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. Retroactive to January 1, 1997, allows a
retired member of the Elected Officials' Retirement Plan (EORP) to continue to
receive a pension if the member is elected or reelected to the same office more
than one full term after the member retired.
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.
DROP
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
DROP permanent for PSPRS members and modifies disability requirements within
DROP.
Tax Equity Benefit
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 estimates that the provisions relating to
survivor benefit increases, DROP and tax equity benefit will cost the state
general fund $733,700 in FY 2003-2004.
EORP Retirement Contribution
Currently, if a retired member of EORP becomes an elected official of the same office the member retired from, contributions to the retirement plan cannot be made by either the retired member or the member's employer and the member is not able to receive a pension. Additionally, if the retired member becomes an elected official of another office, the member can receive a pension; however, contributions to the plan by the member or the new employer do not resume.
H.B. 2118 allows a retired
member elected or reelected more than one full term after the member initially
retired to continue to receive a pension retroactively to January 1, 1997. According to EORP, this provision has no
fiscal impact on the general fund.
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. Removes 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. Allows, retroactive to January 1, 1997, a retired member of EORP elected or reelected to the same office more than one full term after the member initially retired, to continue to receive a pension.
13. Replaces the current incremental ordinary disability system with an ordinary disability proportional within PSPRS.
14. Clarifies that the dispatcher normal retirement date is 25 years of service.
15. Clarifies that PSPRS and CORP plans are designed to have members whose customary employment is at least 40 hours a week.
16. Makes technical and conforming changes.
17. Provides for a general effective date.
3rd Read 4/8/02 51-0-9-0 3rd Read 5/13/02 26-1-3-0
Final Read 5/20/02 58-0-2-0
Signed by Governor 6/4/02
Chapter 335
Prepared by Senate Staff
June 18, 2002