ARIZONA STATE SENATE
Phoenix, Arizona
Makes conforming changes to Arizona State Retirement System (ASRS) statute to comply with the federal Economic Growth and Tax Relief Reconciliation Act of 2001. S.B. 1095 repeals the section of law that eliminates the return to work option in 2003, making full-time return to work a permanent option for ASRS members.
On June 7, 2001, the President signed into law the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). In addition to cutting federal income taxes, and repealing the federal estate tax, EGTRRA also includes several provisions that affect retirement plans. The retirement plan changes are generally effective for plan years beginning after December 31, 2001. Some provisions have a retroactive effective date, and other provisions will be phased in over the next several years. In addition, all the provisions in EGTRRA will expire for taxable years, limitation years and plan years beginning after December 31, 2010. If Congress does not act to extend the EGTRRA provisions, the law will revert back to what it is currently. S.B. 1095 makes the necessary changes to Arizona State Retirement System (ASRS) statutes to comply with federal law and some additional definitional changes in order to prevent administrative problems.
Prior to 2000, members could only return to work if they either worked less than 20 weeks per year or 20 hours per week. Legislation was passed to allow teachers to return to work full-time after a year of retirement; furthermore, in 2001 this option was extended to all ASRS members. Members who chose to return to work continue to receive retirement benefits as well as the members negotiated salary. Participants are not allowed to make contributions to ASRS for retirement and can not accumulate additional benefits in ASRS.
Joint Legislative Budget Committee staff indicates that there is no actuarial fiscal impact associated with this legislation.
1. Increases to $200,000 the annual compensation limit that may be taken into account when determining benefits for public employees under ASRS.
2. Increases the annual contribution limit to an individuals defined contribution plan to the lesser of $40,000 or 100 percent of the individuals annual compensation.
3. Increases annual retirement benefit limit to $160,000 with an actuarial reduction required for benefits commencing prior to age 62 instead of Social Security Retirement Age.
4. Permits direct rollovers from 403(b), 457 and individual retirement plans on a pre-tax basis for the purchase of credited services.
5. Requires ASRS to account for direct transfers and rollovers separately.
6. Makes conforming changes and additions to the following definitions:
a) Compensation
b) Eligible retirement plan
c) Eligible rollover distribution
7. Repeals Laws 2000, chapter 132, section 4, making the return to work option a permanent selection for ASRS members.
8. Makes technical and conforming changes.
9. Applies changes retroactively as follows:
a) July 1, 2001 for provisions dealing with annual retirement benefits limits.
b) January 1, 2002 for provisions dealing with direct rollovers.
c) July 1, 2001 for provisions dealing with annual compensation limits.
Prepared by Senate Staff
March 8, 2002