ARIZONA STATE SENATE
Phoenix, Arizona
retirement; legislative
employees option; transfers
Purpose
Permits members of the “enhanced” tax deferred annuity and deferred compensation program to transfer the actuarial value of their pensions into this account and permits employees participating in the defined contributions pilot program to contribute the maximum dollar amount allowed under federal law.
Background
Last session, the Legislature established what was
then known as the “enhanced deferred compensation” program for term-limited
state officials and legislative employees (Laws 1999, Chapter 329). This allows such individuals to opt out of
either the Arizona State Retirement System (ASRS) or Elected Officials’
Retirement Plan (EORP) and have their employers contribute five percent of
their salary to this program. The
governing committee for tax deferred annuity and deferred compensation plans,
which oversees programs that give state employees income tax benefits, may
approve the use of 457, 401 and 403(b) plans, which refer to various Internal
Revenue Code sections. However, 457
accounts are the most commonly used accounts for employees who supplement their
defined benefit retirement system with tax deferred savings and this was the
account that framers of last year’s program envisioned employers’ contributing
into.
Last session, the
Legislature also established an optional defined contributions (DC) retirement
option for term-limited state elected officials and certain exempt state
officers and employees beginning December 1, 2000 (Laws 1999, Chapter
329). The law requires that both the
employer and employee contribute 2.66 percent of the employee’s salary. This figure was chosen to make the bill
fiscally neutral and was based on the employee/employer contribution for ASRS
for FYs 1998-1999 and 1999-2000.
Proponents of DC retirement plans wish to allow employees to increase
their retirement contributions because DC plans are driven by the amount of
money contributed and how well the investments made with this money perform.
Provisions
1. Permits term-limited state officials and legislative employees to transfer the actuarial value of their pensions into a tax deferred annuity and deferred compensation program.
2. Requires the officials/employees to request the pension value transfer in writing.
3. Requires the actuarial accrued liability to be based on the same actuarial cost method and assumptions that were used for computing the funding requirements of ASRS in their annual actuarial valuation preceding the transfer.
4. Permits employees participating in the defined contributions pilot program to contribute, beginning 2001, the maximum amount allowed under federal law.
5. Makes a technical correction.
6. Provides for a general effective date.
House Action
GOV OP 1/13/00 DPA 6-0-0-0
3rd Read 1/25/00 58-0-2-0
Prepared by Senate Staff
February 28, 2000