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Montana highway patrol officers' retirement system member handbook (Volume 2000) online

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JUL 2 4 2002

SEPTEMBER 200(7™™™ state ubrary





3 0864 1001 5327 2


Name Statutory Designation Resides Expires

(§ 2-15-1009, MCA)

Terry Teichrow Active Public Employee Helena 3/31/05


Carole Carey Active Public Employee Ekalaka 3/31/02

Vice President

Robert Griffith At Large Helena 3/31/03

Jay Klawon Investment Management Hamilton 3/31/04


Carol Lambert At Large Hammond 3/31/01

TroyW. McGee PERS Member Helena 3/31/03

Jean Thompson Active Public Employee Billings 3/31/04


Mike O'Connor Executive Director

Keith McCallum Deputy Executive Director

Kelly Jenkins General Counsel

Melanie Symons Legal Counsel

Kim Flatow Member Services Bureau Chief

Roxanne Minnehan Fiscal Services Bureau Chief

Kathy Samson DC Plans and Education Services Bureau Chief

Lucie Willson Administrative Officer

Contact us at:


P.O. BOX 200131

HELENA, MT 59620-0131

Phone: 406-444-3154

Toll Free: 877-275-7372

E-mail: [email protected]





1. Membership Enrollment.
- Membership Cards






2. Contributions

- Member Contributions

- Employer Contributions

- Refund of Contributions

3. Service 12-17

- Membership Service

- Service Credit

- Part-time Service

- Purchase of Service

- Personal Statement

18- 19


1. Qualifying for Benefits

- Vesting

- Active Members

- Inactive Vested Members

- Non-Vested Members

2. Service Retirement

- Full Service Retirement

- Full Service Retirement Sample


- Early Retirement

- Early Retirement Sample Calculation

-.-... ., - ....... _-,— — r— h

Table of Contents (Continued) |\


Disability Retirement 23-24

- Disability Benefit

- Disability Reviews

- Benefit Cancellation

- Payment of Benefits


1 . Death Benefits 25-27

- Beneficiaries

- Death Benefit Claim

- Death After Retirement

- Death Prior to Retirement

2. Benefit Increases 28-29

- Minimum Retirement Benefit Increases

- Eligibility for GABA Benefits

- Effective Date of GABA Benefits

3. Taxes on Benefits 30 - 3 1

- Tax Statements

- Taxes on Refunds

4. Assignments of Benefits 32

- Family Law Order (FLO)

5. For More Information „„


Glossary of Terms

*■*** ~''" r

Digitized by the Internet Archive

in 2010 with funding from

Montana State Library


This Highway Patrol Officers' Retirement System Member Hand-
book is a general summary of the benefits provided by the
Highway Patrol Officers' Retirement System (HPORS). It is
intended to give you a general idea of your benefits and to
acquaint you with the HPORS. Every effort has been made to
ensure the contents agree with the law and rules. The law and its
interpretation can change, so this handbook may be out-of-date
a few years after it is published. This handbook is not a final
source of the law and rules. IT SHOULD NOT BE TAKEN AS
FINAL LEGAL AUTHORITY. Information in this handbook
is based on 1999 law. Benefits are based on the law in effect at
the time of your termination from employment; thus, some
information found here may not apply in specific cases. If this
handbook differs with law or rules as the Board interprets them,
the law or rules will apply. This handbook replaces all previous
HPORS member handbooks.

Montana Code

The law governing the HPORS may be found in Title 19,
Chapters 2 and 6, Montana Code Annotated (MCA). MCA is
available on line at:

References to the pertinent sections of MCA and Administrative
Rules of Montana (ARM) are provided in parenthesis through-
out this publication.


Retirement Security for our Members Since 1971

The Highway Patrol Officers' Retirement System (HPORS) is a
public pension plan for Montana highway patrol officers, including
supervisory personnel. In 1971, the Legislature created the HPORS
to grant a retirement, disability, or death benefit to plan members
and their beneficiaries. As of June 30, 1999, membership of the
HPORS consisted of the following:

HPORS Membership

Number of participating employers 1

Active plan members 186

Inactive plan members entitled to
but not yet receiving benefits or a refund:

Vested 7

Non-vested 25

Retirees and beneficiaries receiving benefits:

Service Retirements 236

Disability Retirements 7

Survivor Benefits 11

The Public Employees' Retirement Board (PERB) is an indepen-
dent, seven-member board, appointed by the Governor to adminis-
ter the HPORS and seven other retirement systems. The Montana
Public Employee Retirement Administration (MPERA) does the
day-to-day work. This handbook uses the terms "we," "us," the
MPERA, and Board interchangeably.

Money that you pay into the HPORS earns interest and helps pay
for your benefits. At the MPERA, we keep track of your money in
your own account and credit your account with interest. We

combine the funds from all accounts in a trust fund, which the

Board of Investments invests. Income earned from investing

the trust fund goes back into the trust fund. Only the Board

may authorize payment from the trust fund. Current law

limits payments to benefits and refunds for members or their

survivors. In addition, the Board must pay administrative

expenses from the investment earnings. (§19-2-408 and 19-2-505,

Every two years, an actuary must rate the trust fund's capabil-
ity to pay the benefits earned by members. Based on the fund's
strength and the actuary's advice, the Board may initiate
increases in benefits. Benefits are set by law, and only the
Legislature may change them. Before each legislative session,
the Board will review the sufficiency of the benefits and advise
the Legislature. (§19-2-405, MCA)

HPORS is a defined benefit retirement system. The benefits
you receive are based on your years of service and your final
average compensation rather than the amount of money you
contribute and the interest which accrues to your account

Section I: Membership

1. Membership Enrollment

Membership is mandatory for all Montana highway patrol officers,
including supervisory personnel. Membership service will begin for
an individual on the first day of employment in an HPORS-
covered position. (§ 19-6-301, MCA)

Membership Cards

New employees must complete a membership card upon starting
work in a job covered by the HPORS. Your payroll clerk should
provide you with this card on your first day of work. Complete the
card and return it to the clerk who will send it to us. The
information on it is necessary to administer your retirement. (ARM

The HPORS will not pay a benefit or refund unless you have a
membership card on file with us. A membership card is a vital
record; you must keep it up-to-date. Update the card whenever any
of the information on the card changes. To update your informa-
tion, complete a new card and give it to your payroll clerk. The
payroll clerk must send it to us. Marriage, divorce, births of
children, and death of a beneficiary are reasons to update your card.

NOTE: The membership card allows you to list one or more
beneficiaries in addition to your spouse and dependent children.
Your spouse or dependent children are your beneficiaries under
law. A beneficiary may be named in the event of your death
without leaving a "statutory" beneficiary. The beneficiary is eligi-
ble to receive any balance in a member's account but does not
receive monthly benefits. (See page 25 for information on death

2. Contributions

Contributions to the HPORS come from you and your em-
ployer, the state of Montana. The following is an explanation of
contributions to the HPORS and what is expected of you and
your employer.

Member Contributions

All members must pay part of their gross pay to the HPORS in
the amount explained below: (§ 19-6-402, MCA)

• Members not covered under the Guaranteed Annual Benefit
Adjustment (GABA) (see pages 28-29 for an explanation of
the GABA), pay 9%.

• Members covered under the GABA pay 9.05%.

Interest : Your HPORS account earns interest and we add it to
your account each month. Currently, the interest rate is 5%,
compounded annually. Each year the Board sets the rate based
on trends and interest rates earned by short term U.S. Treasury
notes and bills.

The interest credited to your account will not affect the
amount of your monthly retirement benefit. If you end your
HPORS-covered employment and leave your money on ac-
count, it will continue to collect interest.

Tax-Deferred : Since July 1985, the money you contribute to the
HPORS is tax-deferred. The interest your account earns has
always been tax-deferred. This means you don't pay state and
federal taxes until you receive the money as a benefit or refund.
Any money you paid to the HPORS before July 1985 was taxed.
In other words, you paid the taxes before you paid the money to

the HPORS. If you have taxed money in your account when
you retire or take a lump sum refund, then some of your refund
or monthly benefit will be tax exempt.

Purchase of Service: When purchasing refunded service and
other types of optional service, you may contribute amounts
beyond your regular contributions. These additional payments
are tax-deferred if you authorize payment by payroll deduction
contract. If these contributions are not made through payroll
deduction, they are not tax-deferred. You will receive interest on
service purchase payments at the same rate you receive interest
on your regular contributions. All interest paid to a member's
account is tax-deferred. (§19-2-704, MCA)

Employer Contributions

The state of Montana annually contributes an amount equal to
36.33% of the total HPORS-covered payroll to the pension trust
fund. Employer contributions are not refundable and provide
"pooled" funds for retirement, disability, and death benefits. (§
19-6-404, MCA)

Refund of Contributions

Vested members who end HPORS-covered employment may
leave their money on account; it will continue to earn interest.
They may also receive a refund of the money in their account in
lieu of other benefits. To request a refund, you must complete an
application, which your employer will supply. The application
has two parts, one for the member, and one for the employer.
You must complete the member section, then give it to your
employer. Your employer will complete the application and
send it to us. If you have been inactive for more than three
months, you should contact us directly to apply for a refund.
(§19-2-602, MCA)


When you receive a
refund, you are no
longer a member of the
HPORS. You will have
no right to any form of
HPORS benefit.

If you are not a vested mem-
ber (less than five years of
membership service) at the
time you terminate service and
have less than $5,000 in accu-
mulated contributions (your
contributions plus interest),
you must request a lump sum
refund. You may also make a

written application to have your eligible contributions rolled
over to a qualified retirement plan. Inactive nonvested members
who have more than $5,000 in accumulated contributions may
leave their money on account and it will continue to earn
interest. However, they are eligible only for a refund of the
member's accumulated contributions and will have no right to
any form of HPORS benefit. (19-2-602 and 19-6-403, MCA)

Processing Refund ; We cannot process your refund before your
employer sends us the application and the final payroll informa-
tion. This process may take 6 to 8 weeks from the date you get
your last paycheck. Extending your last day of work into a new
pay period or month may increase the processing time.

If, after receiving a refund, you accept a HPORS-covered job,
you must again become a member. We will consider you a new
member without credit for the refunded service. You may
purchase the refunded service to reinstate it for credit. For more
details, see Purchase of Service, on page 13. (§19-2-603, MCA)

NOTE : If you receive your refund directly, the IRS requires us
to withhold 20% for tax purposes. The IRS may also charge you
an additional 10% penalty for early withdrawal. For more
information see taxes on refunds, on page 30.


3. Service '

The amount of time you work and contribute to the HPORS
affects the amount of your retirement benefit. The monthly
benefit you receive will depend on the number of years you work
in a HPORS-covered job, whether you work full- or part-time,
and your purchase of additional service.

Membership Service

We use membership service to determine if you are eligible for
vesting, retirement, or other HPORS benefits. You vest for
retirement after you accrue five years of membership service.
Once vested, you are entitled to benefits if otherwise eligible.
You earn membership service for all periods of service, whatever
the hours you work or the pay you receive. (§19-2-303 and 19-2-702,

Service Credit

Service credit is used to calculate the amount of your retirement
benefit. You accumulate one month service credit for each month
your employer reports you were compensated for at least 160
hours of service. A member compensated for less than 160 hours
for any month will receive proportional service credit. (For
example, if you were paid for 80 hours during a given month,
you earn 0.5 months of service credit.) (§19-2-701, MCA and ARM

The following full-time requirements are used when computing a

HPORS member's service credits:
Until 6/30/75 2000 hours/year = 12 months service credit
7/1/75 - 8/30/86 100 hours/month = 1 month service credit
9/1/86 - 6/30/87 160 hours/month = 1 month service credit
7/1/87 - 6/30/90 140 hours/month = 1 month service credit
7/1/90 - present 160 hours/month = 1 month service credit


Part-time Service

Upon retirement, the PERB will adjust either your service credit
or final average compensation if you work part-time. We will
adjust one or the other to prevent a double reduction of your
benefit. If you retire with a full-time salary, then we will not
adjust your part-time service credits to calculate your benefit. You
will not see the adjustment until retirement.

Purchase of Service

Eligible members may purchase various types of service (see pages
14 and 15). Contact us for complete details about your eligibility.
A written request to initiate the cost statement is required.

To request a cost statement to purchase service, you must first
write to us and provide the following information: your full name
(including any former names), a current address, Social Security
Number, and the type of service you wish to buy. You should also
send us any documents that relate to the service. Your former
employer can usually provide you copies of relevant documents.
We will review the request and send you a cost statement for
buying any service for which you are eligible. (ARM 2.43.428)

You must pay the lump-sum cost or start monthly payments
within 30 days. After 30 days, the cost statement is not valid and
you must contact us for an updated cost statement. Only the
MPERA can give you a cost statement. A cost statement from any
other source may not be used.

Payment for Purchase ; You may pay for a service purchase in
one lump-sum, or you may make monthly payments. Active
members can make monthly payments by tax-deferred payroll
deduction. Inactive vested members, members not paid monthly,
or members who wish to self-pay, may send payments directly to


the MPERA. (These payments are not tax-deferred.) If you fail
to make a regular monthly payment, you give up the right to
make any more payments. Your service purchase will be pro-
rated. We will track your monthly payments in an additional
contribution account until the service purchase is complete.
Then we will transfer the money to your regular account and
credit your account with the service. Vested members may
purchase most types of service at any time before retirement. Be
aware that any delay may increase the cost because of added
interest or higher salaries. If the service purchase is not com-
pleted before the member retires, the service credit will be
pro-rated; or, the member can make a lump sum payment to
complete the service purchase. (§ 19-2-704, MCA)

Service Which May Be Purchased :

1. Refund: If you received a refund for previous service, you
may buy this refunded service. Refunded service means you
terminated your job, and the HPORS paid you the contribu-
tions and interest in your account. To buy the refund, you must
repay the contributions and interest you received as a refund.
You must also pay the interest the contributions would have
earned if you had left it on deposit. (§ 19-2-602, MCA, and ARM
2.43.420 and 2.43.422 )

2. Montana Public Service: Members may also buy service
refunded from other Montana statewide retirement systems. If
the member is an inactive member of another system, the service
and contributions may be transferred directly into the HPORS.
Contact us in writing for eligibility and a cost statement. (§
19-6-802, MCA; ARM 2.43.420 and 2.43.422)

3. Other Montana Public Service: A member may purchase
service credit for other full-time public service performed for the
state or a political subdivision, if the service is not credited in
any other retirement system. (§ 19-6-802, MCA)


4. Military: You may buy up to five years of active military
service, if you have at least 15 years of membership service. A
member may purchase one year of military service for each year
of HPORS service credit in excess of 15 years (e.g., a member
with 16 years and seven months of service credit may purchase
up to one year and seven months of military service). Military
service purchased by a member will be used for the purpose of
calculating retirement benefits. If you have retired and are
receiving a retirement from the military, you may not buy that
military service. (§19-6-801, MCA; ARM 2.43.437)

5. Out-of-State Law Enforcement Service: A member with
five years or more of membership service may purchase one year
of out-of-state law enforcement employment for each year of
service credit, up to a maximum of five years. If you will receive
a retirement benefit for this out-of-state law enforcement em-
ployment, you may not purchase the service. (§19-6-803, MCA)

Note: This service may not be used as membership service to
allow a member to purchase military service. Also, it cannot be
used in calculating a member's retirement benefit unless the last
five years of service credit were earned in an HPOPvS-covered

6. Absence Due to Illness or Injury: Time, not to exceed five
years, that a member is absent from work due to a work-related
illness or injury, is considered membership service. If the mem-
ber pays the contributions and interest, the absence will also
count as service credit. The Board must decide the injury was
work-related within one year of the member's return to work.
Members lose the right to contribute for the absence if they
received a refund of their account during the absence. (§ 19-6-810,


7. Additional Service ("l-for-5") Purchase: For each five-year
period of membership service, you may buy one year of addi-
tional service. You may buy no more than five years of addi-
tional service. Additional service is not membership service and
can not make you eligible to retire. We will include all service
credit when calculating the amount of your retirement benefit.
(§ 19-6-804,MCA; ARM 2:43.432)

Limitations : Current law limits your purchase of military,
out-of-state law enforcement, and additional service, to a com-
bined total of five years. For example, suppose you had 20 years
of state service, two years of out-of-state law enforcement ser-
vice, and three years of military service. Without any limit, you
would be eligible to buy nine years: four years of additional, two
years of out-of-state law enforcement service, and three years of
military. However, current law limits you to only five years, but
it can be any combination of the above service. (§ 19-6-803[5])

Personal Statement

Each August the MPERA will send you a statement with
information concerning your retirement account. If you have
part-time service, the total service reported in your statement
may seem wrong. The service reflects the service reported by
your employer. When your employer reports you worked less
than 160 hours, the system gives you less than one month of
service credit. Adjustments for part-time service will be made
when you retire. We adjust your service to prevent a double
reduction of your benefit for part-time service. However, if you
work full-time somewhere else, then your final average compen-
sation may be based on that full-time service. When your final
average compensation is based on full-time service, we don't
adjust your part-time service.


Carefully review the statement to verify all the information is
correct. If you have corrections or changes to any of the
personal information make a copy of the statement with the
corrections and mail it to the MPERA. Submit any questions
concerning account information as it appears in your state-
ment to the MPERA in writing.


We will correct mistakes in your account or service when we
identify them, or at least before your benefit is final. Mistakes
will not bind the MPERA to pay a benefit for which you are
not eligible. If you think the service credit on your statement
is wrong, please inform us in writing. Provide specific infor-
mation, including your current address.


Section II: Benefits


To receive retirement benefits under the HPORS defined benefit
plan, you must fulfill certain age and service requirements. Re-
tirement benefits are payable directly to you.

1. Qualifying for Benefits —


When you complete five years of membership service (explained
on page 12), you become a vested member. Once vested, the
HPORS guarantees you a retirement benefit after you reach the
minimum age or service requirement.

Active Members

Remember . . .
Once you withdraw the
money from your account,
your membership ends.
You lose your right to any
benefits from the HPORS.

You are an active member if I
you are in a HPORS-covered 1
job and making the required 1
contributions to the system. 1
If you are an active vested I
member, you may terminate 1
your HPORS-covered em- 1
ployment and leave your

contributions in the HPORS. You may apply for monthly
retirement benefits when you are at least age 50 or early retire-
ment benefits at an actuarially reduced amount. (See page 19-21
for calculation of service retirement benefits.) You could also take
a refund of your account, rather than a retirement benefit. When
you withdraw your account, you give up all vested rights. In
other words, once you cash your refund check, you are not
eligible for a monthly retirement benefit. (§ 19-6-503, MCA and ARM


Inactive Vested Members

A member does not need to be an active member to be vested.
You become an inactive vested member when you end HPORS-
covered employment and do not withdraw your HPORS ac-
count. Inactive vested members may buy any service for which
they are eligible. Inactive vested members may apply for retire-
ment after they meet the minimum age requirement. You give
up your vested right to retirement benefits by taking a refund of
your account. (§ 19-6-301, MCA)

Non-Vested Members

If you quit your job before you vest, you may not continue to
buy service. You will not be eligible for a retirement benefit.
However, you are eligible for a refund of the money in your
account. The HPORS will pay you interest until you receive the
refund. See page ten for information on refunds. (§ 19-6-301, MCA)


2. Service Retirement

HPORS members are eligible to receive benefits upon meeting
certain requirements. The HPORS defined benefit plan provides
benefits for members as outlined on the following pages.

Service Retirement

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