Final report: Joint Legislative Study Committee on State Retirement Systems

              Joint Legislative
Study Committee
State
Retirement Systems
Final Report
Joint Legislative Study Committee
on
State Retirement Systems
Background
Laws 1995, Chapter 205 established the Joint Legislative Study Committee on State Retirement
Systems to analyze various issues affecting Arizona's four state retirement systems: the Arizona
State Retirement System [ ASRS]; the Public Safety Personnel Retirement System [ PSPRS]; the
Corrections Officer Retirement Plan [ CORP]; and the Elected Officials' Retirement Plan
[ EORP] . [ Attachment A]
MEMBERSHIP
Senator Spitzer, co- chair Representative King, co- chair
Senator Springer Representative Burns
Senator Burns Representative Daniels
Senator Chesley Representative Blendu
Senator Hardt Representative Armstead
Senator Solomon Representative Foster
Senator Chastain Representative Cunningham
Committee Staff:
Randie Stein, Senate Lisa Barnes, House
PESPONSIBILITIES
The Study Committee was charged with recommending ways in which the benefits and other
provisions under each of the state retirement systems should be equalized and determining those
areas where differences are justified. In making its recommendations and determinations, the
Study Committee was required to consider the following:
* retiree health insurance premium subsidy amounts;
* minimum benefit amounts;
* qualifications for normal and early retirement;
* formulas used to calculate retirement benefits;
* post- retirement benefit increases [ COLAS];
* transfer provisions between retirement systems; and.
* any other benefit or provision determined necessary for consideration by the
Committee.
Additionally, the Study Committee was responsible for studying the following:
* the policy of providing tax equity " hold harmless" benefit increases in response to
the taxation of pension income;
* requesting a legal determination of the State's liability, if any, to retirees resulting
from a change in the taxation of pension income and a fiscal analysis of any
determined liability;
* the differences between defined benefit retirement plans and defined contribution
plans and whether the State should consider establishing a defined contribution
plan; * the advantages and disadvantages of providing early retirement incentives,
commonly referred to as " retirement windows"; and
* any other issue determined necessary for consideration by the Committee.
REPORT
The Study Committee was required to submit a report of its findings and recommendations,
including any proposed legislative changes, to the Governor, the Senate President and the
Speaker of the House by October 3 1, 1995.
TERMINATION
The Study Committee terminates December 3 1, 1995.
Proceedings
Prior to the Committee's first meeting, Committee members received a notebook to assist in their
deliberations containing the following information:
Background Information Regarding the Committee
Enabling Legislation
Comparison Chart of State Retirement Systems
Description/ Historical Recap of the Retiree Health Insurance Program
Description of Minimum Benefit Provisions
Description of Normal and Early Retirement Requirements
Description of Benefit Calculations
Description of Post- retirement Benefit Increases ( COLAS)
Description of Transfer Provisions
Description/ Historical Recap of Tax- equity Benefit Increases
Description of Defined Benefit and Defined Contribution Plans
Description of Retirement Windows
ASRS Materials
PSPRS Materials
COW Materials
EORP Materials
Comparison Reports of Other States' Retirement Systems
NCSL Public Pension Guide for Legislators
The Study Committee held three public meetings as follows:
September 15, 1995 [ Attachment B]
During the Committee's first meeting, presentations were made by representatives of the four
state retirement systems to familiarize members with the differences and similarities between
retirement systems. Leroy Gilbertson, Director of the Arizona State Retirement System, made
the presentation on behalf of ASRS, after which Michael Carter, representing the Watson Wyatt
Worldwide Company, conducted a slide presentation on the Actuarial Aspects of the Arizona
Stare Retirement System. Jack Cross, Administrator for the Public Safety Personnel Retirement
Sj. stem ( PSPRS). the Corrections Officer Retirement Plan ( COW) and the Elected Officials'
Retirement Plan ( EORP), made the presentation on behalf of the three retirement programs he
administers. Following formal presentations, the Committee heard testimony from members of
the publ~ cc onceming the retirement issues they would like to see the Committee address.
Qctober 5. 1995 [ Attachment C]
The Committee was informed during its second meeting that the House Government Operations
and Senate Finance Committee of Reference had conducted a hearing to consider the Auditor
Cieneral's findings and recommendations conceming the Arizona State Retirement System, the
l'ubl~ c Safct! Personnel Retirement System and the Elected Official's Retirement Plan. The
hcanng uru; held as part of the " sunset review" of the state retirement systems. The Committee
of' Reference recommended continuation of ASRS, PSPRS and EORP and further recommended
that thc Corrections Officer Retirement Plan be added to the same sunset schedule as the other
three rctlrcment systems. Committee members were given copies of the Auditor General's
performance audits of the state retirement systems.
Comm~ ttcem embers then heard testimony from persons interested in the various state retirement
s! 5tems hlost comments urged legislative enactment of various retirement proposals, primarily
kncfir enhancements. Staff was asked to summarize the proposals that had been submitted for
the Comm~ ttee's consideration.
Qctober 26. 1995 [ Attachment Dl
During the Committee's final meeting, Committee members reviewed, but took no formal action
on, the handout prepared by staff summarizing all of the retirement proposals submitted for the
Committee's consideration during previous public testimony. [ Attachment El Also, public
testimony was received from individuals whose proposals were not presented during prior
Committee hearings and therefore were not included in the handout of retirement proposals.
Recommendations
The Co- Chairmen of the Committee specifically noted during their final meeting that the
Committee would not make any formal recommendations. Rather, Committee members were
advised they may individually sponsor legislation during the next legislative session to
incorporate any desired recommendations.
Attachments
Attachment A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Enabling legislation
Attachment B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . September 15, 1995 Minutes
Attachment C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 5, 1995 Minutes
Attachment D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . O ctober 26,1995 Minutes
Attachment E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement Proposals Handout
Attachment A
Enabling Legislation
VE S m Y C cs m
( Laws 1995, Chapter 205; SB 1221)
Sec. 15.
A. The o c t e
retirement systems is established for the purpose of analyzing
issues affecting the Arizona state retirement system, the public
safety personnel. retirement system, the corrections officer
retirement plan and the elected officials1 retirement plan.
B. The joint legislative study committee on state
retirement systems shall consist of the following members:
1. The chairperson of the senate finance committee to
serve as co- chairperson.
2. The chairperson of the house of representatives
government operations committee to serve as co- chairperson.
3. The chairperson of the senate appropriations committee.
4. The chairperson of the house of representatives
appropriations committee.
5. Five additional members of the senate appointed by the
president of the senate and five additional members of the house of
representatives appointed by the speaker of the house of
representatives. No more than two of the additional members of
each house may be members from the majority party.
C. The committee shall recommend ways in which the benefits
and other provisions under each of the state retirement systems
should be equalized and determine those areas where differences are
2ustified. In making recommendations and determinations, the study
c~ mmlztee shall consider the following:
1. Retiree health insurance premium subsidy amounts.
2. Minimum benefit amounts.
3. The qualifications for normal and early retirement.
4 . The formulas used to calculate benefits.
5. Post- retirement benefit increases.
6. Provisions for transfer between state retirement
systems.
7 . Any other benefit or provision determined necessary for
= zns; derarion and study by the committee.
C . In addition to the study items listed under subsection - sf = h: s section, the committee shall also study the following:
r . The policy of providing tax equity " hold harmlessn
-~. eh aee f: s: : ' ~ dryn ccroemamsietst eien srheaslplo nrseeq uteos tt hea tlaexgaatli odne toefr mpiennastiioonn ionfc otmhee.
sraze's lrabilicy, if any, to retirees and a fiscal analysis of any
ieze= rn- e d liability. .. I . - The differences between defined benefit plans and
= e:: zet ccncribution plans and whether the State of Arizona should
---- C. . s: 5er establishing defined contribution plans.
3 . . The advantages and disadvantages of providing early
-
retirement incentives, commonly referred to as " retirement
windows.
4 . Any other issue determined necessary for consideration
and study by the committee.
E. The committee shall make recommendHtions concerning each
of the listed study items and submit a report of its findings and
recommendations, including proposed legislative changes, to the
governor, the president of the senate and the speaker of the house
of representatives on or before October 31, 1995.
Sec. 18. ReDeal
Section 15 of this act is repealed from and after December
The Committee Terminates: December 31, 1995.
1. ( R -). The chairperson of the Senate Finance
Committee to serve as co- chairperson.
2 . ( R! una The chairperson of the House Government
Operations committee to serve as
co- chairperson.
3. ( a! S ~ u e r The chairperson of the Senate Appropriations
Committee.
4 . y The chairperson of the House Appropriations
committee.
F~ ve additional members of the Senate appointed by the President.
Nz more rhan two of the additional members may be members from the
zalor:= y party.
5 . !!? 1 Surns
F: ve add~ tional members of the House of Representatives APPOINTED
BY THE SPEAKER. No more than two of the additional members may be
nerrzers from the majority party.
( 1 - -- OI ?& o'E
Attachment B
September 15, 1995 Minutes
ARIZONA STATE LEGISLATURE
Forty- second Legislature - First Regular Session
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
Minutes of Meeting
Friday, September 15, 1995
House Hearing Room 2 - 9: 30 a. m.
( Tape 1, Side A)
Cochair King called the meeting to order at 9: 45 a. m. and roll was called by the secretary.
Members Present
Senator Chastain
Senator Solomon
Senator Spitzer, Cochair
Members Absent
Senator Bums ( excused)
Senator Chesley
Senator Hardt ( excused)
Senator Springer ( excused)
Representative Armstead
Representative Blendu
Representative Bums
Representative Cunningham
Representative King, Cochair
Representative Daniels
Representative Foster
Speakers Present
Lisa Flames, Committee Research Analyst, House of Representatives
Leroy Gilbertson, Director, Arizona State Retirement System ( ASRS)
bllchael Carter, Actuary, Arizona State Retirement System ( ASRS), representing the Watson
Wyatt Worldwide Company ( formerly The Wyatt Companies)
David Smith. Registered Lobbyist, University of Arizona Retiree Association
Jack Cross, Administrator, Public Safety Personnel Retirement System ( PSPRS), Corrections
Officer Retirement Plan ( CORP), and Elected Officials' Retirement Plan ( EORP)
Chuck Tome, nineteen- year veteran of the Department of Public Safety ( DPS); State President,
Fraternal Order of Police ( FOP)
M~ ke Bteltcki, President, Professional Fire Fighters of Arizona
Bcv Cuthberrson, President, Arizona Education Association - Retired ( AEA- R)
Peter Dunn, Attorney, Arizona Judges' Association ( MA)
Laura Krause, Employee Relations Officer, Arizona Department of Corrections ( ADC)
Ballard Bull~ on, Phoenix resident, representing himself
Joint Legislative Study Committee
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091 15/ 95
Robert Stout, Parole Officer and Registered Lobbyist, representing American Federation of
State, County and Municipal Employees ( AFSCME); Coalition of Locals, Arizona
Department of Corrections ( ADC)
Larry Wendt, Deputy Chief, Maricopa County Sheriff's Office
Lisa Barnes, Committee Research Analyst, House of Representatives, referred to a binder
( Attachment 1) on the state retirement systems and gave a synopsis of the information contained
under the following subjects:
Background Information
Enabling Legislation
Comparison Chart of State Retirement
Systems
Retiree Health Insurance
Minimum Benefit Provisions
Normal and Early Retirement
Requirements
Benefit Calculations
Post- retirement Benefit Increases
( COLA's)
Transfer Provisions
Tax- equity Benefit Increases
Defined Benefit and Defined
Contribution Plans
Retirement Windows
Other Issues
Recommendations/ Final Report
ASRS Materials
PSPRS Materials
CORP Materials
EORP Materials
Comparison Reports of Other States'
Retirement Systems
NCSL Public Pension Guide for
Legislators
Committee Meeting Notices and
Minutes
Cochair King mentioned that there are many opposing viewpoints with regard to the state
retirement systems and requested that everyone please keep an open mind.
Leroy Gilbenson, Director, Arizona State Retirement System ( ASRS), with the aid of an
overhead projector, conducted a presentation on the following information:
Arizona State Retirement System ( ASRS) - Purpose 1 History 1 Benefits / Active
Membership 1 Funding as of June 30, 1994 I 1993 Auditor General Performance
Audit Findings / Auditor General Recommendations
Investments
ASRS Benefit Payments and Contributions Received
ASRS Net Income From Investments
ASRS Total Rate of Return
ASRS Rate of Return
ASRS Contribution Rates
( Hard copy of presentation included as Attachment 2.)
Joint Legislative Study Committee
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Senator Chastain asked why the university professors have the option of choosing a retirement
system other than ASRS. Mr. Gilbertson explained that the Teachers Insurance, Annuities
Association/ College Retirement Equity Fund WAAICREF) is a program available across the
country to university professors.
In response to Senator Chastain, Mr. Gilbertson indicated that the state pays a seven percent
contribution rate for TIAAJCREF.
senator Chastain pointed out that some professionals have complained that the state will pay a
seven percent contribution rate for some retirement plans but not for others.
Mr. Armstead expressed concern over the plan to bring the investment function in- house and
asked whether ASRS has projected the amount which will be lost during the staff training period.
Mr. Gilbertson pointed out that ASRS's rate of return over the past few years is exactly the
same as the market rate -- an indication that the active managers which everyone believes are
so critical have not actually added any value.
Cochair Spitzer asked whether it is true that fixed income investments can carry as great a risk
as equity investments. Mr. Gilbertson agreed and said there is as much volatility in the fixed
income market as there is in the equity market.
In response to Cochair Spitzer, Mr. Gilbertson said that up until 1994, ASRS was locked into
investing sixty percent in equity and forty percent in bonds. He added that the legislature has
changed this to allow an eighty percent investment in equity.
Cochair Spitzer remarked that this legislation was criticized by many who did not understand
that the flexibility is necessary. He mentioned that his law firm has paid large commissions to
equity managers who have performed extremely poorly. He added that those who are quick to
criticize ASRS should take into consideration that it performs above the market rate while many
in the private sector have not clone nearly as well.
With regard to ASRS funding as of June 30, 1994, Mr. Cunningham inquired as to the assets
available for benefits. Mr. Giibertson replied that this information will be available within a
couple of months.
Mr. Gilbertson invited Committee and staff members to witness a demonstration of ASRS's
software.
Michael Carter, Actuary, Arizona State Retirement System ( ASRS), representing the Watson
Wyatt Worldwide Company ( formerly The Wyatt Companies), conducted a slide presentation
of a booklet entitled Actuarial Aspects of the Arizona State Retirement System. He briefly
reviewed information on the following subjects:
Characteristics of a Defined Contribution ( DC) Plan
Basic Types of Retirement Plans
Characteristics of a DC Plan
Joint Legislative Study Committee
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091 15/ 95
Characteristics of a Defined Benefit @ B) Plan
How the Pension Plan Works
The Plan's Time Horizon
Function of the Actuary
Actuarial Liabilities
Types of Actuarial Contingencies
Value of Contingent Benefits
Present Value and Investment Return
Concept of Present Value
Present Value and Investment Return
( Tape 1, Side B)
The Valuation Process
Actuarial Assumptions
Types of Actuarial Assumptions
The Valuation Process
Implications of Measurement Process
What Actuary Looks For
Component of Actuarial Cost
Using the Home Mortgage Analogy
( Hard copy of presentation included as Attachment 3.)
Mr. Cunningham inquired as to the maximum variance which would occur between two actuarial
firms conducting separate actuarial studies of ASRS. Mr. Carter estimated that if both
companies are supplied with identical information, their reporting should vary by only one or
two percent. He added that the recommendations should vary by only three to five percent.
Cochair King noted that actuarials price ASRS's buy- back provision for military service
extremely high. Mr. Carter replied that the cost assessed on the service buy- back provision
represents no cost to the retirement system.
David Smith, Registered Lobbyist, University of Arizona Retiree Association, gave a recap of
the retirement systems available to university professors and reported that his group is very
pleased with management of ASRS. With regard to health insurance subsidies, he said that the
requested increase of $ 30-$ 50 per month will help the individuals who chose to sign over their
Medicare benefits in favor of making their own health care decisions.
Dr. Smith shared his belief that employers should assume the actuarial cost of providing the five-percent
window.
Jack Cross, Administrator, Public Safety Personnel Retirement System ( PSPRS), Corrections
Officer Retirement Plan ( CORP), and Elected Officials' Retirement Plan ( EORP), distributed
a handout ( Attachment 4) containing a listing of his credentials and detailed information on each
of the retirement systems, and reviewed the same for the Committee.
Joint Legislative Study Committee
on State Retirement Systems
4 091 15/ 95
Senator Solomon asked whether a member of CORP could take another state job and transfer
into ASRS without penalty. Mr. Cross explained that since CORP has a higher contribution
rate, a person could transfer from CORP to ASRS without any additional cost. He added that
all four retirement systems are governed by a statute which allows for transfer among the
systems.
Senator Chastain asked if a transfer from CORP into ASRS will take into account the extra four
percent paid under CORP. Mr. Cross replied that there is no such adjustment for this difference
in contribution rates. He remarked that not many people make this type of transfer.
Senator Chastain questioned why legislators even need a retirement system since they can only
serve for eight years.
Cochair Spitzer mentioned that Senator Chesley, who was unable to attend, submitted a letter
which enters the following point into record:
Judges in Maricopa and Pima County should not be included in EORP because they
are not elected officials.
Chuck Tome, nineteen- year veteran of the Department of Public Safety ( DPS); State President,
Fraternal Order of Police ( FOP), said that as a result of legislative efforts and fund managers,
Arizona has one of the best retirement systems in the nation. He mentioned that in attending
retirement conferences throughout the country, it is often the case that conference participants
learn from Arizona's example.
Mr. Torrie noted that PSPRS protects the public servants ( e. g., fire fighters, police officers,
corrections officers) who constantly run the risk of not returning home each night. In addition,
he said that PSPRS also protects the wives, husbands and children of public servants who are
not capable of finishing the twenty- year program.
In response to Cochair King, Mr. Torrie explained that fire fighters and certain police agencies,
as groups, opted to leave the social security system.
Cochair Spitzer asked if these groups have Medicare withholding. Mr. Cross explained that
persons hired prior to 1986 do not participate in the Medicare program while those hired after
1986 must participate.
Cochair King inquired as to the rationale for opting out of the social security and Medicare
programs. Mr. Tome indicated uncertainty.
Mr. Tome requested that the FOP have an opportunity at the next meeting to submit specific
agenda items geared toward fine- tuning PSPRS.
Mike Bielecki, President, Professional Fire Fighters of Arizona, recalled that in his twenty years
as a fire fighter, he has dropped through roofs and made exits through windows in addition to
Joint Legislative Study Committee
on State Retirement Systems
091 15/ 95
being shot at. He emphasized that PSPRS was developed in the sixties when the legislature
recognized the increasingly hazardous nature of enforcing public safety.
Mr. Bielecki distributed prepared comments ( Attachment 5) with regard to the purpose and cost
of PSPRS and reviewed them with the Committee.
( Tape 2, Side A)
Senator Chastain clarified that he has no qualms over officers and fire fighters retiring in twenty
years. Senator Solomon pointed out that some teachers in kindergarten are at risk today as well.
In response to Cochair King, Mr. Bielecki explained that the Davis v. Michigan supreme court
ruling provides that the pensions of different classes of public retirees ( federal, state and local)
cannot be taxed differently. As a result, he said that the state began taxing existing and future
retirees at the state and local levels because the very costly alternative would have been to
remove the tax on federal employees.
Bev Cuthbertson, President, Arizona Education Association - Retired ( AEA- R), stated that ASRS
retirees who contributed at seven percent to overfund the system feel that their money is used
to pay the current contribution rate which creates fund inequity between current retirees and
future retirees.
Peter Dunn, Attorney, Arizona Judges' Association ( MA), mentioned that judges are members
of EORP and distributed a letter ( copy not available) which suggests specific equitable changes
within EORP.
Mr. Dunn requested that the Committee consider establishing an excess earnings cost of living
adjustment ( COLA) for EORP which will only activate when fund earnings exceed nine percent.
He further suggested that the Committee bring the EORP health insurance subsidy in
conformance with the other plans and establish a Rule 80.
Laura Krause, Employee Relations Officer, Arizona Department of Corrections ( ADC),
distributed a briefing paper ( Attachment 6) and mentioned that ADC has members in CORP and
ASRS. She explained that different positions are covered by different retirement plans and that
as ADC employees advance into different positions, their retirement credit becomes spread
between two systems and they are unable to retire as quickly. She added that the only way to
combine the two services is for the employee to either pay the actuarial present value of CORP
or ASRS, or take a reduced service credit.
Ms. Krause requested that ADC be listed on a future agenda and given an opportunity to discuss
resolutions to this problem.
In response to Senator Chastain, Ms. Krause shared her understanding that teacher salaries
within ADC are significantly lower than teacher salaries within the Department of Juvenile
Corrections. She noted that proposals are being considered for the next legislative session.
Joint Legislative Study Committee
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091 15/ 95
Ballard Bullion, Phoenix resident, representing himself, in the interest of time, offered no
additional comments to previous testimony.
Robert Stout, Parole Officer and Registered Lobbyist, representing American Federation of
State, County and Municipal Employees ( AFSCME); Coalition of Locals, Arizona Department
of Corrections ( ADC), reported that in 1996 his organizationwill propose legislation to increase
the CORP contribution rate. He mentioned that ADC often hires people over fifty and
occasionally hires the disabled and, for these reasons, requested that the disability language not
be loosened because it would be extremely detrimental to the goal of a twenty- year retirement.
Larry Wendt, Deputy Chief, Maricopa County Sheriffs Office, distributed a copy of H. B. 2451
from the previous legislative session and requested an opportunity to discuss the legislation at
a future meeting.
With regard to Davis v. Michigan, Cochair King suggested that perhaps the Department of
Revenue @ OR) will be able to provide the Committee with correct information.
Without objection, the meeting was adjourned at 12: 03 p. m.
Teresa Alvarez, secretary
( Original minutes, attachments and tapes on file in the Office of the Chief Clerk.)
Joint Legislative Study Committee
on State Retirement Systems
091 15/ 95
Attachment. C
October 5, 1995 Minutes
ARIZONA STATE LEGISLATURE
Forty- second Legislature - First Regular Session
JOINT LEGISLATIVE STUDY CO- E ON
STATE RETIREMENT SYSTEMS -
Minutes of Meeting
Thursday, October 5, 1995
Senate Hearing Room 1 - 10: OO a. m.
( Tape 1, Side A)
The meeting was called to order at 10: 13 by Cochairman King and attendance was noted by the
secretary.
Members Present
Senator Chesley
Senator Chastain
Senator Hardt
Senator Solomon
Senator Springer
Senator Spitzer, Cochairman
Mr. Armstead
Mr. Blendu
Mr. Bums
Mr. Cunningham
Ms. Daniels
Mrs. Foster
Mr. King, Cochairman
Members Absent
Senator Bums
Speakers Present
Randie Stein, Research Staff Director, Arizona State Senate
Don Isaacson, Attorney, representing State Fraternal Order of Police ( FOP)
Laura Krause, Employee Relations Officer, Arizona Department of Corrections ( ADC)
Dr. Robert Letson, representing University of Arizona Retirees Association, Tucson
Pete Dunn, Attorney, representing Arizona Judges Association
Bev Cuthbertson, representing Arizona Education Association
Edith Christy, representing Arizona Retired Teachers Association
Ronald Murphy, State Legislative Chairman, Arizona Retired Teachers Association
Joseph Young, representing himself, Tempe
Kevin McCarthy, President, Arizona Tax Research Association ( ATRA)
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
OCTOBER 5, 1995
Ed Wren, representing Arizona Highway Patrol Association
Lany Wendt, Deputy Chief, Maricopa County Sheriffs Office ( MCSO)
Robert Stout, Parole Office, representing American Federation of State, County and Municipal
Employees ( AFSCME) Coalition of Locals in the Arizona Department of Corrections
( ADC)
Mike Bielecki, President, Professional Fire Fighters of Arizona
Sergeant Chuck Tome, Arizona Department of Public Safety @ PS); President, State
Fraternal Order of Police ( FOP)
Scott Simmons, Chairman, Arizona Fraternal Order of Police ( FOP) Political Action Committee
( PAC)
Guest List ( Attachment 1)
Randie Stein, Research Staff Director, Arizona State Senate, noted that a sunset review
document was distributed to the members' offices yesterday. She indicated that sunset review
hearings were held on the following agencies earlier in the week:
Arizona State Retirement System ( ASRS): The four findings of
the Auditor General's Office were presented and discussed. The
Director of ASRS, LeRoy Gilbertson, was present to respond to
questions. A recommendation was made by the committee that the
agency be continued for another ten years.
Public Safety and Personnel Retirement System ( PSPRS) and the
Elected Officials Retirement Plan ( EORP): The findings for these
systems were reported together by the Auditor General's Office
and discussed together by Jack Cross, Administrator. A
recommendation was made by the committee to continue the two
agencies for ten years.
In conjunction with that, the committee recommended that auditing of the Corrections Officer
Retirement Plan ( CORP) be placed on the same cycle as the others.
Ms. Stein relayed the charge of the Joint Legislative Study Committee on State Retirement
Systems.
Cochairman King reminded everyone that not too long ago an article was written, and public
service TV had a presentation, showing that other states in the country are having problems with
their retirement programs, but, he added, Arizona is not one of them. He opined that the state
has been very fiscally responsible with its retirement investments.
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
2 OCTOBER 5, 1995
Don Isaacson, Attorney, representing State Fraternal Order of Police ( FOP), addressed the
committee ( Attachment 2). He answered questions of Senator Chesley and Senator Solomon
concerning his testimony.
Mr. Isaacson stated that CORP is part of an overall strategy to decrease turnover and increase
professionalism within the Arizona Department of Corrections ( ADC) as well as in the
Corrections Departments in the counties. He said he met with Jack Cross and they determined
that the strategy that applies to pensions and increases in salaries has lengthened the average
term of employees in ADC. He noted that last year the Legislature appropriated $ 8 million in
an effort to upgrade positions within ADC and create more supervisory positions to provide
more career opportunities for Corrections Officers.
He opined that PSPRS is a good, generous, and sound system. He explained that CORP is a
retirement system for prison guards who were entitled to be in the public safety system but were
never funded. He surmised that this may have been due to the cost. He noted that the CORP
system was developed by former Representative Jim Ratliff; it was intended to be a system
halfway between the PSPRS and ASRS. He said the original minutes from meetings in which
CORP legislation was passed stated that it was implemented to increase professionalism, reduce
turnover, reduce turnover costs, etc. He added that Mr. Ratliff hoped that in time the system
would be built up to become more like PSPRS.
Mr. Isaacson noted that the accrual rate of benefits in PSPRS is 2.5 percent per year. In CORP,
it used to be 2 percent per year and has been raised to 2.2 percent. He suggested that
consideration be given to increasing the accrual rate in CORP so that it is similar to the rate in
PSPRS. He indicated that although there have been some successes due to the changes he has
mentioned, there is still a high turnover rate, and this would help. He said he met with Jack
Cross who indicated that if the accrual rate is changed to 2.5, the system would remain 100
percent funded.
Cochairman King reminded the committee that the Davis v. Michirzan De~ artment of Treasury
decision was an all inclusive one, and because of a malfunction between the Department of
Revenue ( DOR) and those who pay taxes, not all of the federal employees ( about 20,000)
received their tax benefits. He said an effort will be made this year to insure that those people
do receive them. He noted that one of the caveats of the Supreme Court decision was that the
state will raise no false barriers to providing tax equity.
Laura Krause, Employee Relations Officer, Arizona Department of Corrections ( ADC), provided
several suggestions relating to CORP. She explained that approximately 80 percent of ADC
employees are in CORP, and 20 percent are in ASRS. Because employees move from one to
the other receiving credit in both systems, they are not able to retire as expected. She asked that
consideration be given to the following proposals:
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
3 OCTOBER 5, 1995
Allow employees in that situation to transfer credits from one
system to the other with little cost or activation of a monthly
payment plan.
Allow some flexibility in statute so that employees moving back
and forth are not required to participate in one of the retirement
systems.
Allow retirement eligibility to be determined by the combined
years of service in ASRS and CORP; maybe a check could be
issued by both systems.
Include chaplains and librarians in the CORP plan.
Provide a monthly payment plan for employees who want to buy
back military service for incorporation in CORP.
Permit sick leave balances to be used toward retirement eligibility.
Ms. Krause clarified for Senator Springer that chaplains and librarians have direct inmate contact
with prison inmates on a regular basis, and there are approximately 30 employed by ADC.
Senator Springer speculated that chaplains and librarians are well protected when they are in
contact with a prisoner. She said she has not heard of any incidents involving their personal
safety.
Senator Chastain stated that he introduced a bill two years ago in the House to allow chaplains
and librarians in CORP. There was some discussion but the bill was not heard. He said that
salaries of teachers in the prison system average around $ 10,000 a year less than that of teachers
in the regular system which does affect the retirement system. He stated that this should be
reviewed.
Dr. Roben Letson, representing University of Arizona Retirees Association, Tucson, reviewed
a handout concerning suggestions relating to ASRS ( Attachment 3). He answered questions of
the hlembers concerning contribution rates, excess earnings, and an annuity option.
( Tape 1, Side B)
Mr. Cunningham noted that Dr. Letson was designated by the Dean of the College of Education
as the representative for the legislative intern program and was responsible for recruiting very
qualified and competent people to serve in the Legislature. He commended him for his efforts
In that capacity.
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
4 OCTOBER 5, 1995
Pete Dunn, Attorney, representing Arizona Judges Association, stated that in 1985 the Judges
Association Retirement Plan was merged with the Elected Officials Retirement Plan ( EORP).
He noted there has recently been some discussion about separating the two groups. He offered
suggestions to bring these plans into conformity with the other- plans:
Reinstate the excess earnings Cost- of- Living Adjustment ( COLA)
in the EORP ( which includes judges).
Increase the health insurance subsidy which is presently $ 60 and
$ 25 to the level of ASRS. These retirees are facing horrendous
health insurance costs and should be given the same level of
subsidy as ASRS retirees.
Provide a Rule of 80, i. e. if the employee's age and years of
service total 80, the employee can assume normal retirement.
Senator Spitzer assumed the Chair.
Senator Spitzer noted that judge participation in the combined plan is difficult because elected
officials are reluctant to enhance benefits that will provide an advantage to them. He asked how
many of the Association members are attorneys in private practice with vested rights under their
law firm pension plans, and how many are in government service, either state or federal, and
participate in a state or federal plan in addition to accruing benefits under EORP during tenure
on the bench.
Mr. Dunn said he can provide those figures. He noted that more and more public sector lawyers
are becoming judges as opposed to those in the private sector. He recognized the problem of
having judges in EORP, and explained that in 1985 the judges' plan was substantially overfunded
and EORP was substantially underfunded so the two were combined. He expressed a desire to
discuss separation of the two plans.
He explained to Mr. King that the excess earnings COLA provision expired in June of 1994, and
a committee chairman in that session chose not to hear a bill that would extend it.
Senator Spitzer asked Mr. Dunn to compile a representative profile of the Association's
membership with a recommendation as to whether or not it is in judges' long- term interest to
remain in EORP or if they should enroll in ASRS. Mr. Dunn agreed to provide that
information.
Bev Cuthbenson, representing Arizona Education Association, read from a prepared handout
relating to ASRS ( Attachment 4).
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
5 OCTOBER 5, 1995
Edith Christy, representing Arizona Retired Teachers Association, reviewed a handout regarding
ASRS ( Attachment 5). She pointed out that the last two pages show that in 1990 when the
contribution rate was 2 percent, it did not begin to cover the benefit payments. She noted that
the Retirement Board and Advisory Council have made good investments and should be given
credit for that.
Senator Spitzer pointed out that the chart showing the gap between benefits and contributions
does not reflect income earned by the system.
Ms. Christy added that her husband retired in 1975, and she retired in 1977; they both took out
ten- year certain. He died in 1982 ( five years after retiring) so she received his benefits for five
more years. She noted that her benefits are lower than his, and she no longer has the assistance
of his retirement pay. She expressed interest in Dr. Letson's " pop up" provision for other
people in the same situation.
Ronald Murphy, State Legislative Chairman, Arizona Retired Teachers Association, spoke in
support and appreciation of the presentations given by Ms. Cuthbertson and Ms. Christy. He
said the habit of toying with contribution rates in the retirement system fund from going to a low
of 2 percent, to 3.5 to 3.75 percent in recent years, combined with intermittent special windows
for early retirement opportunity, seemed to be convenient ways to offset the fiscal impact of
projected revenue for the state but they are actually inequities. He opined that an actuarially
sound rate should be established and remain fairly stable to allow retirees now and in the future
to meet inflation and health needs that they might encounter.
( Tape 2, Side A)
Kevin McCarthy, President, Arizona Tax Research Association ( ATRA), opined that the ASRS
and PSPRS are both sound systems. He opined that equity across the systems is not needed.
If there is a need to have better benefits in the PSPRS, those benefits do not need to apply to
the ASRS if it is not needed.
He said a great change would be to have retirement bills go through the Appropriations
Committees. He said it is amazing that the Appropriations Committees can be grieving over
$ 200,000 on an issue while the Finance or Government Operations Committees are passing
retirement changes which, because they do not have to be prefunded, might result in first- year
employer costs in excess of $ 1 million.
Mr. McCarthy suggested that the members read the performance audit on the ASRS, noting that
the presentation to the sunset committee pointed out that the days of providing benefit increases
for free are over; so are the days of low actuarial rates. He said even if future benefit increases
are not passed, escalating employer rates for the systems can be expected.
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
6 OCTOBER 5, 1995
Discussion followed between Mr. McCarthy and the members regarding his testimony.
Ed Wren, representing Arizona Highway Patrol Association, submitted that the lives of the
people in the PSPRS system are in danger every day which makes it a unique system. He said,
unfortunately, there have been several deaths this year.
He noted that about half of the widows and widowers married to police officers or fire fighters
do not have social security. He stated that a $ 750 check for sick leave is given to state
employees upon retirement; it does not matter how many hours of sick leave have been
accumulated. He added that most of the cities give a lump sum check based on a certain
percentage of the number of remaining sick leave hours. He suggested that it would be fair to
provide one extra year of retirement for those in the PSPRS who retire after 20 years without
using sick leave. He said this would not affect the state budget.
Mr. Wren stated that currently an employee of the State of Arizona who quits or retires can
remain with their health plan or enter a plan which is contracted by the state. He suggested that
a window be provided to allow for a change in health care.
Larry Wendt, Deputy Chief, Maricopa County Sheriffs Office ( MCSO), noted that legislation
introduced last year was part of a financial recovery proposal for Maricopa County. He said
it dealt specifically with a three- year retirement window for the Sheriffs Office which is similar
to the retirement window offered as part of Project SLIM and the state financial recovery plan
a few years ago.
He acknowledged that Maricopa County has had financial difficulties over the last few years.
He said generally the younger, newer officers go to other police agencies that are in better
financial condition. Because of that, in an organization like the Sheriffs Office, there are a
large number of employees who are at the top of their pay scales because they have been there
for many, many years. This results in a law enforcement agency which is a bit top heavy. It
was proposed that the higher- paid senior officers and ranking employees be enticed out of the
Sheriffs Office with a retirement incentive and replaced with entry level patrol deputies at lower
salaries. This proposal was presented to the Maricopa County Board of Supervisors and
approved. He anticipated that between $ 1.6 million and $ 3 million annually will be saved. He
added that it will not reduce the amount of police service or affect the county retirement system
( which is overfunded). He said the county will be required to reimburse the retirement system
100 percent for any employee who leaves. He indicated that this is a viable economic recovery
plan and a good way to reduce staff in the Sheriffs Office effectively.
Mr. Wendt indicated to Senator Chesley that the Sheriffs Office does not have retired deputies
working part- time in any capacity. He explained to Mr. Bums that in order to avoid the same
situation in the future, all Major positions have been eliminated as these employees have retired,
JOINT LEGISLATIVE STUDY C0MMIll" EE
ON STATE RETIREMENT SYSTEMS
7 OCTOBER 5, 1995
and the number of Captain's positions has been reduced. The number of Lieutenant positions
has also been reduced, and no promotions have occurred among the staff for the last two years.
Robert Stout, Parole Officer, representing American Federation of State, County and Municipal
Employees ( AFSCME) Coalition of Locals within the Arizona Department of Corrections
( ADC), said that generally state employees who retire do not receive a $ 750 check unless at least
1,000 hours of sick leave have been accrued. He said this equates to 75 cents per hour, and
after the Internal Revenue Service ( IRS) receives its portion, it amounts to about 40 cents per
hour.
He indicated that in the late 1970' s, there were a couple of librarians killed in a prison escape
in Texas. He said CORP covers at- risk employees which means those behind the walls who are
subject to attack, rape, or murder. He noted that only three staff members have been murdered
during his period of service. The work is not quite as deadly as that of police officers; however,
the turnover rate does explain quite a bit about the nature of the work and the environment. He
contended that spending eight hours per day working with the most dangerous criminals in
Arizona is very stressful, and after 22 years, most people are a basket case.
Mr. Stout commented that CORP was established because FOP and DPS did not want ADC in
their retirement system because they feared that it would cost too much money. He indicated
a long- term goal to have 2.5 percent for each year of service and eventually going to 20- year
retirement. He opined that this is not unreasonable and will actually save money in the constant
recruitment, investigation, and training of new employees. He opined that the money in CORP
is owned by the employees. He indicated that with the recent performance in the stock market,
there is a distinct possibility that CORP will be sufficiently funded over 100 percent to go from
2.2 to 2.5 percent for each year of service. If not, less will be sufficient, and efforts will still
be made to make gradual improvements while keeping the system funded at 100 percent.
He clarified for Mrs. Foster that CORP generally covers people behind the walls and parole
officers working directly with people on parole or other forms of being in the community. The
only groups left out at this point are chaplains and librarians and a few secretaries. Quite often
those secretaries work in the central office in Phoenix, and some of them do not really want to
be in CORE because they are not frequently working behind the walls.
Mike Bielecki, President, Professional Fire Fighters of Arizona, stated that the PSPRS is a
valuable system, and the changes that have been made over the years have been of benefit. He
said the actuaries have calculated cost figures which have been affixed to every retirement bill,
and most of the changes that have been made have been absorbed through increased earnings of
the system above the assumed yield of 9 percent.
He spoke in support of the hold harmless concept conveyed by Mr. Isaacson noting that it is an
issue created from a court decision which affected systems nationwide. He said there was a
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
8 OCTOBER 5, 1995
desire in a bill introduced last year to review increasing widows' benefits to seventy- five percent
from the current two- thirds percent. He stated that most of the survivors are older and do not
have the means to keep up with the cost of living and asked that this be considered.
Sergeant Chuck Torrie, Arizona Department of Public Safety ( DPS); President, Fraternal Order
of Police ( FOP), stated that the people in FOP are very happy with the retirement system. He
said he is also affected by the hold harmless clause and he would like to see that carried out.
He pointed out that almost 100 percent of fire fighters do not contribute to the social security
fund so the retirement from PSPRS is the sole retirement they receive. There are also a great
number of police officers who do not contribute to social security1FICA.
( Tape 2, Side B)
Senator Spitzer indicated that federal law prohibits fire fighters from paying into social security.
Sergeant Tome asked that consideration be given to the issue of increasing the minimum
payment to retirees from $ 1,000 to $ 1,200.
He referred to A. R. S. 38- 844 ( B) for the committee's consideration. He explained that this
statute currently precludes fire fighters or police officers from obtaining a medical or other
disability retirement after their normal retirement date of 20 years. He related a scenario in
which he has 19 years with the department and tonight at midnight will be his 20- year
anniversary. At 11: 30 p. m., he receives a call to respond to an officer down. He drives at a
high rate of speed, loses control of the vehicle, and loses an arm. Because he has not yet met
his 20- year retirement date, he is eligible for and would receive a medical disability retirement
which has many benefits ( includes COLA, tax break from federal government, etc.). If the
accident happened 30 minutes later, he is not qualified for any of that, only for a normal
retirement. He submitted that the employer is going to lose a wealth of experience when officers
realize that it is not productive for them to stay out on the highway after 20 years.
Sergeant Torrie pointed out that even though the employee would not be eligible for medical
disability according to statute, the statutes do show how the benefit is computed if an employee
is in the department in excess of 20 years.
Cochairman Spitzer indicated that he would like staff to prepare a response to this and distribute
11 to all members of the committee.
Sergeant Torrie related that this issue was brought up by a real- life incident which occurred
about three weeks ago. He clarified for Cochairman King that an employee can stay on active
duty beyond 20 years, but after that, he is not eligible for disability.
JOINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
9 OCTOBER 5, 1995
Scott Simmons, Chairman, Arizona Fraternal Order of Police ( FOP) Political Action Committee
( PAC), testified that the counties in Arizona experience a tremendous attrition rate which
translates in loss of millions of tax dollars from many hard- working taxpayers; Maricopa County
and Pima County are the hardest hit. He said Maricopa County spends $ 1 million per year due
to attrition of corrections officers, and Pima County spends $. 5 million per year. He asked that
the counties be allowed to decide at the county level if it is in the best interest of that county to
move its corrections officers into the PSPRS with that particular county absorbing the cost. He
reminded everyone that each group in public safety retains its own separate account within public
safety.
He noted that corrections officers are locked in day after day with criminals brought to them by
street officers. Their lives are constantly in danger, and they are subject to physical assaults.
He said he is 43 and has suffered many minor injuries, as well as two major injuries, and he still
has to contend with the inmates day after day.
Mr. Cunningham requested that a spreadsheet be prepared by the staff listing all of the changes
requested by the various groups at this meeting, and showing the current law. The members
agreed to hold another meeting.
Cochairman King insisted that the list prepared by staff be limited to 10 to 12 possible changes.
Without objection, the meeting adjourned at 1 : 10 p. rn.
( Attachments and tapes are on file in the Office of the Chief Clerk.)
JQINT LEGISLATIVE STUDY COMMITTEE
ON STATE RETIREMENT SYSTEMS
10 OCTOBER 5, 1995
Attachment. D
October 26, 1995 Minutes
ARIZONA STATE LEGISLATURE
Forty- second Legislature - First Regular Session
Interim Committee Meeting
JOINT LEGISLATIVE STUDY COIUMITTEE ON
STATE RETIREMENT SYSTEMS
Minutes of Meeting
Thursday, October 26, 1995
House Hearing Room 2 - 1 : 30 p. m. /
TAPE 1, SIDE A
Cochair King called the meeting to order at 1: 40 p. m. and the secretary called the role.
Members Present
Senator Brenda Bums
Senator Robert Chastain
Senator Larry Chesley
Senator A. V. " Bill" Hardt
Senator Ruth Solomon
Senator Carol Springer
Representative Robert Bums
Representative George Cunningham
Representative Lori Daniels
Representative Kathi Foster
Senator Marc Spitzer, Cochair
Representative Ned King, Cochair
Members Absent
Representative David Armstead ( excused) Representative Robert Blendu ( excused)
S~ eakersP resent
Lisa Barnes, Majority Research Analyst, Arizona House of Representatives
Tom Finnerty, Legislative Liaison, Arizona State Retirement System ( ASRS)
Randie Stein, Research Director, Arizona Senate
Scott Smith, Legislative Liaison, Arizona Department of Corrections ( ADC)
Ken Gerbemy, Secretary/ Treasurer, Maricopa County Deputies Association
Don Isaacson, representing Fraternal Order of Police ( FOP)
Bev Cuthbertson, President, Arizona Education Association ( AEA)
Jeny Doll, representing himself, Mesa
Moyne Jamison, Chair, Legislative Committee, Phoenix Retired Teachers Association
Chuck Tonie, State President, Fraternal Order of Police ( FOP)
Guest list ( Attachment 1)
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10126195
Cochair King thanked House and Senate staff for their in- depth research efforts in compiling
information for Members. By understanding the issues and some of the problems, he said the
Committee can then address the inequities that consistently exist in the various systems.
Cochair Spitzer concurred with Cochair King's statements. He outlined the agenda for today's
meeting: an explanation of the issues, discussion, and concluding with testimony. He said he would
like to see a discussion in order to frame a debate for next session. In the past, legislation has been
drafted to include all the systems. He said that consideration might be given to drafting legislation
for each system.
/
Mr. Chastain asked if the plan is to wait until next session to introduce legislation, who will make the
recommendations and is the Committee charged with making recommendations. Cochair King
advised that Members are free to make any recommendations they desire.
In response to Mr. Chesley's query, Mrs. Barnes replied that a report from the Committee is due on
October 3 1.
PRESENTATIONS:
Lisa Barnes. Ma- iority Research Analvst. Arizona House of Representatives, called attention to the
handout on retirement proposals ( Attachment 2). She noted that the charts are in order of statutory
items of which the Committee is charged. The charts show the proposals submitted during public
testimony at previous meetings for each of the four State retirement systems: Arizona State
Retirement System ( ASRS), Public Safety Personnel Retirement System ( PSPRS), Corrections
Officer Retirement Plan ( CORP), and Elected Oficials Retirement Plan ( EORP). She advised that
she and Randie Stein, Senate Research Director, will review each of the proposals. There are
comparison charts of each of the four systems in the binder on the State Retirement Systems which
was distributed at the September 15, 1995 meeting and filed in the Chief Clerk's Office with the
minutes of the meeting. In addition to comparison charts, the binder contains narrative and discussion
of each of the sections, as well as an historical recap.
Mrs. Barnes reviewed the proposals ( Attachment 2).
Retiree health insurance program and premium subsidy amounts
Mrs. Barnes noted that under All SystedOther, there were recommendations to equalize the subsidy
amounts across all four systems and to open another window.
Mr Chesley asked whether these are defined benefits. Mrs. Barnes replied in the affirmative. In
response to Mr. Chesley, Mrs. Barnes explained that a defined benefit plan is calculated based on
yean of service, salary and a multiplier. The pension amount for a defined contribution is calculated
on salary and investment earnings.
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10/ 26/ 95
Mr. Chesley stated that he will not support any bill containing a provision for windows. He asserted
that he does not believe they do the State a good service.
To that point, Cochair Spitzer told Mr. Chesley that he is not sure the referred window is something
to which he would object.
Mr. Cunningham asked what the economic impact is of increasing the medical subsidy by $ 30.
Tom Finnerty. LePjslative Liaison Arizona State Retirement Svstem [ ASRS), answered that the latest
dormation is two years old, the last time an actuarial study was conducted. To present current data,
another actuarial study will have to be made.
Mr. Chesley asked what the number was two years ago. Mr. Finnerty said he believes it increased
the contribution rate fiom 3.36 to 3.60.
Mr. Chastain commented that the four medical plans are all different. He recommended that they
should be equal. He said he would like to incorporate in a bill provisions for preMedicare and
Medicare eligible, and set the amounts the same by bringing all the plans up to the highest amount.
Ms Solomon stated that she does not object to giving everybody more but because of the nature of
the types of jobs, it is appropriate that there be differences. She said she is not sure that it is in
anyone's best interest to make the plans equal. Before considering such a recommendation, she said
she would like to have more information on cost comparisons relating to benefits and costs.
Cochair Spitzer concurred with Mrs. Solomon's comments. The systems are different, the nature of
the employees are different, and the contribution rates are different. A subsidy increase would
substantially increase the contribution rate for active members as well as impose a greater obligation
on government He stated that there should be fairness within the system. Each system should be
farr, however, fair does not mean equal, it means equity. Equity and equality mean two different
things
Sir Chastain brought up the fact that the hnd was built up by employee contributions of seven
percent Now that the hnd is built up, the current rate is about four percent. He said this might be
taken into consideration in this debate.
Cochlilr Spitzer responded that an expensive new program may be counterproductive.
bin Solomon asked whether there is any additional cost in excess of the $ 65 paid currently by the
fund once a beneficiary is eligible for Medicare and is a member of an Health Maintenance
Orgmzatron ( HMO).
Slr Ftnneny answered in the negative. He said that with the new contracts effective January 1,
anyone who is Medicare eligible and who is receiving a subsidy or premium benefit, will not be
paying more than the amount of the premium benefit.
J O N LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10126195
Minimum benefit amounts
Mrs. Barnes advised that the proposal to increase the PSPRS benefit would result in the benefit
amount being double that of the ASRS benefit. Proposals submitted to change ASRS are: ( 1) base
the minimum benefit on the years of sewice, ( 2) recalculate benefits to current purchasing power, and
( 3) recalculate all retirees' benefits if the two percent multiplier is increased.
TAPE 1, SIDE B
Mr. Chesley said he is not opposed to considering a plan to bringing someone up who retired 20 years
ago, but he said he is opposed to bringing them up to purchasing power. He stated that it will be too
costly.
Mr. Cunningham commented that current law is that the minimum benefit is $ 600 for a person who
reaches age 75 with a minimum 20 years of service. He expressed concern that a person who serves
less gets cut off and receives no minimum. He said he is exploring an approach where a percentage
amount will be used to calculate the minimum benefit for someone with less than 20 years of service
who is under 75 years of age.
Mrs. Burns opined that there is a lack of incentive to stay in the system if there is very little variation
in the number of years served.
Randie Stein. Research Director. Arizona Senate, advised that in the past, there have been proposals
for 15 years of service and 10 years of service. None of these proposals attained fruition.
Mrs Solomon pointed out that at the time of those proposals, very few people were involved and the
fiscal impact was very small.
Xis Stein concurred. She noted the figures which were complied at that time are not valid now since
the hnding method was changed in 1994.
Qualifications for normal and early retirement
Xis Stein rmiewed current retirement eligibility
ASRS - Normal retirement at age 65; at age 62 with ten years of credited service, or when
age and cred~ tedy ears of service equal 80 Early retirement at age 50 with at least five years
of credited service.
PSPRS - No provision for eariy retirement. Normal retirement upon completion of 20 years
of senice or at age 62 with 15 years of service.
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10/ 26/ 95
CORP -- No provision for early retirement. Normal retirement with 25 years of credited
service; at age 62 with ten years of credited service or when age and credited years of service
equal 80.
EORP - Normal retirement at age 65 with five years of credited service; at age 62 with ten
years of credited sexvice; or age 60 with 25 years of credited service. Early retirement at age
50 with ten years of credited service and must cease to hold office as an elected official. ,
Ms. Stein advised that ASRS proposals include: ( 1) retaining the existing criteria, and ( 2)
recalculation of all retirees' benefits if criteria are changed. A recommendation to changing CORP
to 20 years instead of the current 25 years was received, as well as a proposal to introduce a Rule of
80 points for EORP, instead of the current 85.
Mr. Chesley questioned why everyone is under the Rule of 80 except judges and elected officials.
Ms. Stein advised that all of the systems started with 85 and have come down.
Formulas used to calculate retirement benefits
Ms. Stein advised that the monthly benefit amount is 2 percent of the average monthly compensation
multiplied by years of credited service; the PSPRS multiplier is a 2.5 percent formula; the formula
used for CORP is 2.2 percent; and under EORP, 4 percent is the multiplier for credited service.
Proposals submitted include the following: ( 1) allowing unused sick leave to accrue as credited
service for PSPRS, ( 2) increasing the multiplier from 2.2 percent to 2.5 percent for CORP, and ( 3)
equalizing the multipliers for all the systems.
Post- retirement benefit increases
Ms. Stein noted that the provision for post- retirement benefit increase was enacted by ASRS in 1994.
To qualifjl, individuals must be at least 65 years of age and have been receiving benefits for at least
one year. She said it is considered to be an excess- earnings COLA. Excess- earnings that are not
used in a given year are available for the excess- earnings amount in the following year.
ASRS recommendations are to use excess earnings above eight percent and also to place the entire
surplus into the hnd available for providing the COLAS. There is no post- retirement benefit program
for elected officials. A proposal was submitted to reinstate the COLA provision for EORP.
Cochair Spitzer reiterated that in a defined contribution plan, the risk of asset performance and rate
inflation is on the contributor to the plan. In a defined benefit plan, the risk is on the State. The idea
of a COLA is an effort to balance, where all the risk does not fall on one or the other. Other
considerations include the interest of the active members versus the interest of the retirees, and the
interest of governmental employers versus employees. He cautioned against a plan which pays out
all the earnings in one year and leaves no excess earnings for the next year's retirees.
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10/ 26/ 95
In reply to Mrs. Solomon, Mr. Fimerty advised that COLAS are received in January, retroactive to
July. He explained that two checks are received; the regular benefit with the increase associated with
the COLA and a second check that covers payments that should have been made from July 1 through
December 31 without interest added on to that amount. Mrs. solomon asked why the benefit is
withheld for that six- month period. Mr. Finnerty answered that it relates to determining the exact
amounts of money that are available. Mrs. Solomon suggested that speeding up the payment might
be something the Committee might want to consider.
Mr. Kinnerty advised that the COLA increase this year will be $ 14.28 for each year of credited
service, an increase'of last year's $ 8.00.
Mr. Cunningham asked Cochair Spitzer whether using excess earnings above eight percent would
violate the fairness concept.
TAPE SIDE A
C o c h Spitzer opined that excess earnings of nine percent does not endanger the actuarial soundness
of the fimd; however, he said he cannot say that eight percent is wrong. Additional study is needed.
Transfer provisions between state retirement systems
Mrs. Barnes advised that under current law, members of any of the four State retirement systems
may transfer all or part of their credited service to their current retirement system upon mutual
approval of the affected systems.
Recommendations have been received under CORP to allow the Department of Corrections Director
to approve exceptions to CORP membership, and to provide a retirement mechanism for ADC
employees with credited service in CORP and ASRS.
Mr. Cunningham stated that he believes this provision is the most deserving of consideration to
achieve equity and balance.
Cochair King agreed with Mr. Cunningham's statement.
In response to Mr. Chesley, Mr. Finnerty explained the different ways a person can transfer from one
retirement system to another. Mr. Chesley said he concurs with Mr. Cunningham that this is one of
the issues that is important on a fairness basis.
Mr. Chastain commented that his constituency includes the Florence area and he knows of many
instances where there have been problems in transfers. He said that he definitely believes changes
should be made to address problems associated with transfers.
Cochair King said he believes that CORP needs to be restructured. One of the criteria for inclusion
in the system is contact with prisoners. Some people have been overlooked. ADC would like to
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10/ 26/ 95
include librarians and chaplains. He asked the ADC legislative liaison to read the list of people who
are currently under the CORP system.
Scott Smith. Leszislative Liaison. Arizona Department of Corrections ( ADC), said that included in
the CORP program are individuals who work in food sexvice, nursing, physicians assistant therapists,
corrections dental assistant hygienists, teachers and investigators, program officers, behavioral health
treatment unit managers, medical assistants, corrections senice officers, deputy wardens, assistant
deputy wardens and superintendents.
The policy of providing " tax equityhold harmless" benefit increases in response to the
taxation of pension income
Mrs. Barnes provided historical background. She said that in 1989, the United States Supreme Court
ruled in Davis v. Michigan that states could not discriminate in the taxation of government pension
incomes. Further, income tax exemptions offered by states to retired state and local employees were
discriminatory if similar exemptions were not also offered to federal retirees. At that time, Arizona
was taxing federal civil service pensions above $ 2,500 and fully taxing military pensions, but did not
tax state and local government pensions.
In response to the Supreme Court decision, the Legislature amended the income tax law regarding
pension taxation so that all federal, state and local pensions received an income tax deduction of
$ 2,500. The Legislature also granted retirees of the four state retirement systems tax equity benefit
increases to help offset pension income taxation.
Mrs. Barnes advised that proposals received include the following: continuing the policy of providing
tax equity benefit increases, exempting federal, state and local pensions fiom taxation, applying tax
equity benefit increases equally, and increasing the tax pension deduction from $ 2,500 to $ 15,000.
. .
In response to a request received for a legal opinion as to the state's liability under a change in the
tax law, Legislative Council provided the following Opinion: While there is no Arizona case law, it
appears that the Legislature is not required to compensate State retirees for changes in the tax status
of retirement benefits. The Constitution prohibits the Legislature fiom contracting away its taxation
authority; therefore, the tax exempt status of retirement benefits is not a vested right.
In answer to Mr. Bums' query as to how the tax exemption benefit in these plans compares to the
private sector plans, Mrs. Barnes replied that the Supreme Court decision dealt with government
penslon Income.
Cochair King stated that Davis v. Michigan is the law of the land which says that there will be no
barriers to repaying federal retirees. He reminded Members that the Department of Revenue has done
just that and he said he would like to see it undone.
Defined benefit versus defined contribution retirement plans
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10126195
Ms. Stein explained the difference between defined benefit and defined contribution plans. Under a
defined benefit program, the benefit is a formula that is in statute. Once an eligible employee reaches
retirement status, the formula is used to calculate the benefit. What is fixed is the benefit. Under a
defined contribution plan, the amount that the employee remits to the system is fixed. At the time
the employee retires, the amount of the benefit is dependent upon the contributions as well as interest
accrued.
Ms. Stein stated that the difference between the two plans is who bears the risk. Under the defined
benefit program, the risk is borne by the entity providing the benefits. Under the defined contribution
program, the risk is borne by the employee and is directly related to the investment performance.
Currently all four systems are under the defined benefit plan. A very small number, perhaps 200
individuals, are under an old plan of defined contribution.
Cochair Spitzer reminded Members that this issue is one that the Committee was charged with
looking into.
Cochair Spitzer asked whether it would be economically and financially possible to create a system
where an individual could elect to stay in a defined benefit plan or in a defined contribution plan. Mr.
Finnerty said it would be possible, depending on the type of program that would be set up. He opined
that it probably would not be in the best interest of any employee to enter into a defined contribution
plan because of the existing low contribution rate in the defined benefit plan.
Cochair Spitzer said that some individuals have expressed dissatisfaction with how the Legislature
is handling the pension plans and would like the opportunity of electing to belong to a defined
contribution plan. Consideration might be given to this option; however, he said he would not
support any proposal to eliminate the defined benefit plan.
Mr Chastain asked if this is not already king done in the university system. Mr. F i ~ e r t yst ated that
at the time of employment, an individual can make a choice whether to go into an optional retirement
program or go into ASRS. This is for new faculty and administrators.
Members agreed to skip the issue of early retirement incentives (" windows".)
Other issues proposed for consideration by the Committee
Mrs. Barnes reviewed other issues that did not fit into the aforementioned categories:
ASRS -- ( 1) require financial disclosure by BoardAnvestment Advisory Council ( IAC)
members, ( 2) pay at least normal cost in employee/ employer contributions, and ( 3) extend
pop- up option to retirees who elect period certain and life annuity benefit options.
PSPRS -- ( 1) increase suniving spouses pension from two- thirds to three- fourths of
member's pension, and ( 2) allow disabled retirement eligible employees to take a disability
pension.
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10126195
TAPE 2, SIDE B
Relating to the disabiity issue, Mrs. Barnes said that when an individual in public safety with 20 years
of service is disabled, he must take a retirement pension and not a disability- pension.
Cochair King asserted that this is really an inequity issue that should be looked into.
CORP - ( 1) allow prison chaplains and librarians, currently in ASRS, to join CORP, and ( 2)
allow county detention officers, currently in CORP, to join PSPRS.
EORP -- ( 1) separate judges from the program.
All Systems - ( 1) extend statute of limitations for federal retirees' income tax claim, and ( 2)
modify military buy- back conditions.
Mr. Cunningharn expressed opposition to the financial disclosure requirement by Board and IAC
members. He said he is working on an approach that tries to preserve the privacy of these individuals
while having some financial disclosure.
Cochair King commented that the financial disclosure form does not reflect the morality nor ethics
of the person.
klrs Solomon commented that accounting of in- house investments is done only once a year. She said
those who contribute to the hnd need to have some assurances that the individuals who are making
recommendations are not profiting From those recommendations. She noted that Mr. Cunningham
is looking at ways to protect privacy, and if he can accomplish that, Members should look at his
proposal
Cochair Spitzer declared that all four systems have been well managed, all four systems have achieved
higher rates of return than those achieved in the private sector, Board and IAC members are liable
for any transgressions under the law, and the Senate confirms the individuals. He stated that the
current sqrtern works very well and he said he is very reluctant to make changes that would harm the
Interests of the retirees and the State.
Sir Chastain asked whether the pop- up option under ASRS has expired or is about to expire. Ms.
Stein explained that this option is currently available for retirees selecting the joint and survivor
optlon The proposal is to extend it to retirees who elect period certain and life annuity benefit
optlons
Ken Gerbenv. SecretarvTTreasurer. Maricopa Countv De~ utiesA ssociation, distributed proposed
amendments to the CORP system ( Attachment 3 and 4). He explained that the proposals would
correct inequities in the system: ( 1) if an officer is injured in the line of duty while accompanied by
an mmate. the officer can collect disability retirement, if the officer is injured but not in the company
J O N LEGISLATIVE STUDY COMMITTEE ON
STATE RETIREMENT SYSTEMS
10/ 26/ 95
of a prisoner, the officer cannot collect disability retirement, and ( 2) benefits are based on base pay
contributions; all other systems compute benefits on gross pay.
Mrs. Burns raised the question of collecting workers' compensation,- regardles of whether the officer
is accompanied by an inmate. Mr. Gerberry explained that an officer can collect workers'
compensation at two- thirds of his salary; however, if not totally disabled, he cannot collect anything
under disability retirement.
Don Isaacson. re~ resentineF raternal Order of Police ( FOP), testified that FOP has members that
retire both into the PSPRS system and the CORP system. He stated that both systems have a self-finded
COLA out of excess earnings. In PSPRS, the amount of the COLA is 50 percent. In CORP,
the employee- employer percentage is 85- 15 percent. He proposed that excess earnings be split on
a 50- 50 basis to conform CORP to PSPRS.
Bev Cuthbertson. President. Arizona Education Association ( AEA), expressed hope that all the
parameters of this issue will be considered. She said employees working for the government are at
the mercy of elected officials. She said she expects them to keep their promises.
Cochair King assured Ms. Cuthbertson that they do have protection.
Jerry Doll. representing himself. Mesa, spoke about the 75- point window ( Attachment 5). He said
he would like this to become permanent instead of a window. He enumerated benefits: savings to
the state, new openings for employment as people retire, and improved morale of employees.
TAPE 3, SIDE A
Cochair Spitzer remarked on the value of experience in the work force and said one cannot put a
dollar amount on experience. He said his concern is that this proposal tends to discount that and
ignores the benefits of experience.
Chair. bislative Cornrmttee. Phoenix Retired Teachers Association, testified that
ttus is her fifth year in her efforts to try to get equalization. The two issues she discussed were ( 1)
the standard of living which needs to be maintained, and ( 2) COLAS by percentage create inequities.
She proposed paying dollar amounts averaged out instead of a percentage.
Chuck Tome. State President. Fraternal Order of Police ( FOP), asked for consideration in allowing
county detentron officers to join PSPRS.
Without objection, the meeting adjourned at 3.50 p. m.
I
J$ M~ Bell, $ lommittee Secretary
( Attachments and tapes on file in the Office of the Chief Clerk.)
JOINT LEGISLATIVE STUDY COMMITTEE ON
STATE RETDREMENT SYSTEMS
10126195
Attachment E
Retirement Proposals Handout
JOINT LEGISLA TIVE STUDY COMMITTEE
ON
STATE RETIREMENT SYSTEMS
Retirement Proposals Submitted During Public Testimony
The Joint Legislative Study Committee on State Retirement Systems is charged with considering the following:
1) Retiree health insurance program and premium subsidy amounts
COMMITTEE RECOMMENDATION:
?;$;:;$:;:;: j$ s;< gg:;:;:;: ij: j: i: j?. sjj:$;: : i':.;:::: j::::::::": ":. .:.:,. j,~~:: i::: c::: j::.'..:: i'::::::::::.::::::.,: ::.:. .. .................... : . ...: .: .... ........................' .: .: . .: : Y ".'.'.'... .> I...... ...................... %.' ..'- .,.:, ..,.,..., , . . . . . . . . . . ........ ... , ......, .........;; .
, ,,\_,.,/,, .,,, l_,,,_, ..,. , , (, ,.,,,,, __,, ,, . .. _.. . : .,._.. . . . .,. .,. , . _.. . .. . . , . .. . . . .... . ............ .. ,.:.:.:.:.:.:.:::. , ... .. .: ..._, .: : . . . .. . .. . . ". :.. .. . .:.: : .. ...: : .. :.:..:.:.:.:: .:.: :.:.. . ;.- - :-.... ' .' ..................................... ....
. . .. ,. . .,,.,., ,, , . ,, : ::: ::::;:::::: k:. ..,.. .','.'.:.:..., ..;., .. , "., ... .. . . . . ' .:...... ......... ' .:.: ~........... " '," ... . . . .. . . . . . . . . . ....... . . -.-.-::: -.- ..- ..--.. : :. .... .:., ... .. :: ,.: . ..... ...--. .-.--. -. i-:>. - :.: i..: :.:.:.:-......:.: '.:,: :.: :.::.:..:.'.::::<::::::::!..?.:>:::;::: ~ @ ~ & g ~ ~ $ ~ ~ @:$:$%~% ~ ~ ~ ~.$ zp5E$ comompsntms3gE~ 9i z: E~~!
ASRS
PSPRS
CORP
EORP
All SystemsIOther
.:... :.:... .... .,...,... ... ., .. ..,.....: ...:.,.'..',..',:,':,',: 7 ,..,..,,..,.-,. ,.., .,.,.,... ,.:..:...:...:. ..:.......,...;.,...,.. ...... . .,.-..; .:.:.:.:.:..:. ....................................,.., .:.::::: :.' A::::,..;::? ,:-:::.: .: ;.<<, .:' A,,:. .: ":<
1) Establish a pre- paid retiree health
insurance plan
2) Increase subsidy $ 30-$ 50
1) Increase subsidy amounts to match
ASRS and CORP
1) Open another window to allow retirees
who failed to take advantage of the
1994 window to re- enroll under DOA's
coverage
2) Equalize subsidy amounts
:. .;.:.: : :.: .. .. .:. ,:.: . ::' :.: .. .. : .,.:.:.: :.<,:::?:<:? t::: :.:::.:.:::.::: A:::..::::..?.::: x:::<::::*:.::::::?::::;:::::<:::;:: t:::<>:.<< f :
2) Presently $ 95/$ 65 for
member coverage and
$ 80/$ 50 for dependent
coverage
1) Presently $ 60 for members
and $ 25 for dependents
2) Minimum benefit amounts
COMMITTEE RECOMMENDATION:
.:.'..::::.,.:. . ................................. .. :.......................................................................................... .......... ............................ ..:.: ..:.......:......:...:...:...:...:..:.. .:..:....: j..;.( . j .. ............ . . . . . ................................................... ......................... . . . ..................... ........................ ;.;:. ........................... :.: :.:.:.:.:<:<.:.;.:.:.:*::*:.:.: \,., :.. ..> ............................................................ . ............................ i ...: ;. ............ .... .................................................. .. ...:.:.:.:,:.:.:,". :".:.:.:.:.:.:.:. ............... ............................. ..................................... ......................... .................................................... ... ... :.:.... ......".".." ,,::,,,, .......... j:>::.:.:.:..:... .......................... ... ,,:,:,,,<::.:, :...,: :.:.:.:.:.:.:.: :.: > :. ..:>:.: .:..:.:.:. :.:.. ::;< ...':; '..:' i-" i. -' 2......... b . ..:.... e...#...&.... m.. ; sifiFBYFgemi : efi. p# e@@~ p ~ opa$ M:$ j $ g?;;;.; g; j.: : <- 2 jj ............................................................................ ....................::.::., .............................................. .
ASRS
PSPRS
CORP
EORP
All SystemsIOther
.:.; I ...<.... ... . ',:::.::<::...:-.: . I.:::.:.:::: :.: .::: .:.,.:: :.::::,::::.;>.. :':.:::,:,: :>::< I..,.
1 ) Any minimum benefit should be based
on years of service
2) Recalculate benefits to current
purchasing power
3) If 2% multiplier is increased,
recalculate all retirees' benefits
1 ) $ 1,200 member/$ 950 surviving spouse
:.'-::::.':. A:< ::.:: ,'::::",:.::,::',::::'::::::. .:'::: : I:. j..:. :.: ..:,,, ,',.:: .;::::::--,:,;': .: .,: ,:::::.<*:::::.:.::..::.:::::'.:..::::
1) Presently $ 950 and $ 633
-
3) Qualifications for normal and early retirement
COMMITTEE RECOMMENDATION:
4) Formulas used to calculate retirement benefits
. . . . . . .
~.:.:.;~,~::;~;:~:,~::,::.
... ................ ..... .. .. .. .:
1 ) Presently 25 years, 62
years old and ten years of
credited service or rule of
80
1 ) Presently 6515, 62110 or
60125
......... ; ....................... ............................................. .:.:.:.:.:.:.:.;. :.:.:.:.:.:.:.:.+ .. .:. . ...:. .. :.. ,.. :. .., ., :.., .. .:. .. . ~.. .. .. . .., .~... ... .. ... .... ...>. .. . .. . :. ....,..,.... ,.. .....,. .,... .,.. . ,,,.,,., ..,. .,... ,.... ... ... .... .. ... .. .,. .. .,.. .. , , ,
..~.... ..:. ... .., . . ..~ .. . . . . .. ~... .. ... .. . .. .~. ....... ....~... .. ... .. ... .~. ... .. ... ... .. .$.. .. ... .. .. .. . f... .., . .. ~. . .. . ~:,:....:. ~: -: .- .-.:..... f.. ~....... i.-. . $ : : ; $ y s f e m
ASRS
PSPRS
' CORP
!
EORP
All SystemslOther
COMMITTEE RECOMMENDATION:
. . .. . .. .. . . . . . . . . . . . - ... .. . . . . . .. .. . ................................. ::.. :.:.. ....-. .:.... . .......................... ....'...' i.'.. n\.. ZzZ z.............. Z Z Z ...-...-..-.-- .-.---.......-. ... -...-.;-..- .... ..
..:..:..:...:,,.,,.., _ ,.:.. .. ..... /../...... .... .. .......: ..:...:..:., .:..: . :::::.: ::.::.~.. i.:.~. : j. j.:: I: ij: j:. j :.~. . ~. . j..:. j,:..::.:: f.::.: I .:. ~. . :. .. j:. :. .:..:..: :,: .: .:. :.: .: :. :. :. :. :. :.~ . . ..: ~. . :, :;;;.;. ~. . ~. . ~. .~ .. ~. . ~. . . j :. j. :. i: . j ... j:. j .: .~ I,<: i,,:: j::, 1 : j: j;~ jjg~;; j: iti::: j: I:' jj: j.: jj ~........~..... .' ... .........:.' ... . ..;...; 3..-. . . -;.:,. .-...~..: ..:... . :::;..::;<:::::-~:: ::-:.: g.::::':;- D;.::,, :;,:; e,,,,., s.::::::;. c:-.:.- r-...;. i ..... p............... L..... > l on~ ef~ pfoposa1mmg~:~~;~ . ... . . .. ............... ..... . .. ...:... - -.. .... .. -......... .................................-. ..........-..........-. ... ........... ............ :.
1) Recalculate all retirees' benefits when
requirements for normallearly
retirement are changed
2) Retain existing criterra
1 ) 20- year retirement
1) " Rule of 80" points
~ sicripfionof Frapsal Cumments
ASRS
PSPRS
CORP
EORP
All SystemslOther
- ""... . (.'.' .. . .-(.. . .. ,.,. . ...
1 ) Retain 2% formula
1 ) Allow unused sick leave to accrue as
credrted service
1) Increase multiplrer to 2 5%
1) Equalrze multrplrers
1) Presently 2 2%
1 ) Currently range from 2% to
4 O h
5) Post- retirement benefit increases
COMMITTEE RECOMMENDATION:
.:..:?.;.. .................:.. .....: .:.. ..........:. ..... ......... ...... .. ............... ........... .,:.:.:.:: ?: j:::;*:?:.:.::::.::: ...: .::. :.:.:::.:::<.;'::; e.:..:.:..:: - ..::.>:;.:..:::......::: .:.:.: 2, j:::..::.:.:. ...:. fi:<:.. :.:.. . . :.::.<;-. ...:. ...::. ::.:.:...?:.:.:..? ...... ..........................:..:..: .. I
I i X S B i X S B & m ~ ~ ~ ~ 2 - I C o m m e n t s @ ~ ~ ~ @ ~ ..:.... ............................................................................................................................... ............................................................................:.. ..... .....
1 ) Earnings in excess of 9%
are presently available
2) Only excess earnings
associated with retirees
eligible for the COLA are
presently available
1 ) Expired July 1, 1994
,...; .:.....?..;..........:......:.......:. ..:.:. .::.<:.:.:..::.:. :.:..::. .;:;. :.:.:.:.:.:.:.~::.~.:.:.-;..:.::..:.::..>: :.:.:.:.: :., :: : . .....: ........: .. ....................................... ..... ... . G............... ............... f.................... .: i.,.:..?.....:..::.. s.. e.:.: .::. p."...' .......,..:..,..:...,:. . m.:.:..:.:..:.....:..:.:...:..:.:..:..:. :.:::... :..:. :... . e:.:.:.:.::.:.;.:. .~.........~. f ;.. ...~........ i.~.........~.. g......~.........~....... B....... ~.. .:.,:..:..:: ....:..~ ....... ..... y.......~......................~................ ...~.. s.........~.................~...... t.....................>.~....:..,... :.-..... . e.,.......... x..........~........... :. m...~....................~..........~....:......~.. ........~. ....:...:...~..:......... ~ ~ ~ ~ ~ ~ ~ ~ . > ~ ~ ~ ~ . ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ , .:.... ....... .: A. A ...... i.:'.:.. ................ , ............................. .. .........................-.. ... . .... .... ::::.:.:....:.... .................................. .............. _._., ............... ~ ~ ~ ~ ~ ~ ~ ~ afe p$ sapco& f l p H o ~ ""(" ..............
ASRS
PSPRS
CORP
EORP
All SystemsIOther
; ................................... '... .......................................................;.. .. ..: .: ...... ....:..:.:..:.::'..:~.:.....:..:...:.' ..: .,.:.:..>..:..>.:.....:..:..,..:..:..:..::.., :. .:.:. .:.:.....:.: ....:..:.,:..>..:..:..:. :: ...:.:.* : j:: jj:::: j, js;:::::::::::::::::::::: j:::::::::::: j:: jj.:::::.:.:>:: y
1 ) Use excess earnings above 8%
2) Place " surplus" attributable to all
retirees' portion of assets in COLA
account
1 ) Reinstate COLA provisions
6) Transfer provisions between state retirement systems
COMMITTEE RECOMMENDATION:
.::.' ............................................ ........:..: .:.... :.. . ..:.': . :.. ..'... ... ,....,..;.. ................... ............................................................................................................ ............. ...........-. ...-.....:..-..:.-.:..:.. ...: ....:...:...:.:...:...: .,.: ...: .:.;.:.:.
......~........... ........~....................~....................................,....................................~....................... ............. ..............................~.................;........ m.... j...................... B.....:................:.. g...>..... .. ....~. ... , ~ ~ ~ ~ : 1 ) As a result of normal career
movement, ADC employees
move in and out of CORP
designated positions
2) Allow employees moving
between retirement systems
to retire without having to
transfer credited service
.<:.: . . ..<:: jj,::::::.: j;:: j: j<;:;:. j: j.:;: j::. : :. :...:.:...:.:.:.:.: -.: .:::.: .........:'-.'.'.'.'..'... .......... .........-,- .~ i:~,~~ 87 ;; i; 2~~ 3~ 5
ASRS
PSPRS
CORP
EORP
All SystemslOther
...: . ........ 9 .:, :::: ................>.. .....: :.::.:...::.':.. ...
1 ) Allow ADC director to approve
exceptions to membership in CORP
2) Provide retirement mechanism for ADC
employees with CORP and ASRS
credited service
7) The policy of providing " tax equity/ hold harmless" benefit increases in response to the
taxation of pension income
COMMITTEE RECOMMENDATION:
..-............. e........................... Q..................................... m...................................... .... 2m.. .... ..:.....:......:.....:.....:....:.... r.,....:.. ...,.. f..:.......,... I.:.....:.....):...... F... h..........>........ ..+.... .:...;. ........:....>.......:.....:..,..:..,.:...:,.. ...:...:.....:.....:.@....:.....:.....:.. ............................. g...........................@.................................................:@. .......>........:........>...... .:... x ..... g. .3.. . . g
ASRS
PSPRS
I
CORP
EORP
All SystemsIOther
1) Continue policy of providing tax equity
benefit increases for all personnel
employed at the time the taxation of
pension in ' ome law was changed
1) Continue policy of providing tax equity
benefit increases for persons affected
' by 1989 tax change or exempt state
and federal pensions
1 ) Exempt all military, federal civil service
and Arizona state and local pensions
from taxation
2) Apply " tax equity" benefit increases
equally
3) Increase income tax pension deduction
from $ 2,500 to $ 1 5,000
............................................................ .".. ................... ........................................................... ........................... '.....'+..."..... ...................................... ....:...:.. :..:..:.,:..: ................................... .......
1 ) First $ 2,500 is presently not
subject to taxation
I
8) Defined benefit versus defined contribution retirement plans
COMMITTEE RECOMMENDATION:
ASRS
PSPRS
CORP
EORP
All SystemsIOther
Early retirement incentives (" win do ws ' 7
1) Retain defined benefit plan
COMMITTEE RECOMMENDATION:
ASRS
PSPRS
CORP
EORP
All SystemslOther
1) Open " 75- po~ ntsw" ~ ndow
2) Compensate retirees for " bonuses"
created by wlndow incentives
3) D~ salloww ~ ndowsfu nded by the system
1 ) Open w~ ndow
1 ) Open window
1) Requlre costs to be borne solely by
affected employer groups
10) Other issues proposed for consideration by the Committee
COMMITTEE RECOMMENDATION:
Re# rt? rnt? nP System :
ASRS
I
PSPRS
CORP
EORP
All SystemslOther
Descrfptian of Proposal !
1 ) Require financial disclosure by
BoardllAC members
2) Pay at least normal cost in eeler
contri but~ ons
3) Extend pop- up option to retirees who
elect period certain and life annu~ ty
benefit options
1 ) Increase surviving spouses pension
from 213 to 314 of member's pension
2) Allow disabled ret~ remenet ligible
employees to take a disab~ lityp ension
1) Allow prison chaplains and librarians to
join CORP
2) Allow county detent~ ono fficers to join
PSPRS
1 ) Separate judges
1) Extend statute of l~ rnitat~ onfosr federal
retirees' Income tax claim
2) Modify military buy- back conditions
Comments
2) Normal cost contr~ bution
rates are presently
reduced, in accordance
with statute, as a result of
the overfunded status
3) Presently available for
retirees selecting the joint
and survivor option
2) D~ sabilityp ension IS not
taxable and COLA age
requirement does not apply
to dtsabled members
1) Presently in ASRS
2) Presently In CORP
2) For all programs, the
present cost IS the increase
In actuarial present value
*