Bill Text: AZ SB1442 | 2017 | Fifty-third Legislature 1st Regular | Chaptered
Bill Title: Modifications; corrections officer retirement plan
Spectrum: Partisan Bill (Republican 5-0)
Status: (Passed) 2017-04-17 - Chapter 163 [SB1442 Detail]
Download: Arizona-2017-SB1442-Chaptered.html
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House Engrossed Senate Bill |
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State of Arizona Senate Fifty-third Legislature First Regular Session 2017
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CHAPTER 163
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SENATE BILL 1442 |
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AN ACT
AMENDING SECTIONS 38-843 AND 38-848.02, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARTICLE 4, ARIZONA REVISED STATUTES, BY ADDING SECTION 38-863; AMENDING SECTIONS 38-865, 38-867, 38-870, 38-870.01 AND 38-870.06, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARTICLE 4.2, ARIZONA REVISED STATUTES, BY ADDING SECTION 38-870.07; AMENDING SECTION 38-881, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARTICLE 6, ARIZONA REVISED STATUTES, BY ADDING SECTION 38-881.01; AMENDING SECTIONS 38-884, 38-885 AND 38-885.01, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARTICLE 6, ARIZONA REVISED STATUTES, BY ADDING SECTION 38-885.02; AMENDING SECTIONS 38-886.01, 38-888, 38-891 AND 38‑895.01, ARIZONA REVISED STATUTES; REPEALING SECTIONS 38-905, 38‑905.01, 38-905.02, 38-905.03 AND 38-905.04, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARTICLE 6, ARIZONA REVISED STATUTES, BY ADDING SECTIONS 38-905.05 AND 38-905.06; AMENDING SECTION 38-911, ARIZONA REVISED STATUTES; AMENDING TITLE 38, CHAPTER 5, ARTICLE 6, ARIZONA REVISED STATUTES, BY ADDING SECTION 38-914; RELATING TO THE CORRECTIONS OFFICER RETIREMENT PLAN.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. 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 contributions sufficient under such actuarial valuations to meet both the normal cost for members hired before July 1, 2017 plus the actuarially determined amount required to amortize the unfunded accrued liability on a level percent of compensation basis for all employees of the employer who are members of the system or participants as defined in section 38‑865, paragraph 7, subdivision (a), item (i) over, beginning July 1, 2017, a closed period of not more than twenty years, except as provided in subsection I of this section, 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 percent of compensation. For any employer whose actual contribution rate is less than eight percent of compensation for fiscal year 2006‑2007, that employer's contribution rate is not subject to the eight percent minimum but, for fiscal year 2006‑2007 and each year thereafter, shall be at least five percent and not more than the employer's actual contribution rate. An employer shall have the option of paying a higher level percent 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 of this section, 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. A county employer that elected to pay a higher level percentage contribution rate may eliminate that higher level percentage contribution rate amount for members who are hired on or after January 1, 2015. 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 percent funded, the board shall account for fifty percent 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 percent.
C. Each member who was hired before July 1, 2017, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to the amount prescribed in subsection E of this section, except as provided in subsection B of this section. Each member who was hired on or after July 1, 2017, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to the amount prescribed in subsection G of this section. 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. 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.
D. Each employer shall transfer to the board the employer and employee contributions provided for in subsections B, C and G of this section within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten percent 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 who was hired before July 1, 2017 pursuant to subsection C of this section is:
1. Through June 30, 2011, 7.65 percent of the member's compensation.
2. For fiscal year 2011‑2012, 8.65 percent of the member's compensation.
3. For fiscal year 2012‑2013, 9.55 percent of the member's compensation.
4. For fiscal year 2013‑2014, 10.35 percent of the member's compensation.
5. For fiscal year 2014‑2015, 11.05 percent of the member's compensation.
6. For fiscal year 2015‑2016 and each fiscal year thereafter, 11.65 percent of the member's compensation or 33.3 percent of the sum of the member's contribution rate from the preceding fiscal year and the aggregate computed employer contribution rate that is calculated pursuant to subsection B of this section, whichever is lower, except that the member contribution rate shall not be less than 7.65 percent of the member's compensation and the employer contribution rate shall not be less than the rate prescribed in subsection B of this section.
F. For fiscal year 2011‑2012 and each fiscal year thereafter, the amount of the member's contribution that exceeds 7.65 percent of the member's compensation shall not be used to reduce the employer's contributions that are calculated pursuant to subsection B of this section.
G. For members hired on or after July 1, 2017, the employer and member contributions are determined as follows:
1. As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to pay fifty percent of both the normal cost plus the actuarially determined amount required to amortize the total unfunded accrued liability for each employer attributable only to those members hired on or after July 1, 2017. For each year that new unfunded liabilities are attributable to the employer's own members hired on or after July 1, 2017, a new amortization base representing the most recent annual gain or loss, smoothed over a period not more than five years as determined by the board, shall be created on a level‑dollar basis over a closed period equal to the average expected remaining service lives of all members but not more than ten years, as determined by the board.
2. The remaining fifty percent of both the normal cost and actuarially determined amount required to amortize the total unfunded accrued liability as determined pursuant to paragraph 1 of this subsection shall be divided by the total number of the employer's members who were hired on or after July 1, 2017 such that each member contributes an equal percentage of the member's compensation. Member contributions shall begin simultaneously with membership in the system and shall be made by payroll deduction.
H. In any fiscal year, an employer's contribution to the system in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. The board may not suspend contributions to the system unless both of the following apply:
1. The retirement system actuary, based on the annual valuation, determines that continuing to accrue excess earnings could result in disqualification of the system's tax-exempt status under the provisions of the United States internal revenue code.
2. The board determines that the receipt of any additional contributions required under this section would conflict with its fiduciary responsibility.
I. For the purposes of calculating unfunded liability amortization payments pursuant to subsection B of this section, an employer may make a one‑time election to request that the board use a closed period of not more than thirty years if the employer meets both of the following requirements:
1. The governing body of the employer adopts a resolution requesting the longer amortization period and specifying the actuarial valuation date for which the new amortization period is to begin. the actuarial valuation date chosen must be the system's fiscal year end either immediately before or immediately after the date of the resolution.
2. The employer submits a written request for the longer amortization period along with the adopted resolution to the administrator of the board.
J. For the purposes of subsection I of this section, employer does not include this state or any state agency.
I. K. If a member's employment is terminated with an employer by either party, the total liability under the system associated with the member's service with the employer remains with the employer.
Sec. 2. Section 38-848.02, Arizona Revised Statutes, is amended to read:
38-848.02. Board of trustees; report on employer and employee costs; posting funding ratio
A. On or before December 31 of each year, the board of trustees shall provide to the legislature, and the joint legislative budget committee and post on its website the shared cost structure of employees and employers, the funding status and the rate of return. The report to the legislature shall include when the trigger to the reduction in the employee rates is being met.
B. The board of trustees shall post on its website for each plan the board administers each employer's funding ratio.
Sec. 3. Title 38, chapter 5, article 4, Arizona Revised Statutes, is amended by adding section 38-863, to read:
38-863. Employer disclosure; funding ratio
An employer shall disclose the employer's funding ratio for each of the employer's eligible groups under the system on the employer's public website.
Sec. 4. Section 38-865, Arizona Revised Statutes, is amended to read:
38-865. Definitions
In this article, unless the context otherwise requires:
1. "Annuity account" means an account that is established for each participant to record the deposit of participant contributions, employer contributions and interest, dividends or other accumulations credited on behalf of the participant.
2. "Board" means the board of trustees of the public safety personnel retirement system established by section 38‑848.
3. "Compensation":
(a) For participants as defined in paragraph 7, subdivision (a) of this section, has the same meaning prescribed in section 38‑842.
(b) For participants as defined in paragraph 7, subdivision (b) of this section, means salary as defined in section 38‑881.
4. "Defined contribution plan" means the public safety personnel defined contribution retirement plan established pursuant to this article.
5. "Employer" has the same meaning prescribed in section 38‑842 or 38‑881, as applicable.
6. "Employer contribution" means an amount deposited by an employer, from the employer's own monies, in the participant's annuity account on a periodic basis coinciding with the participant's regular pay period.
7. "Participant" means:
(a) A member as defined in section 38‑842, paragraph 31, subdivision (a), excluding subdivision (a), item (vi), who is one of the following:
(a) (i) An employee who is hired on or after July 1, 2017, who makes the irrevocable election to participate solely in the defined contribution plan established pursuant to this article and who was not an active, an inactive or a retired member of the system or a member of the system with a disability on June 30, 2017.
(b) (ii) An employee who is hired on or after July 1, 2017, who is not covered by the federal old age and survivors insurance system and who makes the irrevocable election to participate in the system or is enrolled in the system pursuant to section 38‑842.01, subsection A.
(b) A member as defined in section 38‑881, paragraph 27, subdivision (a) or (b) who is one of the following:
(i) An employee who is hired on or after July 1, 2018 and who was not an active, an inactive or a retired member of the corrections officer retirement plan or a member of the corrections officer retirement plan with a disability on June 30, 2018.
(ii) An employee who is hired on or after July 1, 2018, who is in a designated position as defined in section 38‑881, paragraph 13, subdivision (g), who makes the irrevocable election pursuant to section 38‑881.01 to participate solely in the defined contribution plan established pursuant to this article and who was not an active, an inactive or a retired member of the corrections officer retirement plan or a member of the corrections officer retirement plan with a disability on June 30, 2018.
8. "Pensionable compensation" means the amount of the participant's annual compensation that does not exceed the limitation specified in section 38‑843.04 or 38‑895.01, as applicable.
9. "System" means the public safety personnel retirement system established by article 4 of this chapter.
Sec. 5. Section 38-867, Arizona Revised Statutes, is amended to read:
38-867. Contributions; member; employer; pickup
A. Each participant in the defined contribution plan shall contribute the following percentage of the participant's gross pensionable compensation by salary reduction that shall be deposited in the participant's annuity account:
1. For a participant as defined in section 38‑865, paragraph 7, subdivision (b) (a), item (ii), three percent.
2. For a participant as defined in section 38‑865, paragraph 7, subdivision (a), item (i), nine percent.
3. For a participant as defined in section 38‑865, paragraph 7, subdivision (b), seven percent.
B. A participant as defined in section 38‑865 may make a one‑time irrevocable election, before the participant is eligible to participate in any qualified plan of the employer, to contribute more than the percentage of the participant's gross pensionable compensation specified in this section, up to the amount allowable under section 415(c) of the internal revenue code. , which A participant as defined in section 38‑865, paragraph 7, subdivision (b) may make a one‑time irrevocable election, before the participant is eligible to participate in any qualified plan of the employer, to contribute less than the percentage of the participant's gross pensionable compensation specified in this section but may not elect to contribute less than five percent of the participant's gross pensionable compensation. The election made pursuant to this subsection shall be the participant's contribution rate for the remainder of the participant's employment with any employer under the system or the corrections officer retirement plan, as applicable.
C. Although designated as employee contributions, all participant contributions made to the defined contribution plan 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 participant's compensation. A participant in the defined contribution plan may not choose to receive the contributed amounts directly instead of the employer paying the amounts to the defined contribution plan. All participant 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 the participant's gross income for federal and state income tax purposes and are includable in the gross income of the participant or the participant's beneficiaries only in the taxable year in which they are distributed.
D. Each employer shall annually make a contribution equal to the following percentages of each participant's gross pensionable compensation:
1. For a participant as defined in section 38‑865, paragraph 7, subdivision (b) (a), item (ii), three percent.
2. For a participant as defined in section 38‑865, paragraph 7, subdivision (a), item (i), nine percent.
3. For a participant as defined in section 38‑865, paragraph 7, subdivision (b), five percent.
E. The pro rata share of the amount paid in subsection D of this section shall be paid on each date that a participant contribution is made and shall be credited to the participant's annuity account.
F. A participant of the defined contribution plan may not take loans on any portion of the accumulated assets in the participant's annuity account.
G. Each participant as defined in section 38‑865, paragraph 7, subdivision (a), item (i) and subdivision (b) and each employer shall contribute to the public safety personnel defined contribution retirement plan disability program established by article 4.2 of this chapter.
H. A participant's contributions and earnings on those contributions are immediately vested.
I. A participant as defined in section 38‑865, paragraph 7, subdivision (a) is fully vested in the defined contribution plan after ten years of service, with employer contributions vesting at a rate of ten percent per year.
J. A participant as defined in section 38‑865, paragraph 7, subdivision (b) is fully vested in the defined contribution plan after three years of service, with the employer contributions vesting at the following rates:
1. Twenty‑five percent after the first year of service.
2. fifty percent after the second year of service.
3. one hundred percent after the third year of service.
K. If a participant as defined in section 38‑865, paragraph 7, subdivision (b) dies before completing three years of service, the employer contributions are immediately fully vested.
Sec. 6. Section 38-870, Arizona Revised Statutes, is amended to read:
38-870. Definitions
In this article, unless the context otherwise requires:
1. "Assets" means the accumulated resources of the disability program.
2. "Board" means the board of trustees established by section 38‑848.
3. "Compensation":
(a) for a participant as defined in section 38‑865, paragraph 7, subdivision (a), item (i), has the same meaning prescribed in section 38‑842.
(b) For a participant as defined in section 38‑865, paragraph 7, subdivision (b), means salary as defined in section 38‑881.
4. "Disability program" or "program" means the public safety personnel defined contribution retirement plan disability program established by this article.
5. "Local board" has the same meaning prescribed in section 38‑842 or 38‑881, as applicable.
5. 6. "Participant" means a participant who is in the public safety personnel defined contribution retirement plan and who is a participant as defined in section 38‑865, paragraph 7, subdivision (a), item (i) or subdivision (b).
6. 7. "Pensionable compensation" has the same meaning prescribed in section 38‑865.
Sec. 7. Section 38-870.01, Arizona Revised Statutes, is amended to read:
38-870.01. Disability program; administration; power and duties of the board; hearing
A. The public safety personnel defined contribution retirement plan disability program is established for participants in the public safety personnel defined contribution retirement plan who either have elected to participate solely in the defined contribution plan established pursuant to article 4.1 of this chapter or are participants as defined in section 38‑865, paragraph 7, subdivision (b). The board shall administer the disability program.
B. The board may delegate authority to administer the program as it deems necessary and prudent to the administrator employed pursuant to section 38‑848.
C. The board, in the administration, management and operation of the program, shall:
1. Account for the operation, administration and investment expenses and allocate them against investment income.
2. Contract on a fee basis with an actuary to make an actuarial valuation of the program based on the valuation method and valuation assumptions recommended by the actuary and approved by the board. The actuary shall be a member of the American academy of actuaries.
3. Contract on a fee basis with an independent auditing firm to make an annual audit of the accounting records of the fund and file a copy of the audit with the auditor general.
4. Invest the monies in the fund as provided in article 4 of this chapter.
D. The board, in the administration, management and operation of the program, may:
1. Employ services as it deems necessary.
2. Either keep invested monies separate or commingle invested monies as it deems appropriate.
3. Do all acts, whether expressly authorized, that may be deemed necessary or proper for the protection of the fund.
4. Determine the rights, benefits or obligations of any person under this article and afford any person dissatisfied with a determination of the person's rights, benefits or obligations under this article with a hearing on the determination.
Sec. 8. Section 38-870.06, Arizona Revised Statutes, is amended to read:
38-870.06. Disability program benefit
A. The local board shall follow the same procedures and method as prescribed in section 38‑844, for a participant who is employed by an employer as defined in section 38‑842, and section 38‑886, for a participant who is employed by an employer as defined in section 38‑881, to determine eligibility for and continuation of a disability benefit and in computing the amount available to the participant. A participant is not eligible for a disability benefit under this article for an ordinary disability as defined in section 38‑881.
B. A participant, as defined in section 38‑865, paragraph 7, subdivision (a), item (i), who meets the requirements for a disability pension as prescribed in section 38‑844 shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a public safety personnel retirement system member who is hired on or after July 1, 2017, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost‑of‑living adjustment, as determined by the board. A participant, as defined in section 38‑865, paragraph 7, subdivision (b), who meets the requirements for a disability pension as prescribed in section 38‑886, except for an ordinary disability, shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a corrections officer retirement plan member who is hired on or after July 1, 2018, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost‑of‑living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the disability benefit paid pursuant to this section, the board shall instruct the its actuary for the public safety personnel retirement system to calculate the monthly payment that would be paid to the participant assuming the participant had elected a straight life annuity commencing on the participant's date of disability, using the mortality and interest factors then used by the actuary in determining the valuation of the public safety personnel retirement system or the corrections officer retirement plan, as applicable.
Sec. 9. Title 38, chapter 5, article 4.2, Arizona Revised Statutes, is amended by adding section 38-870.07, to read:
38-870.07. Death benefits; surviving spouse; eligible child
A. If a participant, as defined in section 38‑865, paragraph 7, subdivision (b), is killed in the line of duty or dies from injuries suffered in the line of duty, the local board shall follow the same procedures and methods as prescribed in section 38‑888 to determine eligibility for and the continuation of a death benefit to a surviving spouse or any eligible child.
B. A surviving spouse or eligible child of a participant as specified in subsection A of this section who meets the requirements for a death benefit as prescribed in section 38‑888 shall receive a monthly death benefit equal to a monthly death pension that would be provided to a corrections officer retirement plan member who is hired on or after July 1, 2018, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost‑of‑living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the death benefit paid pursuant to this section, the board shall instruct its actuary to calculate the monthly payment that would be paid to the surviving spouse or eligible child assuming the participant had elected a straight life annuity commencing on the participant's date of death, using the mortality and interest factors then used by the actuary in determining the valuation of the corrections officer retirement plan.
Sec. 10. Section 38-881, Arizona Revised Statutes, is amended to read:
38-881. 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 department, was incurred in the performance of the employee's duties and was the result of any of the following:
(a) Physical contact with inmates, prisoners, parolees or persons on probation.
(b) Responding to a confrontational situation with inmates, prisoners, parolees or persons on probation.
(c) A job-related motor vehicle accident while on official business for the employee's employer. A job-related motor vehicle accident does not include an accident that occurs on the way to or from work. Persons found guilty of violating a personnel rule, a rule established by the employee's employer or a state or federal law in connection with a job‑related motor vehicle accident do not meet the conditions for accidental disability.
2. "Accumulated member contributions" means for each member the sum of the amount of all the member's contributions deducted from the member's salary and paid to the fund, plus member contributions transferred to the fund by another retirement plan covering public employees of this state, plus previously withdrawn accumulated member contributions that are repaid to the fund in accordance with this article, minus any benefits paid to or on behalf of a 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 38‑911.
7. "Average monthly salary" means: ,
(a) For an employee who becomes a member of the plan:
(i) Before January 1, 2012, one‑thirty‑sixth of the aggregate amount of salary that is paid a member by a participating employer during a period of thirty‑six consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service. and, for an employee who becomes a member of the plan
(ii) On or after January 1, 2012 and before July 1, 2018, one‑sixtieth of the aggregate amount of salary that is paid a member by a participating employer during a period of sixty consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service. Average monthly salary means
(iii) On or after July 1, 2018, one‑sixtieth of the aggregate amount of salary that is paid a member by a participating employer during a period of sixty consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service.
(b) The aggregate amount of salary that is paid a member divided by the member's months of service if the member has less than thirty‑six or sixty months of service. In the computation under this paragraph, a period of nonpaid or partially paid industrial leave shall be considered based on the salary the employee would have received in the employee's job classification if the employee was not on industrial leave.
8. "Beneficiary" means an individual who is being paid or who has entitlement to the future payment of a pension on account of a reason other than the individual's membership in the retirement plan.
9. "Board" means the board of trustees of the public safety personnel retirement system.
10. "Claimant" means a member, beneficiary or estate that files an application for benefits with the retirement plan.
11. "Credited service" means credited service transferred to the retirement plan from another retirement system or plan for public employees of this state, plus those compensated periods of service as a member of the retirement plan for which member contributions are on deposit in the fund.
12. "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.
13. "Designated position" means:
(a) For a county:
(i) A county detention officer.
(ii) A nonuniformed employee of a sheriff's department whose primary duties require direct contact with inmates.
(b) For the state department of corrections and the department of juvenile corrections, only the following specifically designated positions:
(i) Food service.
(ii) Nursing personnel.
(iii) Corrections physician assistant.
(iv) Therapist.
(v) Corrections dental assistant.
(vi) Hygienist.
(vii) Corrections medical assistant.
(viii) Correctional service officer, including assistant deputy warden, deputy warden, warden and superintendent.
(ix) State correctional program officer.
(x) Parole or community supervision officers.
(xi) Investigators.
(xii) Teachers.
(xiii) Institutional maintenance workers.
(xiv) Youth corrections officer.
(xv) Youth program officer.
(xvi) Behavioral health treatment unit managers.
(xvii) The director and assistant directors of the department of juvenile corrections and the superintendent of the state educational system for committed youth.
(xviii) The director, deputy directors and assistant directors of the state department of corrections.
(xix) Other positions designated by the local board of the state department of corrections or the local board of the department of juvenile corrections pursuant to section 38‑891.
(c) For a city or town, a city or town detention officer.
(d) For an employer of an eligible group as defined in section 38‑842, full‑time dispatchers.
(e) For the judiciary, probation, surveillance and juvenile detention officers and those positions designated by the local board of the judiciary pursuant to section 38‑891.
(f) For the department of public safety, state detention officers.
(g) for the judiciary, probation and surveillance officers.
14. "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.
15. "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.
16. "Direct rollover" means a payment by the plan to an eligible retirement plan that is specified by the distributee.
17. "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.
18. "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.
19. "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.
20. "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.
21. "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.
22. "Employee" means a person employed by a participating employer in a designated position.
23. "Employer" means an agency or department of this state or a political subdivision of this state that has one or more employees in a designated position.
24. "Fund" means the corrections officer retirement plan fund.
25. "Juvenile detention officer" means a juvenile detention officer responsible for the direct custodial supervision of juveniles who are detained in a county juvenile detention center.
26. "Local board" means the retirement board of the employer that consists of persons appointed or elected to administer the plan as it applies to the employer's members in the plan.
27. "Member":
(a) Means any employee who meets all of the following qualifications:
(a) (i) Who is a full‑time paid person employed by a participating employer in a designated position.
(b) (ii) Who is receiving salary for personal services rendered to a participating employer or would be receiving salary except for an authorized leave of absence.
(c) (iii) Whose customary employment is at least forty hours each week.
(b) Includes an employee who meets the requirements of subdivision (a) of this paragraph, who is hired on or after July 1, 2018, who is in a designated position as defined in paragraph 13, subdivision (g) of this section and who makes the irrevocable election to participate in the plan pursuant to section 38‑881.01.
(c) Except as provided in subdivision (b) of this paragraph, does not include an employee who is hired on or after July 1, 2018, unless the employee was an active, an inactive or a retired member of the plan or a member of the plan with a disability on June 30, 2018.
28. "Normal retirement date" means:
(a) For an employee who becomes a member of the plan before January 1, 2012, the first day of the calendar month immediately following the employee's completion of twenty years of service or, in the case of a dispatcher, twenty‑five years of service, the employee's sixty‑second birthday and completion of ten years of service or the month in which the sum of the employee's age and years of credited service equals eighty.
(b) For an employee who becomes a member of the plan on or after January 1, 2012 and before July 1, 2018, 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 or the employee's sixty‑second birthday and completion of ten years of service.
(c) For an employee who becomes a member of the plan on or after July 1, 2018, the first day of the calendar month immediately following the employee's completion of ten years of credited service if the employee is at least fifty‑five years of age.
29. "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.
30. "Ordinary disability" means a physical condition that the local board determines will totally and permanently prevent an employee from performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will totally and permanently prevent an employee from engaging in any substantial gainful activity.
31. "Participant" means a member who is subject to a domestic relations order.
32. "Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.
33. "Participating employer" means an employer that the board has determined to have one or more employees in a designated position or a county, city, town or department of this state that has entered into a joinder agreement pursuant to section 38‑902.
34. "Pension" means a series of monthly payments by the retirement plan but does not include an annuity that is payable pursuant to section 38‑911.
35. "Personal representative" means the personal representative of a deceased alternate payee.
36. "Physician" means a physician who is licensed pursuant to title 32, chapter 13 or 17.
37. "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.
38. "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.
39. "Probation or surveillance officer" means an officer appointed pursuant to section 8‑203, 12‑251 or 12‑259 but does not include other personnel, office assistants or support staff.
40. "Retired member" means an individual who terminates employment and who is receiving a pension pursuant to either section 38‑885 or 38‑886.
41. "Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension or, for an employee who becomes a member of the plan on or after January 1, 2012, attains the age and service requirements for a normal retirement date.
42. "Retirement plan" or "plan" means the corrections officer retirement plan established by this article.
43. "Salary" means the base salary, shift differential pay, military differential wage pay and holiday pay paid a member for personal services rendered in a designated position to a participating employer on a regular monthly, semimonthly or biweekly payroll basis. Salary includes amounts that are subject to deferred compensation or tax shelter agreements. Salary does not include payment for any remuneration or reimbursement other than as prescribed by this paragraph. For the purposes of this paragraph, "base salary" means the amount of compensation each member 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, fringe benefit pay and similar extra payments.
44. "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.
45. "Service" means employment rendered to a participating employer as an employee in a designated position. Any absence that is authorized by an employer, including any periods during which the employee is on an employer sponsored long‑term disability program, is considered as service if the employee returns or is deemed by the employer to have returned to a designated position within the period of the authorized absence.
46. "Total and permanent disability" means a physical or mental condition that is not an accidental disability, that the local board finds totally and permanently prevents a member from engaging in any gainful employment and that is the direct and proximate result of the member's performance of the member's duty as an employee of a participating employer.
Sec. 11. Title 38, chapter 5, article 6, Arizona Revised Statutes, is amended by adding section 38-881.01, to read:
38-881.01. Employees hired on or after July 1, 2018; defined contribution plan; benefit election; disability
A. Except as provided in subsection B of this section, An employee who is hired on or after July 1, 2018, who is a member as defined in section 38‑881, paragraph 27, subdivision (a) and who was not an active, an inactive or a retired member of the plan or a member of the plan with a disability on June 30, 2018 shall participate in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter.
B. An employee who is hired on or after July 1, 2018, who is in a designated position as defined in section 38‑881, paragraph 13, subdivision (g) and who was not an active, an inactive or a retired member of the plan or a member of the plan with a disability on June 30, 2018 is eligible to participate in the corrections officer retirement plan or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter, depending on the employee's election under this section. During the first sixty days of an employee's employment and before the employee makes a decision regarding the individual's retirement plan, the board shall provide each probation and surveillance officer who is hired on or after July 1, 2018 live, objective educational training, counseling and participant‑specific plan information about both the corrections officer retirement plan and the public safety personnel defined contribution retirement plan options. The employee's participation in either the plan or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter begins ninety days after the date the employee is hired. Unless the elections made under this section are made before the ninetieth day after the date of employment, the employee is automatically enrolled in the plan for the remainder of the employee's employment with any employer under the plan. Any election made under this section is irrevocable and is the employee's election for the remainder of the employee's employment with any employer under the plan, regardless of whether the employee's employment is continuous. The employee may make one of the following irrevocable elections:
1. To participate solely in the corrections officer retirement plan.
2. To participate solely in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter.
C. If an employee specified in subsection B of this section in the employee's first ninety days of employment is determined to be eligible for an accidental disability pension pursuant to section 38‑886, the employee shall be automatically enrolled in the corrections officer retirement plan for the remainder of the employee's employment with any employer under the plan commencing on the employee's date of disability and shall receive an accidental disability pension as prescribed in this article.
Sec. 12. Section 38-884, Arizona Revised Statutes, is amended to read:
38-884. Membership of retirement plan; termination; credited service; redemption; reemployment
A. Each employee of a participating employer is a member of the plan unless the employee is receiving a pension from the plan. A person employed shall undergo a medical examination performed by a designated physician or a physician working in a clinic that is appointed by the local board or, in the case of a state correctional officer who is employed by the state department of corrections, complete a physical examination pursuant to section 41‑1822, subsection B. For the purposes of subsection B of this section, the designated physician or a physician working in a clinic that is appointed by the local board may be the employer's regular employee or contractor.
B. The purpose of the medical examination authorized by this section is to identify a member's physical or mental condition or injury that existed or occurred before the member's date of membership in the plan. Any employee who fails or refuses to submit to the medical examination prescribed in this section is deemed to waive all rights to disability benefits under this article. Medical examinations conducted under this article shall be conducted by a physician and shall not be conducted or used for purposes of hiring, advancement, discharge, job training or other terms, conditions and privileges of employment unrelated to receipt or qualification for pension benefits or service credits from the fund. This subsection does not affect or impair the right of an employer to prescribe medical or physical standards for employees or prospective employees.
C. If a member who becomes a member of the plan before January 1, 2012 ceases to be an employee 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 38‑891, subsection B.
(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 38‑891, subsection B.
(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 38‑891, subsection B.
(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 38‑891, subsection B.
(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 38‑891, subsection B.
(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 38‑891, subsection B.
D. If a member who becomes a member of the plan before January 1, 2012 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 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. The accumulated member contributions of a member who ceases to be an employee for a reason other than death or retirement and who becomes a member of the plan:
1. On or after January 1, 2012 and before July 1, 2018 shall be paid to the member plus interest at a rate determined by the board as of the date of termination within twenty days after filing with the plan a written application for payment.
2. For a member who has less than ten years of credited service with the plan, On or after July 1, 2018 shall be paid to the member plus interest at a rate determined by the board as of the date of termination within twenty days after filing with the plan a written application for payment.
F. If the refund 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.
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 roll over 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. Service shall be credited to a member's individual credited service account in accordance with rules the local board prescribes. 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. In no case shall service be credited for any period during which the member is not employed in a designated position, except as provided by sections 38‑921 and 38‑922.
K. Credited service is forfeited if the amounts prescribed in subsection C, D or E of this section are paid or are transferred in accordance with this section.
L. If a former member becomes reemployed with the same employer within two years after the former member's termination date, a member may have forfeited credited service attributable to service rendered during a prior period of service as an employee restored on satisfaction of each of the following conditions:
1. The member files with the plan a written application for reinstatement of forfeited credited service within ninety days after again becoming an employee.
2. The retirement fund is paid the total amount previously withdrawn pursuant to subsection C, D or E of this section plus compound interest from the date of withdrawal to the dates of repayment. Interest shall be computed at the rate of nine percent for each year compounded each year from the date of withdrawal to the date of repayment. Forfeited credited service shall not be restored until complete payment is received by the fund.
3. The required payment is completed within one year after returning to employee status.
M. If a member who receives a severance refund on termination of employment pursuant to subsection C, D or E of this section is subsequently reemployed by an employer, the member's prior service credits are cancelled, and the board shall credit service only from the date the member's most recent reemployment period commenced. However, a present active member of the plan who received a refund of accumulated contributions from the plan pursuant to subsection C, D or E of this section, forfeited credited service pursuant to subsection K of this section and becomes reemployed with the same employer two years or more after the member's termination date or becomes reemployed with another employer may elect to redeem any part of that forfeited credited service by paying into the plan any amounts required pursuant to this subsection. A present active member who elects to redeem any part of forfeited credited service for which the member is deemed eligible by the board shall pay into the plan the amounts previously paid or transferred as a refund of the member's accumulated contributions plus an amount, computed by the plan's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the plan's actuary. On satisfaction of this obligation, the board shall reinstate the member's prior service credits.
N. A retired member may become employed by an employer in a designated position and continue to receive a pension if the employment occurs at least twelve months after retirement. The retired member shall not contribute to the fund and shall not accrue credited service. If a retired member becomes employed by an employer in a designated position before twelve months after retirement:
1. Payment of the retired member's pension shall be suspended until the retired member again ceases to be an employee. The amount of pension shall not be changed on account of service as an employee subsequent to retirement.
2. The retired member shall not contribute to the fund and shall not accrue credited service.
O. Notwithstanding any other provision of this article, a member who retires having met all of the qualifications for retirement and who subsequently becomes an elected official, by election or appointment, is not considered reemployed by the same employer.
Sec. 13. Section 38-885, Arizona Revised Statutes, is amended to read:
38-885. Normal retirement; conditions and pension
A. A member may retire if the member:
1. Files a written application for normal retirement with the plan in the form prescribed by the plan.
2. Ceases to be an employee before the date of retirement.
3. Meets one of the age and service requirements for normal retirement prescribed in subsection B, or D or F of this section.
B. A member who becomes a member of the plan before January 1, 2012 is eligible for a normal retirement pension if the member satisfies one of the following requirements:
1. Is at least sixty‑two years of age and has ten or more years of service.
2. Has twenty or more years of service or, in the case of a dispatcher, twenty‑five or more years of service.
3. The sum of the member's age and years of credited service equals at least eighty.
C. A member who meets the requirements for a normal retirement pension pursuant to subsection B of this section and who has twenty years or twenty‑five years, as applicable, of credited service is entitled to receive a pension that equals fifty per cent percent of the member's average monthly salary, except that:
1. If the member retires with more than twenty years of credited service the foregoing amount shall be increased by a monthly amount equal to two per cent percent of the member's average monthly salary multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional years, except that if a member retires with twenty‑five or more years of credited service the foregoing amount shall be increased by a monthly amount equal to two and one‑half per cent percent of the member's average monthly salary 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.
2. If the member retires pursuant to subsection B of this section but has less than twenty years of credited service, the member is entitled to receive a pension equal to the product of:
(a) Two and one‑half per cent percent of the member's average monthly salary.
(b) The member's credited service.
D. A person who becomes a member of the plan on or after January 1, 2012 and before July 1, 2018 is eligible for a normal retirement pension if the person satisfies one of the following requirements:
1. Is at least sixty‑two years of age and has ten or more years of service.
2. Is at least fifty‑two and one‑half years of age and has twenty‑five or more years of service.
E. A person who meets the requirements for a normal retirement pension pursuant to subsection D of this section and who has twenty‑five years of credited service is entitled to receive a pension that equals sixty‑two and one‑half per cent percent of the member's average monthly salary, except that:
1. If the person retires with more than twenty‑five years of credited service the foregoing amount shall be increased by a monthly amount equal to two and one‑half per cent percent of the member's average monthly salary 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.
2. If the person retires pursuant to subsection D of this section but has less than twenty‑five years of credited service, the person is entitled to receive a pension equal to the product of:
(a) Two and one‑half per cent percent of the member's average monthly salary.
(b) The member's credited service.
F. A member who becomes a member of the plan on or after July 1, 2018 is eligible for a normal retirement pension if the member is at least fifty-five years of age and has ten or more years of credited service. A person who becomes a member of the plan on or after July 1, 2018 and who retires on or after the member's normal retirement date shall receive a monthly amount equal to the member's average monthly salary multiplied by the NUMBER OF whole and fractional years of credited service multiplied by the following:
1. 1.25 percent if the member has at least ten years of credited service but less than fifteen years of credited service.
2. 1.50 percent if the member has at least fifteen years of credited service but less than twenty years of credited service.
3. 1.75 percent if the member has at least twenty years of credited service but less than twenty‑two years of credited service.
4. 2.00 percent if the member has at least twenty‑two years of credited service but less than twenty‑five years of credited service.
5. 2.25 percent if the member has at least twenty‑five years of credited service.
F. G. In no case shall the amount of a member's pension exceed eighty per cent percent of the member's average monthly salary. Such limitation does not preclude cost‑of‑living increases granted by the legislature.
Sec. 14. Section 38-885.01, Arizona Revised Statutes, is amended to read:
38-885.01. Reverse deferred retirement option plan; purpose
A. A reverse deferred retirement option plan is established. The purpose of the reverse deferred retirement option plan is to add flexibility to the plan and to provide members who elect to participate in the reverse deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.
B. The board shall offer the reverse deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the plan.
C. Any member who is eligible for a normal pension pursuant to section 38‑885, who is not awarded an accidental, ordinary or total and permanent disability pension and who has at least twenty‑four years of credited service, or in the case of a dispatcher, who has at least twenty‑five years of credited service, is eligible to participate in the reverse deferred retirement option plan.
D. A member who elects to participate in the reverse deferred retirement option plan shall voluntarily and irrevocably:
1. Designate a reverse deferred retirement option plan date that is the first day of the calendar month immediately following a member's completion of twenty‑four years of credited service or a date not more than sixty consecutive months before the date the member elects to participate in the reverse deferred retirement option plan, whichever is later.
2. Agree to terminate employment on the date the member elects to participate in the reverse deferred retirement option plan.
3. Receive benefits from the plan on termination of employment at the same time and in the same manner as otherwise prescribed in this article using the factors of credited service and average monthly salary in effect on the reverse deferred retirement option plan date.
E. On election, a reverse deferred retirement option plan participation account is established within the plan on behalf of each reverse deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the reverse deferred retirement option plan participation account. A reverse deferred retirement option plan participant does not have a claim on the assets of the plan with respect to the member's reverse deferred retirement option plan participation account and assets shall not be set aside for any reverse deferred retirement option plan participant that are separate from all other system assets.
F. All amounts credited to a member's reverse deferred retirement option plan participation account are fully vested.
G. A member's reverse deferred retirement option plan participation account shall be credited with the following:
1. An amount that is credited as though accrued monthly from the reverse deferred retirement option plan date to the date the member elected to participate in the reverse deferred retirement option plan and that is computed in the same manner as a normal retirement benefit using the factors of credited service and average monthly salary in effect on the reverse deferred retirement option plan date.
2. An amount that is credited as though accrued monthly and that represents interest at a rate equal to the yield on a five year treasury note as of the first day of the month as published by the federal reserve board.
H. Employee and employer contributions pursuant to section 38‑891 that are deposited during the period of the reverse deferred retirement option plan are not eligible to be refunded to the employer or member.
I. The participant is not entitled to receive any amount prescribed by section 38‑905 or 38‑906 during the reverse deferred retirement option plan participation period.
J. The form of payment shall be a lump sum distribution. The member or the member's beneficiary may make a direct rollover of the lump sum distribution to an eligible retirement plan under the same rules specified in section 38‑884, subsections G, H and I.
K. The reverse deferred retirement option plan shall not jeopardize in any way the tax qualified status of the plan under the rules of the internal revenue service. The board may adopt additional provisions to the extent necessary or appropriate for the reverse deferred retirement option plan to comply with applicable federal laws or rules.
Sec. 15. Title 38, chapter 5, article 6, Arizona Revised Statutes, is amended by adding section 38-885.02, to read:
38-885.02. Early retirement
members who are hired on or after July 1, 2018 and who have earned at least ten years of credited service may retire at fifty‑two and one‑half years of age and will receive an actuarially equivalent retirement benefit to the benefit amount prescribed in section 38‑885, subsection F.
Sec. 16. Section 38-886.01, Arizona Revised Statutes, is amended to read:
38-886.01. Ordinary disability retirement; qualifications; amount of pension; conditions for continued payment of pension; definition
A. A member may retire and receive an ordinary disability pension if the local board finds that all of the following conditions occur:
1. An application for disability retirement is filed with the retirement plan or the local board by either the member or the member's participating employer after the disabling incident or within one year after the date the member ceases to be an employee and the member's employment is terminated before the member's normal retirement date by reason of ordinary disability. Timely application for an ordinary disability pension is a prerequisite to receipt of the pension.
2. The member undergoes all medical examinations and tests ordered by the local board and releases to the local board all medical reports and records requested by the local board.
3. The local board determines that an ordinary disability condition exists that meets the requirements for an ordinary disability.
4. The member is not participating in the reverse deferred retirement option plan pursuant to section 38‑885.01.
B. The effective date of an ordinary disability retirement shall not predate the date of disability or the date the member ceases to be an employee, and the disability pension payments shall not violate section 38‑895.02.
C. Except for a full‑time dispatcher or a person who becomes a member of the plan on or after January 1, 2012, the amount of an ordinary disability pension is equal to a fraction times the member's normal retirement pension that is computed pursuant to section 38‑885, subsection C as 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. For a full‑time dispatcher or a person who becomes a member of the plan on or after January 1, 2012, the amount of an ordinary disability pension is equal to a fraction times the member's normal retirement pension that is computed pursuant to section 38‑885, subsection C or E as if the member had twenty‑five years of credited service or subsection F as if the member had twenty‑five years of credited service. The fraction is the result obtained by dividing the member's actual years of credited service, not to exceed twenty‑five years of credited service, by twenty‑five.
D. The local board may require a retired member with a disability to undergo periodic reevaluation of the continuation of ordinary disability. If the retired member with a disability refuses to submit to reevaluation, the local board may suspend payment of the pension. If the refusal continues for one year, the local board may revoke the rights to the pension of the retired member's member with a disability rights to the pension. An ordinary disability pension is terminated if the local board finds the retired member no longer meets the requirements for ordinary disability retirement. This subsection does not apply after a retired member with a disability reaches the member's normal retirement date. The amount of a disability pension shall not be recomputed at the normal retirement date of a retired member's member with a disability normal retirement date.
E. A member does not qualify for an ordinary disability pension if the local board determines that the member's disability results from any of the following:
1. An injury suffered while engaged in a felonious criminal act or enterprise.
2. Service in the armed forces of the United States that entitles the member to a veteran's disability pension.
3. A physical or mental condition or injury that existed or occurred before the member's date of membership in the plan.
F. Local boards shall base a finding of ordinary disability on medical evidence that is obtained by a designated physician or a physician working in a clinic selected by the local board and shall disregard any other medical evidence or opinions. If the local board retains more than one physician or clinic in connection with the application, the local board shall resolve any material conflicts presented in the medical evidence that is presented by the designated physicians or clinics.
G. If an ordinary disability ceases before a retired member reaches the member's normal retirement date and the member is reemployed by an employer under the plan, the pension payable on the member's subsequent retirement shall be determined as provided in section 38‑885.
H. For the purposes of this section, "ordinary disability" means a physical condition that the local board determines will prevent an employee from totally and permanently performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will prevent an employee from totally and permanently engaging in any substantial gainful activity.
Sec. 17. Section 38-888, Arizona Revised Statutes, is amended to read:
38-888. Pension to the surviving spouse of a member
A. The surviving spouse of a deceased member is entitled to receive a surviving spouse's pension if the spouse was married to the member on the date of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. The amount of a surviving spouse's pension is forty per cent percent of the deceased member's average monthly salary. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.
B. The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member's average monthly benefit compensation. For the purposes of this subsection, "killed in the line of duty" means the decedent's death was the direct and proximate result of physical injuries incurred in the performance of the decedent's public safety duties and does not include suicide.
C. If a deceased member does not have an eligible surviving spouse or the pension of the eligible surviving spouse is terminated, each eligible child is entitled to a child's pension as calculated pursuant to section 38‑904.
Sec. 18. Section 38-891, Arizona Revised Statutes, is amended to read:
38-891. Employer and member contributions
A. As determined by actuarial valuations reported to the employers and the local boards by the board, each employer shall make level per cent of salary contributions sufficient under the actuarial valuations to meet both the normal cost for members hired before July 1, 2018 plus the actuarially determined amount required to amortize the unfunded accrued liability on a level percent of salary basis for all employees of the employer who are members of the plan or participants as defined in section 38‑865, paragraph 7, subdivision (b) over, beginning July 1, 2005 2018, a rolling closed period of at least twenty and not more than thirty twenty years, except as provided in subsection M or O of this section, that is established by the board taking into account the recommendation of the plan's actuary, except that, beginning with fiscal year 2006‑2007, except as otherwise provided, the employer contribution rate shall not be less than six per cent percent of salary. For any employer whose actual contribution rate is less than six per cent percent of salary for fiscal year 2006‑2007 and each year thereafter, that employer's contribution rate shall be at least five per cent percent and not more than the employer's actual contribution rate. An employer may pay a higher level per cent percent of salary thereby reducing its unfunded past service liability. 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 plan or to pay expenses of the plan 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 for any other reason shall be applied to reduce the cost to the employer, not to increase the benefits otherwise payable to members. After the close of any fiscal year, if the plan'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 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 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 percent.
B. Each member who was hired before July 1, 2018, shall contribute the amount prescribed in subsection H of this section to the retirement plan. Each member who was hired on or after July 1, 2018, through the member's period of service from the member's effective date of participation, shall contribute an amount equal to the amount prescribed in subsection K of this section. Member contributions shall be made by payroll deduction. Continuation of employment by the member constitutes consent and agreement to the deduction of the applicable member contribution. Payment of the member's salary less the deducted contributions constitutes full and complete discharge and satisfaction of all claims and demands of the member relating to salary for services rendered during the period covered by the payment. 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.
C. Each employer shall transfer to the board the employer and employee contributions provided for in this section within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten per cent percent per annum, compounded annually, for each day the contributions are late. The employer shall pay this penalty. 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 the employer by any department or agency of this state.
D. 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 and employee shall make contributions based on the salary the employee would have received in the employee's job classification if the employee was in normal employment status.
E. The local board of the state department of corrections or the local board of the department of juvenile corrections may specify a position within that department as a designated position if the position is filled by an employee who has at least five years of credited service under the plan, who is transferred to temporarily fill the position and who makes a written request to the local board to specify the position as a designated position within ninety days of after being transferred. On the employee leaving the position, the position is no longer a designated position.
F. The local board of the state department of corrections, the local board of the department of juvenile corrections or the local board of a county, city or town that operates detention facilities may specify a designated position within the department or facility as a nondesignated position if the position is filled by an employee who has at least five years of credited service under the Arizona state retirement system and who makes a written request to the local board to specify the position as a nondesignated position within ninety days of after accepting the position. On the employee leaving the position, the position reverts to a designated position.
G. The local board of the judiciary may specify positions within the administrative office of the courts that require direct contact with and primarily provide training or technical expertise to county probation, surveillance or juvenile detention officers as a designated position if the position is filled by an employee who is a member of the plan currently employed in a designated position as a probation, surveillance or juvenile detention officer and who has at least five years of credited service under the plan. An employee who fills such a position shall make a written request to the local board to specify the position as a designated position within ninety days of after accepting the position. On the employee leaving the position, the position reverts to a nondesignated position.
H. The amount contributed by a member who was hired before July 1, 2018 pursuant to subsection B of this section is:
1. Through June 30, 2011, 8.41 per cent percent of the member's salary, except for a full‑time dispatcher. The amount contributed by a full‑time dispatcher through June 30, 2011 is 7.96 per cent percent of the member's salary.
2. For fiscal year 2011‑2012 and each fiscal year thereafter, 8.41 per cent percent of the member's salary or fifty per cent percent of the sum of the member's contribution rate from the preceding fiscal year and the aggregate computed employer contribution rate that is calculated pursuant to subsection A of this section, whichever is lower, except that the member contribution rate shall not be less than 7.65 per cent percent of the member's salary and the employer contribution rate shall not be less than the rate prescribed in subsection A of this section.
I. Notwithstanding subsection H, paragraph 2 of this section, the contribution rate for a full‑time dispatcher is forty‑five basis points less than the member contribution amount calculated pursuant to subsection H, paragraph 2 of this section, except that after the close of any fiscal year, if the plan's actuary determines that the aggregate ratio of the funding value of the accrued assets to the accrued liabilities of the fund is at least one hundred per cent percent, from and after June 30 of the following year the member contribution rate for a full‑time dispatcher is equal to the member contribution rate for a member who is not a full‑time dispatcher.
J. For fiscal year 2011‑2012 and each fiscal year thereafter, the amount of the member's contribution that exceeds 8.41 per cent percent of the member's salary for a member other than a full‑time dispatcher or 7.96 per cent percent of the member's salary for a full‑time dispatcher shall not be used to reduce the employer's contributions that are calculated pursuant to subsection A of this section.
K. For members hired on or after July 1, 2018, the employer and member contributions are determined as follows:
1. As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to pay 33.3 percent of the normal cost plus 50 percent of the actuarially determined amount required to amortize the total unfunded accrued liability for each employer attributable only to those members hired on or after July 1, 2018. For each year that new unfunded liabilities are attributable to the employer's own members hired on or after July 1, 2018, a new amortization base representing the most recent annual gain or loss, smoothed over a period not more than five years as determined by the board, shall be created on a level‑dollar basis over a closed period equal to the average expected remaining service lives of all members but not more than ten years, as determined by the board.
2. The remaining 66.7 percent of the normal cost and the remaining 50 percent of the actuarially determined amount required to amortize the total unfunded accrued liability as determined pursuant to paragraph 1 of this subsection shall be divided by the total number of the employer's members who were hired on or after July 1, 2018 such that each member contributes an equal percentage of the member's compensation. Member contributions shall begin simultaneously with membership in the plan and shall be made by payroll deduction.
L. In any fiscal year, an employer's contribution to the plan in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. The board may not suspend contributions to the plan unless both of the following apply:
1. The plan's actuary, based on the annual valuation, determines that continuing to accrue excess earnings could result in disqualification of the plan's tax-exempt status under the provisions of the united states internal revenue code.
2. The board determines that the receipt of any additional contributions required under this section would conflict with its fiduciary responsibility.
M. For the purposes of calculating unfunded liability amortization payments pursuant to subsection A of this section, an employer may make a one‑time election to request that the board use a closed period of not more than thirty years if the employer meets both of the following requirements:
1. The governing body of the employer adopts a resolution requesting the longer amortization period and specifying the actuarial valuation date for which the new amortization period is to begin. the actuarial valuation date chosen must be the plan's fiscal year end either immediately before or immediately after the date of the resolution.
2. The employer submits a written request for the longer amortization period along with the adopted resolution to the administrator of the board.
N. For the purposes of subsection M of this section, employer does not include this state or any state agency.
O. For the purposes of calculating unfunded liability amortization payments pursuant to subsection A of this section, the board may use a closed period of not more than thirty years for the judiciary.
P. If a member's employment is terminated with an employer by either party, the total liability under the plan associated with the member's service with the employer remains with the employer.
Sec. 19. Section 38-895.01, Arizona Revised Statutes, is amended to read:
38-895.01. Compensation limitation; adjustments; definition
A. The annual compensation of each member taken into account for purposes of the plan shall not exceed the following:
1. Beginning January 1, 1996 through December 31, 2001, one hundred fifty thousand dollars.
2. Except for members hired on or after July 1, 2018, beginning January 1, 2002, two hundred thousand dollars. The board shall adjust the two hundred thousand dollar annual compensation limit under this paragraph at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this paragraph for a calendar year applies to annual compensation for the plan year that begins with or within the calendar year.
3. For members who are hired on or after July 1, 2018, seventy thousand dollars. The board shall adjust the seventy thousand dollar annual compensation limit under this paragraph as prescribed in subsection C of this section. Notwithstanding the adjustments made under subsection C of this section, the limit under this paragraph, as adjusted by the board, may not exceed the maximum compensation limit of section 401(a)(17) of the internal revenue code, as adjusted by the United States secretary of the treasury.
B. If compensation under the plan is determined on a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.
C. The board shall adjust the annual compensation limits under this section at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this subsection for a calendar year applies to annual compensation for the plan year that begins with or within the calendar year.
C. Beginning in fiscal year 2021‑2022, and every third fiscal year thereafter, the board shall adjust the annual compensation limit specified in subsection A, paragraph 3 of this section by the average change in the probation wage index as determined pursuant to this subsection. the board shall annually publish the probation wage index in January. To determine the probation wage index:
1. The administrative office of the courts shall provide to the board pay scales for the month of July for the classifications of probation officers, by county, annually in July.
2. The board shall determine the weighted average of the change in the top of the pay scale for probation officers. The average change shall be weighted by measuring each county's total number of members divided by the total number of members of all counties represented in the probation wage index.
D. The board shall establish a probation wage index that reflects the calculation made pursuant to subsection C of this section.
E. For the purposes of this section, "probation officers" means the classifications of probation officers or surveillance officers or their equivalent classifications.
Sec. 20. Repeal
Sections 38-905, 38-905.01, 38-905.02, 38-905.03 and 38-905.04, Arizona Revised Statutes, are repealed.
Sec. 21. Title 38, chapter 5, article 6, Arizona Revised Statutes, is amended by adding sections 38-905.05 and 38‑905.06, to read:
38-905.05. Cost-of-living adjustment; members hired on or before June 30, 2018
A. For members hired on or before June 30, 2018, each retired member or survivor of a retired member is eligible to receive a compounding cost‑of‑living adjustment in the base benefit as provided in this section. The first payment under this section shall be made immediately following the first year the cost-of-living adjustment specified in subsection C of this section is paid. The cost‑of‑living adjustment shall be made on July 1 each year thereafter.
B. A retired member or a survivor of a retired member shall receive annually a cost-of-living adjustment in the base benefit based on the average annual percentage change in the metropolitan Phoenix‑Mesa consumer price index published by the United States department of labor, bureau of labor statistics, with the immediately preceding year as the base year for making the determination, not to exceed annually two percent of the retired member's or survivor's base benefit.
C. In the first year of a member's retirement, the cost-of-living adjustment specified in subsection B of this section shall be prorated based on the date of retirement.
D. The plan's actuary shall include the projected cost of providing the cost‑of‑living adjustment specified in subsection B of this section in the calculation of normal cost and accrued liability.
38-905.06. Cost-of-living adjustment; members hired on or after July 1, 2018; definition
A. For members who are hired on or after July 1, 2018, each eligible retired member or survivor of a retired member may receive a compounding cost‑of‑living adjustment in the base benefit as provided in this section.
B. A retired member or survivor of a retired member is eligible to receive a cost-of-living adjustment under this section beginning the earlier of the first calendar year after the seventh anniversary of the retired member's retirement or when the retired member is or would have been sixty years of age.
C. A cost-of-living adjustment shall be paid on July 1 each year that the funded ratio for members who are hired on or after July 1, 2018 is seventy percent or more, as reported in the most recent actuarial valuation.
D. An eligible retired member or survivor of a retired member shall receive annually a cost‑of‑living adjustment in the base benefit based on the average annual percentage change in the metropolitan Phoenix‑Mesa consumer price index published by the United States department of labor, bureau of labor statistics, with the immediately preceding year as the base year for making the determination, not to exceed annually the following:
1. Two percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2018 is ninety percent or more, as reported in the most recent actuarial valuation.
2. One and one‑half percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2018 is eighty percent or more but less than ninety percent, as reported in the most recent actuarial valuation.
3. One percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2018 is seventy percent or more but less than eighty percent, as reported in the most recent actuarial valuation.
E. The plan's actuary shall include the projected cost of providing the cost-of-living adjustment specified in subsection D of this section in the calculation of normal cost and accrued liability.
F. For the purposes of this section, "funded ratio" means the ratio of the market value of assets to the actual accrued liabilities.
Sec. 22. Section 38-911, Arizona Revised Statutes, is amended to read:
38-911. Deferred annuity; eligibility; amount; exception
A. If any member who has at least ten years of credited service terminates employment for reasons other than retirement or disability, the person may elect to receive a deferred annuity, except that if the person withdraws the person's accumulated contributions from the plan, all rights to a deferred annuity are forfeited. A deferred annuity is a lifetime monthly payment that is actuarially equivalent to the annuitant's accumulated contributions in the plan plus an equal amount paid by the employer and commences on application on or after the sixty‑second birthday of the annuitant. The deferred annuity is not a retirement benefit and annuitants are not entitled to receive any amount prescribed by section 38‑887, 38‑888, 38‑904, 38‑905, 38‑905.02 or 38‑906.
B. This section does not apply to a member who becomes a member of the plan on or after January 1, 2012 and before July 1, 2018. 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. 23. Title 38, chapter 5, article 6, Arizona Revised Statutes, is amended by adding section 38-914, to read:
38-914. Employer disclosure; funding ratio
An employer shall disclose the employer's funding ratio under the plan on the employer's public website.
Sec. 24. Conditional enactment
Section 38‑885.01, Arizona Revised Statutes, as amended by this act, sections 38‑905, 38-905.01, 38-905.02, 38-905.03 and 38‑905.04, Arizona Revised Statutes, as repealed by this act, section 38‑905.05, Arizona Revised Statutes, as added by this act and section 38‑911, Arizona Revised Statutes, as amended by this act, do not become effective unless the Constitution of Arizona is amended as prescribed in Senate concurrent resolution 1023, fifty‑third legislature, first regular session, by vote of the people at the next general election.
APPROVED BY THE GOVERNOR APRIL 17, 2017.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 17, 2017.
