Bill Text: AZ SB1206 | 2016 | Fifty-second Legislature 2nd Regular | Engrossed
Bill Title: Retirement plans; elected officials; opt-out
Spectrum: Moderate Partisan Bill (Republican 7-1)
Status: (Engrossed - Dead) 2016-03-17 - House Committee of the Whole action: Do Pass [SB1206 Detail]
Download: Arizona-2016-SB1206-Engrossed.html
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Senate Engrossed |
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State of Arizona Senate Fifty-second Legislature Second Regular Session 2016
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SENATE BILL 1206 |
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AN ACT
Amending sections 38‑727, 38‑801, 38‑804, 38‑810, 38‑831 and 38‑833, Arizona Revised Statutes; relating to state retirement systems.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 38-727, Arizona Revised Statutes, is amended to read:
38-727. Eligibility; options
A. The following provisions apply to all employees hired on or after the effective date:
1. All employees and officers of this state and all officers and employees of political subdivisions establishing a retirement plan administered by the board pursuant to this article are subject to this article, except that membership is not mandatory:
(a) On the part of any employee who is eligible and who elects to participate in the optional retirement programs established by the Arizona board of regents pursuant to the authority conferred by section 15‑1628 or by a community college district board pursuant to authority conferred by section 15‑1451.
(b) For a state elected official who is subject to term limits, who is initially elected or appointed before January 1, 2014, who is eligible for participation in ASRS because the state elected official has continuously elected not to participate in the elected officials' retirement plan as specified in section 38‑804, subsection K and as provided in section 38‑804, subsection A and who elects has continuously elected not to participate in ASRS as provided in paragraph 7 of this subsection.
(c) On the part of any employee or officer who is eligible to participate and who participates in the elected officials' retirement plan pursuant to article 3 of this chapter, the elected officials' defined contribution retirement system pursuant to article 3.1 of this chapter, the public safety personnel retirement system pursuant to article 4 of this chapter or the corrections officer retirement plan pursuant to article 6 of this chapter.
2. All employees and officers of political subdivisions whose compensation is provided wholly or in part from state monies and who are declared to be state employees and officers by the legislature for retirement purposes are subject, on legislative enactment, to this article and are members of ASRS.
3. Any member whose service terminates other than by death or withdrawal from membership is deemed to be a member of ASRS until the member's death benefit is paid.
4. Employees and officers shall not become members of ASRS and, if they are members immediately before becoming employed as provided by this section, shall have their membership status suspended while they are employed by state departments paying the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund for the period or periods payment of the employer contributions is not made by or on behalf of the departments.
5. Notwithstanding other provisions of this section, a temporary employee of the legislature whose projected term of employment is for not more than six months is ineligible for membership in ASRS. If the employment continues beyond six successive months, the employee may elect to either:
(a) Receive credit for service for the first six months of employment and establish membership in ASRS as of the beginning of the current term of employment if, within forty‑five days after the first six months of employment, both the employer and the employee contribute to ASRS the amount that would have been required to be contributed to ASRS during the first six months of employment as if the employee had been a member of ASRS during those six months.
(b) Establish membership in ASRS as of the day following the completion of six months of employment.
6. A person who is employed in postgraduate training in an approved medical residency training program of an employer or a postdoctoral scholar who is employed by a university under the jurisdiction of the Arizona board of regents is ineligible for membership in ASRS.
7. A state elected official who is subject to term limits, who is initially elected or appointed before January 1, 2014 and who is eligible for participation in ASRS because the state elected official has continuously elected not to participate in the elected officials' retirement plan as specified in section 38‑804, subsection K and as provided in section 38‑804, subsection A may elect not to participate in ASRS. The election not to participate is specific for that term of office. The state elected official who is subject to term limits shall make the election in writing and file the election with ASRS within thirty days after the elected official's retirement plan mails the notice to the state elected official of the state elected official's eligibility to participate in ASRS. The election is effective on the first day of the state elected official's eligibility. If a state elected official who is subject to term limits fails to make an election as provided in this paragraph, the state elected official is deemed to have elected to participate in ASRS. The election not to participate in ASRS is irrevocable and constitutes a waiver of all benefits provided by ASRS for the state elected official's entire term, except for any benefits accrued by the state elected official in ASRS for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law.
8. A person may elect not to participate in ASRS if the person becomes employed by an employer after the person has attained at least sixty‑five years of age, is not an active member, inactive member, retired member or receiving benefits pursuant to article 2.1 of this chapter and does not have any credited service or prior service in ASRS. The employee shall make the election not to participate in writing and file the election with ASRS within thirty days after employment. The election not to participate is irrevocable for the remainder of the person's employment for which the person made the election and constitutes a waiver of all benefits provided by the Arizona state retirement system. The period the person works is not eligible for purchase under section 38‑743 or 38‑744.
9. The following are ineligible for membership in ASRS:
(a) A person who performs services in a hospital, home or other institution as an inmate or patient at the hospital, home or other institution.
(b) A person who performs agricultural labor services, as defined in section 210 of the social security act.
(c) A person who is a nonresident alien temporarily residing in the United States and who holds an F‑1, J‑1, M‑1 or Q‑1 visa when services are performed.
(d) A person who performs services for a school, college or university in this state at which the person is enrolled as a student, as defined by the employing institution. The employing institution shall maintain an appeal process for a person who disagrees with the employing institution's determination that the person is a student and not eligible for membership in ASRS.
(e) A person who performs services under a program designed to relieve the person from unemployment.
B. The following elected officials are subject to this article if the member's employer is an employer under article 3 of this chapter:
1. A state elected official who is subject to term limits, who is elected or appointed on or before December 31, 2013 and who is an active, an inactive or a retired member of ASRS or a member of ASRS with a disability because the state elected official had previously elected not to participate in the elected officials' retirement plan as provided in section 38‑804, subsection A.
2. An elected official, as defined in section 38‑831, who is an active, an inactive or a retired member of ASRS or a member of ASRS with a disability, if the elected official's employer is a participating employer under this article.
Sec. 2. Section 38-801, Arizona Revised Statutes, is amended to read:
38-801. Definitions
In this article, unless the context otherwise requires:
1. "Accumulated contributions" means the sum of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A plus the amount transferred to the fund on behalf of the member plus the amount deposited in the fund pursuant to section 38‑816.
2. "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.
3. "Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.
4. "Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.
5. "Average yearly salary" means the result obtained by dividing the total salary paid to an employee during a considered period by the number of years, including fractional years, in which the salary was received. The considered period shall be:
(a) For an elected official who becomes a member of the plan before January 1, 2012, the three consecutive years within the last ten completed years of credited service as an elected official that yield the highest average. If a member does not have three consecutive years of credited service as an elected official, the considered period is the member's last consecutive period of employment with a plan employer immediately before retirement.
(b) For an elected official who becomes a member of the plan on or after January 1, 2012, the five consecutive years within the last ten completed years of credited service as an elected official that yield the highest average. If a member does not have five consecutive years of credited service as an elected official, the considered period is the member's last consecutive period of employment with a plan employer immediately before retirement.
6. "Board" means the board of trustees of the system.
7. "Credited service" means the number of whole and fractional years of a member's service as an elected official after the elected official's effective date of participation for which member and employer contributions are on deposit with the fund, plus credited service transferred to the plan from another retirement system or plan for public employees of this state, plus service as an elected official before the elected official's effective date of participation that is being funded pursuant to a joinder agreement pursuant to section 38‑815 or service that was redeemed pursuant to section 38‑816. Credited service does not include periods of service for which an active member is uncompensated by the employer and for which no contributions to the plan are made.
8. "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 plan issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.
9. "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.
10. "Determination period" means the ninety-day period in which the plan 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 plan mails a notice of receipt to the participant and alternate payee.
11. "Direct rollover" means a payment by the plan to an eligible retirement plan that is specified by the distributee.
12. "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.
13. "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.
14. "Effective date of participation" means August 7, 1985, except with respect to employers and their elected officials whose contributions to the plan commence after that date, in which case the effective date of their participation in the plan is specified in the applicable joinder agreement.
15. "Elected official" means:
(a) Every elected official of this state who was a member of the plan on December 31, 2013.
(b) Every elected official of each county of this state who was a member of the plan on December 31, 2013.
(c) Every justice of the supreme court, every judge of the court of appeals, every judge of the superior court and every full‑time superior court commissioner, except full‑time superior court commissioners who failed to make a timely election of membership under the judges' retirement plan, repealed on August 7, 1985, who was a member of the plan on December 31, 2013.
(d) The administrator of the board if the administrator is a natural person but only if the administrator is employed by the board before January 1, 2012.
(e) Each elected official of an incorporated city or town whose employer has executed a proper joinder agreement for coverage of its elected officials and who was a member of the plan on December 31, 2013.
(f) a state elected official who is subject to term limits, who is initially elected or appointed before january 1, 2014, who has continuously elected not to participate in the plan pursuant to section 38‑804, subsection A and in the arizona state retirement system pursuant to section 38‑727, subsection A since initially being elected as a state elected official who is subject to term limits and who is subsequently elected or appointed as a state elected official who is subject to term limits on or after January 1, 2014.
16. "Eligible child" means an unmarried child of a deceased active 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.
17. "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.
18. "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.
(d) Any distribution made to satisfy the requirements of section 415 of the internal revenue code.
(e) Hardship distributions.
(f) Similar items designated by the commissioner of the United States internal revenue service in revenue rulings, notices and other guidance published in the internal revenue bulletin.
19. "Employer" means a department, agency or political subdivision of this state that makes employer contributions to the plan pursuant to section 38‑810 on behalf of an elected official who participates in the plan.
20. "Fund" means the elected officials' retirement plan fund.
21. "Notice of receipt" means a written document that is issued by the plan to a participant and alternate payee and that states that the plan has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.
22. "Participant" means a member who is subject to a domestic relations order.
23. "Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.
24. "Pension" means a series of monthly payments to a person who is entitled to receive benefits under the plan.
25. "Personal representative" means the personal representative of a deceased alternate payee.
26. "Physician" means a physician who is licensed pursuant to title 32, chapter 13 or 17.
27. "Plan" means the elected officials' retirement plan.
28. "Plan approved domestic relations order" means a domestic relations order that the plan approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.
29. "Plan year" or "fiscal year" means the period beginning on July 1 of any year and ending on June 30 of the next succeeding year.
30. "Retired member" means a person who is being paid a pension based on the person's credited service as a member of the plan.
31. "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 plan, or a domestic relations order submitted to the plan 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.
32. "System" means the public safety personnel retirement system.
Sec. 3. Section 38-804, Arizona Revised Statutes, is amended to read:
38-804. Membership; termination; definition
A. Except as otherwise provided in this section, all elected officials are members of the plan, except that a state elected official who is subject to term limits may elect not to participate in the plan. The state elected official who is subject to term limits shall make the election in writing and file the election with the board within thirty days after the state elected official assumes office. The election is effective on the first day of the state elected official's eligibility for that term of office. The election not to participate is specific for that term of office. If a state elected official who is subject to term limits fails to make an election as provided in this subsection, the state elected official is deemed to have elected to participate in the plan. The election not to participate in the plan is irrevocable and constitutes a waiver of all benefits provided by the plan for the state elected official's entire term, except for any benefits accrued by the state elected official in the plan for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law. The state elected official who elects not to participate in the plan shall participate in the Arizona state retirement system unless the state elected official makes an irrevocable election not to participate in the Arizona state retirement system as provided in section 38‑727.
B. All elected officials who are members of the plan on December 31, 2013 may remain members of the plan under the terms and limitations of this article.
C. If a member who becomes a member of the plan before January 1, 2012 ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:
1. If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.
2. If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:
(a) 5.0 to 5.9 years of credited service, twenty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.
(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.
(c) 7.0 to 7.9 years of credited service, fifty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.
(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.
(e) 9.0 to 9.9 years of credited service, eighty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.
(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.
D. If a member has more than ten years of credited service with the plan, leaves the monies prescribed in subsection C of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection B C of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.
E. If an elected official who becomes a member of the plan on or after January 1, 2012 ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member may withdraw the member's accumulated contributions from the plan and shall be paid the member's accumulated contributions plus interest at a rate determined by the board as of the date of termination, less any benefit payments the member has received and any amount the member may owe to the plan.
F. If the amount prescribed in subsection C, D or E of this section includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee‑to‑trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board. A member who receives the amount prescribed in subsection C, D or E of this section from the plan or who elects a transfer pursuant to this subsection forfeits the member's credited service, and all rights to benefits under the plan and membership in the plan terminate.
G. For distributions occurring from and after December 31, 2007, a member or a member's beneficiary, including a nonspouse designated beneficiary to the extent permitted under subsection H of this section, may roll over an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code to a roth individual retirement account, if, for distributions occurring before January 1, 2010, the member or the member's beneficiary satisfies the requirements for making a roth individual retirement account contribution under section 408A(c)(3)(B) of the internal revenue code, as in effect on the date of the rollover. Any amount rolled over to a roth individual retirement account is included in the gross income of the member or the member's beneficiary to the extent the amounts would have been included in gross income if not rolled over as required under section 408A(d)(3)(A) of the internal revenue code. For the purposes of this subsection, the administrator is not responsible for ensuring the member or the member's beneficiary is eligible to make a rollover to a roth individual retirement account.
H. For distributions made from and after December 31, 2009, a nonspouse designated beneficiary as defined in section 401(a)(9)(E) of the internal revenue code may elect to directly rollover an eligible rollover distribution to an individual retirement account under section 408(a) of the internal revenue code or an individual retirement annuity under section 408(b) of the internal revenue code that is established on behalf of the designated beneficiary and that will be treated as an inherited individual retirement plan pursuant to section 402(c)(11) of the internal revenue code. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code. In applying this subsection, a nonspouse rollover is not subject to the direct rollover requirements under section 401(a)(31) of the internal revenue code, the rollover notice requirements under section 402(f) of the internal revenue code or the mandatory withholding requirements under section 3405(c) of the internal revenue code.
I. For plan years occurring before January 1, 2007, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no less than thirty days and no more than ninety days before the date of distribution and, for plan years beginning from and after December 31, 2006, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no less than thirty days and no more than one hundred eighty days before the date of distribution.
J. 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.
K. Except as otherwise provided in this subsection, if an elected official who has terminated the member's membership in the plan pursuant to subsection C A of this section is subsequently elected, appointed or hired on or after January 1, 2014, the elected official is not eligible to become a member of the plan but is subject to article 3.1 of this chapter. If a state elected official who is subject to term limits, who is initially elected or appointed before january 1, 2014 and who has continuously elected not to participate in the plan pursuant to subsection A of this section and in the arizona state retirement system pursuant to section 38‑727, subsection A since initially being elected as a state elected official who is subject to term limits is subsequently elected or appointed as a state elected official who is subject to term limits on or after January 1, 2014, the state elected official is eligible to become a member of the plan or may elect not to participate in the plan pursuant to subsection A of this section. if the state elected official becomes a member of the plan, credited service only accrues from the date of the member's most recent eligibility as a state elected official.
L. Notwithstanding subsection K of this section relating to an elected official who has terminated the member's membership in the plan, if an elected official files a written election form with the board within ninety days after the day of the member's reemployment as an elected official and repays the amount previously withdrawn pursuant to subsection C or D of this section within one year after the date of the member's reemployment as an elected official, with interest on that amount at the rate of nine per cent percent for each year, compounded each year from the date of withdrawal to the date of repayment, credited service shall be restored. Credited service shall not be restored until complete repayment is made to the fund.
M. Except as provided in subsection K of this section, an elected official who is elected, appointed or hired on or after January 1, 2014 and who was not a member of the plan on December 31, 2013 is not eligible to become a member of the plan but is subject to article 3.1 of this chapter.
N. If a retired member subsequently becomes an elected official, contributions shall not be made by the retired member and credited service shall not accrue while the retired member is holding office.
O. In addition to subsection N of this section, if a retired member subsequently becomes, by reason of election or reelection, an elected official of the same office from which the member retired within a time period following the member's retirement that is less than one full term for that office, the member shall not receive a pension. If the elected official ceases to hold the same office, the elected official is entitled to receive the same pension the elected official was receiving when the elected official's pension was discontinued pursuant to this subsection. Nothing in this subsection prohibits a retired judge called by the supreme court to active duties of a judge pursuant to section 38‑813 from receiving retirement benefits.
Sec. 4. Section 38-810, Arizona Revised Statutes, is amended to read:
38-810. Contributions; appropriations
A. Each member shall contribute to the fund an amount equal to the amount prescribed in subsection G of this section. Contributions of members shall be made by payroll deductions. Every member is deemed to consent to these deductions. Payment of a member's compensation, less these payroll deductions, constitutes a full and complete discharge and satisfaction of all claims and demands by the member relating to remuneration for the member's services rendered during the period covered by the payment, except with respect to the benefits provided under the plan. A member may not, under any circumstance, borrow from, take a loan against or remove contributions from the member's account before the termination of membership in the plan or the receipt of a pension.
B. The board's office shall
be credited monthly with monies collected pursuant to section 12‑119.01,
subsection B, paragraph 2, section 12‑120.31, subsection D, paragraph 2,
section 12‑284.03, subsection A, paragraph 6, section 22‑281,
subsection C, paragraph 3 and section 41‑178. The monies credited to the
fund pursuant to this subsection shall be deposited in the fund on a monthly
basis, and there shall be a complete accounting of the determination of these
monies deposited in the fund.
C. Beginning on January 1, 2014 through June 30, 2044, except as otherwise provided in this subsection, each employer shall make level per cent percent compensation contributions of twenty‑three and one‑half per cent percent of the compensation of all employees of the employer who are either members under this article, article 3.1 of this chapter or article 2 of this chapter pursuant to section 38‑727, subsection B to meet the normal cost plus an amount to amortize the unfunded accrued liability and the employer's contribution under the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter and the employer's contribution under article 2 of this chapter for members eligible pursuant to section 38‑727, subsection B. If a member has elected not to accept the employer's contribution pursuant to section 38‑833, the employer is not required to contribute that percent of compensation for that member. The employer also shall pay the amount required by section 38-797.05 for members under article 2 of this chapter who are eligible pursuant to section 38‑727, subsection B and the amount required by article 3.2 of this chapter for members under article 3.1 of this chapter. The monies deposited in the fund pursuant to subsection B of this section shall be used to supplement the contributions required of all employers under the plan. The employer level per cent percent compensation contribution that is paid pursuant to this subsection, less the amount contributed by the employer pursuant to section 38‑833 and section 38‑737 for members eligible pursuant to section 38‑727, subsection B, shall not be used to pay for an increase in benefits that is otherwise payable to members but shall be used to meet the normal cost plus an amount to amortize the unfunded accrued liability.
D. Beginning July 1, 2044, as determined by actuarial valuations performed by the plan's actuary, each employer shall make level per cent percent compensation contributions sufficient under the actuarial valuation to meet both the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability over a rolling period of at least twenty and not more than thirty years that is established by the board taking into account the recommendation of the plan's actuary, except that the employer contribution rate shall not be less than ten per cent percent of salary. The monies deposited in the fund pursuant to subsection B of this section shall be used to supplement the contributions required of all employers under the plan. 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. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of the fund contains excess valuation assets and is more than one hundred per cent percent funded, the board shall account for fifty per cent percent of the excess valuation assets in a stabilization reserve account. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of the fund has a valuation asset deficiency and an unfunded actuarial accrued liability, the board shall use any valuation assets in the stabilization reserve account, to the extent available, to limit the decline in the fund's funding ratio to not more than two per cent percent.
E. The department of administration and the treasurer of each county and participating city and town shall transfer to the board the contributions provided for in subsections A, C and D of this section within ten working days after each payroll date. The state, county treasurers and clerks of the superior court shall transfer the monies credited under subsection B of this section to the board on or before the fifteenth day of each calendar month that follows the month in which the court fees were collected. Contributions and monies credited under subsection B of this section and transferred after these dates shall include a penalty equal to ten per cent percent a year, compounded annually, for each day that the contributions or monies credited under subsection B of this section are late. Delinquent payments due under this subsection, together with interest charges as provided in this subsection and court costs, may be recovered by action in a court of competent jurisdiction against the person or persons responsible for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to a political subdivision by any department or agency of this state. If requested by the board, the state, county treasurers or clerks of the superior court shall transfer the monies credited under subsection B of this section, in an amount determined by the board, directly to the qualified governmental excess benefit arrangement established pursuant to section 38‑803.01.
F. The employer shall pay the member contributions required of members on account of compensation earned after August 7, 1985. The paid contributions shall be treated as employer contributions for the purpose of determining tax treatment under the United States internal revenue code. The effective date of the employer payment shall not be before the date the retirement plan has received notification from the United States internal revenue service that pursuant to section 414(h) of the United States internal revenue code the member contributions paid will not be included in gross income for income tax purposes until the paid contributions are distributed by refund or pension payments. The employer shall pay the member contributions from monies established and available in the retirement deduction account, which monies would otherwise have been designated as member contributions and paid to the retirement plan. Member contributions paid pursuant to this subsection shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before August 7, 1985.
G. The amount contributed by a member pursuant to subsection A of this section is:
1. Through June 30, 2011, seven per cent percent of the member's gross salary.
2. For fiscal year 2011‑2012, ten per cent percent of the member's gross salary.
3. For fiscal year 2012‑2013, eleven and one‑half per cent percent of the member's gross salary.
4. For fiscal year 2013‑2014 and each fiscal year thereafter, thirteen per cent percent of the member's gross salary.
H. For fiscal year 2011‑2012 and each fiscal year thereafter, the amount of the member's contribution that exceeds seven per cent percent of the member's compensation shall not be used to reduce the employer's contributions that are calculated pursuant to subsection C of this section.
I. In fiscal years 2013‑2014 through 2042‑2043, the sum of $5,000,000 is appropriated in each fiscal year from the state general fund to the elected officials' retirement plan fund to supplement the normal cost plus an amount to amortize the unfunded accrued liability pursuant to subsection C of this section. Monies appropriated pursuant to this subsection shall not be used to pay for an increase in benefits that is otherwise payable to members and shall only be used as specified in this subsection. Monies appropriated pursuant to this subsection are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.
Sec. 5. Section 38-831, Arizona Revised Statutes, is amended to read:
38-831. Definitions
In this article, unless the context otherwise requires:
1. "Annuity account" means an account that is established for each member to record the deposit of member contributions, employer contributions and interest, dividends or other accumulations credited on behalf of the member.
2. "Board" means the board of trustees of the public safety personnel retirement system established by section 38‑848.
3. "Defined contribution system" means the elected officials' defined contribution retirement system established pursuant to this article.
4. "Elected official":
(a) Means:
(a) (i) Every elected official of this state who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(b) (ii) Every elected official of each county of this state who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(c) (iii) Every justice of the supreme court who was appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(d) (iv) Every judge of the court of appeals who was appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(e) (v) Every judge of the superior court who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(f) (vi) Every full‑time superior court commissioner, except full‑time superior court commissioners who failed to make a timely election of membership under the judges' retirement plan, repealed on August 7, 1985, who was hired on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(g) (vii) Each elected official of an incorporated city or town whose employer has executed a proper joinder agreement with the plan for coverage of its elected officials, who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan or a member of the plan with a disability on December 31, 2013.
(b) Does not include a state elected official who is subject to term limits, who is not an active, an inactive or a retired member of the plan or a member of the plan with a disability because the state elected official has continuously elected not to participate in the plan pursuant to section 38‑804, subsection A and in the arizona state retirement system pursuant to section 38‑727, subsection A since initially being elected before January 1, 2014 as a state elected official who is subject to term limits and who is subsequently elected or appointed as a state elected official who is subject to term limits on or after January 1, 2014.
5. "Employer" means a department or political subdivision of this state that makes employer contributions to the defined contribution system on behalf of a member.
6. "Employer contribution" means an amount deposited by an employer, from the employer's own monies, in the member's annuity account on a periodic basis coinciding with the member's regular pay period.
7. "Member" means an elected official under the defined contribution system.
8. "Plan" means the elected officials' retirement plan established by article 3 of this chapter.
Sec. 6. Section 38-833, Arizona Revised Statutes, is amended to read:
38-833. Member and employer contributions; disability
A. Beginning January 1, 2014, the defined contribution system is the retirement program for elected officials, unless the elected official is described in section 38‑727, subsection B. Elected officials shall be enrolled in the defined contribution plan established by the board pursuant to this article.
B. Each elected official who is a member of the defined contribution system shall contribute eight per cent percent of the member's gross compensation by salary reduction that shall be deposited in the member's annuity account. Each member shall also contribute to the elected officials' defined contribution retirement system disability program pursuant to article 3.2 of this chapter.
C. Although designated as employee contributions, all member contributions made to the defined contribution system shall be picked up and paid by the employer in lieu of contributions by the employee. The contributions picked up by an employer may be made through a reduction in the member's compensation. A member participating in the defined contribution system does not have the option of choosing to receive the contributed amounts directly instead of the employer paying the amounts to the defined contribution system. All member contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code, shall be excluded from members' gross income for federal and state income tax purposes and are includable in the gross income of the members or the members' beneficiaries only in the taxable year in which they are distributed.
D. Each employer shall annually make a contribution:
1. Equal to six per cent percent of each member's gross compensation. The pro rata share of this amount shall be paid on each date that a member contribution is made and shall be credited to the member's annuity account. A member who is a state elected official and who is subject to term limits may elect not to accept the employer's contribution to the member's annuity account that is required by this subsection. The state elected official who is subject to term limits shall make the election as provided in this paragraph in writing and file the election with the board within thirty days after the state elected official assumes office. The election is effective on the first day of the state elected official's eligibility for that term of office. The election not to accept the employer's contribution to the state elected official's annuity account is specific for that term of office. If a state elected official who is subject to term limits fails to make an election as provided in this paragraph, the state elected official is deemed to have elected to accept the employer's contribution to the state elected official's annuity account. The election not to accept the employer's contribution to the state elected official's annuity account is irrevocable and constitutes a waiver of the employer's contribution to the state elected official's annuity account for the state elected official's entire term.
2. Each employer shall also contribute To the elected officials' defined contribution retirement system disability program pursuant to article 3.2 of this chapter.
E. Member and employer contributions and earnings on those contributions are immediately vested. A member may receive benefits pursuant to article 3.2 of this chapter if the member develops a total disability.
F. At the election of a state elected official as described in section 38‑831, paragraph 4, subdivision (b) who has attained age sixty-two, the board shall distribute the balance of the state elected official's annuity account to the state elected official or the official's beneficiary.
Sec. 7. Refund of employer contribution; election
A state elected official who was subject to term limits, who was enrolled in the elected officials' defined contribution retirement system established pursuant to title 38, chapter 5, article 3.1, Arizona Revised Statutes, because the state elected official was not an active, an inactive or a retired member of the elected officials' retirement plan or a member of the elected officials' retirement plan with a disability and who had continuously elected not to participate in the elected officials' retirement plan pursuant to section 38-804, subsection A, Arizona Revised Statutes, and in the Arizona state retirement system pursuant to section 38‑727, subsection A, Arizona Revised Statutes, since initially being elected before January 1, 2014 as a state elected official who is subject to term limits may elect to return the employer's contributions and the earnings on those contributions that were deposited, pursuant to section 38‑833, Arizona Revised Statutes, in the state elected official's annuity account. The election under this section shall be made within one hundred eighty days after the effective date of this section or the employer's contributions and the earnings on those contributions will remain in the state elected official's annuity account until distribution.
Sec. 8. Retroactivity
Sections 38‑727, 38‑801, 38‑804 and 38‑831, Arizona Revised Statutes, as amended by this act, apply retroactively to from and after September 12, 2013.
