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Public pensions in Montana

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Montana public pensions
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Pension System
Number of pension systems 9
State pension systems: Public Employees' Retirement System
Teachers' Retirement System
Municipal Police Officers' Retirement System
Firefighters' Unified Retirement System
Sheriffs' Retirement System
Highway Patrol Officers' Retirement System
Game Wardens' & Peace Officers' Retirement System
Judges' Retirement System
Volunteer Firefighters' Compensation Act
System type: Defined Benefit Plan and alternate Defined Contribution Plan
Pension Health (2012)[1]
Fund Value: $7,848,033,714
Estimated liabilities: $11,756,545,641
Unfunded liabilities : $3,908,511,927
Percent funded: 66.75%
Percent funded change: Green Arrow Up Darker.svg0.48%[2]
Percent funded rank: 37[3]
Pension Fund Members (2012)
Total Members: 100,639
Active Members: 52,714
Other Members: 47,925
Other State Pension Information
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Pension Policy
Public pensions
State public pension plans
Public pension health by state
Montana public pensions are the state mechanism by which state and local government employees in Montana receive retirement benefits and are organized into nine separate pension funds. Plans administered by the Montana Public Employees Retirement Board include the Municipal Police Officers' Retirement System, the Firefighters' Unified Retirement System, the Sheriffs' Retirement System, the Highway Patrol Officers' Retirement System, the Game Wardens' & Peace Officers' Retirement System, the Judges' Retirement System, and the Volunteer Firefighters' Compensation System. There is also a large Teachers’ Retirement System, which is administered separate from the other eight.

As of 2012, the system had an unfunded liability of approximately $3.9 billion and was 66.75 percent funded. According to the Pew Center on the States Widening Gap update, a report on pensions in all 50 states, Montana failed to pay its full annual pension contribution four times from 2005 to 2010. According to the report, most experts agree that a fiscally sustainable system should be at least 80 percent funded.[4]

Membership in the Montana Public Employees' Retirement System (PERS) is mandatory for most state employees and begins on the first day of employment. Mandatory contributions to PERS are tax deferred and may not be refunded for any reason before termination of covered employment.[5]


Pension plans

Montana public pensions consist of eight plans administered by the Montana Public Employees Retirement Board as well as a Teachers’ Retirement Plan administered separately. The plans are:

  1. Teachers' Retirement System
  2. Municipal Police Officers' Retirement System
  3. Firefighters' Unified Retirement System
  4. Sheriffs' Retirement System
  5. Highway Patrol Officers' Retirement System
  6. Game Wardens' & Peace Officers' Retirement System
  7. Judges' Retirement System
  8. Volunteer Firefighters' Compensation System

PERS covers two retirement plans: the Defined Benefit Retirement Plan and the Defined Contribution Retirement Plan. JRS provides retirement, disability and death benefits to all Montana judges of the district courts, justices of the Supreme Court, the Chief Water Judge and their beneficiaries. HPORS provides retirement, disability and death benefits to all members of the Montana Highway Patrol, including supervisory personnel and their beneficiaries. SRS provides retirement, disability and death benefits to all Department of Justice criminal investigators hired after July 1, 1993; detention officers hired after July 1, 2005; and to all Montana sheriffs and their beneficiaries. The TRS serves active and retired teachers and educators in the State of Montana. Its primary purpose is to administer their pension plan, which includes (but is not limited to) payment of retirement benefits, collection of member contributions and enrollment of new members.

In fiscal year 2012, according to Actuarial Valuation Reports, the systems had a total of 52,714 active members.[6] Our membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).[7]

The following data was collected from the state's 2012 Actuarial Valuation Report, which measured fund status as of June 30, 2012, and the Teachers' Retirement System’s independent valuation which measured fund status as of July 1, 2013. Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds.

The Montana Teachers’ Retirement System Valuation Reports for 2013 were produced by Cavanaugh MacDonald Consulting, LLC, a Georgia-based firm that exclusively provides financial consulting to public sector pension and health care plans to governments throughout the United States.[8] The "percentage funded" is calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The current fund value is calculated assuming an 7.75 percent rate of return. The valuation reports for 2012 for the other eight systems, administered by the Montana Public Employees Retirement Board, were produced by Cheiron, a national employee-owned, full-service actuarial and financial consultancy.[9]

The Government Accountability Office (GAO) and Pew Research Centers cite a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggests that all pension systems "have a strategy in place to attain or maintain a funded status of 100% or greater."[10][11] The column "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis uses a rate of return of 3.225 percent, which is based upon the 15-year Treasury bond yield. The organization calls this a "risk-free" rate of return, which would make it easier for states to hit their pension requirements in the future. Since 2006, all private sector corporate pension plans have incorporated market costs into their funding schemes.[12]

Basic Pension Plan Information -- Montana
Plans Current value Percentage funded Unfunded liabilities Membership
State figure SBS figure[13] State figure SBS figure[13]
Montana Teachers Retirement System[14] $3,067,878,000 66.80 percent N/A[15] $1,524,780,000 N/A[15] 18,249 active members
Montana Public Employees Retirement System[6] $3,816,919,734 67.42% $1,844,361,756 28,548 active members
Judges Retirement System[6] $63,194,986 136.82% $17,005,039 54 active members
Highway Patrol Officers System[6] $96,655,208 57.59% $71,168,635 218 active members
Sheriff's Retirement System[6] $211,535,253 74.34% $73,023,918 1,241 active members
Game Warden and Peace Officer's Retirement System[6] $97,691,102 75.77% $31,235,412 972 active members
Firefighters Unified Retirement System[6] $233,121,145 61.80% $144,090,130 590 active members
Municipal Police Officers Retirement System[6] $234,025,065 54.77% $193,232,265 736 active members
Volunteer Firefighters' Compensation Act[6] $27,013,221 73.40% $9,614,772 2,106 active members
TOTALS $7,848,033,714 66.75% 34% $3,908,511,927 $15,001,532,000 52,714 active members

Annual Required Contribution

Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for.

According to a report by the Pew Center on the States, between 1999 and 2008, Montana paid 104.98 percent of its annual required contribution.[16][17]

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014.[18] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants will use an actuarially determined contribution or a statutory contribution for reporting purposes.[19]

ARC Historical Data
Fiscal year Montana Public Employees Retirement System[6] Judges Retirement System[6] Highway Patrol Officers System[6] Sheriff's Retirement System[6] Game Warden and Peace Officer's Retirement System[6]
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2012 $148,104,042 53.68% $137,479 1,162.61% $4,348,117 114.21% $9,512,3750 63.37% $4,843,235 71.65%
2011 $144,957,239 54.56% $38,387 3,846.97% $3,926,052 115.69% $8,747,310 68.75% $4,903,232 71.85%
2010 $132,004,388 60.46% N/A N/A $3,403,692 139.93% $7,734,578 72.88% $4,917,654 73.45%
2009 $99,314,044 76.35% N/A N/A $2,500,911 165.97% $6,506,675 79.81% $3,490,652 94.31%
2008 $68,165,225 105.98% N/A N/A $3,947,723 100.03% $4,443,543 108.78% $2,540,673 117.23%
ARC Historical Data
Fiscal year Municipal Police Officers Retirement System[6] Firefighters Unified Retirement System[6] Volunteer Firefighters' Compensation Act[6](Annual Required State Contribution Only) Montana Teachers Retirement System[14]
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2012 $5,046,941 119.97% $1,512,185 349.25% $1,635,400 100.00% $108,984,000 81.9%
2011 $4,625,936 122.58% $1,341,808 373.29% $1,596,436 100.00% $91,859,000 98.3%
2010 $3,896,969 176.04% $850,134 603.27% $1,574,589 100.00% $90,947,000 98.3%
2009 $3,454,837 146.35% $117,622 3,852.37% $ 1,579,887 100.00% $80,998,000 100.0%
2008 $4,637,223 111.19% $4,187,118 106.68% $1,562,019 100.00% $93,142,000 87.4%

Historical funding levels

Historical pension plan data - all systems
Year Value of assets Accrued liability Unfunded liability Funded ratio
2007 $7,650,336,000 $9,168,369,000 $1,406,463,000 83.44%
2009 $7,659,206,000 $10,304,575,000 $2,528,330,000 74.33%
2011 $7,585,464,000 $11,446,051,000 $3,896,307,000 66.27%
Change from 2007-2011 -$64,872,000 $2,277,682,000 $2,489,844,000 -17.17%

Rate of return

Montana presumes a 7.75 percent rate of return.[20]

The state's public pensions showed a 2.41 percent return for investment, far below the expected 7.75 percent rate of return. The Teachers’ Retirement System pension fund posted a 2.42 percent net gain for fiscal year 2012, after paying investment costs. This pension fund had $2.91 billion as of June 30. The Public Employees’ Retirement System showed a 2.41 percent net gain for the year. It had $3.9 billion on June 30.[21]


Percent Funded Status of Pension Plans
in the 50 States as of November 2013
Public pensions in NevadaPublic pensions in MassachusettsPublic pensions in ColoradoPublic pensions in New MexicoPublic pensions in WyomingPublic pensions in ArizonaPublic pensions in MontanaPublic pensions in CaliforniaPublic pensions in OregonPublic pensions in WashingtonPublic pensions in IdahoPublic pensions in TexasPublic pensions in OklahomaPublic pensions in KansasPublic pensions in NebraskaPublic pensions in South DakotaPublic pensions in North DakotaPublic pensions in MinnesotaPublic pensions in IowaPublic pensions in MissouriPublic pensions in ArkansasPublic pensions in LouisianaPublic pensions in MississippiPublic pensions in AlabamaPublic pensions in GeorgiaPublic pensions in FloridaPublic pensions in South CarolinaPublic pensions in IllinoisPublic pensions in WisconsinPublic pensions in TennesseePublic pensions in North CarolinaPublic pensions in IndianaPublic pensions in OhioPublic pensions in KentuckyPublic pensions in PennsylvaniaPublic pensions in New JerseyPublic pensions in New YorkPublic pensions in VermontPublic pensions in VermontPublic pensions in New HampshirePublic pensions in MainePublic pensions in West VirginiaPublic pensions in VirginiaPublic pensions in MarylandPublic pensions in MarylandPublic pensions in ConnecticutPublic pensions in ConnecticutPublic pensions in DelawarePublic pensions in DelawarePublic pensions in Rhode IslandPublic pensions in Rhode IslandPublic pensions in MassachusettsPublic pensions in New HampshirePublic pensions in MichiganPublic pensions in MichiganPublic pensions in AlaskaPolicypediaPension Health 2013.png
Note: The data in this map was compiled from state CAFR reports and Actuarial Valuation documents. Figures reflect a combination of all of the state pension plans.
Funded Ratio of State Public Pension Plans as compiled by State Budget Solutions

According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments.[22] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[23] When states lower the rate of return in an effort to accurately predict investment earnings, it increases the current plan liabilities, thereby lowering the percent funded ratio and causing the ARC to increase. This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.[24] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.[25] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.[26]

The 2008 financial crisis had a devastating effect on pension plans nationwide and has resulted in slower economic growth and increased market volatility. In light of this, some market strategists find the 8 percent assumption to be overly ambitious. Stanford University Finance Professor Joshua Rauh stated that using past investment performance in this economic climate was "dangerously optimistic."[27] Advocates for a lower assumed rate of return argue that the standard assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Further, if pension plans were using more conservative assumptions, such as the 3 or 4 percent assumed rate of return used in the private sector, and the plans grew more quickly than expected, the fund would have a surplus and smaller future ARCs, which would be preferable to using optimistic assumptions and potentially being caught with larger-than-expected deficits.[28][29][30][31][32]

On the other hand, traditional public pension plan advocates argue that the dip observed in recent years is not sufficient proof of a long-term, downward trend in investment returns. According to Chris Hoene, executive director at the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."[27]

The National Association of State Retirement Administrators compiled data on the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20-, and 25-year periods ending in 2013. While the median annualized rate of return failed to meet the 8 percent assumption that most public pensions assume over the 5- and 10-year periods, it was just shy (7.9 percent) over the 20-year period, and it exceeded 8 percent for the 1-, 3-, and 25-year periods. It is important to note that the NASRA data is reporting the median returns, indicating that even though median annualized returns exceeded 8 percent in the 25-year period, the investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.[33]

In September 2013, the nonprofit organization State Budget Solutions published an analysis of state pension funding levels. In its calculations, State Budget Solutions used a 3.2 percent rate of return, the 15-year Treasury bond yield as of August 21, 2013, to discount plan liabilities.

The research found that in all states combined, state public employee pension plans have only 39 percent of the assets they need to cover their promised payments—a $4.1 trillion gap. According to the report, Montana's public pension plans were 34% funded, making it the 30th most funded state.[34]

Moody's report on adjusted pension liabilities

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.67 percent for Montana) instead of the state reported assumed rates of return (7.75 percent for Montana).[35]

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 (Nebraska) percent to 241 (Illinois) percent of governmental revenues in fiscal year 2011.[35]

The adjusted net pension liability for Montana's pension system in fiscal year 2011 was ranked 39th.[35] The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - Montana
Governmental revenue* Personal income State GDP Per capita
State findings 62.5% 9.0% 8.5% $3,249
National ranking 15th 17th 16th 19th
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.[35]


Enacted reforms



The Montana House introduced a bill which would provide funding for the Public Employees' Retirement System defined benefit plan and revise the GABA. The bill passed and was signed by the governor on June 6, 2013.[36]

HB377, which targets the Teachers' Retirement System by increasing contributions and revising the GABA, was signed into law on May 6, 2013.


HB 122

Chapter 369, Laws of 2011 (House Bill 122) revised contribution rates and other Montana Public Employee Retirement System provisions for members who joined the system on or after July 1, 2011. The bill mandated that the contribution rate for such new members would be 7.9%. It remained at 6.9% for those hired before July 1, 2011.

Proposed reforms


HB 85

HB 85 was introduced on June 29, 2010 in the Montana state legislature by Rep. Franke Wilmer. The bill would have required government entities who hire retirees to also pay into the public pension system. This would have applied to the Public Employees Retirement System, the Sheriffs’ Retirement System and the Firefighters Unified Retirement System. It died in a standing committee on April 28, 2011.[37]

Local public pensions

See also: Local government public pensions


See also: Public pension disclosure and Governmental Accounting Standards Board

In September 2011, Attorney General Steve Bullock upheld his preliminary opinion, deciding that the public has a right to public pension information.[38] The Montana Annotated Code requires annual reports on pension performance and investments.[39] However, a State Integrity Investigation gave Montana an "F" on pension fund management and transparency.[40]

Recent news

This section displays the most recent stories in a Google news search for the term "Montana + public + pensions"

All stories may not be relevant to this page due to the nature of the search engine.

Montana Public Pensions News Feed

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See also

External links


  1. Figures below are compiled by adding up all state pension plans
  2. This figure is derived by calculating the percent difference between the current year's funding level and the system's percent funded from the prior year.
  3. Rank is relative to the 50 state pension programs. "1" refers to the healthiest pension plan while "50" would be the least well-funded plan.
  4. Pew Center on the States Widening Gap Update
  5. Retirement
  6. Cite error: Invalid <ref> tag; no text was provided for refs named CAFR12
  7. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
  8. Cavanaugh MacDonald Consulting, LLC "About Us," accessed October 22, 2013
  9. Cheiron Consulting, "About Us," accessed October 22, 2013
  10. United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," September 2007. Accessed October 23, 2013
  11. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012. Accessed October 23, 2013
  12. Governing Magazine, " Is There a Plot Against Pensions?" October 14, 2013
  13. 13.0 13.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  14. 14.0 14.1 14.2 Montana Teachers' Retirement System 2013 Actuarial Valuation, Accessed October 29, 2013
  15. 15.0 15.1 Analysis only available for system totals and not individual funds.
  16. "The Trillion Dollar Gap: Montana," February 18, 2010
  17. Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
  18. Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
  19. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
  20. Cite error: Invalid <ref> tag; no text was provided for refs named cafr
  21. Billings Gazette, State pension funds show net returns in 2.4% range, Aug. 15, 2012
  22. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  23. The New York Times "Public Pensions Faulted for Bets on Rosy Returns," May 27, 2012
  24. Benefits Magazine "Public Pension Funding 101: Key Terms and Concepts," April 2013. accessed October 23, 2013
  25. Crain's Chicago Business "State teachers pension board lowers expected rate of return," September 21, 2013. accessed October 23, 2013
  26. Huffington Post "California Pension Funds Expect Lower Investment Return," March 14, 2012. accessed October 23, 2013
  27. 27.0 27.1 Governing "Expert: Governments Are Masking Their Pension Liabilities ," October 25, 2013. accessed October 25, 2013
  28. The Washington Post "Kansas’s pension funding gap just grew by $1 billion," September 6, 2013. accessed October 25, 2013
  29. Topeka Capital-Journal "KPERS' unfunded liability rises to $10.2B," September 4, 2013. accessed October 25, 2013
  30. Wall Street Journal "Pensions Wrestle With Return Rates," October 10, 2011. accessed October 23, 2013
  31. The Courant "Promising Too Much On Public Pensions," August 10, 2012. accessed October 23, 2013
  32. Business Wire "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," October 22, 2013. accessed October 25, 2013
  33. National Association of State Retirement Administrators "Issue Brief: Public Pension Plan Investment Return Assumptions," October 2013. accessed October 23, 2013
  34. State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  35. 35.0 35.1 35.2 35.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," June 27, 2013
  36. Missoulian, Montana House approves state employee raises, pension fixes, March 28, 2013
  37. LegiScan, "Montana House Bill 85 (Prior Session Legislation) , October 31, 2013
  38. Montana Watchdog, "Attorney general upholds opinion on making pension information public," September 21, 2011
  39. Montana pension law
  40. State Integrity Investigation