave balances, have been paid to the member.” And under section 19-20-810(3)(a): “A member who has not attained normal retirement age has not terminated employment in a position reportable to the retirement system if the member and the employer have a prearranged agreement for postretirement service.”

After retirement, section 19-20-731(1)(a) lets a retired member earn, without a reduction in the benefit, “an amount not to exceed the greater of: (i) 49% of the sum of the member’s average final compensation; or (ii) 49% of the median of the average final compensation for members retired during the preceding fiscal year as determined by the retirement board.” That text ends on June 30, 2027; the version that takes effect on July 1, 2027 reads the same with one-third in place of 49%: “an amount not to exceed the greater of: (i) one-third of the sum of the member’s average final compensation; or (ii) one-third of the median of the average final compensation for members retired during the preceding fiscal year as determined by the retirement board.” Earnings above the limit reduce the benefit dollar for dollar (section 19-20-731(3)), and section 19-20-734 requires a break in service before a retired member returns to a reportable position; its length depends on the termination date and the text is marked temporary.

The figures at a glance

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 Montana TRS’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 roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. The Montana pages read describe a refund as a payment of accumulated contributions but do not describe TRS withholding on a refund or a lump sum retirement option, so those details come from TRS’s own forms. The code does address a direct rollover; section 19-20-722 is quoted in the open questions below. For the rollover tax rules in general, see pension refund versus leaving 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”. 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.

What this page could not settle

• The pages read do not state the reduction for any joint and survivor option or period certain allowance.
• The pages read do not state the pricing of a period certain allowance against the Normal Form.
• The pages read do not give a dollar projection of the annual benefit adjustment for any member; section 19-20-719 sets the percentages and TRS applies them.
• The pages read do not state how a refund is paid or whether TRS withholds federal tax from it. On rollovers, section 19-20-722 says: “the retirement system shall advise an eligible recipient of any payment from the retirement system that constitutes an eligible rollover distribution of the recipient’s rights to roll over the distribution and shall allow the recipient to elect a direct rollover of the eligible distribution to an eligible plan.”
• The pages read do not state the dollar price of forfeited service for any one member; section 19-20-427 sets the formula and TRS prices the purchase.
• The pages read do not describe a lump sum retirement option or a deferred retirement option program.

Common mistakes

• Assuming a retirement allowance can be changed after the first monthly payment is processed.
• Electing the Normal Form without noticing it gives a surviving spouse no continuing monthly benefit (apart from the $200 a month for each minor child).
• Signing the termination pay election before seeing an Estimate of Benefits; it is irrevocable.
• Taking a refund without recognizing it forfeits creditable service and, for a Tier 1 member, ends Tier 1 status.

Related on this site: Montana retirement taxes, does Montana tax pensions, single-life versus joint-and-survivor pension, survivor benefit with a government pension, pension refund versus leaving it, pension buyback calculator and public pension retirement decisions by system.

Sources

• Montana Teachers’ Retirement System, understanding benefits: https://trs.mt.gov/active-members/understanding-benefits
• Montana Teachers’ Retirement System, retirement preparation: https://trs.mt.gov/active-members/retirement-prep
• Montana Code Annotated 19-20-702 (TRS payment options): https://www.leg.mt.gov/bills/mca/title_0190/chapter_0200/part_0070/section_0020/0190-0200-0070-0020.html
• Montana Code Annotated 19-20-603 (TRS refund of contributions): https://www.leg.mt.gov/bills/mca/title_0190/chapter_0200/part_0060/section_0030/0190-0200-0060-0030.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 2, 2026; the further code sections named on this page (Montana Code Annotated title 19, chapter 20, 2025 edition, at mca.legmt.gov) were read on October 24, 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.