Which set applies depends on when you joined; see Foundation or Generational.
Foundation members
1.7% × final average compensation × years before July 1, 2008
+ 1.55% × final average compensation × years from July 1, 2008
= your yearly benefit at 65 or the Rule of 85. Foundation Handbook (July 2024), p. 11, Normal Retirement Benefits (formula graphics, see source/handbook-image-text.txt); SDCL 3-12C-1106; SDRS Actuarial Valuation (June 30, 2024), pp. 53-54
| Handbook example | Before July 2008 | After | Yearly |
|---|---|---|---|
| Normal retirement (standard formula)30 years (13 before July 2008), $30,000 FAC, age 65 | $6,630 | $7,905 | $14,535.00 |
| Early retirement at 6218 years (1 before July 2008), $30,000 FAC, age 62 | $510 | $7,905 | $7,657.65after a 9% cut |
Our calculator gets the handbook's amounts: $14,535 and $7,657.65 a year. Tap an example to load it.
Foundation members earn 1.7% for service before July 1, 2008 and 1.55% after. If you don't enter your years before July 1, 2008, we assume you worked without a break from your membership date. Your SDRS statement shows the real split.
What would settle it: The member's Personal Benefits Statement or MySDRS service detail.
The handbook and law say service 'before July 1, 2008' earns 1.7% and service 'after July 1, 2008' earns 1.55%; the actuary says 'after June 30, 2008'. We count everything from July 1, 2008 at 1.55%.
Foundation Handbook (July 2024), p. 11; SDCL 3-12C-1106; SDRS Actuarial Valuation (June 30, 2024), pp. 53-54The alternate formula
SDRS also works out a second formula for Foundation members and pays the larger: 2.4% × final average compensation × years before July 1, 2008, plus 2.25% × final average compensation × years after, less 80% of your primary Social Security benefit. The handbook says the standard formula is higher in most cases. Foundation Handbook (July 2024), p. 11, Normal Retirement Benefits (formula graphics, see source/handbook-image-text.txt); SDCL 3-12C-1106; SDRS Actuarial Valuation (June 30, 2024), pp. 53-54
For members with public employment not covered by Social Security, the law presumes the maximum primary benefit. SDCL 3-12C-101(62) (other public benefits = 80% of the primary insurance amount); SDCL 3-12C-1106(2) (members with non-Social-Security public employment are presumed to get the maximum primary benefit)
The Foundation alternate formula subtracts 80% of your primary Social Security benefit, but the sources don't say at what age that amount is measured. We use it only if you type in a monthly Social Security amount.
What would settle it: SDRS rules (ARSD 62:01) or an SDRS estimate showing both formulas.
Generational members
1.8% × final average compensation × years of service = your yearly benefit at 67. Generational Handbook (July 2024), p. 11, Normal Retirement Benefits (formula graphic, see source/handbook-image-text.txt); SDCL 3-12C-1204
| Handbook example | Unreduced | Yearly |
|---|---|---|
| Normal retirement at 6730 years, $30,000 FAC, age 67 | $16,200 | $16,200.00 |
| Early retirement at 6230 years, $30,000 FAC, age 62 | $16,200 | $12,150.00after a 25% cut |
Final average compensation
- Final average compensation (FAC) is the average of your highest 20 consecutive calendar quarters of pay in your last 40 quarters: the highest five years out of the last ten.Foundation Handbook (July 2024), p. 9; SDCL 3-12C-1103, 3-12C-1201
- Raises are capped at 105% a year for FAC purposes. The first FAC year is limited to 105% of your best earlier year in the last ten; each later year to 105% of the highest earlier capped year. Contributions on the excluded pay come back to you as a lump-sum 'contribution credit' with investment earnings.Foundation Handbook (July 2024), pp. 9-10; SDCL 3-12C-1104, 3-12C-1202, 3-12C-713
With fewer than 20 but more than four quarters of membership, FAC uses all quarters; with four or fewer, your annual compensation. SDCL 3-12C-1103; SDCL 3-12C-1201
If your contributory service ended before July 1, 2022, FAC is calculated differently (16 quarters if it ended July 1, 2021-June 30, 2022). Contact SDRS. Foundation Handbook (July 2024), p. 10 (note); SDCL 3-12C-1101, 3-12C-1103
A June 2026 SDRS board slide says Foundation members use a three-year average. The handbook, a 2025 SDRS newsletter and the law all say five years (20 quarters) for anyone whose service ends after June 30, 2022. We use five years.
SDRS Update (June 2026), slide 12; Foundation Handbook (July 2024), p. 9; SDCL 3-12C-1103The 105% cap
The earliest compensation year is limited to 105% of the base year (highest prior four-consecutive-quarter period in the last 40 quarters). Each later year is limited to 105% of the highest compensation considered for any prior compensation year, but never less than the first year's limit. Foundation Handbook (July 2024), p. 9; SDCL 3-12C-1104(1)-(2) (Foundation); SDCL 3-12C-1202(1)-(2) (Generational)
Both handbooks use the same pay: a $30,000 base year, then five years that count toward the average. Under the law, each year is held to 105% of the highest earlier year counted. The Generational handbook's example also trims the shaded years, which the law does not.
| Year | Paid | Counted (law) | Counted (Gen. handbook) |
|---|---|---|---|
| 1 | $31,800 | $31,500 | $31,500 |
| 2 | $34,026 | $33,075 | $33,075 |
| 3 | $35,727 | $34,729 | $34,729 |
| 4 | $36,799 | $36,465 | $35,771 |
| 5 | $37,903 | $37,903 | $36,844 |
| Average | $34,734 | $34,384 | |
| Contribution credit | $309.96 | $520.32 |
The two handbooks show the same pay but different results. The Foundation handbook (corrected October 2024) gets an average of $34,734; the Generational handbook gets $34,384 because it also trims two raises of only 3%. The law uses the same words for both groups and matches the Foundation example, so we use that method for everyone.
Foundation Handbook (July 2024; Oct. 18, 2024 file), pp. 9-10; Generational Handbook (July 2024), pp. 9-10; Foundation Handbook Aug. 13, 2024 file, p. 10; SDCL 3-12C-1104, 3-12C-1202The Generational handbook's pay-cap example cuts raises that were under 5%, which the law does not do. We use the law's method (each year limited to 105% of the highest earlier year counted), which matches the corrected Foundation handbook.
What would settle it: A corrected Generational handbook or an SDRS statement of the method.
Not modeled: the separate 105% limit on the last calendar quarter, the rule that a first year overlapping the earliest of the last 40 quarters is not limited, and adjustments for extraordinary final-year payments. SDCL 3-12C-1104; SDCL 3-12C-1202; Foundation Handbook (July 2024), p. 9
The contribution credit
Member and employer contributions on pay cut by the 105% cap, plus actual investment earnings, are paid to you as a lump sum at retirement (three calendar months after the benefit starts). It can be paid in cash, rolled over, or used to buy a Supplemental Pension Benefit. Foundation Handbook (July 2024), p. 10, Contribution Credit; Generational Handbook (July 2024), p. 10; SDCL 3-12C-713
For Generational members the statute reduces the credit by any variable retirement contributions on that pay; the handbook example uses the full 6% + 6%. SDCL 3-12C-713; Generational Handbook (July 2024), p. 10
Work out your own number in the calculator, or see what one more year adds. Retiring before full age? The early cut comes off this amount.
Questions
What is the SDRS benefit formula?
Foundation members: 1.7% × final average compensation × years before July 1, 2008, plus 1.55% × final average compensation × years after. Generational members: 1.8% × final average compensation × years of service.
What is final average compensation?
The average of your highest 20 consecutive calendar quarters of pay (five years) in your last 40 quarters, with each year's pay limited to 105% of the year before.
What happens to pay above the 105% cap?
The member and employer contributions on it, plus investment earnings, come back to you as a lump sum, the contribution credit, at retirement.
Source: SDRS Class A Handbooks (Foundation and Generational members), July 2024, Foundation pp. 9-12; Generational pp. 9-11. Also: SDRS Actuarial Valuation (June 30, 2024) pp. 53-54; SDCL §§ 3-12C-101, 3-12C-713, 3-12C-1101, 3-12C-1103, 3-12C-1104, 3-12C-1106, 3-12C-1201, 3-12C-1202, 3-12C-1204. Last reviewed .