Pension Update – SB 1609 (Hearing Held 02.23.2011)

SB 1609 is another bill attempting to reform our pension systems.  The bill passed out of the Senate Finance Committee with a 3-1 vote and three (3) amendments were adopted. None of the amendments were of significance to police.  CLICK HERE TO READ THE BILL AND ITS STATUS. On Feb. 23rd, APA spoke against SB 1609, as it was written.  Below are the major highlights of this bill:
Positives
-Continues to allow present employees to use their three (3) top base pay years for retirement
-Makes employers pay some contributions on “return to work”
-Leaves DROP in place for current members

-No changes were made to ASRS
-The bill did not include a provision that eliminated overtime included in “base compensation”

 

Negatives

-The bill significantly asks employees to make more contributions into the pension system.  

FY 2011-2012, one would have to pay a two (2) percent increase (9.65%) into their retirement, and

FY 2012-2013, add an additional one (1) percent (10.65%), and

FY 2013-2014 & maximum contribution from the employee, add an additional two (2) percent (max rate of 11.65%)

OR

Pay one-third (1/3) of the rate and the state pays two third’s (2/3) – whichever is lower

Police officers throughout Arizona would be paying different amounts for the same pension benefit.

-Changes the “COLA” fund so no new assets would flow into the fund for several years and no COLA’s for retirees

New Hires

-Minimum retirement age of 25 and 52.2 years of age

-Removes the match for employees who leave with less than 20 years of service

-No DROP benefit/option

-High five (5) years of base pay toward retirement

-Increased contributions rates

During the hearing, MPA members were well represented.  CLICK HERE TO VIEW THE VIDEO OF THE HEARING.  Many of the same remarks from HB 2726 were reiterated.  This committee did speak to the police associations and other stakeholders.  On your behalf, Brian Livingston (APA Executive Director) stated the following key points (at 1:20:00.00 in the video):

1. Reemphasized that if there was not a $1.6 billion dollars loss to the pension system, our government would not have to deal with this issue.

2. The part of the bill that is missing is “oversight”.   APA would like to see mandated accountability and everyone from the JLBC to the Governor should have a regular report on the pension system.  

3. The employee contribution rate is too short and too much.  This bill (in its current condition) is heavily weighted for employers and their contributions.

4. User fees: Police take a lot of actions to benefit of the public, namely insurance companies.  Fees should be applied to benefits they are receiving in order to have a reduction of contributions from employers.

5.  A full investigation should be done on PSPRS and the state should attempt to recapture expenditures not accounted for.

6.  Do use actuarial value versus market value.

7.  In 2011, to date, we have lost 43 law enforcement officials; Iraq lost 37.  We would not diminish the retirement of a US solider, so why would the state of Arizona do it to law enforcement?

Please contact a board member if you have any questions, or email mpa@mesampa.com.

Respectfully,

Fabian Cota, MPA-President