HB2050 - 512R

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

Section 1. Section 38-727, Arizona Revised Statutes, is amended to read:

START_STATUTE38-727. Eligibility; options

A. The following provisions apply to all employees hired on or after the effective date:

1. All employees and officers of this state and all officers and employees of political subdivisions establishing a retirement plan administered by the board pursuant to this article who as a result of state service or service for the political subdivision are included in agreements providing for their coverage under the federal old age and survivors insurance system are subject to this article, except that membership is not mandatory:

(a) On the part of any employee who is eligible and who elects to participate in the optional retirement programs established by the Arizona board of regents pursuant to the authority conferred by section 15‑1628 or by a community college district board pursuant to authority conferred by section 15‑1451.

(b) For a state elected official who is subject to term limits, who is elected or appointed before January 1, 2014, who is eligible for participation in ASRS because the state elected official elected not to participate in the elected officials' retirement plan as provided in section 38‑804, subsection A and who elects not to participate in ASRS as provided in paragraph 7 of this section.

(c) On the part of any employee or officer who is eligible to participate and who participates in the elected officials' retirement plan pursuant to article 3 of this chapter, the elected officials' defined contribution retirement system pursuant to article 3.1 of this chapter, the public safety personnel retirement system pursuant to article 4 of this chapter or the corrections officer retirement plan pursuant to article 6 of this chapter.

2. All employees and officers of political subdivisions whose compensation is provided wholly or in part from state monies and who are declared to be state employees and officers by the legislature for retirement purposes are subject, on legislative enactment, to this article and are members of ASRS.

3. Any member whose service terminates other than by death or withdrawal from membership is deemed to be a member of ASRS until the member's death benefit is paid.

4. Employees and officers shall not become members of ASRS and, if they are members immediately before becoming employed as provided by this section, shall have their membership status suspended while they are employed by state departments paying the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund for the period or periods payment of the employer contributions is not made by or on behalf of the departments.

5. Notwithstanding other provisions of this section, a temporary employee of the legislature whose projected term of employment is for not more than six months is ineligible for membership in ASRS. If the employment continues beyond six successive months, the employee may elect to either:

(a) Receive credit for service for the first six months of employment and establish membership in ASRS as of the beginning of the current term of employment if, within forty‑five days after the first six months of employment, both the employer and the employee contribute to ASRS the amount that would have been required to be contributed to ASRS during the first six months of employment as if the employee had been a member of ASRS during those six months.

(b) Establish membership in ASRS as of the day following the completion of six months of employment.

6. A person who is employed in postgraduate training in an approved medical residency training program of an employer or a postdoctoral scholar who is employed by a university under the jurisdiction of the Arizona board of regents is ineligible for membership in ASRS.

7. A state elected official who is subject to term limits, who is elected or appointed before January 1, 2014 and who is eligible for participation in ASRS because the state elected official elected not to participate in the elected officials' retirement plan as provided in section 38‑804, subsection A may elect not to participate in ASRS. The election not to participate is specific for that term of office. The state elected official who is subject to term limits shall make the election in writing and file the election with ASRS within thirty days after the elected official's retirement plan mails the notice to the state elected official of the state elected official's eligibility to participate in ASRS. The election is effective on the first day of the state elected official's eligibility. If a state elected official who is subject to term limits fails to make an election as provided in this paragraph, the state elected official is deemed to have elected to participate in ASRS. The election not to participate in ASRS is irrevocable and constitutes a waiver of all benefits provided by ASRS for the state elected official's entire term, except for any benefits accrued by the state elected official in ASRS for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law.

8. Before July 1, 2015, a person may elect not to participate in ASRS if the person becomes employed by an employer after the person has attained at least sixty‑five years of age, is not an active member, inactive member, retired member or receiving benefits pursuant to article 2.1 of this chapter and does not have any credited service or prior service in ASRS. The employee shall make the election not to participate in writing and file the election with ASRS within thirty days of employment. The election not to participate is irrevocable for the remainder of the person's employment for which the person made the election and constitutes a waiver of all benefits provided by the Arizona state retirement system. The period the person works is not eligible for purchase under section 38‑743 or 38‑744.

9. The following are ineligible for membership in ASRS:

(a) A person who performs services in a hospital, home or other institution as an inmate or patient at the hospital, home or other institution.

(b) A person who performs agricultural labor services, as defined in section 210 of the social security act.

(c) A person who is a nonresident alien temporarily residing in the United States and who holds an F‑1, J‑1, M‑1 or Q‑1 visa when services are performed.

(d) A person who Performs services for a school, college or university in this state at which the person is enrolled as a student, as defined by the employing institution. The employing institution shall maintain an appeal process for a person who disagrees with the employing institution's determination that the person is a student and not eligible for membership in ASRS.

(e) A person who performs services under a program designed to relieve the person from unemployment.

B. The following elected officials are subject to this article if the member's employer is an employer under article 3 of this chapter and the member elects to participate in ASRS pursuant to subsection C of this section:

1. A state elected official who is subject to term limits, who is elected or appointed on or before December 31, 2013 and who is an active or inactive member of ASRS because the state elected official had previously elected not to participate in the elected officials' retirement plan as provided in section 38‑804, subsection A.

2. Notwithstanding any exclusion from an agreement providing for coverage under the federal old age and survivors insurance system, An elected official, as defined in section 38‑831, who is an active or inactive member of ASRS, if the elected official's employer is a participating employer under this article.

C. If an elected official as described in subsection B of this section elects to continue or resume the member's participation in ASRS, the election shall be made in writing and filed with ASRS within thirty days after the elected official's term begins. The election is irrevocable for the remainder of the elected official's term for which the election was made. If the elected official does not make an election under this subsection, the elected official shall be enrolled in the elected officials' defined contribution retirement system pursuant to article 3.1 of this chapter. END_STATUTE

Sec. 2. Repeal

Section 38-728, Arizona Revised Statutes, is repealed.

Sec. 3. Section 38-729, Arizona Revised Statutes, is amended to read:

START_STATUTE38-729. Political subdivision plans

A. The governing body of any political subdivision may adopt, by appropriate legislation, a supplemental retirement plan for employees and officers of the political subdivision who are included within agreements entered into between the governing body and the state agency providing for the extension of federal old age and survivors insurance benefits to the officers and employees. The supplemental retirement plan shall provide the same retirement benefits and require the same obligations for entitlement as are provided for other members under this article, except that:

1. The supplemental retirement plan shall specify the date of commencement of the supplemental retirement plan as the first day of the month following board approval of the supplemental plan of the political subdivision as provided in this section.

2. Employer and employee obligations shall be paid to ASRS in accordance with that date.

B. The governing body of the political subdivision shall submit the supplemental retirement plan to the board in the form of an agreement. The agreement shall state the terms of the supplemental retirement plan as provided in this section. The board shall either approve or disapprove the supplemental retirement plan submitted by the governing body of the political subdivision.

C. On approval, the board shall administer the supplemental plan of the political subdivision.

D. The employer's share of contributions and payments in excess of those required of the employer under section 38‑737 shall be paid from monies of the political subdivision.

E. On establishment of the supplemental retirement plan the governing body of the political subdivision shall deduct member contributions in the same amounts and in the same manner as provided in this article for state employees and shall pay those contributions, together with the employer contributions for the political subdivision, to ASRS for deposit in the ASRS depository. The governing body of the political subdivision shall reimburse ASRS in a similar manner for its pro rata share of administrative costs attributable to coverage of employees of the political subdivision.

F. In addition to the employer contributions required under section 38‑737, on establishment of the supplemental retirement plan the governing body of the political subdivision shall pay to ASRS the amounts, as determined by the board, required to fund additional costs of benefits attributable to service for the political subdivision before the effective date of the supplemental retirement plan. The board may authorize payments to be made at such times as the board requires and in amounts that are less than the amount required for fully funding the additional costs.

G. If the supplemental retirement plan is authorized by a political subdivision, then on or after the effective date of the supplemental retirement plan the governing body of the political subdivision and the board may sign an agreement to waive the provisions of subsection F of this section and to authorize benefits under the supplemental retirement plan only for service with the political subdivision after the effective date of the supplemental retirement plan. In lieu of waiving benefits for all service before the effective date of the supplemental retirement plan, the governing body of the political subdivision may elect to waive benefits for a portion of that service. Amendments to the agreement may increase but shall not reduce the service for which a member is entitled to benefits. The governing body of the political subdivision shall certify for each member the years of service before the effective date of the supplemental retirement plan for which the member is entitled to benefits. In addition to the employer contributions required in section 38‑737, the governing body of the political subdivision shall pay to ASRS the amount, as determined by the board, required to fund the cost of the benefits attributable to service before the effective date of the supplemental retirement plan for which members are entitled to benefits.

H. The new political subdivision shall designate the classification of employees that is eligible for membership in ASRS and shall make contributions each year as provided in this section.

I. The liability of the political subdivision providing a supplemental retirement plan within ASRS arises in consideration of the officer's or employee's retention in or entrance into service for the political subdivision. END_STATUTE

Sec. 4. Section 38-766.02, Arizona Revised Statutes, is amended to read:

START_STATUTE38-766.02. Retired members; return to work; employer contribution payments; definitions

A. Notwithstanding section 38-766.01, subsection D, beginning July 1, 2012, an employer shall pay contributions at an alternate contribution rate on behalf of a retired member who returns to work in any capacity in a position ordinarily filled by an employee of the employer who is included in agreements providing for their coverage under the federal old age and survivors insurance system. This subsection applies to a retired member who has reached a normal retirement age or a retired member who retired under section 38‑758 if the retired member's retirement benefit has not been suspended pursuant to section 38‑766.

B. The ASRS actuary shall determine the alternate contribution rate in an annual valuation performed as of June 30. For the fiscal year beginning on July 1 of the following calendar year, the valuation shall determine the percentage to be applied to the compensation, gross salary or contract fee of a retired member who meets the requirements of this section.

C. The alternate contribution rate shall not be less than two per cent in any fiscal year. The alternate contribution rate is equal to the lesser of:

1. The employer contribution rate established by the ASRS actuary pursuant to section 38‑737 plus the employer contribution rate established by the ASRS actuary pursuant to section 38‑797.06.

2. The total past service funding requirement rate established by the ASRS actuary pursuant to section 38‑737 plus the total past service funding requirement rate established by the ASRS actuary pursuant to section 38‑797.06.

D. ASRS shall determine the schedule and method of payment of the alternate contribution rate. Subject to section 38-738, subsection A, all contributions made by the employer and allocated to the fund established by section 38‑712 are irrevocable and shall be used as benefits under this article or to pay the expenses of ASRS. Payments made pursuant to this section by employers become delinquent after the due date prescribed in the board's rules and thereafter shall be increased by interest from and after that date until payment is received by ASRS. ASRS shall charge interest on the delinquent payments as prescribed in section 38‑711. ASRS may recover delinquent payments due under this section, together with interest charges as provided in this section, by action in a court of competent jurisdiction against an employer liable for payments or, at the request of the director, ASRS may deduct the delinquent payments and interest charges from any other monies, including excise revenue taxes, payable to the employer by any department or agency of this state.

E. An employer of a retired member shall submit any reports, data, paperwork or materials that are requested by ASRS and that are necessary to determine the compensation, gross salary or contract fee associated with a retired member who returns to work or to determine the function, utilization, efficacy or operation of the return to work program.

F. For the purposes of this section:

1. "Contract fee" means the gross amount paid to a retired member as an independent contractor minus an amount, not to exceed ten per cent, for an administrative fee.

2. "Gross salary" means the gross amount paid to a retired member by a leasing company as salary or wages, including amounts that are subject to deferred compensation or tax shelter agreements, for services rendered or that would have been paid to the retired member except for the member's election or a legal requirement that all or part of the gross amount be used for other purposes. END_STATUTE

Sec. 5. Section 38-797, Arizona Revised Statutes, is amended to read:

START_STATUTE38-797. Definitions

In this article, unless the context otherwise requires:

1. "ASRS" means the Arizona state retirement system established by article 2 of this chapter.

2. "Assets" means the accumulated resources of the LTD program.

3. "Board" means the ASRS board established pursuant to section 38‑713.

4. "Compensation" has the same meaning prescribed in section 38‑711.

5. "Depository" means a bank in which the monies of the LTD program are deposited and collateralized as provided by law.

6. "Employer" has the same meaning prescribed in section 38‑711.

7. "Employer contributions" means all amounts paid into the LTD program by an employer.

8. "Fiscal year" has the same meaning prescribed in section 38‑711.

9. "LTD program" means the long‑term disability program established by this article.

10. "Member":

(a) has the same meaning prescribed in section 38‑711.

(b) Includes an employee described in section 38‑956.

11. "Monthly compensation" means one‑twelfth of a member's annual compensation paid and payable in the fiscal year during which a member becomes disabled.

12. "Normal retirement date":

(a) has the same meaning prescribed in section 38‑711. for members eligible pursuant to article 2 of this chapter.

(b) Means sixty‑five years of age for members eligible pursuant to section 38‑956.

13. "Political subdivision" has the same meaning prescribed in section 38‑711.

14. "State" has the same meaning prescribed in section 38‑711.END_STATUTE

Sec. 6. Section 38-797.07, Arizona Revised Statutes, is amended to read:

START_STATUTE38-797.07. LTD program benefits; limitations; definitions

A. The LTD program is subject to the following limitations:

1. Except as provided in paragraph 9 of this subsection, monthly LTD program benefits shall not exceed two‑thirds of a member's monthly compensation at the time disability commences, reduced by:

(a) For a member whose disability commences before July 1, 2008, sixty‑four per cent of social security disability benefits that the member and the member's dependents are eligible to receive.

(b) For a member whose disability commences on or after July 1, 2008, eighty‑five per cent of social security disability benefits that the member and the member's dependents are eligible to receive, but not including:

(i) The amount of attorney fees approved pursuant to social security administration rules and reasonable documented costs paid to an attorney to secure that disability benefit.

(ii) Any cost‑of‑living adjustments that are granted after the member commences benefits under this section.

(c) For a member whose disability commences before July 1, 2008, eighty‑three per cent of social security retirement benefits that the member is eligible to receive.

(d) For a member whose disability commences on or after July 1, 2008, eighty‑five per cent of social security retirement benefits that the member is eligible to receive, but not including any cost‑of‑living adjustments that are granted after the member commences benefits under this section.

(e) All of any workers' compensation benefits.

(f) All of any payments for a veteran's disability if both of the following apply:

(i) The veteran's disability payment is for the same condition or a condition related to the condition currently causing the member's total disability.

(ii) The veteran's disability is due to, or a result of, service in the armed forces of the United States.

(g) All of any other benefits by reason of employment that are financed partly or wholly by an employer, including payments for sick leave. This subdivision does not include any retirement benefit that is received by the member pursuant to a state retirement system or plan other than ASRS.

(h) Fifty per cent of any salary, wages, commissions or other employment related pay that the member receives or is entitled to receive from any gainful employment in which the member actually engages.

2. For a member whose disability commences on or after August 2, 2012, a member's monthly income from the monthly LTD program benefits and sources listed in paragraph 1 of this subsection shall not exceed one hundred per cent of the member's monthly compensation at the time disability commences. ASRS shall offset the member's monthly LTD program benefits by the amount necessary to reduce the member's total monthly income to meet the limit prescribed in this paragraph.

3. Monthly LTD program benefits are not payable until a member has been totally disabled for a period of six consecutive months.

4. Monthly LTD program benefits are not payable to a member who files an initial claim for disability more than twelve months after the date of the member's date of disability unless the member demonstrates to ASRS good cause for not filing the initial claim within twelve months after the date of disability.

5. Monthly LTD program benefits are not payable to a member who is receiving retirement benefits from ASRS.

6. Monthly LTD program benefits are not payable to a member whose disability is due to, or a result of, any of the following:

(a) An intentionally self‑inflicted injury.

(b) War, whether declared or not.

(d) For a member whose most recent membership in the LTD program commences before July 1, 2008, an injury or sickness for which the member received medical treatment within three months before the date of the member's coverage under the LTD program. This subdivision does not apply to a member who either:

(i) Has been an active member of an employer for twelve continuous months.

(ii) Is employed by an employer before July 1, 1988.

(e) For a member whose most recent membership in the LTD program commences on or after July 1, 2008, an injury or sickness for which the member received medical treatment within six months before the date of the member's coverage under the LTD program. This subdivision does not apply to a member who has been an active member of an employer for twelve continuous months.

7. Monthly LTD program benefits cease to be payable to a member at the earliest of the following:

(a) The date the member ceases to be totally disabled.

(b) The date the member:

(i) Ceases to be under the direct care of a doctor.

(ii) Refuses to undergo any medical examination or refuses to participate in any work rehabilitation program for which the member is reasonably qualified by education, training or experience and that is requested by the insurance company or claims administrator that is selected by the board to administer the LTD program.

(d) The later of the following:

(i) The member's normal retirement date.

(ii) The month following sixty months of payments if disability occurs before sixty‑five years of age.

(iii) The month following attainment of seventy years of age if disability occurs at sixty‑five years of age or after but before sixty‑nine years of age.

(iv) The month following twelve months of payments if disability occurs at or after sixty‑nine years of age.

(e) If the member is convicted of a criminal offense and sentenced to more than six months in a jail, prison or other penal institution, the first day of the month following the first thirty continuous days of the member's confinement for the remainder of the confinement.

8. Monthly LTD program benefits are payable only for disabilities that commence on or after July 1, 1988.

9. The minimum benefit for a member who is entitled to receive monthly LTD program benefits is fifty dollars per month.

10. Members are eligible to receive the LTD program benefits and payments described in paragraph 1 of this subsection, and the reductions provided by paragraph 1 of this subsection apply even though the social security benefits are not actually paid as follows:

(a) For primary and dependent social security benefits, the members are eligible for the social security benefits until the social security benefits are actually awarded, or if the social security benefits are denied, until the member pursues the social security appeal process through a hearing before a social security administrative law judge or until the insurance company or claims administrator determines that the member is not eligible for social security benefits.

(b) For benefits and payments from any other source provided in paragraph 1 of this subsection, the members are eligible for the benefits if it is reasonable to believe that those benefits will be paid on proper completion of the claim or would have been paid except for the failure of the member to pursue the claim in time.

11. A member shall be considered totally disabled if based on objective medical evidence:

(a) During the first thirty months of a period of disability, the member is unable to perform all duties of the position held by the member when the member became totally disabled.

(b) For a member who has received monthly LTD program benefits for twenty‑four months within a five‑year period, the member is unable to perform any work for compensation or gain for which the member is reasonably qualified by education, training or experience in an amount at least equal to the scheduled LTD program benefits prescribed in paragraph 1 of this subsection.

B. A member who is eligible pursuant to article 2 of this chapter and who receives monthly LTD program benefits is entitled to receive service credit pursuant to article 2 of this chapter from the time disability commences until LTD program benefits cease to be payable, except that for a member who receives monthly LTD program benefits on or after June 30, 1999 the number of years of service credited to the member's retirement account during the period the member receives LTD program benefit payments shall not cause the member's total credited service for retirement benefits to exceed the greater of thirty years or the total years of service credited to the member's retirement account on the commencement of disability.

C. This section does not prohibit a member whose disability has been established to the satisfaction of the board from relying on treatment by prayer through spiritual means in accordance with the tenets and practice of a recognized church, religious denomination or Native American traditional medicine by a duly accredited practitioner of the church, denomination or Native American traditional medicine without suffering reduction or suspension of the member's monthly LTD program benefits.

D. ASRS may suspend or terminate benefits under this article if a member fails to provide information, data, paperwork or other materials that are requested by ASRS or the insurance company or claims administrator that is selected by the board to administer the LTD program. If the member provides the information requested, ASRS shall retroactively reinstate the benefits or claim for which the member qualifies under this article.

E. For the purposes of this section:

1. "Objective medical evidence" means evidence that established facts and conditions, as perceived without distortion by personal feelings, prejudices or interpretations, and includes x-rays, quantitative tests, laboratory findings, data, records, reports from the attending physician and reports from a consulting physician, as applicable.

2. "Received medical treatment" means that the member consulted with or received the advice of a licensed medical or dental practitioner, including advice given during a routine examination, and it includes situations in which the member received medical or dental care, treatment or services, including the taking of drugs, medication, insulin or similar substances.

3. "Social security" and "social security disability" includes the railroad retirement act of 1974 (P.L. 93‑445; 88 Stat. 1305; 45 United States Code sections 231 through 231u).END_STATUTE

Sec. 7. Repeal

Sections 38-955 and 38-956, Arizona Revised Statutes, are repealed.

Sec. 8. Defined contribution plan termination; distribution; long-term disability

A. An employee who is participating in the defined contribution plan established pursuant to section 38‑955, Arizona Revised Statutes, as repealed by this act, shall discontinue employee contributions to the plan and to the long‑term disability program established by title 38, chapter 5, article 2.1, Arizona Revised Statutes, on the effective date of this act.

B. At the election of the employee, the Arizona state retirement system shall either distribute the balance of the employee's account under the defined contribution plan or transfer the balance of the employee's account to another eligible plan. If the employee has not made an election within one hundred eighty days after the effective date of this section, the Arizona state retirement system shall transfer the balance of the employee's account to an individual retirement account and designate the employee as the account holder.

C. An employee who was participating in the defined contribution plan established pursuant to section 38‑955, Arizona Revised Statutes, as repealed by this act, and who is receiving benefits pursuant to title 38, chapter 5, article 2.1, Arizona Revised Statutes, is subject to all of the provisions of that article and may continue to receive those benefits until the earliest of the following:

1. The date the member ceases to be totally disabled.

2. The date the member:

(a) Ceases to be under the direct care of a doctor.

(b) Refuses to undergo any medical examination or refuses to participate in any work rehabilitation program for which the member is reasonably qualified by education, training or experience and that is requested by the insurance company or claims administrator that is selected by the Arizona state retirement system board to administer the long‑term disability program.

3. The later of the following:

(a) Age sixty‑five.

(b) The month following sixty months of payments if the disability commences before the member reaches sixty‑five years of age.

(c) The month after the member reaches seventy years of age if the disability commences when the member is at least sixty‑five years of age.

(d) The month following twelve months of payments if the disability commences when the member is at least sixty‑nine years of age.

4. If the member is convicted of a criminal offense and sentenced to more than six months in a jail, prison or other penal institution, the first day of the month following the first thirty continuous days of the member's confinement for the remainder of the confinement.