HB2170 - 451R - House Bill Summary

House of Representatives

HB 2170

emergency telephone service; children

Sponsors: Brimhall

DPA

S/E

Committee on Retirement & Government Operations

Caucus and COW

As Passed the House

The proposed strike-everything amendment to HB 2170 makes numerous changes to state retirement statutes.

History

Entry Age Normal (EAN) Actuarial Computation Method

Laws 2000, Chapter 341, established the ASRS Actuarial Computation Method Study Committee. This committee was charged with examining and comparing actuarial computation methods that may be appropriate for the Arizona State Retirement System (ASRS), including the EAN cost method and the Projected Unit Credit (PUC) method. The EAN provisions of this legislation are a result of the discussions and study of the ASRS Actuarial Computation Method Study Committee.

Group Health & Accident Insurance Premium Subsidy

Current law requires ASRS to administer group health and accident coverage for eligible retired and disabled members and their dependents. Currently, all four state retirement systems are under the jurisdiction of ASRS. The law requires that a portion of a retired member’s health care premium be subsidized. The subsidy amounts differ between the four state retirement systems and whether or not members, survivors or dependents are eligible for medicare. The portion of a member’s health care premium not covered by the subsidy is paid from the member’s retirement benefit or out of the member’s pocket. The premium subsidies for each plan are as follows:

ASRS

EORP

PSPRS

CORP

Single premium coverage

Member not eligible for Medicare

$95

Member not eligible for Medicare

$60

N/A

$82.50

Member not eligible for Medicare

$95

Member eligible for Medicare

$65

Member eligible for Medicare

$60

N/A

$82.50

Member eligible for Medicare

$65

Family Coverage Premium

Member and one or more dependents not eligible for Medicare

$175

N/A

$85

N/A

$130

Members and one or more dependent not eligible

$175

Member plus one or more dependent eligible for Medicare/

$115

N/A

$85

N/A

$130

Member and one or more dependent eligible for Medicare/

$115

Member and dependents eligible/ not eligible

$145

N/A

$85

N/A

$130

Members and dependents eligible/not eligible

$145

Health premium eligibility differs between plans. For example, ASRS requires at least five years of credited service in order to be eligible for coverage. If the member works between five to ten years, the member is eligible for a proportionate share of the full subsidy. The Elected Officials Retirement Plan (EORP) requires five to eight years of service in order for the member to be eligible for a proportionate share of the full subsidy. These requirements do not apply to the Public Safety Personnel Retirement System (PSPRS) or the Corrections Officer Retirement Plan (CORP).

Normal Retirement Multiplier

Currently, normal retirement eligibility for ASRS members is achieved when the member is 65 years of age, or age 62 with 10 years of credited service, or any combination of age and years of credited service totaling 80 points. The normal retirement benefits are calculated by multiplying 2.1% times the average monthly salary times the years of credited service. Laws 1999, Chapter 327, changed the normal retirement multiplier to 2.1% from 2% and provided a 5% permanent benefit increase to current retirees, effective July 1, 2000.

Optional Forms of Retirement Benefits

Currently in ASRS statutes, members may select their retirement benefit from among optional forms. One form is the joint and survivor annuity. This option allows the survivor, after the member’s death, to continue to receive all, two-thirds or one-half of the retirement benefit during the lifetime of the contingent annuitant (survivor).

The second optional form is the straight life annuity, which is equal to the calculated retirement benefit and paid during the remainder of the member’s lifetime. The third optional form is the period certain and life annuity. This option is actuarially reduced with payments for five, ten or fifteen years that are dependent on the continued lifetime of the member but whose payments continue for the member’s lifetime beyond the five, ten or fifteen year period. Finally, the last optional forms that may be selected are actuarially reduced optional benefits prescribed by the ASRS board.

Provisions

EAN Computation Method

· Changes the ASRS computation funding method from the PUC to the EAN cost method.

· Specifies that the EAN cost method shall be used beginning with the June 30, 2002 valuation and employer contributions payable beginning July 1, 2003.

· Changes the amortization-funding period from a rolling thirty-year period to a rolling twenty-year period.

· Makes technical and conforming changes

Health Care Premium Subsidy

· Defines nonservice area as an area in the state in which ASRS, DOA, or the members’ or the survivors’ participating employer does not provide a managed care program for which they are eligible.

· Increases single health premium coverage subsidies permanently for all four plans retroactively to July 1, 2001 to the following amounts:

1. $150 for members or survivors not eligible for Medicare.

2. $100 for members or survivors eligible for Medicare.

· Increases family health premium coverage subsidies permanently for all four plans retroactively to July 1, 2001 to the following amounts:

1. $260 for a member or survivor and 1 or more dependents not eligible for Medicare.

2. $170 for a member or survivor and 1 or more dependent that are eligible for Medicare.

3. $215 for a member or survivor when member is not eligible for Medicare and one or more dependents are eligible or member is eligible and one or more dependents are not.

· Increases non-service area health premium coverage subsidies until December 31, 2003 to the following amounts:

1. $300 for a member or survivor that is not eligible for Medicare.

2. $170 for a member or survivor that is eligible for Medicare.

3. $600 if a member and one or more dependents are not eligible for Medicare.

4. $350 if a member and one or more dependents are eligible for Medicare.

5. $470 if member is not eligible and one or more dependents are eligible for Medicare or if the member is eligible and one or more dependents is not eligible for Medicare.

Graded Normal Retirement Multiplier

· Provides a graded normal retirement multiplier based on years of credited service, effective July 1, 2002 as follows:

1. Less than 15 years of service equals 2.1%

2. 15 years of service to less than 18 years of service equals 2.2%

3. 18 years of service to less than 22 years of service equals 2.3%

4. 22 years of service to less than 25 years of service equals 2.4%

5. 25 or more years of service equals 2.5%

· Provides a onetime permanent benefit increase to current retirees based on the same years of credited service graded multiplier formula.

· Caps retirement benefits at 80% of the member’s average monthly compensation for members hired after June 29, 2002. This does not preclude COLA increases.

Lump Sum Optional Retirement Benefit

· Allows a member to receive at the time of retirement a lump sum payment equal to not more than 36 months of the member’s retirement benefit, beginning July 1, 2002.

· Specifies that the member’s benefit will be actuarially reduced based on the lump sum payment.

· Specifies that any benefit increase granted to a lump sum member would be based on the actuarially reduced retirement benefit, if the benefit increase is a percentage increase of the member’s retirement benefit.

· States that COLA increases shall be calculated without regard to the lump sum payment.

The Retirement and Government Operations Committee adopted the strike-everything amendment.

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45th Legislature

First Regular Session 3 February 13, 2001

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