HB2090 - 502R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 38-740, Arizona Revised Statutes, is amended to read:

START_STATUTE38-740. Return of contributions

A. A member whose membership commenced before July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of the contributions as follows:

1. If the member has less than five years of credited service, the member shall receive all of the member's contributions.

2. If a member has five or more years of credited service, the member shall receive the member's contributions and an amount equal to a percentage of the employer contributions paid on behalf of the member. This amount excludes payments made by an employer pursuant to section 38‑783, subsection B, paragraph 3, unless the member has made the payment required by section 38‑783, subsection B, paragraph 1. The percentage of employer contributions paid on behalf of the member shall be as follows:

(a) 5.0 to 5.9 years of credited service, twenty‑five per cent.

(b) 6.0 to 6.9 years of credited service, forty per cent.

(d) 8.0 to 8.9 years of credited service, seventy per cent.

(e) 9.0 to 9.9 years of credited service, eighty‑five per cent.

(f) 10.0 or more years of credited service, one hundred per cent.

3. Interest on the returned contributions as determined by the board.

B. A member whose membership commenced on or after July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of all of the member's contributions with interest as determined by the board.

C. Notwithstanding subsection B of this section, if a member has five or more years of credited service and the member is terminated solely because of an employer reduction in force by reason of a lack of monies or elimination of the member's position, the member is entitled to receive the amounts prescribed in subsection A of this section.

D. Withdrawal of contributions with interest constitutes a withdrawal from membership in ASRS and results in a forfeiture of all other benefits under ASRS.

E. Notwithstanding any other provision of this article, a member who has not received a return of contributions pursuant to this section may combine any two or more periods of service for purposes of determining the member's benefits.

F. If a member receives more than the amount due to a member pursuant to this section, the member shall repay the amount of the overpayment together with interest at the interest rate earned on ASRS investments as reported on a quarterly basis, but not less than the valuation rate established by the board, from the time of overpayment to the settlement of the debt. END_STATUTE

Sec. 2. Section 38-760, Arizona Revised Statutes, is amended to read:

START_STATUTE38-760. Optional forms of retirement benefits

A. On retirement, members may elect an optional form of retirement benefit as provided in this section.

B. The optional retirement benefits available under this section include the following:

1. Joint and survivor annuity in a reduced amount payable to the retiring member during life, with the provisions that after the member's death all, two‑thirds or one‑half of the retirement income, as the member elects, shall be continued during the lifetime of the contingent annuitant designated by the retiring member subject to the restrictions prescribed in section 38‑764. The amount of retirement income shall be the actuarial equivalent of the retirement income to which the member would be entitled under normal or early retirement. The election in a manner prescribed by the board shall name the contingent annuitant. The election may be revoked at any time before the member's effective date of retirement. At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board as follows:

(a) If a different contingent annuitant is named, the annuity of the member under the same joint and survivor annuity option previously elected shall be adjusted to the actuarial equivalent of the original annuity, based on the age of the new contingent annuitant. The adjustment shall include all postretirement increases in retirement income that are authorized by law after the member's date of retirement. Payment of this adjusted annuity shall continue under the provisions of the option previously elected by the member.

(b) If the member rescinds the election, the member shall thereafter receive a straight life annuity equal to what the member would otherwise be entitled to receive if the member had not elected the joint and survivor annuity option, including all postretirement increases in retirement income that are authorized by law after the date of retirement. The increased payment shall continue during the remainder of the member's lifetime.

(c) If a member whose original date of retirement is before the effective date of this amendment to this section July 1, 2008 rescinds the joint and survivor annuity option previously elected and receives the straight life annuity pursuant to subdivision (b) of this paragraph, the member may again elect the same joint and survivor annuity option previously elected subject to the same restrictions prescribed in subdivision (a) of this paragraph.

(d) A member whose original date of retirement is on or after the effective date of this amendment to this section July 1, 2008 may exercise a one-time election to rescind the joint and survivor annuity option elected by the member if the contingent annuitant dies or ceases to be a contingent annuitant pursuant to the terms of a qualified domestic relations order.

(e) If the member's contingent annuitant is the member's current spouse, the member shall notify the contingent annuitant before the member names a new contingent annuitant or before the member rescinds the election.

2. A period certain and life annuity actuarially reduced with payments for five, ten or fifteen years that are not dependent on the continued lifetime of the member but whose payments continue for the member's lifetime beyond the five, ten or fifteen year period. At the time of electing this option the member shall name a period certain beneficiary or beneficiaries who are entitled to receive the payments for any portion of the period certain beyond the lifetime of the member. The member may name a different beneficiary at any time. If no beneficiary survives the member, any remaining payments are the property of the member's estate. A member who retires after August 9, 2001 and before the effective date of this amendment to this section July 1, 2008 may rescind the election of a period certain and life annuity. If the member rescinds the election of a period certain and life annuity, the member shall thereafter receive a straight life annuity equal to what the member would otherwise be entitled to receive if the member had not elected the period certain and life annuity option, including all postretirement increases in retirement income that are authorized by law after the date of retirement. The increased payment shall continue during the remainder of the member's lifetime. If the member reverts to a straight life annuity pursuant to this paragraph, the member may again elect a period certain and life annuity subject to the same provisions of the period certain and life annuity previously elected by the member. A member whose original date of retirement is on or after the effective date of this amendment to this section July 1, 2008 may exercise a one-time election to rescind the period certain and life annuity option elected by the member if the beneficiary dies or ceases to be a beneficiary pursuant to the terms of a qualified domestic relations order or at the expiration of the member's period certain term. If the member's contingent annuitant is the member's current spouse, the member shall notify the contingent annuitant before the member rescinds the election of a period certain and life annuity or again elects a period certain and life annuity pursuant to this paragraph.

3. Beginning on July 1, 2002, a lump sum payment equal to not more than thirty‑six months of the member's retirement benefits under the benefit option elected by the member based on the actuarial equivalent of the retirement income to which the member would be entitled under normal or early retirement. The member's benefit shall be actuarially reduced to provide for the lump sum payment. The lump sum payment shall be made at the time of retirement. Any benefit increase granted to a member who elects a lump sum payment pursuant to this paragraph is subject to the following conditions:

(a) If the benefit increase is a percentage increase of the member's retirement benefit, the increase shall be based on the actuarially reduced retirement benefit of the member.

(b) If the benefit increase is pursuant to section 38‑767, the amount of the member's benefit increase shall be calculated without regard to the lump sum payment pursuant to this paragraph.

4. Other forms of actuarially reduced optional benefits prescribed by the board. END_STATUTE

Sec. 3. Delayed repeal

Section 38-761, Arizona Revised Statutes, is repealed from and after June 30, 2013.

Sec. 4. Section 38-762, Arizona Revised Statutes, is amended to read:

START_STATUTE38-762. Survivor benefits before retirement; definitions

A. On the death of any active or inactive member before retirement, the designated beneficiary of the member shall be paid a survivor benefit equal to the sum of both of the following:

1. The member's contribution and interest and the employer's contribution and interest to the defined benefit plan established by this article for credited service that a member earned by working for an employer, plus all contributions and interest made for the purchase of military service, leave without pay or other public service credit. This amount excludes payments made by an employer pursuant to section 38‑783, subsection B, paragraph 3, unless the member has made the payment required by section 38‑783, subsection B, paragraph 1.

2. The amount of the member's employee account and the member's employer account together with supplemental credits, if any, transferred from the defined contribution program administered by ASRS to the defined benefit program established by this article.

B. Subsection A, paragraphs 1 and 2 of this section shall be accumulated at compound interest at a rate determined by the board through the day of the payment of the benefit.

C. In lieu of a single payment, a designated beneficiary who is eligible for a survivor benefit pursuant to subsection A of this section of more than five thousand dollars may elect to receive the actuarial equivalent of the survivor benefit pursuant to one of the following options:

1. A monthly income for five, ten or fifteen years certain and for life thereafter.

2. Another form of optional benefits approved by the board.

D. On the death of an active or inactive member who has reached an early retirement date applicable to the member or who has a minimum of fifteen years of credited service and whose designated beneficiary is a spouse, a member's natural or adopted child under the age of twenty‑one or a member's natural or adopted child of any age who is disabled, ASRS shall pay the designated beneficiary a survivor benefit equal to the present value, on the date following the date of the member's death, of the life annuity that would have been payable to the designated beneficiary if the member had retired on the date of the member's death and elected to receive an annuity in the form of a joint and survivor annuity providing the same amount of annuity to the surviving beneficiary as the reduced amount that would have been payable during the lifetime of the member. If there is more than one designated beneficiary under this subsection, ASRS shall determine the amount of the annuity and its present value as if the oldest of the beneficiaries was the sole beneficiary. Payment under this subsection shall be in lieu of, but not less than, any payment under subsection A of this section. Payment under this subsection, at the election of the designated beneficiary, may be made in a single sum or may be made in accordance with subsection C of this section. A beneficiary may not elect this option unless a benefit of twenty‑five dollars or more per month is payable to the designated beneficiary or the designated beneficiary's estate.

E. If a member dies before distribution of the member's benefits commences, the member's entire benefits shall be distributed within the required distribution provisions of section 401(a)(9) of the internal revenue code and the regulations that are issued under that section by the United States secretary of the treasury as prescribed in section 38‑775.

F. If a deceased member did not designate a beneficiary or the beneficiary named by a member predeceases the member, ASRS shall pay the member's survivor benefit to the following persons in the following order of priority:

1. The member's surviving spouse.

2. The member's surviving natural or adopted children in equal shares.

3. The member's surviving parents in equal shares.

4. The member's estate.

G. Any payment pursuant to this section is payment for the account of the member or the member's beneficiary and all persons entitled to payment and, to the extent of the payment, is a full and complete discharge of all liability of the board or ASRS, or both, under or in connection with ASRS.

H. For the purposes of this section:

1. "Designated beneficiary" means any individual designated by the member as the member's beneficiary.

2. "Disabled" means a person is incapable of self‑sustaining employment by reason of mental or physical handicap and is chiefly dependent on the member for support. END_STATUTE

Sec. 5. Section 38-783, Arizona Revised Statutes, is amended to read:

START_STATUTE38-783. Retired members; dependents; health insurance; premium payment; separate account; definitions

A. Subject to subsections F, G and H g, h and i of this section, the board shall pay from ASRS assets part of the single coverage premium of any health and accident insurance for each retired, contingent annuitant or disabled member of ASRS if the member elects to participate in the coverage provided by ASRS or section 38‑651.01 or elects to participate in a health and accident insurance program provided or administered by an employer or paid for, in whole or in part, by an employer to an insurer. A contingent annuitant must be receiving a monthly retirement benefit from ASRS in order to obtain any premium payment provided by this section. The board shall pay:

1. Up to one hundred fifty dollars per month for a member of ASRS who is not eligible for medicare if the retired or disabled member has ten or more years of credited service.

2. Up to one hundred dollars per month for each member of ASRS who is eligible for medicare if the retired or disabled member has ten or more years of credited service.

B. Subject to subsections F, G and H g, h and i of this section, the board shall pay from ASRS assets part of the family coverage premium of any health and accident insurance for a retired, contingent annuitant or disabled member of ASRS who elects family coverage and who otherwise qualifies for payment pursuant to subsection A of this section. If a member of ASRS and the member's spouse are both either retired or disabled under ASRS and apply for family coverage, the member who elects family coverage is entitled to receive the payments under this section as if they were both applying under a single coverage premium unless the payment under this section for family coverage is greater. Payment under this subsection is in the following amounts:

1. Up to two hundred sixty dollars per month if the member of ASRS and one or more dependents are not eligible for medicare.

2. Up to one hundred seventy dollars per month if the member of ASRS and one or more dependents are eligible for medicare.

3. Up to two hundred fifteen dollars per month if either:

(a) The member of ASRS is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The member of ASRS is eligible for medicare and one or more dependents are not eligible for medicare.

C. In addition each retired, contingent annuitant or disabled member of ASRS with less than ten years of credited service and a dependent of such a retired, contingent annuitant or disabled member who elects to participate in the coverage provided by ASRS or section 38‑651.01 or who elects to participate in a health and accident insurance program provided or administered by an employer or paid for, in whole or in part, by an employer to an insurer is entitled to receive a proportion of the full benefit prescribed by subsection A or B of this section according to the following schedule:

1. 9.0 to 9.9 years of credited service, ninety per cent.

2. 8.0 to 8.9 years of credited service, eighty per cent.

3. 7.0 to 7.9 years of credited service, seventy per cent.

4. 6.0 to 6.9 years of credited service, sixty per cent.

5. 5.0 to 5.9 years of credited service, fifty per cent.

6. Those with less than five years of credited service do not qualify for the benefit.

D. The board shall not pay more than the amount prescribed in this section for a member of ASRS.

E. Notwithstanding subjections A, B and C of this section, for a member who retires on or after the effective date of this amendment to this section, the board shall not make a payment under this section to a retired, contingent annuitant or disabled member who is enrolled in an employer's active employee group health and accident insurance program either as the insured or as a dependent, except that if the retired, contingent annuitant or disabled member is enrolled as a dependent and the premium paid to the employer's active employee group health and accident insurance program is not subsidized by the employer, the retired, contingent annuitant or disabled member is entitled to receive the amount provided in subsection A of this section.

E. f. The board shall establish a separate account that consists of the benefits provided by this section. The board shall not use or divert any part of the corpus or income of the account for any purpose other than the provision of benefits under this section unless the liabilities of ASRS to provide the benefits are satisfied. If the liabilities of ASRS to provide the benefits described in this section are satisfied, the board shall return any amount remaining in the account to the employer.

F. g. Payment of the benefits provided by this section is subject to the following conditions:

1. The payment of the benefits is subordinate to the payment of retirement benefits payable by ASRS.

2. The total of contributions for the benefits and actual contributions for life insurance protection, if any, shall not exceed twenty‑five per cent of the total actual employer and employee contributions to ASRS, less contributions to fund past service credits, after the day the account is established.

3. The board shall deposit the benefits provided by this section in the account.

4. The contributions by the employer to the account shall be reasonable and ascertainable.

G. h. A member who elects to receive a retirement benefit pursuant to section 38‑760, subsection B, paragraph 1 may elect at the time of retirement an optional form of health and accident insurance premium benefit payment pursuant to this subsection as follows:

1. The optional premium benefit payment shall be an amount prescribed by subsection A, B or C of this section that is actuarially reduced to the retiring member for life. The amount of the optional premium benefit payment shall be the actuarial equivalent of the premium benefit payment to which the retired member would otherwise be entitled. The election in a manner prescribed by the board shall name the contingent annuitant and may be revoked at any time before the retiring member's effective date of retirement. At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board as follows:

(a) If the retired member names a different contingent annuitant, the optional premium benefit payment shall be adjusted to the actuarial equivalent of the original premium benefit payment based on the age of the new contingent annuitant. The adjustment shall include all postretirement increases or decreases in amounts prescribed by subsection A, B or C of this section that are authorized by law after the retired member's date of retirement. Payment of this adjusted premium benefit payment shall continue under the provisions of the optional premium benefit payment previously elected by the retired member. A retired member cannot name a different contingent annuitant if the retired member has at any time rescinded the optional form of health and accident insurance premium benefit payment.

(b) If the retired member rescinds the election, the retired member shall thereafter receive the premium benefit payment that the retired member would otherwise be entitled to receive if the retired member had not elected the optional premium benefit payment, including all postretirement increases or decreases in amounts prescribed by subsection A, B or C of this section that are authorized by law after the member's date of retirement. The increased benefit payment shall continue during the remainder of the retired member's lifetime. The decision to rescind shall be irrevocable.

2. If, at the time of the retired member's death:

(a) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection B or C of this section times the reduction factor applied to the retired member's premium benefit payment times the joint and survivor option reduction factor elected by the retired member at the time of retirement pursuant to section 38‑760, subsection B, paragraph 1.

(b) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection A or C of this section and the contingent annuitant is eligible for single health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the reduction factor applied to the retired member's premium benefit payment times the joint and survivor option reduction factor elected by the retired member at the time of retirement pursuant to section 38‑760, subsection B, paragraph 1.

(c) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is not eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the reduction factor applied to the retired member's premium benefit payment times the joint and survivor option reduction factor elected by the retired member at the time of retirement pursuant to section 38‑760, subsection B, paragraph 1.

H. i. A member who elects to receive a retirement benefit pursuant to section 38‑760, subsection B, paragraph 2 may elect at the time of retirement an optional form of health and accident insurance premium benefit payment pursuant to this subsection as follows:

1. The optional premium benefit payment shall be an amount prescribed by subsection A, B or C of this section that is actuarially reduced with payments for five, ten or fifteen years that are not dependent on the continued lifetime of the retired member but whose payments continue for the retired member's lifetime beyond the five, ten or fifteen year period. The election in a manner prescribed by the board shall name the contingent annuitant and may be revoked at any time before the retiring member's effective date of retirement. At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board. If the retired member rescinds the election, the retired member shall thereafter receive the premium benefit payment that the retired member would otherwise be entitled to receive if the retired member had not elected the optional premium benefit payment, including all postretirement increases or decreases in amounts prescribed by subsection A, B or C of this section that are authorized by law after the member's date of retirement. The increased benefit payment shall continue during the remainder of the retired member's lifetime. The decision to rescind shall be irrevocable.

2. If, at the time of the retired member's death:

(a) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection B or C of this section times the period certain and life option reduction factor elected by the retired member at the time of retirement pursuant to section 38‑760, subsection B, paragraph 2.

(b) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection A or C of this section and the contingent annuitant is eligible for single health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the period certain and life option reduction factor elected by the retired member at the time of retirement pursuant to section 38‑760, subsection B, paragraph 2.

(c) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is not eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the period certain and life option reduction factor elected by the retired member at the time of retirement pursuant to section 38‑760, subsection B, paragraph 2.

I. j. If, at the time of retirement, a retiring member does not elect to receive a reduced premium benefit payment pursuant to subsection G or H or i of this section, the retired member's contingent annuitant is not eligible at any time for the optional premium benefit payment.

J. k. A contingent annuitant is not eligible for any premium benefit payment if the contingent annuitant was not enrolled in an eligible health and accident insurance plan at the time of the retired member's death or if the contingent annuitant is not the dependent beneficiary or insured surviving dependent as provided in section 38‑782.

K. l. For the purposes of this section:

1. "Account" means the separate account established pursuant to subsection E F of this section.

2. "Credited service" includes prior service.

3. "Prior service" means service for this state or a political subdivision of this state before membership in the defined contribution program administered by ASRS.

4. "Subsidized" means a portion of the total premium is paid by the employer, but does not necessarily mean a plan in which the employer uses blended rates to determine the total premium. END_STATUTE

Sec. 6. Appropriation; ASRS; purpose; exemption

A. The sum of $47,000 is appropriated from the Arizona state retirement system administration account in fiscal year 2012-2013 to the Arizona state retirement system for the implementation of this act.

B. The appropriation made in subsection A of this section is exempt from the provisions of section 35-190, Arizona Revised Statutes, relating to lapsing of appropriations.