19-20-805. Calculation of average final compensation. (1) Except as limited by this section, average final compensation is calculated by averaging the earned compensation paid to:

Terms Used In Montana Code 19-20-805

  • Average final compensation: means a member's highest average earned compensation, determined pursuant to 19-20-805, on which all required contributions have been made. See Montana Code 19-20-101
  • Earned compensation: means , except as limited by subsections (12)(b) and (12)(c) or by 19-20-715, remuneration paid for the service of a member out of funds controlled by an employer before any pretax deductions allowed under the Internal Revenue Code are deducted. See Montana Code 19-20-101
  • Employer: means :

    (a)the state of Montana;

    (b)a public school district, as provided in 20-6-101 and 20-6-701;

    (c)the office of public instruction;

    (d)the board of public education;

    (e)an education cooperative;

    (f)the Montana school for the deaf and blind, as described in 20-8-101;

    (g)the Montana youth challenge program, as defined in 10-1-101;

    (h)a correctional facility, as defined in 41-5-103;

    (i)the Montana university system;

    (j)a community college; or

    (k)any other agency, political subdivision, or instrumentality of the state that employs a person who is designated a member of the retirement system pursuant to 19-20-302. See Montana Code 19-20-101

  • Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
  • Full-time service: means service that is:

    (a)at least 180 days in a fiscal year;

    (b)at least 140 hours a month during at least 9 months in a fiscal year; or

    (c)at least 1,080 hours in a fiscal year under an alternative school calendar adopted by a school board and reported to the office of public instruction as required by 20-1-302. See Montana Code 19-20-101

  • Member: means a person who has an individual account in the annuity savings account. See Montana Code 19-20-101
  • Part-time service: means service that is not full-time service. See Montana Code 19-20-101
  • Service: means the performance of duties that would entitle the person to active membership in the retirement system under the provisions of 19-20-302. See Montana Code 19-20-101
  • Termination pay: means any form of bona fide vacation leave, sick leave, severance pay, amounts provided under a window or early retirement incentive plan, or other payments contingent on the employee terminating employment. See Montana Code 19-20-101
  • Tier one member: means a person who became a member before July 1, 2013, and who has not withdrawn the member's account balance. See Montana Code 19-20-101
  • Tier two member: means a person who became a member on or after July 1, 2013, or who, after withdrawing the member's account balance, became a member again after July 1, 2013. See Montana Code 19-20-101

(a)a tier one member in 3 consecutive fiscal years of full-time service that yields the highest average; or

(b)a tier two member in 5 consecutive fiscal years of full-time service that yields the highest average.

(2)(a) The earned compensation of a tier one member who retires under 19-20-802, 19-20-804, or 19-20-902 and has less than 3 consecutive years of full-time service during the 5 years immediately preceding the member’s termination is the compensation that the member would have earned in the 3 years used to calculate average final compensation had the member’s part-time service during the 5 years preceding termination been full-time service.

(b)The earned compensation of a tier two member who retires under 19-20-802, 19-20-804, or 19-20-902 and has less than 5 consecutive years of full-time service during the 7 years immediately preceding the member’s termination is the compensation that the member would have earned in the 5 years used to calculate average final compensation had the member’s part-time service during the 7 years preceding termination been full-time service.

(3)To determine the compensation that the member would have earned under subsection (2), the compensation reported must be divided by the part-time service credited to the member’s account.

(4)(a) Subject to subsection (4)(b), if a member has transferred service from the public employees’ retirement system as provided under 19-20-409 and does not have 3 consecutive years of full-time service if a tier one member or 5 consecutive years of full-time service if a tier two member reported to the teachers’ retirement system, the member’s average final compensation must be calculated as follows:

(i)if the member’s part-time service credit in the public employees’ retirement system plus the member’s part-time service credit in the teachers’ retirement system equals 1 year in any of the fiscal years used in determining average final compensation, then the member’s annual salary for that fiscal year must be the member’s salary as a member of the public employees’ retirement system plus the member’s salary as a member of the teachers’ retirement system; or

(ii)if the member’s part-time service credit in the public employees’ retirement system plus the member’s part-time service credit in the teachers’ retirement system equals less than 1 year in any of the fiscal years used to determine average final compensation, then the member’s part-time salary as a member of the public employees’ retirement system plus the member’s part-time salary as a member of the teachers’ retirement system must be divided by the sum of the member’s part-time teachers’ retirement system service credit and the member’s part-time public employees’ retirement system service credit.

(b)Compensation reported to the public employees’ retirement system used to calculate average final compensation must be adjusted to exclude any compensation that would be considered termination pay under this chapter.

(5)(a) The earned compensation reported in each year that is used to calculate the average final compensation may not be greater than 110% of the earned compensation for the next prior year of service reported to the teachers’ retirement system. 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.

(b)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).

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