Bill Text: AZ HB2019 | 2016 | Fifty-second Legislature 2nd Regular | Engrossed

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Credited service; military service purchase

Spectrum: Partisan Bill (Republican 1-0)

Status: (Passed) 2016-04-05 - Chapter 90 [HB2019 Detail]

Download: Arizona-2016-HB2019-Engrossed.html

 

 

House Engrossed

 

 

 

State of Arizona

House of Representatives

Fifty-second Legislature

Second Regular Session

2016

 

 

HOUSE BILL 2019

 

 

 

AN ACT

 

Amending sections 38‑816 and 38‑820, arizona revised statutes; amending title 38, chapter 5, article 3, arizona revised statutes, by adding section 38‑823; amending sections 38‑853.01 and 38‑858, arizona revised statutes; amending title 38, chapter 5, article 4, arizona revised statutes, by adding section 38‑861; amending sections 38‑907 and 38‑909, arizona revised statutes; amending title 38, chapter 5, article 6, arizona revised statutes, by adding section 38‑913; relating to public retirement systems.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 


Be it enacted by the Legislature of the State of Arizona:

Section 1.  Section 38-816, Arizona Revised Statutes, is amended to read:

START_STATUTE38-816.  Redemption of prior service

A.  Any present active elected official who has at least five years of credited service with the plan may elect to redeem up to sixty months of any part of the following prior service or employment by paying into the fund the amounts required under subsection B of this section if the prior service or employment is not on account with any other retirement system or plan:

1.  Prior service in this state as an elected official with an employer now covered by the plan before the effective date of participation if the elected official has received a refund from a prior retirement system or plan on termination of employment before the elected official's application for redemption of prior service. 

2.  Prior service in this state as an elected official with an employer now covered by the plan before the effective date of participation if the elected official was not covered by a retirement system or plan during the elected official's prior elected official service.

3.  Prior service as an elected official of this state or a city, town or county of this state if the elected official was not covered by a retirement system or plan during that service whether or not the city, town or county is an employer now covered by the plan.

4.  Prior employment with the United States government, a state of the United States or a political subdivision of a state of the United States.

B.  Any present active elected official who elects to redeem any part of the prior service or employment for which the elected official is deemed eligible by the board under this section shall pay into the plan the amounts previously withdrawn by the elected official as a refund of the elected official's accumulated contributions, if any, plus the additional amount, if any, that is computed by the plan's actuary and that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions that are prescribed by the plan's actuary.  The discount rate used by the actuary for the calculation of the actuarial present value of the projected benefits resulting from the redemption calculation pursuant to this subsection is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten year treasury note as of March 1 that is published by the federal reserve board plus two per cent.  This discount rate is effective beginning in the next fiscal year and the board shall recalculate the rate each year.

C.  On approval by the governing body of an incorporated city or town that executes a joinder agreement under section 38‑815, the city or town may pay into the fund all or any part of the amount sufficient to provide retirement benefits for elected officials or former elected officials for the time of service as an elected official of the city or town before the joinder agreement if no retirement benefits were in effect for elected officials during the time of service being redeemed under this section.

D.  A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the plan, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.END_STATUTE

Sec. 2.  Section 38-820, Arizona Revised Statutes, is amended to read:

START_STATUTE38-820.  Credit for military service

A.  A member of the plan who has at least ten five years of credited service with the plan may receive credited service for periods of active military service performed before employment with the member's current employer if:

1.  The member was honorably separated from the military service.

2.  The period of military service for which the member receives credited service does not exceed sixty months.

3.  The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736 or except if the member is not yet eligible for a military retirement benefit.

4.  The member pays the cost to purchase the prior active military service.  The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the additional credited service.

5.  The amount of benefits purchased pursuant to this subsection is subject to limits established by section 415 of the internal revenue code.

B.  An active member of the plan who volunteers or is ordered to perform military service may receive credited service for not more than sixty months of military service as provided by the uniformed services employment and reemployment rights act of 1994 (38 United States Code part III, chapter 43).  The member's employer shall make employer contributions and the member shall make the member contributions pursuant to subsection C of this section if the member meets the following requirements:

1.  Was an active member of the plan on the day before the member began military service.

2.  Entered into and served in the armed forces of the United States or is a member of the national guard.

3.  Complies with the notice and return to work provisions of 38 United States Code section 4312.

C.  Contributions made pursuant to subsection B of this section shall be for the period of time beginning on the date the member began military service and ending on the later of one of the following dates:

1.  The date the member is separated from military service.

2.  The date the member is released from service related hospitalization or two years after initiation of service related hospitalization, whichever date is earlier.

3.  The date the member dies as a result of or during military service.

D.  Notwithstanding any other law, on payment of the contributions made pursuant to subsection B of this section, the member shall be credited with service for retirement purposes for the period of military service of not more than sixty months.  The member shall submit a copy of the military discharge certificate (DD-256A) and a copy of the military service record (DD-214) or its equivalent with the member's application when applying for credited service corresponding to the period of military service.

E.  The employer and the member shall make contributions pursuant to subsection B of this section as follows:

1.  Contributions shall be based on the compensation that the member would have received but for the period that the member was ordered into active military service.

2.  If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into military service, contributions shall be based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.

3.  If a member has been employed less than twelve months before being ordered into military service, contributions shall be based on the member's compensation being earned immediately preceding the period of military service.

4.  The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions.  Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum.  Death benefits shall be calculated as prescribed by law.

5.  If the member's employer pays military differential wage pay to members serving in the military, contributions shall be paid to the plan pursuant to section 38‑810 for any military differential wage pay paid to the member while performing military service.

F.  In computing the length of total credited service of a member for the purpose of determining retirement benefits or eligibility, the period of military service, as prescribed by this section, shall be included.

G.  If a member performs military service due to a presidential call‑up, not to exceed forty‑eight months, the employer shall make the employer and member contributions computed pursuant to subsection E of this section on the member's return and in compliance with subsection B of this section.

H.  In addition to, but not in duplication of, subsection B of this section, beginning December 12, 1994 contributions, benefits and credited service provided pursuant to this section shall be provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

I.  For plan years beginning after December 31, 2008, a member who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code is not considered having a severance from employment during that qualified military service.  Any payments by the employer to the member during the qualified military service shall be considered compensation to the extent those payments do not exceed the amounts the member would have received if the member had continued to perform services for the employer rather than entering qualified military service.

J.  For deaths occurring from and after December 31, 2006, in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the plan as though the member resumed and then terminated employment on account of death. END_STATUTE

Sec. 3.  Title 38, chapter 5, article 3, Arizona Revised Statutes, is amended by adding section 38-823, to read:

START_STATUTE38-823.  Discount rate; service purchase; transfer of service credits

A.  Beginning July 1, 2017, the discount rate specified in subsection B of this section applies to service purchases or transfers of service credits to the plan pursuant to the following sections:

1.  Section 38‑816, subsection B.

2.  Section 38‑820, subsection A.

3.  Section 38‑821.

4.  Sections 38‑921, 38‑922, 38‑923 and 38‑924.

B.  The discount rate is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten‑year treasury note as of March 1 that is published by the federal reserve board plus two percent.  The discount rate is effective beginning in the next fiscal year, and the board shall recalculate the rate each year. END_STATUTE

Sec. 4.  Section 38-853.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-853.01.  Redemption of prior service; calculation

A.  Each present active member of the system who has at least five years of service with the system may elect to redeem up to sixty months of any part of the following prior service or employment by paying into the system any amounts required under subsection B of this section if the prior service or employment is not on account with any other retirement system:

1.  Prior service in this state as an employee with an employer now covered by the system or prior service with an agency of the United States government, a state of the United States or a political subdivision of this state or of a state of the United States as a full‑time paid firefighter, full‑time paid certified peace officer or full‑time paid corrections officer engaged in law enforcement duties.

2.  Subject to any limitations prescribed by federal law, prior employment as an employee of a corporation that contracted with an employer now covered by the system to provide firefighting services on behalf of that employer as a full‑time paid firefighter or that provided firefighting services for a political subdivision of this state.

B.  Any present active member who elects to redeem any part of the prior service or employment for which the employee is deemed eligible by the board under this section shall pay into the system the amounts previously withdrawn by the member, if any, as a refund of the member's accumulated contributions plus accumulated interest as determined by the board and the additional amount, if any, computed by the system's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the system's actuary.  The discount rate used by the actuary for the redemption calculation pursuant to this subsection is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten‑year treasury note as of March 1 that is published by the federal reserve board plus two per cent. The discount rate is effective beginning in the next fiscal year, and the board shall recalculate the rate each year.

C.  A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the system, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible  distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.END_STATUTE

Sec. 5.  Section 38-858, Arizona Revised Statutes, is amended to read:

START_STATUTE38-858.  Credit for military service

A.  A member of the system who has at least ten five years of service with the system may receive credited service for periods of active military service performed before employment with the member's current employer if:

1.  The member was honorably separated from the military service.

2.  The period of military service for which the member receives credited service does not exceed sixty months.

3.  The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736 or except if the member is not yet eligible for a military retirement benefit.

4.  The member pays the cost to purchase the prior active military service.  The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the additional credited service.

5.  The amount of benefits purchased pursuant to this subsection is subject to limits established by section 415 of the internal revenue code.

B.  An active member of the system who volunteers or is ordered to perform military service may receive credited service for not more than sixty months of military service as provided by the uniformed services employment and reemployment rights act of 1994 (38 United States Code part III, chapter 43).  The member's employer shall make employer contributions and the member shall make the member contributions pursuant to subsection C of this section if the member meets the following requirements:

1.  Was an active member of the system on the day before the member began military service.

2.  Entered into and served in the armed forces of the United States or is a member of the national guard.

3.  Complies with the notice and return to work provisions of 38 United States Code section 4312.

C.  Contributions made pursuant to subsection B of this section shall be for the period of time beginning on the date the member began military service and ending on the later of one of the following dates:

1.  The date the member is separated from military service.

2.  The date the member is released from service related hospitalization or two years after initiation of service related hospitalization, whichever date is earlier.

3.  The date the member dies as a result of or during military service.

D.  Notwithstanding any other law, on payment of the contributions made pursuant to subsection B of this section, the member shall be credited with service for retirement purposes for the period of military service of not more than sixty months.  The member shall submit a copy of the military discharge certificate (DD-256A) and a copy of the military service record (DD-214) or its equivalent with the member's application when applying for credited service corresponding to the period of military service.

E.  The employer and the member shall make contributions pursuant to subsection B of this section as follows:

1.  Contributions shall be based on the compensation that the member would have received but for the period that the member was ordered into active military service.

2.  If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into military service, contributions shall be based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.

3.  If a member has been employed less than twelve months before being ordered into military service, contributions shall be based on the member's compensation being earned immediately preceding the period of military service.

4.  The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions.  Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum.  Death benefits shall be calculated as prescribed by law.

5.  If the member's employer pays military differential wage pay to members serving in the military, contributions shall be paid to the system pursuant to section 38‑843 for any military differential wage pay paid to the member while performing military service.

F.  In computing the length of total credited service of a member for the purpose of determining retirement benefits or eligibility, the period of military service, as prescribed by this section, shall be included.

G.  If a member performs military service due to a presidential call‑up, not to exceed forty-eight months, the employer shall make the employer and member contributions computed pursuant to subsection E of this section on the member's return and in compliance with subsection B of this section.

H.  In addition to, but not in duplication of, the provisions of subsection B of this section, beginning December 12, 1994 contributions, benefits and credited service provided pursuant to this section shall be provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

I.  For plan years beginning after December 31, 2008, a member who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code is not considered having a severance from employment during that qualified military service.  Any payments by the employer to the member during the qualified military service shall be considered compensation to the extent those payments do not exceed the amounts the member would have received if the member had continued to perform services for the employer rather than entering qualified military service.

J.  For deaths occurring from and after December 31, 2006, in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the system as though the member resumed and then terminated employment on account of death. END_STATUTE

Sec. 6.  Title 38, chapter 5, article 4, Arizona Revised Statutes, is amended by adding section 38-861, to read:

START_STATUTE38-861.  Discount rate; service purchase; transfer of service credit

A.  Beginning July 1, 2017, the discount rate specified in subsection B of this section applies to service purchases or transfers of service credits to the system pursuant to the following sections:

1.  Section 38‑849, subsection D.

2.  Section 38‑853.01, subsection B.

3.  Section 38‑858, subsection A.

4.  Sections 38‑921, 38‑922, 38‑923 and 38‑924.

B.  The discount rate is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten‑year treasury note as of March 1 that is published by the federal reserve board plus two percent. The discount rate is effective beginning in the next fiscal year, and the board shall recalculate the rate each year.END_STATUTE

Sec. 7.  Section 38-907, Arizona Revised Statutes, is amended to read:

START_STATUTE38-907.  Credit for military service

A.  A member of the plan who has at least ten five years of credited service with the plan may receive credited service for periods of active military service performed before employment with the member's current employer if:

1.  The member was honorably separated from the military service.

2.  The period of military service for which the member receives credited service does not exceed sixty months.

3.  The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736 or except if the member is not yet eligible for a military retirement benefit.

4.  The member pays the cost to purchase the prior active military service.  The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the additional credited service.

5.  The amount of benefits purchased pursuant to this subsection is subject to limits established by section 415 of the internal revenue code.

B.  An active member of the plan who volunteers or is ordered to perform military service may receive credited service for not more than sixty months of military service as provided by the uniformed services employment and reemployment rights act of 1994 (38 United States Code part III, chapter 43).  The member's employer shall make employer contributions and the member shall make the member contributions pursuant to subsection C of this section if the member meets the following requirements:

1.  Was an active member of the plan on the day before the member began military service.

2.  Entered into and served in the armed forces of the United States or is a member of the national guard.

3.  Complies with the notice and return to work provisions of 38 United States Code section 4312.

C.  Contributions made pursuant to subsection B of this section shall be for the period of time beginning on the date the member began military service and ending on the later of one of the following dates:

1.  The date the member is separated from military service.

2.  The date the member is released from service related hospitalization or two years after initiation of service related hospitalization, whichever date is earlier.

3.  The date the member dies as a result of or during military service.

D.  Notwithstanding any other law, on payment of the contributions made pursuant to subsection B of this section, the member shall be credited with service for retirement purposes for the period of military service of not more than sixty months.  The member shall submit a copy of the military discharge certificate (DD-256A) and a copy of the military service record (DD-214) or its equivalent with the member's application when applying for credited service corresponding to the period of military service.

E.  The employer and the member shall make contributions pursuant to subsection B of this section as follows:

1.  Contributions shall be based on the compensation that the member would have received but for the period that the member was ordered into active military service.

2.  If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into military service, contributions shall be based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.

3.  If a member has been employed less than twelve months before being ordered into military service, contributions shall be based on the member's compensation being earned immediately preceding the period of military service.

4.  The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions.  Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum.  Death benefits shall be calculated as prescribed by law.

5.  If the member's employer pays military differential wage pay to members serving in the military, contributions shall be paid to the plan pursuant to section 38-891 for any military differential wage pay paid to the member while performing military service.

F.  In computing the length of total credited service of a member for the purpose of determining retirement benefits or eligibility, the period of military service, as prescribed by this section, shall be included.

G.  If a member performs military service due to a presidential call‑up, not to exceed forty-eight months, the employer shall make the employer and member contributions computed pursuant to subsection E of this section on the member's return and in compliance with subsection B of this section.

H.  In addition to, but not in duplication of, subsection B of this section, beginning December 12, 1994 contributions, benefits and credited service provided pursuant to this section shall be provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

I.  For plan years beginning after December 31, 2008, a member who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code is not considered having a severance from employment during that qualified military service.  Any payments by the employer to the member during the qualified military service shall be considered compensation to the extent those payments do not exceed the amounts the member would have received if the member had continued to perform services for the employer rather than entering qualified military service.

J.  For deaths occurring from and after December 31, 2006 in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the plan as though the member resumed and then terminated employment on account of death. END_STATUTE

Sec. 8.  Section 38-909, Arizona Revised Statutes, is amended to read:

START_STATUTE38-909.  Redemption of prior service; calculation

A.  Each present active member of the plan who has at least five years of credited service with the plan who had previous service in this state as an employee with an employer now covered by the plan or who had previous service with an agency of the United States government, a state of the United States or a political subdivision of this state or a state of the United States as a full‑time paid corrections officer or full‑time paid certified peace officer may elect to redeem up to sixty months of any part of the prior service by paying into the plan any amounts required under subsection B of this section if the prior service is not on account with any other retirement system.

B.  Any present active member who elects to redeem any part of the prior service or employment for which the employee is deemed eligible by the board under this section shall pay into the plan the amounts previously withdrawn by the member, if any, as a refund of the member's accumulated contributions plus accumulated interest as determined by the board and the additional amount, if any, computed by the plan's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the plan's actuary.

C.  The discount rate used by the actuary for the redemption calculation pursuant to subsection B is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten year treasury note as of March 1 that is published by the federal reserve board plus two per cent.  This discount rate is effective beginning in the next fiscal year and shall be recalculated each year.

D.  C.  A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the plan, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code. END_STATUTE

Sec. 9.  Title 38, chapter 5, article 6, Arizona Revised Statutes, is amended by adding section 38-913, to read:

START_STATUTE38-913.  Discount rate; service purchase; transfer of service credits

A.  Beginning July 1, 2017, the discount rate specified in subsection B of this section applies to service purchases or transfers of service credits to the plan pursuant to the following sections:

1.  Section 38‑907, subsection A.

2.  Section 38‑909, subsection B.

3.  Sections 38‑921, 38‑922, 38‑923 and 38‑924.

B.  The discount rate is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten‑year treasury note as of March 1 that is published by the federal reserve board plus two percent.  The discount rate is effective beginning in the next fiscal year, and the board shall recalculate the rate each year.END_STATUTE

Sec. 10.  Discount rate; applicability; delayed repeal

A.  Until July 1, 2017, for service purchases and transfers of service credits under the elected officials' retirement plan, the public safety personnel retirement system and the corrections officer retirement plan, the discount rate used by the actuary for the calculation of the actuarial present value of the projected benefits is an amount equal to the assumed rate of return that is prescribed by the board of trustees of the public safety personnel retirement system.

B.  This section applies retroactively to from and after August 1, 2012.

C.  This section is repealed from and after June 30, 2017.

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