Bill Text: AZ HB2199 | 2011 | Fiftieth Legislature 1st Regular | Introduced
Bill Title: PSPRS; plan design
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2011-02-09 - Referred to House ERA Committee [HB2199 Detail]
Download: Arizona-2011-HB2199-Introduced.html
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REFERENCE TITLE: PSPRS; plan design |
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State of Arizona House of Representatives Fiftieth Legislature First Regular Session 2011
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HB 2199 |
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Introduced by Representative Robson
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AN ACT
amending sections 38‑842, 38‑843, 38‑844.05, 38‑844.06, 38‑845, 38‑846.01 and 38‑856, Arizona Revised Statutes; relating to the public safety personnel retirement system.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 38-842, Arizona Revised Statutes, is amended to read:
38-842. Definitions
In this article, unless the context otherwise requires:
1. "Accidental disability" means a physical or mental condition that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's job classification and that was incurred in the performance of the employee's duty.
2. "Accumulated contributions" means, for each member, the sum of the amount of the member's aggregate contributions made to the fund and the amount, if any, attributable to the employee's contributions before the member's effective date under another public retirement system, other than the federal social security act, and transferred to the fund minus the benefits paid to or on behalf of the member.
3. "Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the board.
4. "Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.
5. "Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.
6. "Annuitant" means a person who is receiving a benefit pursuant to section 38‑846.01.
7. "Average monthly benefit compensation" means the result obtained by dividing the total compensation paid to an employee during a considered period by the number of months, including fractional months, in which such compensation was received. The considered period shall be the three five consecutive years within the last twenty completed years of credited service that yield the highest average. In the computation under this paragraph, a period of nonpaid or partially paid industrial leave shall be considered based on the compensation the employee would have received in the employee's job classification if the employee was not on industrial leave.
8. "Board" means the board of trustees of the system, who are the persons appointed to invest and operate the fund.
9. "Catastrophic disability" means a physical and not a psychological condition that the local board determines prevents the employee from totally and permanently engaging in any gainful employment and that results from a physical injury incurred in the performance of the employee's duty.
10. "Certified peace officer" means a peace officer certified by the Arizona peace officers standards and training board.
11. "Claimant" means any member or beneficiary who files an application for benefits pursuant to this article.
12. "Compensation" means, for the purpose of computing retirement benefits, base salary, overtime pay, shift differential pay, military differential wage pay and holiday pay paid to an employee by the employer on a regular monthly, semimonthly or biweekly payroll basis and longevity pay paid to an employee at least every six months for which contributions are made to the system pursuant to section 38‑843, subsection D. Compensation does not include, for the purpose of computing retirement benefits, payment for unused sick leave, payment in lieu of vacation, payment for compensatory time or payment for any fringe benefits. In addition, compensation does not include, for the purpose of computing retirement benefits, payments made directly or indirectly by the employer to the employee for work performed for a third party on a contracted basis or any other type of agreement under which the third party pays or reimburses the employer for the work performed by the employee for that third party, except for third party contracts between public agencies for law enforcement, criminal, traffic and crime suppression activities training or fire, wildfire, emergency medical or emergency management activities or where the employer supervises the employee's performance of law enforcement, criminal, traffic and crime suppression activities, training, or fire, wildfire, emergency medical or emergency management services activities. For the purposes of this paragraph, "base salary" means the amount of compensation each employee is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, longevity pay, fringe benefit pay and similar extra payments.
13. "Credited service" means the member's total period of service before the member's effective date of participation, plus those compensated periods of the member's service thereafter for which the member made contributions to the fund.
14. "Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the system issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.
15. "Depository" means a bank in which all monies of the system are deposited and held and from which all expenditures for benefits, expenses and investments are disbursed.
16. "Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.
17. "Determination period" means the ninety-day period in which the system must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the system mails a notice of receipt to the participant and alternate payee.
18. "Direct rollover" means a payment by the system to an eligible retirement plan that is specified by the distributee.
19. "Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.
20. "Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.
21. "Effective date of participation" means July 1, 1968, except with respect to employers and their covered employees whose contributions to the fund commence thereafter, the effective date of their participation in the system is as specified in the applicable joinder agreement.
22. "Effective date of vesting" means the date a member's rights to benefits vest pursuant to section 38‑844.01.
23. "Eligible child" means an unmarried child of a deceased member or retired member who meets one of the following qualifications:
(a) Is under eighteen years of age.
(b) Is at least eighteen years of age and under twenty‑three years of age only during any period that the child is a full‑time student.
(c) Is under a disability that began before the child attained twenty‑three years of age and remains a dependent of the surviving spouse or guardian.
24. "Eligible groups" means only the following who are regularly assigned to hazardous duty:
(a) Municipal police officers who are certified peace officers.
(b) Municipal fire fighters.
(c) Paid full‑time fire fighters employed directly by a fire district organized pursuant to section 48‑803 or 48‑804 with three or more full‑time fire fighters, but not including fire fighters employed by a fire district pursuant to a contract with a corporation.
(d) State highway patrol officers who are certified peace officers.
(e) State fire fighters.
(f) County sheriffs and deputies who are certified peace officers.
(g) Game and fish wardens who are certified peace officers.
(h) Police officers who are certified peace officers and fire fighters of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424. A police officer shall be designated pursuant to section 28‑8426 to aid and supplement state and local law enforcement agencies and a fire fighter's sole duty shall be to perform fire fighting services, including services required by federal regulations.
(i) Police officers who are certified peace officers and who are appointed by the Arizona board of regents.
(j) Police officers who are certified peace officers and who are appointed by a community college district governing board.
(k) State attorney general investigators who are certified peace officers.
(l) County attorney investigators who are certified peace officers.
(m) Police officers who are certified peace officers and who are employed by an Indian reservation police agency.
(n) Fire fighters who are employed by an Indian reservation fire fighting agency.
(o) Police officers who are certified peace officers and who are appointed by the department of administration.
(p) Department of liquor licenses and control investigators who are certified peace officers.
(q) Arizona department of agriculture officers who are certified peace officers.
(r) Arizona state parks board rangers and managers who are certified peace officers.
(s) County park rangers who are certified peace officers.
25. "Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:
(a) An individual retirement account described in section 408(a) of the internal revenue code.
(b) An individual retirement annuity described in section 408(b) of the internal revenue code.
(c) An annuity plan described in section 403(a) of the internal revenue code.
(d) A qualified trust described in section 401(a) of the internal revenue code.
(e) An annuity contract described in section 403(b) of the internal revenue code.
(f) An eligible deferred compensation plan described in section 457(b) of the internal revenue code that is maintained by a state, a political subdivision of a state or any agency or instrumentality of a state or a political subdivision of a state and that agrees to separately account for amounts transferred into the eligible deferred compensation plan from this plan.
26. "Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:
(a) Any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the member or the joint lives or joint life expectancies of the member and the member's beneficiary or for a specified period of ten years or more.
(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.
(c) The portion of any distribution that is not includable in gross income.
27. "Employee" means any person who is employed by a participating employer and who is a member of an eligible group but does not include any persons compensated on a contractual or fee basis. If an eligible group requires certified peace officer status and at the option of the local board, employee may include a person who is training to become a certified peace officer.
28. "Employers" means:
(a) Cities contributing to the fire fighters' relief and pension fund as provided in sections 9‑951 through 9‑971 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their full‑time paid fire fighters.
(b) Cities contributing under the state police pension laws as provided in sections 9‑911 through 9‑934 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their municipal policemen.
(c) The state highway patrol covered under the state highway patrol retirement system.
(d) The state, or any political subdivision of this state, including towns, cities, fire districts, counties and nonprofit corporations operating public airports pursuant to sections 28‑8423 and 28‑8424, that has elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.
(e) Indian tribes that have elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.
29. "Fund" means the public safety personnel retirement fund, which is the fund established to receive and invest contributions accumulated
30. "Local board" means the retirement board of the employer, who are the persons appointed to administer the system as it applies to their members in the system.
31. "Member" means any full‑time employee who meets all of the following qualifications:
(a) Who is either a paid municipal police officer, a paid fire fighter, a law enforcement officer who is employed by this state including the director thereof, a state fire fighter who is primarily assigned to fire fighting duties, a fire fighter or police officer of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, all ranks designated by the Arizona law enforcement merit system council, a state attorney general investigator who is a certified peace officer, a county attorney investigator who is a certified peace officer, a police officer who is appointed by the department of administration and who is a certified peace officer, a department of liquor licenses and control investigator who is a certified peace officer, an Arizona department of agriculture officer who is a certified peace officer, an Arizona state parks board ranger or manager who is a certified peace officer, a county park ranger who is a certified peace officer, a person who is a certified peace officer and who is employed by an Indian reservation police agency, a fire fighter who is employed by an Indian reservation fire fighting agency or an employee included in a group designated as eligible employees under a joinder agreement entered into by their employer after July 1, 1968 and who is or was regularly assigned to hazardous duty.
(b) Who, on or after the employee's effective date of participation, is receiving compensation for personal services rendered to an employer or would be receiving compensation except for an authorized leave of absence.
(c) Whose customary employment is at least forty hours per week or, for those employees who customarily work fluctuating work weeks, whose customary employment averages at least forty hours per week.
(d) Who is engaged to work for more than six months in a calendar year.
(e) Who, if economic conditions exist, is required to take furlough days or reduce the hours of their the employee's normal work week below forty hours but not less than thirty hours per pay cycle, and maintain their the employee's active member status within the system as long as the hour change does not extend beyond twelve consecutive months.
(f) Who has not attained age sixty‑five before the employee's effective date of participation or who was over age sixty‑five with twenty‑five years or more of service prior to the employee's effective date of participation.
32. "Normal retirement date" means:
(a) For an employee who becomes employed by an employer before the effective date of this amendment to this section, the first day of the calendar month immediately following an the employee's completion of twenty years of service or the employee's sixty‑second birthday and the employee's completion of fifteen years of service.
(b) For an employee who becomes employed by an employer on or after the effective date of this amendment to this section, the first day of the calendar month immediately following the employee's completion of twenty‑five years of service if the employee is at least fifty‑two and one‑half years of age.
33. "Notice of receipt" means a written document that is issued by the system to a participant and alternate payee and that states that the system has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.
34. "Ordinary disability" means a physical condition that the local board determines will prevent an employee totally and permanently from performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will prevent an employee totally and permanently from engaging in any substantial gainful activity.
35. "Participant" means a member who is subject to a domestic relations order.
36. "Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.
37. "Pension" means a series of monthly amounts that are payable to a person who is entitled to receive benefits under the plan but does not include an annuity that is payable pursuant to section 38-846.01.
38. "Personal representative" means the personal representative of a deceased alternate payee.
39. "Plan approved domestic relations order" means a domestic relations order that the system approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.
40. "Regularly assigned to hazardous duty" means regularly assigned to duties of the type normally expected of municipal police officers, municipal or state fire fighters, eligible fire district fire fighters, state highway patrol officers, county sheriffs and deputies, fish and game wardens, fire fighters and police officers of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, police officers who are appointed by the Arizona board of regents or a community college district governing board, state attorney general investigators who are certified peace officers, county attorney investigators who are certified peace officers, police officers who are appointed by the department of administration and who are certified peace officers, department of liquor licenses and control investigators who are certified peace officers, Arizona department of agriculture officers who are certified peace officers, Arizona state parks board rangers and managers who are certified peace officers, county park rangers who are certified peace officers, police officers who are certified peace officers and who are employed by an Indian reservation police agency or fire fighters who are employed by an Indian reservation fire fighting agency. Those individuals who are assigned solely to support duties such as secretaries, stenographers, clerical personnel, clerks, cooks, maintenance personnel, mechanics and dispatchers are not assigned to hazardous duty regardless of their position classification title. Since the normal duties of those jobs described in this paragraph are constantly changing, questions as to whether a person is or was previously regularly assigned to hazardous duty shall be resolved by the local board on a case‑by‑case basis. Resolutions by local boards are subject to rehearing and appeal.
41. "Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension or, for a member who becomes employed by an employer on or after the effective date of this amendment to this section, attains the age and service requirements for a normal retirement date. Retirement shall be considered as commencing on the first day of the month immediately following a member's last day of employment or authorized leave of absence, if later.
42. "Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the system, or a domestic relations order submitted to the system that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.
43. "Service" means the last period of continuous employment of an employee by the employers before the employee's retirement, except that if such period includes employment during which the employee would not have qualified as a member had the system then been effective, such as employment as a volunteer fire fighter, then only twenty‑five per cent of such noncovered employment shall be considered as service. Any absence that is authorized by an employer shall not be considered as interrupting continuity of employment if the employee returns within the period of authorized absence. Transfers between employers also shall not be considered as interrupting continuity of employment. Any period during which a member is receiving sick leave payments or a temporary disability pension shall be considered as service. Notwithstanding any other provision of this paragraph, any period during which a person was employed as a full‑time paid fire fighter for a corporation that contracted with an employer to provide firefighting services on behalf of the employer shall be considered as service if the employer has elected at its option to treat part or all of the period the firefighter worked for the company as service in its applicable joinder agreement. Any reference in this system to the number of years of service of an employee shall be deemed to include fractional portions of a year.
44. "State" means the state of Arizona, including any department, office, board, commission, agency or other instrumentality of the state.
45. "System" means the public safety personnel retirement system established by this article.
46. "Temporary disability" means a physical or mental condition that the local board finds totally and temporarily prevents an employee from performing a reasonable range of duties within the employee's department and that was incurred in the performance of the employee's duty.
Sec. 2. Section 38-843, Arizona Revised Statutes, is amended to read:
38-843. Contributions
A. Each employer who participates in the system on behalf of a group of employees who were covered under a prior public retirement system, other than the federal social security act, shall transfer all securities and monies attributable to the taxes and contributions of the state other than the state contribution to social security, the employer and the employees for the covered group of employees under the other system, such transfer to be made to the fund subject to all existing liabilities and on or within sixty days following the employer's effective date. All monies and securities transferred to the fund shall be credited to the employer's account in the fund. A record of the market value and the cost value of such transferred contributions shall be maintained for actuarial and investment purposes.
B. As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make level per cent of compensation contributions sufficient under such actuarial valuations to meet both the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability over, beginning July 1, 2005, a rolling period of at least twenty and not more than thirty years that is established by the board of trustees taking into account the recommendation of the system's actuary, except that, beginning with fiscal year 2006‑2007, except as otherwise provided, the employer contribution rate shall not be less than eight per cent of compensation. For any employer whose actual contribution rate is less than eight per cent of compensation for fiscal year 2006‑2007, that employer's contribution rate is not subject to the eight per cent minimum but, for fiscal year 2006-2007 and each year thereafter, shall be at least five per cent and not more than the employer's actual contribution rate. An employer shall have the option of paying a higher level per cent of compensation thereby reducing its unfunded past service liability. An employer shall also have the option of increasing its contributions in order to reduce the contributions required from its members under subsection C, except that if an employer elects this option the employer shall pay the same higher level percentage contribution for all members of the eligible group. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employer shall make the contributions based on the compensation the employee would have received in the employee's job classification if the employee was in normal employment status. All contributions made by the employers and all state taxes allocated to the fund shall be irrevocable and shall be used to pay benefits under the system or to pay expenses of the system and fund. The minimum employer contribution that is paid and that is in excess of the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability as calculated pursuant to this subsection shall be used to reduce future employer contribution increases and shall not be used to pay for an increase in benefits that are otherwise payable to members. The board shall separately account for these monies in the fund. Forfeitures arising because of severance of employment before a member becomes eligible for a pension or any other reason shall be applied to reduce the cost of the employer, not to increase the benefits otherwise payable to members. After the close of any fiscal year, if the system's actuary determines that the actuarial valuation of an employer's account contains excess valuation assets other than excess valuation assets that were in the employer's account as of fiscal year 2004‑2005 and is more than one hundred per cent funded, the board shall account for fifty per cent of the excess valuation assets in a stabilization reserve account. After the close of any fiscal year, if the system's actuary determines that the actuarial valuation of an employer's account has a valuation asset deficiency and an unfunded actuarial accrued liability, the board shall use any valuation assets in the stabilization reserve account for that employer, to the extent available, to limit the decline in that employer's funding ratio to not more than two per cent.
C. Each member, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to 7.65 per cent of the member's compensation the amount prescribed in subsection E, except as provided in subsection B. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employee shall make the employee's contribution based on the compensation the employee would have received in the employee's job classification if the employee was in normal employment status. Contributions of members shall be required as a condition of employment and membership in the system and shall be made by payroll deductions. Every employee shall be deemed to consent to such deductions. Payment of an employee's compensation, less such payroll deductions, shall constitute a full and complete discharge and satisfaction of all claims and demands by the employee relating to remuneration for the employee's services rendered during the period covered by the payment, except with respect to the benefits provided under the system.
D. Each employer shall transfer to the board the employer and employee contributions provided for in subsections B and C within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten per cent per annum, compounded annually, for each day the contributions are late, such penalty to be paid by the employer. Delinquent payments due under this subsection, together with interest charges as provided in this subsection, may be recovered by action in a court of competent jurisdiction against an employer liable for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to such employer by any department or agency of this state.
E. The amount contributed by a member pursuant to subsection C is:
1. Through June 30, 2011, 7.65 per cent of the member's compensation.
2. For fiscal year 2011‑2012, 8.65 per cent of the member's compensation.
3. For fiscal year 2012‑2013, 9.65 per cent of the member's compensation.
4. For fiscal year 2013‑2014, 10.65 per cent of the member's compensation.
5. For fiscal year 2014‑2015, 11.65 per cent of the member's compensation.
6. For fiscal year 2015‑2016 and each fiscal year thereafter, 11.65 per cent of the member's compensation or 33.3 per cent of the aggregate computed employer contribution rate that is calculated pursuant to subsection b, whichever is lower, except that the member contribution rate shall not be less than 7.65 per cent of the member's compensation and the employer contribution rate shall not be less than the rate prescribed in subsection B.
F. For fiscal years 2011‑2012, 2012‑2013, 2013‑2014 and 2014‑2015, the amount of the member's contribution that exceeds 7.65 per cent of the member's compensation shall not be used to reduce the employer's contribution that is calculated pursuant to subsection B.
E. G. In no case shall more than twelve months of credited service be credited on account of all service rendered by a member in any one year.
Sec. 3. Section 38-844.05, Arizona Revised Statutes, is amended to read:
38-844.05. Deferred retirement option benefits and participation accounts
A. A deferred retirement option plan participation account is an account established within the system on behalf of each deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the deferred retirement option plan participation account. A deferred retirement option plan participant does not have a claim on the assets of the system with respect to the member's deferred retirement option plan participation account and assets shall not be set aside for any deferred retirement option plan participant that are separate from all other system assets.
B. All amounts credited to a member's deferred retirement option plan participation account are fully vested.
C. A member's deferred retirement option plan participation account shall be credited with the following:
1. An amount, credited monthly, that is computed in the same manner as a normal retirement benefit using the factors of credited service and average monthly benefit compensation in effect on the date of deferred retirement option plan participation.
2. for those members who elect to participate in the deferred retirement option plan before the effective date of this amendment to this section, an amount, credited monthly, that represents interest at a rate equal to the assumed rate of return determined by the board.
3. For those members who elect to participate in the deferred retirement option plan on or after the effective date of this amendment to this section, an amount, credited monthly, equal to one‑half of the total rate of return of the system for the previous fiscal year, but not to exceed the system's assumed investment rate of return but at least two per cent.
D. The participant is not entitled to receive any amount prescribed by section 38‑856 or 38‑857 during the deferred retirement option plan participation period.
Sec. 4. Section 38-844.06, Arizona Revised Statutes, is amended to read:
38-844.06. Additional deferred retirement option plan provisions
A. Beginning on the day after the date the member elects to participate in the deferred retirement option plan, employee and employer contributions pursuant to section 38‑843 cease with respect to that member, except that, for those members who elect to participate in the deferred retirement option plan on or after the effective date of this amendment to this section, during the period a member is participating in the deferred retirement option plan, the member shall continue to make member contributions as calculated pursuant to section 38‑843.
B. A member who elects to participate in the deferred retirement option plan and who becomes disabled during the period of deferred retirement option plan participation is eligible to apply for disability retirement benefits. If the application for disability retirement benefits is approved by the local board:
1. The disability retirement benefits shall be computed using the factors of credited service and average monthly benefit compensation in effect the day before the effective date of the member's deferred retirement option plan participation.
2. All amounts in the member's deferred retirement option plan participation account shall be distributed pursuant to section 38‑844.08.
C. If a member dies during the period of the member's deferred retirement option plan participation, the designated beneficiary of the member is entitled to receive all amounts in the member's deferred retirement option plan participation account. END_STATUTE
Sec. 5. Section 38-845, Arizona Revised Statutes, is amended to read:
38-845. Amount of retirement benefit; purchase of firearm
A. A member who meets the requirements for a normal pension, who was employed by an employer before the effective date of this amendment to this section and who has twenty years of credited service shall receive a monthly amount which that equals fifty per cent of the member's average monthly benefit compensation. If the member retires with other than twenty years of credited service, the foregoing amount shall be:
1. Reduced by four per cent for each year of credited service under twenty years, with pro rata reduction for any fractional year.
2. Increased by a monthly amount equal to two per cent of the member's average monthly benefit compensation multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional year, except that if a member retires with twenty‑five or more years of credited service the amount shall be increased by a monthly amount equal to two and one‑half per cent of the member's average monthly benefit compensation multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional year. Notwithstanding the provisions of this subsection, the maximum amount payable as a normal pension shall be eighty per cent of the average monthly benefit compensation.
B. A member who meets the requirements for an accidental disability pension shall receive a monthly amount, which shall be computed in the same manner as a normal pension, using the member's average monthly benefit compensation before termination of employment and the member's actual credited service or twenty years of credited service, whichever is greater.
C. A member who meets the requirements for an ordinary disability pension shall receive a monthly amount that is equal to a fraction times the member's normal pension that is computed according to subsection A or G if the member had twenty years of credited service. The fraction is the result obtained by dividing the member's actual years of credited service, not to exceed twenty years of credited service, by twenty.
D. A member who meets the requirements for a temporary disability pension shall receive a monthly amount which shall that is be equal to one‑twelfth of fifty per cent of the member's annual compensation received immediately prior to the date on which the member's disability was incurred.
E. A member who meets the requirements for a catastrophic disability pension is entitle entitled to receive a monthly amount computed as follows:
1. For the first sixty months, ninety per cent of the member's average monthly benefit compensation before termination of employment.
2. After sixty months, sixty‑two and one‑half per cent of the member's average monthly benefit compensation before termination of employment or computed in the same manner as a normal pension using the member's average monthly benefit compensation before termination of employment and the member's actual credited service, whichever is greater.
F. A member who was employed before September 15, 1989 by an employer participating in the system and who retires on or after November 1, 2001 is entitled to receive a tax equity benefit allowance consisting of a permanent increase of two per cent of the member's base benefit retroactive to the day of retirement.
G. A member who meets the requirements for a normal pension, who is employed by an employer on or after the effective date of this amendment to this section and who has twenty‑five years of credited service shall receive a monthly amount that equals sixty‑two and one‑half per cent of the member's average monthly benefit compensation. If the member retires with other than twenty‑five years of credited service, the foregoing amount shall be:
1. Reduced by four per cent for each year of credited service under twenty‑five years, with pro rata reduction for any fractional year.
2. Increased by a monthly amount equal to two and one‑half per cent of the member's average monthly benefit compensation multiplied by the number of the member's years of credited service in excess of twenty‑five years, with pro rata increase for any fractional year. Notwithstanding the provisions of this subsection, the maximum amount payable as a normal pension shall be eighty per cent of the average monthly benefit compensation.
G. H. In addition to the amounts received under subsection A, B, C, D, or E or G and subject to the approval of the employer, the pension includes the ability of a member to purchase the handgun or shotgun issued by the employer to the member at less than fair market value.
Sec. 6. Section 38-846.01, Arizona Revised Statutes, is amended to read:
38-846.01. Deferred annuity; exception
If any member who has at least ten years of credited service terminates employment for reasons other than retirement or disability, the member may elect to receive a deferred annuity, except that if the annuitant withdraws all or part of the annuitant's accumulated contributions in the system all rights in and to a deferred annuity shall be forfeited by the annuitant. A deferred annuity is a lifetime monthly payment actuarially equivalent to the annuitant's accumulated contributions in the system plus an equal amount paid by the employer and shall commence on application on or after the sixty‑second birthday of the annuitant. The annuity is not a retirement benefit and annuitants are not entitled to receive any amount prescribed by section 38-845, subsection F, or section 38‑846, 38‑856 or 38‑857.
B. This section applies to a member who becomes employed by an employer on or after the effective date of this amendment to this section, except that such a person who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for normal retirement if the member attains the service requirement for normal retirement.
Sec. 7. Section 38-856, Arizona Revised Statutes, is amended to read:
38-856. Benefit increases; definition
A. Effective July 1 of each year, each retired member or survivor of a retired member is entitled to receive a permanent increase in the base benefit equal to the amount determined pursuant to this section if either:
1. The retired member or the survivor of a retired member was receiving benefits on or before July 31 of the two previous years.
2. The retired member or survivor of a retired member was fifty‑five years of age or older on July 1 of the current year and was receiving benefits on or before July 31 of the previous year.
B. The monthly amount of a permanent increase provided by subsection A is determined as follows:
1. Determine the excess investment earnings on the net assets of the fund.
2. Determine the excess investment earnings account balance.
3. Determine the actuarial present value, as of June 30 of the preceding calendar year, of a five dollar per month increase in the amount of each pension eligible for an increase.
4. Add the amounts determined in paragraphs 1 and 2 of this subsection then divide by the amount determined in paragraph 3 of this subsection.
5. From the quotient obtained in paragraph 4 of this subsection, drop any fraction.
6. Multiply the number obtained in paragraph 5 of this subsection by five dollars.
C. The excess investment earnings on the net assets of the fund are equal to the total assets of the fund less any amount allocated to the excess investment earnings account multiplied by one‑half of the positive difference, if any, between the total return of the system and nine per cent the excess investment earnings amount. The excess investment earnings on the net assets of the fund are zero if the total return of the system is less than or equal to nine per cent.
D. As used in this section: ,
1. Total return and the net assets of the fund are the amounts published in the annual report of the system for the fiscal year ending June 30 of the calendar year preceding the July 1 of the increase.
2. The ratio of the market value of assets to the actuarial accrued liability of the fund is the number determined by the administrator for the fiscal year ending June 30 of the calendar year preceding the July 1 of the increase.
E. All excess investment earnings on the net assets of the fund are available for benefit increases as provided in this section. Any excess investment earnings on the net assets of the fund from any year which that are not used for benefit adjustments for that year are available for future benefit increases in the following years. Earnings on the excess investment earnings account balance at the rate of the total return as published in the annual report of the system shall be added each year to the excess investment earnings account and shall be available for future benefit increases.
F. The maximum benefit increase under this section is limited to the equivalent of four per cent of the average normal benefit being received on the preceding June 30.
G. For the purposes of this section, "excess investment earnings amount" means:
1. If the ratio of the market value of assets to the actuarial accrued liability of the fund is seventy per cent or less, zero.
2. If the ratio of the market value of assets to the actuarial accrued liability of the fund is more than seventy per cent but less than eighty per cent, one‑quarter of the positive difference, if any, between the total return of the system and nine per cent.
3. If the ratio of the market value of assets to the actuarial accrued liability of the fund is eighty per cent or more, one‑half of the positive difference, if any, between the total return of the system and nine per cent.
Sec. 8. Retroactivity
Sections 38‑843 and 38-856, Arizona Revised Statutes, as amended by this act, apply retroactively to from and after June 29, 2011.
