Common Questions Reference SB 1609:Current and Retired Members of PSPRS

retirementPSPRS

PSPRS changes start on page 34 of the bill and continue through page 58.

Retirement Calculation

For current employees – The best 3 year calculation remains in effect.

Employee Work Week

Employee Work Week remains the same (40 hours).  If tough economic times remain causing furloughs, an officer can remain in the system as long as they work, on average, at least 30 hours per week.  A less than 40 hour work week cannot last longer than 12 consecutive months.

Normal Retirement Date

The definition of a normal retirement date stays the same.  A member must complete 20 years of service or the employee must reach 62 years of age and complete 15 years of service.

Employee Contributions (Page 44-45, lines 28-44)

There are significant changes to Employee Contribution rate.  Here are the new rates:

2011-2012 = 8.65%

2012 – 2013= 9.55%

2013-2014= 10.35%

2014-2015 = 11.05%

2015-2016 = 11.65% or 33.3% of the sum of the member’s contribution rate from the preceding fiscal year and the aggregate computed employer contribution rate except that the member contribution rate shall not be  less than 7.65%.

Retired Members Return to Work

Any employer who rehires a member of PSPRS will be required to pay an alternative contribution (much higher) rate on behalf of the retired member.  This section only applies to a retired member who returns to work with another participating employer and who returns to work after sixty consecutive days with the same employer.  This is commonly referred to as the “double dipping provision”.  The incentive here is for the employer to not hire a previous employee back in their same or a similar position.

DROP

DROP eligibility remains the same for all current employees.  For those members who will have 20 years within PSPRS  on or before 12/31/2011, the current DROP program will be available, regardless of when you enroll in DROP.  For those employees with less than 20 years in PSPRS on or before 12/31/2011, you will be eligible to participate in the new, contributory, DROP.  The new DROP will require enrollees to continue to pay the employee contribution rate while participating.

DROP will not be available for any employee hired after 1/1/2012.

DROP interest rates will change for those entering the NEW DROP.  The interest on your DROP account will be determined by the interest at a rate equal to the average annual return of the system over the period of years, established by the PSPRS Board, based on the actuarial assets of the previous year but not to exceed 8 percent.

Prior Service

Starting 1/2/2012 members who come to an Arizona Law Enforcement Agency from another law enforcement entity from outside of Arizona may purchase up to 60 months of PSPRS service time.  This is less than what a person can purchase now.

Purchase of Firearm

Members currently in the system can still purchase their service weapon.

Deferred Annuity

Deferred Annuity rights are protected for current members of PSPRS.

Termination of Membership in PSPRS

All provisions established for members who terminate their membership in PSPRS prior to meeting retirement qualifications remain in effect.

Reinstatement of Credited Service

Current members who leave PSPRS but then return are eligible to be reemployed as long as they repay the system for the monies received plus interest.  However, these members will be placed into the PSPRS system that is in effect at the time of rehire.

Class Five Penalty Provision

Any member who is convicted of a class 1,2,3,4 or 5  felony may be subject to losing their pension from the time they committed the offense to the time of their conviction.  Class five felony offenses must have occurred while the member was on duty and in the performance of their official duties.  The new title 13 provision is below.

13-713.  Forfeiture of public retirement system benefits; definition

A.  Notwithstanding any other law, if a member of a state retirement system or plan is convicted of or pleads no contest to an offense that is a class 1, 2, 3, 4 or 5 felony and that was committed in the course of the member’s employment as a public official or for a public employer, the court shall order the person’s membership terminated and the person shall forfeit all rights and benefits earned under the state retirement system or plan.  A member who forfeits all rights and benefits earned pursuant to this section is entitled to receive, in a lump sum amount, the member’s contribution to the state retirement system or plan plus interest as determined by the board of that state retirement system or plan, less any benefits received by the member.

B.  An order forfeiting a member’s benefits on conviction of an offense listed in subsection A shall not be stayed on the filing of any appeal of the conviction.  while an appeal of the conviction is being adjudicated and until a final judgment is issued, for a member who is not receiving benefits, the member and the member’s employer are required to continue making contributions to the retirement system or plan and for a member who is receiving benefits, the retirement system or plan shall suspend payments to the member and hold the assets in trust.  If the conviction is reversed on final judgment, no rights or benefits shall be forfeited and the member’s membership shall be reinstated.

C.  Notwithstanding subsection A, the court may award to a spouse, dependent or former spouse of a member who is subject to subsection a some or all of the amount that was forfeited under subsection A.  The award under this subsection shall not require the board of the state retirement system or plan to provide any type, form or time of payment of severance, survivor or retirement benefits or any severance, survivor or retirement benefit option that is not provided by the laws governing the state retirement system or plan from which the award is being made.  In determining whether to make an award under this subsection, the judge shall consider the totality of circumstances, including:

1.  The role, if any, of the person’s spouse, dependent or former spouse in connection with the illegal conduct for which the person was convicted.

2.  The degree of knowledge, if any, possessed by the person’s spouse, dependent or former spouse in connection with the illegal conduct for which the person was convicted.

3.  The community property nature of the benefits involved.

4.  The extent to which the person’s spouse, dependent or former spouse was relying on the forfeited benefits.

D.  Notwithstanding subsection h, the court shall order that a person who is subject to forfeiture under this section is ineligible for future membership in any state retirement system or plan.

E.  The court shall provide a copy of the order of forfeiture to the state retirement system or plan to which it applies.

F.  This section does not apply to a member whose most recent retirement occurs before the effective date of this section, unless the member has resumed making contributions to the state retirement system or plan.

G.  Notwithstanding subsection a, a court shall not order the forfeiture of rights and benefits earned under the state retirement system or plan that accrued before the effective date of this section or for a felony committed before the effective date of this section.

H.  This section applies only to the state retirement system or plan in which the person was a contributing member at the time the offense was committed.

I.  For the purposes of this section, “state retirement system or plan” means the Arizona state retirement system established by title 38, chapter 5, article 2, the elected officials’ retirement plan established by title 38, chapter 5, article 3, the public safety personnel retirement system established by title 38, chapter 5, article 4 and the corrections officer retirement plan established by title 38, chapter 5, article 6. END_STATUTE

Prior Service Redemption

Members of PSRS may purchase up to 60 months of prior service time after they have completed ten years of service with their agency.

COLA

Major changes are coming to our COLA system.  First the excess earning account will stop receiving money as of June 1, 2010.  The money in this account will be used to pay COLA increases to retirees.  It is expected that COLAs will be paid out of this fund for the next 2-3 years.  After all the funds are distributed a new COLA calculation will go into effect. This is expected to occur in 2013.

The new system requires that a retired member or the survivor of a retired member must have been receiving benefits on or before July 1, 2013 for a period of two years or the retired member or survivor of a retired member was 55 or older on July 1 of the current year and was receiving benefits on or before July 31 of the previous year.

After 1/1/12:

a. A retired member or survivor must be 55 years of age or older on July 1of the current year and be receiving benefits;
b. The retired members was under 55 YOA on July 1 of the current year and is receiving accidental disability or a catastrophic disability retirement benefit and was receiving retirement benefits on or before July 31 of the two previous years.
c. A survivor was under 55 YOA of July 1 of the current year, is the survivor of a member who was killed in the line of duty and was receiving benefits on or before July 31 of the two previous years.

The COLA Calculation

The calculation is based on the ratio between the Actuarial Assets of the fund to the actuarial liabilities of the fund.  Additionally, the fund’s investments must achieve revenue greater than 10.5% in earnings.  The COLA will be based on the earnings of the fund and fund balance.  It will no longer be based solely on investment earnings above 9%.  The ratio of the actuarial value of assets to the actuarial accrued liabilities will be determined by the fund administrator.

The COLA for each year will be based on the previous year’s fund performance.

If the ratio is 60% or greater but less than 65% and the fund obtains earning above 10.5% then a 2% COLA will be distributed.

If the ratio is 65% or greater but less than 70% and the fund obtains earnings above 10.5% then a 2.5% COLA will be distributed.

If the ratio is 70% or greater but less than 75% and the fund obtains earnings above 10.5% then a 3.0% COLA will be distributed.

If the ratio is 75% or greater but less than 80% and the fund obtains earnings above 10.5% then a 3.5% COLA will be distributed.

If the ratio is 80% or greater and the fund obtains earnings above 10.5% then a 4.0% COLA will be distributed.

A permanent increase in benefits is available only if the fund attains a total return of more than 10.5% for the fiscal year.  The amount of monies available to fully fund a current COLA in any year is 100% of the earnings of the fund that exceed 10.5% for the fiscal year.  If 100% of the earnings is not achieved to fully fund the current value of the COLA the increase will be limited to that percentage of present value which can be fully funded.

There is also a provision that will permit the legislature to enact a permanent increase in the COLA after consulting with the Joint Legislative Budget Committee and if it is deemed appropriate fiscally to do so.

Military Service Credit

Military veterans will be able to purchase up to 5 years of service with the system as long as they first complete ten years of service with their agency.  However, if any member has a military pension they will not be permitted to purchase these five years of service.