HB2485 - 531R

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

Section 1. Section 38-644, Arizona Revised Statutes, is amended to read:

START_STATUTE38-644. Eligibility

A. Except as provided in subsections B, C and D of this section, to qualify for covered benefits under the program, a person must satisfy all of the following criteria:

1. Be an active or retired member of the public safety personnel retirement system or the corrections officer retirement plan or a participant in the public safety personnel defined contribution retirement plan.

2. Be one of the following:

(a) A firefighter who is or was regularly assigned to hazardous duty of the type normally expected of a firefighter.

(b) A peace officer.

(c) A corrections officer employed by the state department of corrections or the department of juvenile corrections, a detention officer employed by a county, city or town or any other member as defined in section 38‑881 if the department, county, city, town or participating employer as defined in section 38-881 has voluntarily established a program and the corrections officer, detention officer or other member as defined in section 38‑881 voluntarily enrolled in the program and made the payments pursuant to section 38‑642, subsection D.

3. Have cancer that was first diagnosed after the person's date of membership in the public safety personnel retirement system or corrections officer retirement plan or date of participation in the public safety personnel defined contribution retirement plan.

B. Persons who terminate employment with a participating employer are not eligible for benefits under the program unless the person has made a valid claim for payment of expenses under the program before termination of employment.

C. On retirement, persons who were either receiving benefits under the program before retirement or who are diagnosed with cancer subsequent to retirement remain eligible for coverage under the program for five months for each year of credited service accumulated toward retirement under the public safety personnel retirement system or corrections officer retirement plan or for five months for each year of service under the public safety personnel defined contribution retirement plan.

D. A person whose eligibility to receive benefits under subsection C of this section is expiring may continue to remain eligible for coverage under the program if the person makes an election with the board and pays to the board the cost of the premium as determined by the board at the time determined by the board.

E. A person is not eligible for benefits under the program if there is any evidence that the cancer that forms the basis for a benefit claim under the program existed before the person's membership in the public safety personnel retirement system or corrections officer retirement plan or the person's participation in the public safety personnel defined contribution retirement plan. END_STATUTE

Sec. 2. Section 38-804, Arizona Revised Statutes, is amended to read:

START_STATUTE38-804. Membership; termination; definition

A. Except as otherwise provided in this section, all elected officials are members of the plan, except that a state elected official who is subject to term limits may elect not to participate in the plan. The state elected official who is subject to term limits shall make the election in writing and file the election with the board within thirty days after the state elected official assumes office. The election is effective on the first day of the state elected official's eligibility for that term of office. The election not to participate is specific for that term of office. If a state elected official who is subject to term limits fails to make an election as provided in this subsection, the state elected official is deemed to have elected to participate in the plan. The election not to participate in the plan is irrevocable and constitutes a waiver of all benefits provided by the plan for the state elected official's entire term, except for any benefits accrued by the state elected official in the plan for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law. The state elected official who elects not to participate in the plan shall participate in the Arizona state retirement system unless the state elected official makes an irrevocable election not to participate in the Arizona state retirement system as provided in section 38‑727.

B. All elected officials who are members of the plan on December 31, 2013 may remain members of the plan under the terms and limitations of this article.

C. If a member who becomes a member of the plan before January 1, 2012 ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:

1. If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.

2. If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(c) 7.0 to 7.9 years of credited service, fifty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(e) 9.0 to 9.9 years of credited service, eighty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

D. If a member has more than ten years of credited service with the plan, leaves the monies prescribed in subsection C of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection B C of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.

E. If an elected official who becomes a member of the plan on or after January 1, 2012 ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member may withdraw the member's accumulated contributions from the plan and shall be paid the member's accumulated contributions plus interest at a rate determined by the board as of the date of termination, less any benefit payments the member has received and any amount the member may owe to the plan.

F. If the amount prescribed in subsection C, D or E of this section includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee‑to‑trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board. A member who receives the amount prescribed in subsection C, D or E of this section from the plan or who elects a transfer pursuant to this subsection forfeits the member's credited service, and all rights to benefits under the plan and membership in the plan terminate.

G. For distributions occurring from and after December 31, 2007, a member or a member's beneficiary, including a nonspouse designated beneficiary to the extent permitted under subsection H of this section, may roll over an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code to a Roth individual retirement account, if, for distributions occurring before January 1, 2010, the member or the member's beneficiary satisfies the requirements for making a roth individual retirement account contribution under section 408A(c)(3)(B) of the internal revenue code, as in effect on the date of the rollover. Any amount rolled over to a Roth individual retirement account is included in the gross income of the member or the member's beneficiary to the extent the amounts would have been included in gross income if not rolled over as required under section 408A(d)(3)(A) of the internal revenue code. For the purposes of this subsection, the administrator is not responsible for ensuring the member or the member's beneficiary is eligible to make a rollover to a Roth individual retirement account.

H. For distributions made from and after December 31, 2009, a nonspouse designated beneficiary as defined in section 401(a)(9)(E) of the internal revenue code may elect to directly roll over an eligible rollover distribution to an individual retirement account under section 408(a) of the internal revenue code or an individual retirement annuity under section 408(b) of the internal revenue code that is established on behalf of the designated beneficiary and that will be treated as an inherited individual retirement plan pursuant to section 402(c)(11) of the internal revenue code. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code. In applying this subsection, a nonspouse rollover is not subject to the direct rollover requirements under section 401(a)(31) of the internal revenue code, the rollover notice requirements under section 402(f) of the internal revenue code or and the mandatory withholding requirements under section 3405(c) of the internal revenue code.

I. For plan years occurring before January 1, 2007, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no not less than thirty days and no not more than ninety days before the date of distribution and, for plan years beginning from and after December 31, 2006, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no not less than thirty days and no not more than one hundred eighty days before the date of distribution.

J. In no case shall more than twelve months of credited service be credited on account of all service rendered by a member in any one year.

K. If an elected official who has terminated the member's membership in the plan pursuant to subsection C of this section is subsequently elected, appointed or hired on or after January 1, 2014, the elected official is not eligible to become a member of the plan but is subject to article 3.1 of this chapter.

L. Notwithstanding subsection K of this section, if an elected official files a written election form with the board within ninety days after the day of the member's reemployment as an elected official and repays the amount previously withdrawn pursuant to subsection C or D of this section within one year after the date of the member's reemployment as an elected official, with interest on that amount at the rate of nine per cent percent for each year, compounded each year from the date of withdrawal to the date of repayment, credited service shall be restored. Credited service shall not be restored until complete repayment is made to the fund.

M. An elected official who is elected, appointed or hired on or after January 1, 2014 and who was not a member of the plan on December 31, 2013 is not eligible to become a member of the plan but is subject to article 3.1 of this chapter.

N. If a retired member subsequently becomes an elected official, contributions shall not be made by the retired member and credited service shall not accrue while the retired member is holding office.

O. In addition to subsection N of this section, if a retired member subsequently becomes, by reason of election or reelection, an elected official of the same office from which the member retired within a time period following the member's retirement that is less than one full term for that office, the member shall not receive a pension. If the elected official ceases to hold the same office, the elected official is entitled to receive the same pension the elected official was receiving when the elected official's pension was discontinued pursuant to this subsection. Nothing in this subsection prohibits a retired judge called by the supreme court to active duties of a judge pursuant to section 38‑813 from receiving retirement benefits. END_STATUTE

Sec. 3. Title 38, chapter 5, article 3, Arizona Revised Statutes, is amended by adding section 38-810.05, to read:

START_STATUTE38-810.05. Required distributions

All distributions required under this article shall be determined and made pursuant to 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. END_STATUTE

Sec. 4. Section 38-814, Arizona Revised Statutes, is amended to read:

START_STATUTE38-814. Termination of plan; adjustment and refund

A. If the plan terminates, each member's accrued benefits to the date of termination become one hundred per cent percent nonforfeitable to the extent funded. After provision is made for all expenses of the plan, including expenses of liquidation, the assets of the plan shall be allocated by the payment or provision for the payment of benefits in the following order of preference:

1. To pay each elected official and nonretired former elected official an amount equal to his accumulated contributions.

2. To continue to pay pensions to retired members or their beneficiaries.

3. To provide for potential rights of elected officials and former elected officials on an equitable and nondiscriminatory basis according to generally accepted actuarial principles.

4. To pay any excess to this state.

B. The allocations in subsection A of this section may be implemented through the existing trust, a new trust instrument for that purpose or the purchase by the board of insurance company contracts, or by a combination of these methods. An elected official has no rights or claims on the plan or this state beyond the capacity of the assets held by the board to provide benefits in accordance with subsection A of this section.

C. If the allocations produce a pension of less than twenty‑five dollars per month for any person, the board may pay a lump sum of actuarial equivalent value in lieu of the pension.

D. If more than the correct amount of employer or member contributions is paid into the plan by an employer through a mistake of fact, the board shall return those contributions to the employer if the employer requests return of the contributions within one year after the date of the overpayment. the board may not pay an employer earnings attributable to excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions. END_STATUTE

Sec. 5. Section 38-840.06, Arizona Revised Statutes, is amended to read:

START_STATUTE38-840.06. EODC disability program benefits

A. In determining eligibility for and continuation of a disability benefit and computing the amount available to a member, the board shall follow the same procedures and methods as prescribed in section 38‑806, except that an elected official who no longer holds office must apply within one year of after terminating office and the credited service used to compute the benefit shall be only the time earned while a member of the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter. Payment of the disability benefit will be made retroactive only to the date the board receives an application for the disability.

B. A member who was elected, appointed or hired on or after July 1, 2017 and who meets the requirements for a disability pension as prescribed in section 38‑806 shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a member who was elected, appointed or hired on or after January 1, 2012 and before January 1, 2014, reduced by an amount equal to the monthly annuitized value of the member's annuity account under article 3.1 of this chapter that does not include a cost‑of‑living adjustment, as determined by the board. In determining the monthly annuitized offset value of the member's annuity account under article 3.1 of this chapter to be used in reducing the disability benefit paid pursuant to this subsection, the board shall instruct the actuary for the elected officials' retirement plan to calculate the monthly payment that would be paid to the member assuming the member had elected a straight life annuity commencing on the member's date of disability, using the mortality and interest factors then used by the actuary in determining the valuation of the elected officials' retirement plan. END_STATUTE

Sec. 6. Section 38-843, Arizona Revised Statutes, is amended to read:

START_STATUTE38-843. Contributions

A. Each employer who participates in the system on behalf of a group of employees who were covered under a prior public retirement system, other than the federal social security act, shall transfer all securities and monies attributable to the taxes and contributions of the state other than the state contribution to social security, the employer and the employees for the covered group of employees under the other system, such transfer to be made to the fund subject to all existing liabilities and on or within sixty days following the employer's effective date. All monies and securities transferred to the fund shall be credited to the employer's account in the fund. A record of the market value and the cost value of such transferred contributions shall be maintained for actuarial and investment purposes.

B. As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to meet both the normal cost for members hired before July 1, 2017 plus the actuarially determined amount required to amortize the unfunded accrued liability on a level percent of compensation basis for all employees of the employer who are members of the system or participants as defined in section 38‑865, paragraph 7, subdivision (a) over, beginning July 1, 2017, a closed period of not more than twenty thirty years that is established by the board of trustees taking into account the recommendation of the system's actuary, except that, beginning with fiscal year 2006‑2007, except as otherwise provided, the employer contribution rate shall not be less than eight percent of compensation. For any employer whose actual contribution rate is less than eight percent of compensation for fiscal year 2006‑2007, that employer's contribution rate is not subject to the eight percent minimum but, for fiscal year 2006‑2007 and each year thereafter, shall be at least five percent and not more than the employer's actual contribution rate. An employer shall have the option of paying a higher level percent of compensation thereby reducing its unfunded past service liability. An employer shall also have the option of increasing its contributions in order to reduce the contributions required from its members under subsection C of this section, except that if an employer elects this option the employer shall pay the same higher level percentage contribution for all members of the eligible group. A county employer that elected to pay a higher level percentage contribution rate may eliminate that higher level percentage contribution rate amount for members who are hired on or after January 1, 2015. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employer shall make the contributions based on the compensation the employee would have received in the employee's job classification if the employee was in normal employment status. All contributions made by the employers and all state taxes allocated to the fund shall be irrevocable and shall be used to pay benefits under the system or to pay expenses of the system and fund. The minimum employer contribution that is paid and that is in excess of the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability as calculated pursuant to this subsection shall be used to reduce future employer contribution increases and shall not be used to pay for an increase in benefits that are otherwise payable to members. The board shall separately account for these monies in the fund. Forfeitures arising because of severance of employment before a member becomes eligible for a pension or any other reason shall be applied to reduce the cost of the employer, not to increase the benefits otherwise payable to members. After the close of any fiscal year, if the system's actuary determines that the actuarial valuation of an employer's account contains excess valuation assets other than excess valuation assets that were in the employer's account as of fiscal year 2004‑2005 and is more than one hundred percent funded, the board shall account for fifty percent of the excess valuation assets in a stabilization reserve account. After the close of any fiscal year, if the system's actuary determines that the actuarial valuation of an employer's account has a valuation asset deficiency and an unfunded actuarial accrued liability, the board shall use any valuation assets in the stabilization reserve account for that employer, to the extent available, to limit the decline in that employer's funding ratio to not more than two percent.

C. Each member who was hired before July 1, 2017, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to the amount prescribed in subsection E of this section, except as provided in subsection B of this section. Each member who was hired on or after July 1, 2017, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to the amount prescribed in subsection G of this section. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employee shall make the employee's contribution based on the compensation the employee would have received in the employee's job classification if the employee was in normal employment status. Contributions of members shall be required as a condition of employment and membership in the system and shall be made by payroll deductions. Every employee shall be deemed to consent to such deductions. Payment of an employee's compensation, less such payroll deductions, shall constitute a full and complete discharge and satisfaction of all claims and demands by the employee relating to remuneration for the employee's services rendered during the period covered by the payment, except with respect to the benefits provided under the system. A member may not, under any circumstance, borrow from, take a loan against or remove contributions from the member's account before the termination of membership in the plan or the receipt of a pension.

D. Each employer shall transfer to the board the employer and employee contributions provided for in subsections B, C and G of this section within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten percent per annum, compounded annually, for each day the contributions are late, such penalty to be paid by the employer. Delinquent payments due under this subsection, together with interest charges as provided in this subsection, may be recovered by action in a court of competent jurisdiction against an employer liable for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to such employer by any department or agency of this state.

E. The amount contributed by a member who was hired before July 1, 2017 pursuant to subsection C of this section is:

1. Through June 30, 2011, 7.65 percent of the member's compensation.

2. For fiscal year 2011‑2012, 8.65 percent of the member's compensation.

3. For fiscal year 2012‑2013, 9.55 percent of the member's compensation.

4. For fiscal year 2013‑2014, 10.35 percent of the member's compensation.

5. For fiscal year 2014‑2015, 11.05 percent of the member's compensation.

6. For fiscal year 2015‑2016 and each fiscal year thereafter, 11.65 percent of the member's compensation or 33.3 percent of the sum of the member's contribution rate from the preceding fiscal year and the aggregate computed employer contribution rate that is calculated pursuant to subsection B of this section, whichever is lower, except that the member contribution rate shall not be less than 7.65 percent of the member's compensation and the employer contribution rate shall not be less than the rate prescribed in subsection B of this section.

F. For fiscal year 2011‑2012 and each fiscal year thereafter, the amount of the member's contribution that exceeds 7.65 percent of the member's compensation shall not be used to reduce the employer's contributions that are calculated pursuant to subsection B of this section.

G. For members hired on or after July 1, 2017, the employer and member contributions are determined as follows:

1. As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to pay fifty percent of both the normal cost plus the actuarially determined amount required to amortize the total unfunded accrued liability for each employer attributable only to those members hired on or after July 1, 2017. For each year that new unfunded liabilities are attributable to the employer's own members hired on or after July 1, 2017, a new amortization base representing the most recent annual gain or loss, smoothed over a period not more than five years as determined by the board, shall be created on a level‑dollar basis over a closed period equal to the average expected remaining service lives of all members but not more than ten years, as determined by the board.

2. The remaining fifty percent of both the normal cost and actuarially determined amount required to amortize the total unfunded accrued liability as determined pursuant to paragraph 1 of this subsection shall be divided by the total number of the employer's members who were hired on or after July 1, 2017 such that each member contributes an equal percentage of the member's compensation. Member contributions shall begin simultaneously with membership in the system and shall be made by payroll deduction.

H. In any fiscal year, an employer's contribution to the system in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. The board may not suspend contributions to the system unless both of the following apply:

1. The retirement system actuary, based on the annual valuation, determines that continuing to accrue excess earnings could result in disqualification of the system's tax-exempt status under the provisions of the United States internal revenue code.

2. The board determines that the receipt of any additional contributions required under this section would conflict with its fiduciary responsibility.

I. If a member's employment is terminated with an employer by either party, the total liability under the system associated with the member's service with the employer remains with the employer. END_STATUTE

Sec. 7. Title 38, chapter 5, article 4, Arizona Revised Statutes, is amended by adding sections 38-843.06 and 38-843.07, to read:

START_STATUTE38-843.06. Required distributions

START_STATUTE38-843.07. Adjustment and refund; termination of the system

A. If more than the correct amount of employer or member contributions is paid into the system by an employer through a mistake of fact, the board shall return those contributions to the employer if the employer requests return of the contributions within one year after the date of the overpayment. the board may not pay an employer earnings attributable to excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions.

B. On termination or partial termination of the system, the accrued benefit of each member is, as of the date of termination or partial termination, fully vested and nonforfeitable to the extent then funded. END_STATUTE

Sec. 8. Section 38-844.08, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.08. Payment of deferred retirement option plan benefits

A. On the simultaneous termination of deferred retirement option plan participation and employment, a member is entitled to receive all of the following:

1. The monthly retirement allowance in the amount determined pursuant to section 38‑845 that was credited monthly to the member's deferred retirement option plan participation account at the date of termination of deferred retirement option plan participation.

2. All amounts credited to the member's deferred retirement option plan participation account on the effective date of termination of deferred retirement option plan participation.

3. Interest on the amount credited pursuant to section 38‑844.05, subsection C, paragraph 3 at a rate equal to two percent but only if the average annual return of the system over the period of years established by the board for use in the calculation of the actuarial value of assets is at least two percent for the previous fiscal year.

B. The form of payment shall be a lump sum distribution. The member or the member's beneficiary may make a direct rollover of the lump sum distribution to an eligible retirement plan under the same rules specified in section 38‑846.02, subsections E, F and G. that is directly deposited in an account created for the member in the public safety personnel defined contribution retirement plan established by article 4.1 of this chapter. On deposit of the lump sum payment, the member shall immediately be able to either withdraw all or any portion of the lump sum deposit or directly transfer all or any portion of the lump sum deposit to an eligible retirement plan as required by section 401(a)(31) of the internal revenue code. END_STATUTE

Sec. 9. Section 38-846.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-846.01. Deferred annuity; exception

A. If any member who has at least ten years of credited service terminates employment for reasons other than retirement or disability, the member may elect to receive a deferred annuity, except that if the annuitant withdraws all or part of the annuitant's accumulated contributions in the system all rights in and to a deferred annuity shall be forfeited by the annuitant. A deferred annuity is a lifetime monthly payment actuarially equivalent to the annuitant's accumulated contributions in the system plus an equal amount paid by the employer and shall commence on application on or after the sixty‑second birthday of the annuitant. The annuity is not a retirement benefit and annuitants are not entitled to receive any amount prescribed by section 38‑845, subsection F or section 38‑846, 38‑856, 38‑856.02 38‑856.05 or 38‑857.

B. This section does not apply to a member who becomes a member of the system on or after January 1, 2012. For a member who is hired on or after January 1, 2012 and before July 1, 2017, a member who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for normal retirement if the member attains the service requirement for normal retirement. For a member who is hired on or after July 1, 2017, a member who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for normal retirement if the member attains the credited service requirement for normal retirement. Once a member described in this subsection reaches the normal retirement age, the member may receive payments made under section 38‑845. END_STATUTE

Sec. 10. Section 38-846.02, Arizona Revised Statutes, is amended to read:

START_STATUTE38-846.02. Termination of membership

A. On termination of employment for any reason other than death or retirement, within twenty days after filing a completed application with the board, a member who becomes a member of the system before January 1, 2012 is entitled to receive the following amounts, less any benefit payments the member has received or any amount the member may owe to the system:

1. If the member has less than five years of credited service with the system, the member may withdraw the member's accumulated contributions from the system.

2. If the member has five or more years of credited service with the system, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

(c) 7.0 to 7.9 years of credited service, fifty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

(e) 9.0 to 9.9 years of credited service, eighty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

B. If a member who becomes a member of the system before January 1, 2012 has more than ten years of credited service with the system, leaves the monies prescribed in subsection A of this section on account with the system for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection A of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.

C. On termination of employment for any reason other than death or retirement, within twenty days after filing a completed application with the board, a member who becomes a member of the system on or after January 1, 2012 is entitled to receive a lump sum payment equal to the member's accumulated contribution plus interest at a rate determined by the board as of the date of termination, less any benefit payments the member has received as of the date of termination or any amount the member may owe to the system.

D. If the amount prescribed in subsection A, B or C of this section includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee‑to‑trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board. A member who withdraws the amount prescribed in subsection A, B or C of this section from the system or who elects a transfer pursuant to this section forfeits all rights to benefits under the system and rights to rehearing and appeal, except as provided in section 38‑849.

E. For distributions occurring from and after December 31, 2007, a member or a member's beneficiary, including a nonspouse designated beneficiary to the extent permitted under subsection F of this section, may roll over an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code to a Roth individual retirement account, if, for distributions occurring before January 1, 2010, the member or the member's beneficiary satisfies the requirements for making a Roth individual retirement account contribution under section 408A(c)(3)(B) of the internal revenue code, as in effect on the date of the rollover. Any amount rolled over to a roth individual retirement account is included in the gross income of the member or the member's beneficiary to the extent the amounts would have been included in gross income if not rolled over as required under section 408A(d)(3)(A) of the internal revenue code. For the purposes of this subsection, the administrator is not responsible for ensuring the member or the member's beneficiary is eligible to make a rollover to a Roth individual retirement account.

F. For distributions made from and after December 31, 2009, a nonspouse designated beneficiary as defined in section 401(a)(9)(E) of the internal revenue code may elect to directly roll over an eligible rollover distribution to an individual retirement account under section 408(a) of the internal revenue code or an individual retirement annuity under section 408(b) of the internal revenue code that is established on behalf of the designated beneficiary and that will be treated as an inherited individual retirement plan pursuant to section 402(c)(11) of the internal revenue code. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code. In applying this subsection, a nonspouse rollover is not subject to the direct rollover requirements under section 401(a)(31) of the internal revenue code, the rollover notice requirements under section 402(f) of the internal revenue code or and the mandatory withholding requirements under section 3405(c) of the internal revenue code.

G. For plan years occurring before January 1, 2007, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no not less than thirty days and no not more than ninety days before the date of distribution and, for plan years beginning from and after December 31, 2006, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no not less than thirty days and no not more than one hundred eighty days before the date of distribution. END_STATUTE

Sec. 11. Section 38-846.04, Arizona Revised Statutes, is amended to read:

START_STATUTE38-846.04. Reinstatement of credited service; effect of prior law

A. A member who received a severance refund on termination of employment as provided in section 38‑846.02, who is subsequently reemployed by an employer and who redeposits the amount withdrawn with interest as provided in section 38‑849 or a member who redeems prior service pursuant to statute is subject to the benefits and duties in effect at the following times for the specified situations:

1. At the time of the member's most recent reemployment if the member is reemployed by an employer other than the same employer.

2. At the time of the member's reemployment if the member is reemployed by the same employer at least ninety days after the date of termination.

3. At the time of the member's most recent termination if the member is reemployed by the same employer in any capacity within ninety days after the date of termination.

B. This Subsection A of this section does not apply if a court of competent jurisdiction orders reinstatement of benefits and duties under a prior law.

C. If a member was initially employed on or after July 1, 2017, regardless of whether the member received a severance refund or redeposits the amount withdrawn with interest, the member shall return to the system as irrevocably elected pursuant to section 38‑842.01.

B. D. A member who transfers credited service from one employer to another employer pursuant to section 38‑853 retains the benefits and duties in effect at the time of the member's transfer. END_STATUTE

Sec. 12. Section 38-849, Arizona Revised Statutes, is amended to read:

START_STATUTE38-849. Limitations on receiving pension; violation; classification; reemployment after severance; reinstatement of service credits; reemployment of retired member or member with a disability; definition

A. If a member is convicted of, or discharged because of, theft, embezzlement, fraud or misappropriation of an employer's property or property under the control of the employer, the member shall be subject to restitution and fines imposed by a court of competent jurisdiction. The court may order the restitution or fines to be paid from any payments otherwise payable to the member from the retirement system.

B. A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the system with an intent to defraud the system is guilty of a class 5 felony. If any change or error in the records results in any member or beneficiary receiving from the system more or less than the member or beneficiary would have been entitled to receive had the records been correct, the local board shall correct such error, and as far as practicable shall adjust the payments in such manner that the actuarial equivalent of the benefit to which such member or beneficiary was correctly entitled shall be paid. If a member is convicted of a crime specified in this subsection, section 13‑713 applies.

C. If a member who received a severance refund on termination of employment pursuant to section 38‑846.02 becomes reemployed with the same employer within two years after the former member's termination date, the member may have forfeited credited service attributable to service rendered during a prior period of service as an employee restored on satisfaction of each of the following conditions:

1. The member files with the system a written application for reinstatement of forfeited credited service within ninety days after again becoming an employee.

2. The retirement fund is paid the total amount previously withdrawn pursuant to section 38‑846.02 plus compound interest from the date of withdrawal to the date of repayment. Interest shall be computed at the rate of nine percent for each year compounded each year from the date of withdrawal to the date of repayment. Forfeited credited service shall not be restored until complete payment is received by the fund.

3. The required payment is completed within one year after returning to employee status.

D. If a member who received a severance refund on termination of employment, as provided in section 38‑846.02, is subsequently reemployed by an employer, the member's prior service credits shall be cancelled and service shall be credited only from the date the member's most recent reemployment period commenced. However, a present active member of the system who forfeited credited service, received a severance refund pursuant to section 38‑846.02 and becomes reemployed with the same employer two years or more after the member's termination date or becomes reemployed with another employer may elect to redeem any part of that forfeited credited service by paying into the system any amounts required pursuant to this subsection. A present active member who elects to redeem any part of forfeited credited service for which the member is deemed eligible by the board shall pay into the system the amounts previously paid or transferred to the member as a severance refund plus an amount, computed by the system's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the system's actuary. On satisfaction of this obligation the member's prior service credits shall be reinstated.

E. If a retired member becomes reemployed in any capacity by the employer from which the member retired before one year from the date of retirement or in the same position at any time following retirement:

1. The following apply:

(a) Within ten days after the retired member is reemployed, the local board shall advise the system in writing of the retired member's reemployment.

(b) The system shall not make pension payments to the retired member during the period of reemployment.

(c) Employee contributions shall not be made on the retired member's account, nor shall any service be credited during the period of reemployment. On subsequent termination of employment by the retired member, the retired member is entitled to receive a pension based on the member's service and compensation before the date of the member's reemployment. The employer shall pay the alternate contribution rate pursuant to section 38‑843.05.

2. Paragraph 1, subdivisions (a) and (b) of this subsection do not apply if either any of the following occur:

(a) The retired member becomes reemployed after sixty consecutive days from the member's retirement date as a result of participating in an open competitive new hire process for an entry level, nonsupervisory position, except if the retired member is hired for the same position.

(b) The retired member is hired as a fire inspector or arson investigator.

(c) The retired member accepts a job reassignment as an accommodation in accordance with the Americans with disabilities act of 1990 due to a disability that is directly related to the retired member being awarded an accidental disability, ordinary disability, catastrophic disability or temporary disability benefit.

F. If a retired member is assigned voluntary duties acting as a limited authority peace officer, pursuant to the Arizona peace officer standards and training board rules, employee contributions shall not be made on the retired member's account, and any service shall not be credited during the period of reemployment. The employer shall not pay the alternate contribution rate pursuant to section 38‑843.05.

G. If after one year from the date of retirement a retired member becomes reemployed by the employer from which the member retired in a position other than the same position from which the member retired, employee contributions shall not be made on the retired member's account, and any service shall not be credited during the period of reemployment. The employer shall pay the alternate contribution rate pursuant to section 38‑843.05.

H. At any time following retirement, if the retired member becomes employed by an employer, other than the employer from which the member retired, in a position ordinarily filled by an employee of an eligible group, employee contributions shall not be made on the retired member's account, and any service shall not be credited during the period of reemployment. The employer shall pay the alternate contribution rate pursuant to section 38‑843.05.

I. If a member who retired under an accidental or ordinary disability becomes reemployed as an employee of an eligible group, section 38‑844 applies and a determination shall be made by the local board as to whether subsection E, F, G or H of this section applies.

J. The local board shall review all reemployment determinations and voluntary assignments as described in subsection F of this section. If the local board or the system is not provided the necessary information required by the system to make a reemployment determination, the local board and the system shall suspend pension payments until information is received and a determination is made regarding whether the reemployment meets the requirements of subsection E, F, G, H or I of this section.

K. A person who defrauds the system or who takes, converts, steals or embezzles monies owned by or from the system and who fails or refuses to return the monies to the system on the board's written request is subject to civil suit by the system in the superior court in Maricopa county. On entry of an order finding the person has defrauded the system or taken, converted, stolen or embezzled monies owned by or from the system, the court shall enter an order against that person and for the system awarding the system all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the system a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the system, plus interest at the rate prescribed by section 44‑1201, until all amounts owed are paid to the system.

L. Notwithstanding any other provision of this article, the board may offset against any benefits otherwise payable by the system to an active or retired member or survivor any court ordered amounts awarded to the board and system and assessed against the member or survivor.

M. Notwithstanding any other provision of this article, a member who retires having met all of the qualifications for retirement and who subsequently becomes an elected official, by election or appointment, is not considered reemployed by the same employer.

N. For the purposes of this section, "same position" means a position in which the member performs substantially similar duties that were performed and exercises substantially similar authority that was exercised by the retired member before retirement. END_STATUTE

Sec. 13. Section 38-857, Arizona Revised Statutes, is amended to read:

START_STATUTE38-857. Group health and accident coverage for retired members; payment; forfeiture of interest

A. On notification, the board shall pay from the assets of the separate account established pursuant to subsection G of this section part of the single coverage premium of any group health and accident insurance for each retired member or survivor of the system who receives a pension and who has elected to participate in the coverage provided by section 38‑651.01 or 38‑782 or any other retiree health and accident insurance coverage provided or administered by a participating employer of the system or a tax‑exempt welfare benefit trust described in section 501(c)(9) of the internal revenue code that provides for the payment of sickness, accident, hospitalization and medical expenses and is designed for the benefit of public safety personnel in this state. The board shall pay up to:

1. One hundred fifty dollars per month for each retired member or survivor of the system who is not eligible for medicare.

2. One hundred dollars per month for each retired member or survivor of the system who is eligible for medicare.

B. On notification, the board shall pay from assets of the separate account established pursuant to subsection G of this section part of the family coverage premium of any group health and accident insurance each month for a benefit recipient who elects family coverage and otherwise qualifies for payment pursuant to subsection A of this section. The board shall pay up to:

1. Two hundred sixty dollars per month if the retired member or survivor of the system and one or more dependents are not eligible for medicare.

2. One hundred seventy dollars per month if the retired member or survivor of the system and one or more dependents are eligible for medicare.

3. Two hundred fifteen dollars per month if either:

(a) The retired member or survivor of the system is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the system is eligible for medicare and one or more dependents are not eligible for medicare.

C. The board shall not pay from assets of the fund more than the amount prescribed in this section for a benefit recipient as a member or survivor of the system.

D. A retired member or survivor of the system may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's former employer if that former employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired member or survivor of the system.

E. This section does not apply to a retired member of the system who becomes a member on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the member's new employer.

F. This section does not apply to a survivor of the system whose deceased spouse becomes a member on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the survivor's new employer.

G. The board shall establish a separate account that consists of the benefits provided in this section. The board shall deposit the benefits provided by this section in the account. 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 pursuant to this section unless the liabilities to provide the benefits pursuant to this section are satisfied. If the liabilities to provide the benefits described in this section are satisfied, the board shall return any amount remaining in the account to the employer.

H. 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 the system.

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

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

I. If a member who is eligible for benefits under this section forfeits the member's interest in the account before the termination of the plan, an amount equal to the amount of the forfeiture shall be applied as soon as possible to reduce employer contributions to fund the benefits provided by this section. END_STATUTE

Sec. 14. Section 38-866, Arizona Revised Statutes, is amended to read:

START_STATUTE38-866. Defined contribution plan design; purpose; powers and duties of the board; administration

A. The board shall establish, design and administer a defined contribution plan to provide for the retirement of specified participants beginning July 1, 2017.

B. The purpose of this article is to provide a defined contribution plan that is fully funded on a current basis from employer and participant contributions.

C. The legislature intends that the defined contribution plan for participants under this article be designed to be a qualified governmental plan under section 401(a) of the internal revenue code, as amended, or successor provisions of law, and be exempt from taxation under section 501 of the internal revenue code. The board may adopt any additional provision to the defined contribution plan that is necessary to fulfill this intent. Consistent with this intent, the board may submit to the internal revenue service a request for a determination letter that the defined contribution plan is a plan qualified under section 401(a) of the internal revenue code and a private letter ruling that all participant contributions that are picked up by the employer as provided in section 38‑867 shall be treated as employer contributions pursuant to section 414(h) of the internal revenue code.

D. The board shall:

1. Enter into a contract with a provider or providers to provide fully bundled retirement plan investments, plan administration and services to participants in the defined contribution plan. The contract shall provide for appropriate long‑term retirement‑oriented investments and shall may include both fixed and variable deferred annuities. The board shall may consider all of the following when determining a company with which to contract:

(a) The financial stability of the company and the ability of the company to provide the contracted rights and benefits to the participants.

(b) The cost of the investments, plan administration and services to the participants.

(c) The experience of the company in providing defined contribution retirement plans in lieu of defined benefit plan participation to public employees.

(d) The experience of the company in paying retirement income to public employees.

(e) The experience of the company in providing plan education, counseling and advice to participants in public employee retirement plans that are offered in lieu of state defined benefit plan participation.

2. Require under the contract that the provider Provide education, counseling and objective participant‑specific plan advice to participants. Any participant‑specific advice and counseling shall be administered by a federally registered investment advisor. The federally registered investment advisor shall act as a fiduciary to participants and is required to act in the participant's best interest. Registered investment advisor services may be contracted for separately from the recordkeeper to avoid any conflicts of interest regarding product.

3. Require under the contract that the defined contribution plan include not less than five and not more than fifteen predetermined investment portfolio options to participants. The predetermined investment portfolio options shall include options that reflect different risk profiles and options that automatically reallocate and rebalance contributions as a participant ages. In addition, the defined contribution plan may permit participants to construct investment portfolios using some or all of the investment options comprising the predetermined investment portfolio options.

4. Require under the contract that the defined contribution retirement plan offer participants a menu of lifetime annuity options, either fixed or variable or a combination of both.

E. The board may:

1. Employ other services it deems necessary, including legal services, for the operation and administration of the defined contribution plan.

2. Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the operation and protection of the plan.

F. The board shall adopt policies regarding the defined contribution plan, including the administration of the participant and employer contributions, investment options, termination of participation in the defined contribution plan, administration of the payout options under the defined contribution plan and administration of the participant distributions.

G. The board shall participate in a competitive bid process at least once every five years to contract with a private person or any qualified company or companies to administer the defined contribution plan established pursuant to this article.

H. Any contract for a third‑party administrator of the defined contribution plan shall include competitive fees and provisions requiring quarterly meetings with the system, annual updates to the board on the status of the defined contribution plan and quarterly statements to each participant. On or before December 31 of each year, the board shall report the status of the defined contribution plan to the governor, the president of the senate, the speaker of the house of representatives and the joint legislative budget committee. END_STATUTE

Sec. 15. Section 38-867, Arizona Revised Statutes, is amended to read:

START_STATUTE38-867. Contributions; member; employer; pickup

A. Each participant in the defined contribution plan shall contribute the following percentage of the participant's gross pensionable compensation by salary reduction that shall be deposited in the participant's annuity account:

1. For a participant as defined in section 38‑865, paragraph 7, subdivision (b), three percent.

2. For a participant as defined in section 38‑865, paragraph 7, subdivision (a), nine percent.

B. A participant as defined in section 38‑865 may make a one‑time irrevocable election, before the participant is eligible to participate in any qualified plan of the employer, to contribute more than the percentage of the participant's gross pensionable compensation specified in this section, up to the amount allowable under section 415(c) of the internal revenue code, which shall be the participant's contribution rate for the remainder of the participant's employment with any employer under the system.

C. Although designated as employee contributions, all participant contributions made to the defined contribution plan shall be picked up and paid by the employer in lieu of contributions by the employee. The contributions picked up by an employer may be made through a reduction in the participant's compensation. A participant in the defined contribution plan may not choose to receive the contributed amounts directly instead of the employer paying the amounts to the defined contribution plan. All participant contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code, shall be excluded from the participant's gross income for federal and state income tax purposes and are includable in the gross income of the participant or the participant's beneficiaries only in the taxable year in which they are distributed.

D. Each employer shall annually make a contribution equal to the following percentages of each participant's gross pensionable compensation:

1. For a participant defined in section 38‑865, paragraph 7, subdivision (b), three percent.

2. For a participant defined in section 38‑865, paragraph 7, subdivision (a), nine percent.

E. The pro rata share of the amount paid in subsection D of this section shall be paid on each date that a participant contribution is made and shall be credited to the participant's annuity account.

F. A participant of the defined contribution plan may not take loans on any portion of the accumulated assets in the participant's annuity account.

G. Each participant as defined in section 38‑865, paragraph 7, subdivision (a) and each employer shall contribute to the public safety personnel defined contribution retirement plan disability program established by article 4.2 of this chapter.

H. A participant's contributions and earnings on those contributions are immediately vested. A participant is fully vested in the defined contribution plan after ten years of service, with employer contributions vesting at a rate of ten percent per year. If a participant dies before completing ten years of service, the employer contributions are immediately fully vested. END_STATUTE

Sec. 16. Title 38, chapter 5, article 4.1, Arizona Revised Statutes, is amended by adding section 38-867.01, to read:

START_STATUTE38-867.01. Rollover distribution from the system; definition

A. A lump sum distribution made pursuant to section 38‑844.08, subsection B shall be deposited in the account of the participant as defined in this section and made immediately available for the participant to either withdraw all or any portion of the lump sum deposit or directly transfer all or any portion of the lump sum deposit to an eligible retirement plan as required by section 401(a)(31) of the internal revenue code.

B. For the purposes of this section, "participant" means a member as defined in section 38‑842, paragraph 31, excluding subdivision (a), item (vi), who is hired before January 1, 2012 and who has elected to enter the deferred retirement option plan established by section 38‑844.02. END_STATUTE

Sec. 17. Section 38-870, Arizona Revised Statutes, is amended to read:

START_STATUTE38-870. Definitions

In this article, unless the context otherwise requires:

1. "Assets" means the accumulated resources of the disability program.

2. "Board" means the board of trustees established by section 38‑848.

3. "Compensation" has the same meaning prescribed in section 38‑842.

4. "Disability program" or "program" means the public safety personnel defined contribution retirement plan disability program established by this article.

5. "Local board" has the same meaning prescribed in section 38‑842.

5. 6. "Participant" means a participant who is in the public safety personnel defined contribution retirement plan and who is a participant as defined in section 38‑865, paragraph 7, subdivision (a).

6. 7. "Pensionable compensation" has the same meaning prescribed in section 38‑865. END_STATUTE

Sec. 18. Section 38-870.06, Arizona Revised Statutes, is amended to read:

START_STATUTE38-870.06. Disability program benefit

A. The local board shall follow the same procedures and method as prescribed in section 38‑844 to determine eligibility for and continuation of a disability benefit and in computing the amount available to the participant, except that a participant is not eligible for a disability benefit under this article for an ordinary disability as defined in section 38‑842.

B. A participant who meets the requirements for a disability pension as prescribed in section 38‑844, except for an ordinary disability, shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a public safety personnel retirement system member who is hired on or after July 1, 2017, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost‑of‑living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the disability benefit paid pursuant to this section, the board shall instruct the actuary for the public safety personnel retirement system to calculate the monthly payment that would be paid to the participant assuming the participant had elected a straight life annuity commencing on the participant's date of disability, using the mortality and interest factors then used by the actuary in determining the valuation of the public safety personnel retirement system. END_STATUTE

Sec. 19. Title 38, chapter 5, article 4.2, Arizona Revised Statutes, is amended by adding section 38-870.07, to read:

START_STATUTE38-870.07. Death benefits; survivor or eligible child

A. If a participant, as defined in section 38‑865, paragraph 7, subdivision (a), is killed in the line of duty or dies from injuries suffered in the line of duty, the local board shall follow the same procedures and methods as prescribed in section 38‑846 to determine eligibility for and the continuation of a death benefit to a surviving spouse or any eligible child.

B. A surviving spouse or eligible child of a participant as specified in subsection A of this section who meets the requirements for a death benefit as prescribed in section 38‑846 shall receive a monthly death benefit equal to a monthly death pension that would be provided to a public safety personnel retirement system member who is hired on or after July 1, 2017, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost‑of‑living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the death benefit paid pursuant to this section, the board shall instruct the actuary for the public safety personnel retirement system to calculate the monthly payment that would be paid to the surviving spouse or eligible child assuming the participant had elected a straight life annuity commencing on the participant's date of death, using the mortality and interest factors then used by the actuary in determining the valuation of the public safety personnel retirement system. END_STATUTE

Sec. 20. Section 38-884, Arizona Revised Statutes, is amended to read:

START_STATUTE38-884. Membership of retirement plan; termination; credited service; redemption; reemployment

A. Each employee of a participating employer is a member of the plan unless the employee is receiving a pension from the plan. A person employed shall undergo a medical examination performed by a designated physician or a physician working in a clinic that is appointed by the local board or, in the case of a state correctional officer who is employed by the state department of corrections, complete a physical examination pursuant to section 41‑1822, subsection B. For the purposes of subsection B of this section, the designated physician or a physician working in a clinic that is appointed by the local board may be the employer's regular employee or contractor.

B. The purpose of the medical examination authorized by this section is to identify a member's physical or mental condition or injury that existed or occurred before the member's date of membership in the plan. Any employee who fails or refuses to submit to the medical examination prescribed in this section is deemed to waive all rights to disability benefits under this article. Medical examinations conducted under this article shall be conducted by a physician and shall not be conducted or used for purposes of hiring, advancement, discharge, job training or other terms, conditions and privileges of employment unrelated to receipt or qualification for pension benefits or service credits from the fund. This subsection does not affect or impair the right of an employer to prescribe medical or physical standards for employees or prospective employees.

C. If a member who becomes a member of the plan before January 1, 2012 ceases to be an employee for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:

1. If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.

2. If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑891, subsection B.

(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38‑891, subsection B.

(c) 7.0 to 7.9 years of credited service, fifty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑891, subsection B.

(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38‑891, subsection B.

(e) 9.0 to 9.9 years of credited service, eighty‑five percent of all member contributions deducted from the member's salary pursuant to section 38‑891, subsection B.

(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38‑891, subsection B.

D. If a member who becomes a member of the plan before January 1, 2012 has more than ten years of credited service with the plan, leaves the monies prescribed in subsection C of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection C of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.

E. The accumulated member contributions of a member who ceases to be an employee for a reason other than death or retirement and who becomes a member of the plan on or after January 1, 2012 shall be paid to the member plus interest at a rate determined by the board as of the date of termination within twenty days after filing with the plan a written application for payment.

F. If the refund includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee‑to‑trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board.

G. For distributions occurring from and after December 31, 2007, a member or a member's beneficiary, including a nonspouse designated beneficiary to the extent permitted under subsection H of this section, may roll over an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code to a Roth individual retirement account, if, for distributions occurring before January 1, 2010, the member or the member's beneficiary satisfies the requirements for making a Roth individual retirement account contribution under section 408A(c)(3)(B) of the internal revenue code, as in effect on the date of the rollover. Any amount rolled over to a Roth individual retirement account is included in the gross income of the member or the member's beneficiary to the extent the amounts would have been included in gross income if not rolled over as required under section 408A(d)(3)(A) of the internal revenue code. For the purposes of this subsection, the administrator is not responsible for ensuring the member or the member's beneficiary is eligible to make a rollover to a Roth individual retirement account.

I. For plan years occurring before January 1, 2007, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no less than thirty days and no more than ninety days before the date of distribution and, for plan years beginning from and after December 31, 2006, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is no less than thirty days and no more than one hundred eighty days before the date of distribution.

J. Service shall be credited to a member's individual credited service account in accordance with rules the local board prescribes. In no case shall more than twelve months of credited service be credited on account of all service rendered by a member in any one year. In no case shall service be credited for any period during which the member is not employed in a designated position, except as provided by sections 38‑921 and 38‑922.

K. Credited service is forfeited if the amounts prescribed in subsection C, D or E of this section are paid or are transferred in accordance with this section.

L. If a former member becomes reemployed with the same employer within two years after the former member's termination date, a member may have forfeited credited service attributable to service rendered during a prior period of service as an employee restored on satisfaction of each of the following conditions:

1. The member files with the plan a written application for reinstatement of forfeited credited service within ninety days after again becoming an employee.

2. The retirement fund is paid the total amount previously withdrawn pursuant to subsection C, D or E of this section plus compound interest from the date of withdrawal to the dates of repayment. Interest shall be computed at the rate of nine percent for each year compounded each year from the date of withdrawal to the date of repayment. Forfeited credited service shall not be restored until complete payment is received by the fund.

3. The required payment is completed within one year after returning to employee status.

M. If a member who receives a severance refund on termination of employment pursuant to subsection C, D or E of this section is subsequently reemployed by an employer, the member's prior service credits are cancelled, and the board shall credit service only from the date the member's most recent reemployment period commenced. However, a present active member of the plan who received a refund of accumulated contributions from the plan pursuant to subsection C, D or E of this section, forfeited credited service pursuant to subsection K of this section and becomes reemployed with the same employer two years or more after the member's termination date or becomes reemployed with another employer may elect to redeem any part of that forfeited credited service by paying into the plan any amounts required pursuant to this subsection. A present active member who elects to redeem any part of forfeited credited service for which the member is deemed eligible by the board shall pay into the plan the amounts previously paid or transferred as a refund of the member's accumulated contributions plus an amount, computed by the plan's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the plan's actuary. On satisfaction of this obligation, the board shall reinstate the member's prior service credits.

N. A retired member may become employed by an employer in a designated position and continue to receive a pension if the employment occurs at least twelve months after retirement. The retired member shall not contribute to the fund and shall not accrue credited service. If a retired member becomes employed by an employer in a designated position before twelve months after retirement:

1. Payment of the retired member's pension shall be suspended until the retired member again ceases to be an employee. The amount of pension shall not be changed on account of service as an employee subsequent to retirement.

2. The retired member shall not contribute to the fund and shall not accrue credited service.

O. Notwithstanding any other provision of this article, a member who retires having met all of the qualifications for retirement and who subsequently becomes an elected official, by election or appointment, is not considered reemployed by the same employer. END_STATUTE

Sec. 21. Title 38, chapter 5, article 6, Arizona Revised Statutes, is amended by adding sections 38-895.03 and 38-900.02, to read:

START_STATUTE38-895.03. Required distributions

START_STATUTE38-900.02. Adjustment and refund; termination of plan

A. If more than the correct amount of employer or member contributions is paid into the plan by an employer through a mistake of fact, the board shall return those contributions to the employer if the employer requests return of the contributions within one year after the date of the overpayment. the board may not pay an employer earnings attributable to excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions.

B. On termination or partial termination of the plan, the accrued benefit of each member is, as of the date of termination or partial termination, fully vested and nonforfeitable to the extent then funded.END_STATUTE