Employer update

              MARCH 2000
In this Issue ...
3 Post-Retirement
Employment
3 Terminating Payroll
Deduction Agreements
3 ASRS Contribution Rates
for Fiscal Year 2000-2001
3 Proposed
2000 Legislation
Employer A PUBLICATION OF THE ARIZONA STATE RETIREMENT SYSTEM UPDATE
ARIZONA STATE
RETIREMENT SYSTEM
3300 N. CENTRAL AVE.
PHOENIX, AZ 85012
(602)240-2022
(800)621-3778
(OUTSIDE METRO PHOENIX)
Human Resources.................
Payroll.....................................
Benefits..................................
Accounting.............................
Post-Retirement Employment —
49% Contracts
As you already know, a retired member who returns to work with an
ASRS employer does not resume active membership if the new
employment does not meet the ASRS 20 week/20 hour membership
requirement. Employers often will rehire retired members on a “49%”
contract so the employee may avoid resuming active membership and
thereby continue to receive his/her monthly retirement benefit.
However, if you use this practice, you must take care that the
employee’s schedule does not meet the membership requirements.
ASRS membership is based on time worked, not the dollars paid for
the work. Therefore, that an employee receives only 49% of full-time
compensation does not on its own assure the member will not
meet the membership qualification. The actual work performed must
not meet the 20 week/20 hour criteria. If an employee is paid 49% of
full-time, but works more than twenty hours a week for twenty weeks,
the employee becomes an active member.
Moreover, the criteria is stated in hours and weeks worked. A per-centage
of work is meaningful only in relation to the actual hours and
weeks worked. If an employee works 49% of full-time, but full time is
more than 40 hours, again, the member may achieve active member
status.
By the same token, if an employee works at 50% of full-time, the
employee does not become an ASRS member if full-time requirement
is less than 40 hours a week.
The bottom line is that however the question about membership quali-fication
is asked or the terminology used to describe the work sched-ule,
the answer is always: “If the employee works twenty weeks/twenty
hours, the employee becomes an active ASRS member. If the em-ployee
was retired, the ASRS must suspend the retirement benefit.”
ROUTING SLIP
EmployerUPDATE PAGE TWO
SIDENOTES
PROPOSED 2000
LEGISLATION
The 2000 Legislative session is draw-ing
to a close. At the writing of this
newsletter, the final outcome of bills
had not been determined. However,
the following bills that might have
broad impact on ASRS members are
still alive in the process:
• SB 1128 – would permit members to
choose a partial lump sum benefit at
retirement with a reduced monthly
benefit thereafter.
• SB 1320 and HB 2238 – these are
identical bills that would remove the
age 55 eligibility requirement for
eligibility for the excess earnings
permanent benefit increase (COLA).
• SB 1463 – would permit teachers to
return to work full-time after 12 months
of retirement without a loss of retire-ment
benefits. At the time of this
writing, the possibility of extending the
provision to all ASRS members was
being considered.
• HB 2011 – originally would have
changed the retirement benefit multi-plier
from 2.1% to 2.2% effective July
1, 2001. It now has been amended to
provide a graded multiplier in the ben-efit
formula based on years of service
credit, ranging from 2.1% up to 2.3%
with 35 or more years of ASRS
service credit.
• HB 2531 – would increase the
amount payable for the health insur-ance
premium benefit and extend the
payment to retired members not
currently eligible for the premium
benefit.
Any increase in the contribution rate
associated with passage of new provi-sions
would be reflected in the rates
that become effective July 1, 2001.
Follow the ASRS Legislative Report
or ALIS on line to keep abreast of
progress of these and other bills.
ASRS Contribution Rates
for Fiscal Year 2000-2001
Terminating Payroll Deduction Agreements
The ASRS permits members to pay for a service credit purchase
by installment payments through tax-deferred payroll deduction.
The payroll deduction is governed by salary reduction agreement
provisions of Internal Revenue Code. Under these provisions, a payroll
deduction agreement is irrevocable and the employee can have no
control over the dollars once entering into the agreement. It also means,
however, that deductions may be made only from compensation
counting toward ASRS retirement. If an employee changes status or
reduces his/her work schedule such that the employee is no longer an
active ASRS member, you must stop the payroll deduction, even if
the individual remains a paid employee. This situation may occur when
an employee changes to a position covered by another retirement
program (for example, a university optional plan or one of the other
state plans) or reduces work hours such that the employee no longer
meets the 20 week/20 hour work requirement for ASRS membership.
Refer to Section 13 of the ASRS Employer Manual for more information.
Just a reminder that the retirement contribution rate remains at 2.17%
of pay for both employees and employers for fiscal year 2000-2001.
The rates for members subject to the old System money purchase plan
remain 7% of pay.
Contribution rates to the long term disability program likely will re-main
0.49% of pay for employees and employers. There is a small
possibility that the LTD rates may change effective July 1, 2000. The
LTD rates inadvertently were not converted to biennial rates when the
retirement contribution rates were changed to a biennial rate. Legis-lative
action has been introduced to correct the oversight. If the rate is
changed, there would be a small increase of two or three basis points
(0.02 or 0.03 percent). The ASRS will advise if the rate does not re-main
at the 0.49 % rate. Continue to use the 0.49% rate unless notified
by the ASRS to change the rate.
The ASRS continues to receive inquires from employer payroll/account-ing
departments asking about the contribution rates for next fiscal
year. It is apparent that human resource personnel receiving the Em-ployer
UPDATE may not be sharing the newsletter with their payroll
counterparts. It is essential that you forward the UPDATE to your
payroll staff so that they become aware of changes that affect pay-roll.
If necessary, you may request separate copies of the UPDATE be
distributed to each department.