ARIZONA STATE SENATE
Phoenix, Arizona
PSPRS; CORP; EORP;
retirement benefits
Increases
survivor benefits for the Public Safety Personnel Retirement System (PSPRS),
and the Corrections Officer Retirement Plan (CORP). Makes the PSPRS deferred
retirement option program (DROP) permanent and modifies disability
requirements. Applies a two percent tax equity benefit for PSPRS members.
Currently, an eligible
surviving spouse of a retired PSPRS member may receive three-fourths of the
retired member's pension. An eligible surviving spouse of a PSPRS nonretired
member may receive three-fourths of the pension a deceased active member would
have been paid for accidental disability retirement. An eligible child receives
one-eighth of the pension of a deceased active member’s accidental disability
retirement or a retired member's pension.
Furthermore, an eligible
surviving spouse of a retired CORP member may receive three-fourths of the
retired member's pension at the time of death.
A surviving spouse of a nonretired CORP member may receive 37.5 percent
of the deceased member's average monthly salary.
H.B. 2118 increases survivor
benefits for PSPRS and CORP.
In 2000, the Legislature
established a six year pilot DROP program for PSPRS members (Laws 2000, Chapter
340). DROP enables PSPRS members to
accumulate a lump sum payment upon termination of employment. To receive this payment, the participant,
instead of taking retirement, places his or her monthly pension payment into a
DROP account that also earns or is credited with a fixed interest rate while
the participant continues working. In
exchange, the participant ceases to accrue credited years of service or benefit
increases based on salary raises during this period of time. Upon termination of employment, the
participant starts receiving monthly pension payments along with the lump sum
payment from the DROP account.
H.B. 2118 makes
the DROP option permanent for PSPRS members and modifies disability
requirements within DROP.
In 1989, the U.S. Supreme
Court ruled the taxation difference between state and federal retirement
systems was discriminatory. As a
result, Arizona conformed its systems to the federal tax regulations. Since
that time, Arizona has systematically extended tax equity benefit increases. A
total of nine tax equity benefit increases have been given to retirees.
H.B. 2118 applies a two
percent tax equity benefit for certain PSPRS members.
The Joint Legislative Budget
Committee (JLBC) staff fiscal note states the estimated impact of this
legislation for FY 2004-2005 is approximately $904,000 from the state general
fund and $380,400 from other appropriated funds; however, a House of
Representatives floor amendment eliminated increases for Elected Officials’
Retirement Plan (EORP) members.
Therefore, based on figures provided in the JLBC fiscal note, the total
fiscal impact of H.B. 2118 (minus EORP) would be $1,114,100.
1. Increases the pension for a surviving spouse of a PSPRS and CORP member killed in the line of duty from 50 percent to 100 percent of the deceased member’s average monthly salary.
2. Increases the pension for a surviving spouse of a PSPRS and CORP retired member from 75 percent to 80 percent of the deceased retired member’s pension.
3. Increases the pension for a surviving spouse of a PSPRS member, who dies before retirement, to 80 percent of disability retirement.
4. Increases the pension for a surviving spouse of a CORP member who dies before retirement to 40 percent of the deceased member’s average monthly salary from 37.5 percent.
5. Changes the monthly benefit for eligible children of deceased members of PSPRS from 12.5 percent to 10 percent.
6. Authorizes a one-time permanent pension benefit increase for current surviving spouses of PSPRS and CORP members who did not die in the line of duty equal to two-thirtieths of their monthly pension.
7. Grants a one-time permanent pension benefit increase for surviving spouses of PSPRS and CORP members who die in the line of duty before the effective date of this act.
8. Makes DROP a permanent option for PSPRS members.
9. Eliminates the requirement that disability retirement must occur during the DROP participation period in order to determine disability.
10. Specifies that the day after the date a member elects to participate in the DROP, rather than the day of the election, the member ceases to accrue benefits and employer and employee contribution's cease in PSPRS.
11. Applies a two percent tax equity benefit for members of PSPRS hired before September 15, 1989 and who retire on or after November 1, 2001.
12. Replaces the current incremental ordinary disability system with an ordinary disability proportional within PSPRS.
13. Clarifies that the dispatcher normal retirement date is 25 years of service.
14. Clarifies that PSPRS and CORP plans are designed to have members whose customary employment is at least 40 hours a week.
15. Makes technical and conforming changes.
16. Provides for a general effective date.
3rd Read 4/8/02 51-0-9-0
Prepared by Senate Staff
April 18, 2002