SB1006 - 492R

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

Section 1. Section 9-453, Arizona Revised Statutes, is amended to read:

START_STATUTE9-453. Cemetery maintenance fund

A. The governing body of a city or town having and maintaining a cemetery, may establish a maintenance fund to provide for the maintenance and care of such cemetery. Such maintenance fund shall consist of all amounts received by the city or town in the form of bequests, donations, grants or gifts of all kinds or property, in fee simple or otherwise, for the purpose of cemetery maintenance, and cities and towns are empowered to accept such bequests, donations, grants and gifts to become part of such maintenance funds. In addition, there may be paid into such fund each year such amounts as the governing body may determine.

B. All amounts paid into or which that become a part of a cemetery maintenance fund may be invested or reinvested by the governing body in the manner provided in section 38‑848 for the investment of funds of the public safety personnel retirement system, and the duties, limitations, and obligations of the governing body with respect to such maintenance fund shall, so far as practical, be the same as the duties, limitations and obligations of the fund manager board of trustees with respect to the funds of the public safety personnel retirement system. END_STATUTE

Sec. 2. Section 9-972, Arizona Revised Statutes, is amended to read:

START_STATUTE9-972. Inapplicability of article

A. Effective from and after June 30, 1968, this article shall be amended as to all full-time paid firemen, and employees other than volunteer firemen employed after June 30, 1968, shall be covered by the provisions of the public safety personnel retirement system in those cities which that have established a pension system under the provisions of this article prior to the effective date of this section before July 1, 1968, subject to the right of election provided for in section 38‑854. However, those employers presently participating under the sections 9‑912 to through 9‑971 shall not come under the provisions of the social security act as to their employees.

B. Notwithstanding any provision of law to the contrary, effective from and after June 30, 1968, this article shall apply only to volunteer firemen and all amounts accumulated under this article for full-time paid firemen, as determined by actuarial procedures prescribed by the fund manager board of trustees of public safety personnel retirement system, shall be transferred to the fund maintained under the public safety personnel retirement system, and accounted for by each employer. Each full-time paid fireman employed after June 30, 1968, shall be covered by the provisions of the public safety personnel retirement system, which continues and amends this fund in regard to full-time paid employees. END_STATUTE

Sec. 3. Section 20-224.01, Arizona Revised Statutes, is amended to read:

START_STATUTE20-224.01. Additional premium tax

A. Coincident with the filing of the tax report as required in section 20‑224, each insurer shall pay to the director, for deposit, pursuant to sections 35‑146 and 35‑147, a tax of .4312 per cent of such net premiums received from all insurance carried for or on vehicles as defined in section 28‑101, in addition to other applicable taxes.

B. The tax of .4312 per cent of such net premiums received by the director and paid by an insurer on account of premiums received for insurance on certain vehicles as defined in section 28‑101 shall be separately specified in the insurer's report required in section 20‑224 and is appropriated to the public safety personnel retirement system and shall be transferred by the state treasurer to the fund manager board of trustees of the public safety personnel retirement system for deposit in the highway patrol account. If the tax received is greater than the amount necessary to fund the highway patrol account, beginning in the 1991‑1992 fiscal year the state treasurer shall deposit the excess in the Arizona highway patrol fund established in section 41‑1752 in any amount required by legislative appropriation.

C. An insurer shall report and pay the taxes required by this section in the manner prescribed by section 20‑224. An insurer who fails to pay the tax on or before the prescribed payment dates is subject to a civil penalty determined pursuant to section 20‑225.

D. An insurer shall not claim a premium tax credit pursuant to section 20‑224.03 or 20‑224.04 for the premium taxes paid pursuant to this section.END_STATUTE

Sec. 4. Section 35-142, Arizona Revised Statutes, is amended to read:

START_STATUTE35-142. Monies kept in funds separate from state general fund; receipt and withdrawal

A. All monies received for and belonging to the state shall be deposited in the state treasury and credited to the state general fund except the following, which shall be placed and retained in separate funds:

1. The unexpendable principal of monies received from federal land grants shall be placed in separate funds and the account of each such separate fund shall bear a title indicating the source and the institution or purpose to which such fund belongs.

2. The interest, rentals and other expendable money received as income from federal land grants shall be placed in separate accounts, each account bearing a title indicating the source and the institution or purpose to which the fund belongs. Such expendable monies shall be expended only as authorized, regulated and controlled by the general appropriation act or other act of the legislature.

3. All private or quasi‑private monies authorized by law to be paid to or held by the state treasurer shall be placed in separate accounts, each account bearing a title indicating the source and purpose of such fund.

4. All monies legally pledged to retirement of building indebtedness or bonds issued by those institutions authorized to incur such indebtedness or to issue such bonds shall be placed in separate accounts.

5. Monies of a multi‑county water conservation district authorized by law to be paid to or held by the state treasurer shall be placed in separate accounts, each account bearing a title indicating the source and purpose of such fund.

6. All monies collected by the Arizona game and fish department shall be deposited in a special fund known as the state game and fish protection fund for the use of the Arizona game and fish commission in carrying out the provisions of title 17.

7. All federal monies that are received by the department of economic security for family assistance benefits and medical eligibility as a result of efficiencies developed by the department of economic security and that would otherwise revert to the state general fund pursuant to section 35‑190 shall be retained for use by the department of economic security in accordance with the terms and conditions imposed by the federal funding source in an account or accounts established or authorized by the state treasurer.

8. Monies designated by law as special state funds shall not be considered a part of the general fund. Unless otherwise prescribed by law, the state treasurer shall be the custodian of all such funds.

9. All monies received and any accounts established and maintained by the director of the Arizona state retirement system or the fund manager administrator of the public safety personnel retirement system, the corrections officer retirement plan and the elected officials' retirement plan.

B. No money shall be received or held by the state treasurer except as authorized by law, and in every instance the treasurer shall issue a receipt for money received and shall record the transaction in the statewide accounting system. No money shall be withdrawn from the treasury except upon on the warrant or electronic funds transfer voucher of the department of administration.

C. All federal monies granted and paid to the state by the federal government shall be accounted for in the accounts or funds of the state in the necessary detail to meet federal and state accounting, budgetary and auditing requirements, and all appropriations for matching such federal monies shall be transferred from the general fund to such separate funds as needed, except as otherwise required by the federal government.

D. Nothing in this section requires the establishment of separate accounts or funds for such federal monies unless otherwise required by federal or state law. The department of administration has the authority to use the most efficient system of accounts and records, consistent with legal requirements and standard and necessary fiscal safeguards.

E. Nothing in this section precludes the creation by the department of administration of a clearing account or other acceptable accounting method to effect prompt payment of claims from an approved budget or appropriation. The department of administration shall report each account or fund established or cancelled to the directors of the joint legislative budget committee and the governor's office of strategic planning and budgeting.

F. Nothing in this section or any other section precludes the use of monies kept in funds separate from the general fund, the interest from which accrues to the general fund, for payment of claims against the general fund, provided sufficient monies remain available for payment of claims against such funds.

G. The department of administration may issue warrants for qualified expenditures of federal program monies before they are deposited in the state treasury. The receipt of federal monies shall be timed to coincide, as closely as administratively feasible, with the redemption of warrants by the state treasurer. The department of administration shall limit expenditures to the amount that has been made available for the use under the grant award by the federal government. The state agency initiating the expenditures is responsible for ensuring that expenditures qualify for coverage under the guidelines of the federal grant award.

H. The department of administration shall establish the policies and procedures for all state agencies for drawing federal monies. When the established method results in federal monies being held by this state, the department of administration may use the interest earned on the monies to pay the federal government for any related interest liability. If an interest liability is incurred due to a state agency varying from the established policies and procedures, the department of administration shall charge the appropriate agency account or fund. Interest payment charges to agencies shall be reported by the department of administration to the joint legislative budget committee on or before March 1. Any federal interest liability owed to this state as a result of the delayed federal disbursements shall be used to offset this state's interest liability to the federal government. Any remaining interest earnings shall be deposited in the state general fund.

I. Any state agency or authorized agent of a state agency may accept credit cards pursuant to an agreement entered into by the state treasurer pursuant to section 35‑315 for the payment of any amount due to that agency or agent or this state.

J. Except for the department of revenue for tax payments, agencies or authorized agents on behalf of state agencies that accept credit cards shall deduct any applicable discount fee and processing fee associated with the transaction amount before depositing the net amount in the appropriate state fund. No other reduction is permitted against the transaction amount. The net amount deposited in the appropriate state fund shall be considered as the full deposit required by law of monies received by the agency or the authorized agent. Payment of any applicable discount fee and processing fee shall be accounted for in the annual report submitted to the governor's office of strategic planning and budgeting in accordance with section 41‑1273. The transaction amount of any credit card transaction shall not be reduced by any discount fee or processing fee in an amount in excess of the merchant card settlement fees reflected in the state banking contract with the state treasurer's office.

K. Any state agency that contracts with an authorized agent for the electronic processing of transactions pursuant to title 41, chapter 23 may include a provision in the contract to allow the authorized agent to impose a convenience fee. If allowed, the convenience fee shall be charged to the cardholder in addition to the transaction amount, except for the following:

1. Except as provided in subsection R of this section, any permits, licenses or other authorizations needed to pursue a trade or occupation in this state.

2. Except as provided in subsection R of this section, any permits, licenses or other authorizations needed to establish, expand or operate a business in this state.

3. Except as provided in subsection R of this section, any permits, licenses or other authorizations needed to register a vehicle or license a driver in this state.

L. Each state agency or its authorized agent shall:

1. Deduct the amount of the convenience fee before depositing the transaction amount or the transaction amount reduced by the discount fee or the processing fee, or both, into the appropriate state fund.

2. Not deduct any part of the convenience fee from the transaction amount before depositing the net amount into the appropriate state fund.

3. Deduct the amount of the discount fee or the processing fee, or both, from the transaction amount before depositing the net amount into the appropriate state fund.

M. The net amount deposited in the appropriate state fund pursuant to subsection K or subsection L of this section shall be considered as the full deposit of monies that is required by law and that is received by the agency.

N. Notwithstanding section 35‑142.01, convenience fees received by a state agency or its authorized agent are limited to, and may be used to offset, the costs imposed by the authorized agent in processing the transactions.

O. When the percentage of electronic transactions first exceeds at least thirty per cent of a state agency's total transactions, the state agency shall perform a cost benefit report, including costs of convenience fees, the amount of revenue generated and any realized cost savings. The state agency shall submit the cost benefit report to the joint legislative budget committee within six months after reaching the thirty per cent threshold.

P. State agencies shall report the number of transactions, the number of electronic transactions, the total dollar amount of transactions processed, the total dollar amount of any discount fee, the total dollar amount of any processing fee and the total dollar amount of any convenience fee charged, deducted or paid pursuant to subsections J and K of this section annually by October 1 to the governor, the government information technology agency and the joint legislative budget committee.

Q. Nothing in this section or any other provision of law authorizes any state agency, authorized agent of any state agency or budget unit to establish a bank account for any government monies. All monies received by or on behalf of this state shall be deposited with and in the custody of the state treasurer or in an account that is authorized by the state treasurer pursuant to this section. This subsection does not apply to monies received and any accounts established and maintained by the director of the Arizona state retirement system or the fund manager administrator of the public safety personnel retirement system, the corrections officer retirement plan and the elected officials' retirement plan.

R. If a state agency provides an alternative method of payment, the convenience fee may be charged to the cardholder in addition to the transaction amount. END_STATUTE

Sec. 5. Section 35-392, Arizona Revised Statutes, is amended to read:

START_STATUTE35-392. State treasurer and retirement system divestments; policy notices

A. The state board of investment, the Arizona state retirement system board and the fund manager board of trustees of the public safety personnel retirement system shall each adopt a policy, and submit a copy of the policy to the president of the senate and the speaker of the house of representatives, regarding the countries identified as those countries currently designated by the United States department of state as state sponsors of terrorism. The policy shall include:

1. The procedure to identify United States companies that are in violation of section 6(j) of the export administration act.

2. The process for communicating with the companies and appropriate federal officials, including this state's congressional delegation, in regard to its findings pursuant to this section.

3. The process for divestment from the companies that are identified pursuant to paragraph 1.

B. The state treasurer, the Arizona state retirement system board and the fund manager board of trustees of the public safety personnel retirement system shall divest from those companies, based on public information, identified pursuant to subsection A, paragraph 1.

C. The state treasurer, the Arizona state retirement system board and the fund manager board of trustees of the public safety personnel retirement system shall notify the governor, the president of the senate, the speaker of the house of representatives, the director of the department of administration and each other of any divestments and the reasons for the divestments.

D. Within fourteen days after receipt of the notice pursuant to subsection C, the director of the department of administration shall send notice to the company indicating that this state and its political subdivisions are prohibited from purchasing any product or service from the company until the company is no longer identified pursuant to subsection A, paragraph 1.

E. The prohibition in subsection D does not apply to any existing contract but does apply to any renewal of a contract.

F. This section applies to all affiliated companies and subsidiaries of the company. END_STATUTE

Sec. 6. Section 38-641, Arizona Revised Statutes, is amended to read:

START_STATUTE38-641. Definitions

In this article, unless the context otherwise requires:

1. "Board" means the board of trustees of the public safety personnel retirement system established by section 38‑848, including its authorized employees, administrators, attorneys and agents.

1. 2. "Employer" means this state or any political subdivision of this state, including cities, towns, fire districts and Indian tribes, that employs fire fighters or peace officers and that participates in the public safety personnel retirement system established by chapter 5, article 4 of this title.

2. "Fund manager" means the fund manager of the public safety personnel retirement system established by section 38‑848, including its authorized employees, administrators, attorneys and agents.

3. "Peace officer" means a certified peace officer as defined in section 38‑842.

4. "Program" means the fire fighter and peace officer cancer insurance policy program established by this article.END_STATUTE

Sec. 7. Section 38-642, Arizona Revised Statutes, is amended to read:

START_STATUTE38-642. Fire fighter and peace officer cancer insurance policy program

A. The fund manager board shall establish and administer a fire fighter and peace officer cancer insurance policy program for participating employers that employ fire fighters or peace officers. For the purposes of the internal revenue code, the program is an integral part of a political subdivision of this state.

B. Participating employers that employ fire fighters or peace officers shall participate in the program.

C. The fund manager board shall contract for a group cancer insurance policy to provide coverage as prescribed by section 38‑645 or may self‑insure the program by establishing an insurance policy that is of its own design and that is underwritten by the assets of the fire fighter and peace officer cancer insurance policy program account established by section 38‑643. When procuring, establishing or administering any cancer insurance policy provided pursuant to this article the fund manager board is exempt from the requirements of title 41, chapter 23.

D. On or before July 31 of each year, the fund manager board shall notify each employer required to participate in the program of the total amount payable to the fund manager board to pay for the costs of the program. The amount charged to each employer shall not exceed one hundred eighty dollars for each employee of the employer who is a fire fighter or peace officer on record with the fund manager board as of June 30 of that year. Each employer shall pay this amount to the fund manager board on or before August 31 of each year.

E. Employers that fail to pay the amount required by subsection D of this section by August 31 shall pay a fifteen per cent late charge to the fund manager board on all delinquent amounts accrued monthly. If the amount due and the late charge are not paid within thirty days, the fund manager board may recover the amounts due from the employer by either:

1. Filing an action in a court of competent jurisdiction to recover the amount due.

2. Requesting a deduction of any monies, including excise revenue taxes, payable to the employer by any department or agency of this state.

F. If the fund manager board self‑insures the program the fund manager board and the program are exempt from title 20 and any rules adopted pursuant to title 20.END_STATUTE

Sec. 8. Section 38-643, Arizona Revised Statutes, is amended to read:

START_STATUTE38-643. Fire fighter and peace officer cancer insurance policy program account

A. The fire fighter and peace officer cancer insurance policy program account is established and shall be under the exclusive control of the fund manager board. The fund manager board shall deposit monies collected pursuant to section 38‑642 in the account to pay the cost of providing a group cancer insurance policy under the program and the cost of administering the program.

B. The fund manager board may use up to ten per cent of the monies deposited in the account each year ending July 31 to pay the costs of administering the program, except that fund manager board attorney fees and court costs relating to the program shall be paid out of the account and are not subject to this limitation.

C. The fund manager board shall cause an independent audit of the account to be performed at the end of each fiscal year and shall report the results of the audit to each employer within six months following the end of the fiscal year.

D. The employer contributions and securities in the account and investment earnings on monies in the account are exempt from state, county and municipal taxes.

E. The program is a welfare benefit plan or trust intended to pay expenses incurred in the treatment of cancer as provided in the policy of insurance secured or established by the fund manager board pursuant to section 38‑642. The legislature intends that the program's income be excluded as gross income for the purposes of the assessment of federal income tax under section 115 of the internal revenue code and that coverage under the program be excluded as gross income to the employees or retirees under section 106 of the internal revenue code. The fund manager board may adopt additional program provisions as are necessary to fulfill its intent that the program's income and premiums are not subject to federal income tax.

F. Employers, the fund manager board of trustees and any member of a local board do not guarantee the account in any manner against loss or depreciation and are not liable for any act or failure to act made in good faith pursuant to this article, including determinations on program claims.END_STATUTE

Sec. 9. Section 38-644, Arizona Revised Statutes, is amended to read:

START_STATUTE38-644. Eligibility

A. Except as provided in subsections B, C and D, 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.

2. Be a firefighter who is or was regularly assigned to hazardous duty of the type normally expected of a firefighter or be a peace officer.

3. Have cancer that was first diagnosed after the person's date of membership in the public safety personnel retirement system.

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.

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

Sec. 10. Section 38-645, Arizona Revised Statutes, is amended to read:

START_STATUTE38-645. Coverage

A. Coverage provided under the program shall provide benefits to eligible persons to pay for expenses that are designated by the fund manager board and that are incurred in the treatment of cancer, including treatments by clinics or providers outside of the United States.

B. The fund manager board may provide for additional coverage or exclusions under the program based on available monies in the fire fighter and peace officer cancer insurance policy program account.

C. Coverage under the fire fighter and peace officer cancer insurance policy program may be canceled, changed or terminated by the fund manager board at any time without notice. If the program is terminated, the fund manager board shall refund monies in the fire fighter and peace officer cancer insurance policy program account on a pro rata basis to employers, excluding monies held in reserve for benefits as determined by the fund manager board.

D. If the program is self‑insured, benefits are limited to the assets in the fire fighter and peace officer cancer insurance policy program account and those benefits may be reduced or eliminated at any time.END_STATUTE

Sec. 11. Section 38-651.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-651.01. Group health and accident coverage for retired public employees and elected officials and their dependents

A. The department of administration shall, by rule, shall adopt standards to establish group health and accident coverage for former employees who worked for the state of Arizona and who opt upon on retirement to enroll or continue enrollment in the group health and accident coverage for active employees working for the state of Arizona, or disabled, and receiving either income from a retirement program of this state or long‑term disability income benefits pursuant to section 38‑651.03 or chapter 5, article 2.1 of this title and their dependents and to establish eligibility for retired or disabled state employees to participate in the coverage. The department of administration may adopt rules which that provide that if a retired or disabled insured dies before an insured surviving dependent, the insured surviving dependent is entitled to extended coverage at group rates if the insured surviving dependent elects to continue in the coverage within six months of the retired or disabled insured's death and the insured surviving dependent agrees to pay the cost of the premium for group health and accident insurance. Upon On notification of the retired or disabled insured's death, the department of administration shall immediately notify an insured surviving dependent of the provisions of this section. The department of administration may enter into agreements with disabled former state employees and their dependents who elect to obtain the coverage provided by this section. The agreements may include provisions for the payment of amounts sufficient to pay for the premium and administrative expense of providing the coverage. The department of administration may adopt rules which that provide that upon on the death of a state employee who at the time of death was eligible for normal retirement pursuant to section 38‑757 under the Arizona state retirement system, the insured surviving spouse and eligible dependent children are entitled to continue coverage under group rates provided that the deceased insured state employee, spouse and dependent children were insured at the time of the employee's death. The insured surviving spouse shall be charged an amount sufficient to pay the full premium for the coverage.

B. The department of administration may, by rule, may adopt standards to establish group health and accident coverage for former elected officials of this state or its political subdivisions and their dependents and to establish eligibility for former elected officials to participate in the coverage. Qualifications for eligibility shall include that the former elected official has at least five years of credited service in the elected officials' retirement plan pursuant to chapter 5 of this title, had been covered under a group health or group health and accident plan while serving as an elected official and had been serving as an elected official on or after January 1, 1983. The department of administration may adopt rules which that provide that upon on the death of an elected official or insured former elected official, the insured surviving spouse is entitled to coverage at group rates provided that the deceased insured former elected official met or would have met the qualifications for eligibility pursuant to this subsection or that the deceased elected official would have met the qualifications for eligibility had the deceased not been in office at the time of death. Except as provided in subsection J of this section, the insured former elected official or the insured surviving spouse shall be charged amounts which that are sufficient to pay for the premium and state administrative expense of providing coverage. Notwithstanding subsection J of this section, the standards shall provide that all or any portion of the former state employees or former elected officials or their dependents shall be grouped with officers and employees of the state and its departments and agencies or their dependents as necessary to obtain health and accident coverage at favorable rates.

C. The arizona state retirement system board may enter into agreements with retired and disabled state employee members of the system and plan who elect to obtain the coverage provided pursuant to subsection A of this section. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain coverage of amounts sufficient to pay for the premium not covered under retirement benefits and state administrative expense of providing coverage.

D. Retired state employee or disabled state employee members of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section 15‑1628 who opt upon on retirement to enroll or continue enrollment in the group health and accident coverage for active employees working for the state of Arizona and their dependents and who are receiving benefits from the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section 15‑1628 may participate in group health and accident coverage provided pursuant to this section. The department of administration shall adopt rules which that are necessary for the implementation of this subsection.

E. The fund manager board of trustees of the public safety personnel retirement system may enter into agreements with retired state employee members and their dependents who elect to obtain the coverage provided pursuant to this section. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain coverage of amounts sufficient to pay for the premium not covered under retirement benefits and state administrative expense of providing coverage.

F. The fund manager board of trustees of the public safety personnel retirement system may enter into agreements with retired judges and retired elected officials and their dependents who elect to obtain the coverage provided pursuant to this section. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain coverage of amounts sufficient to pay for the premium not covered under retirement benefits and state administrative expense of providing coverage.

G. The fund manager board of trustees of the public safety personnel retirement system may contract with an insurance carrier and adopt standards to establish a group health and accident insurance coverage program for retired members of the public safety personnel retirement system, their dependents and their spouses. Any members or spouses who elect to obtain the group health and accident coverage provided under this subsection shall agree to a deduction from their monthly retirement benefits of an amount sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing coverage.

H. A county board of supervisors may enter into agreements to establish group health and accident coverage for retired or disabled county employees and their dependents who elect to obtain the coverage provided pursuant to section 11‑263, subsection B. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing for the coverage.

I. Nonmedicare eligible retirees who live in this state, who enroll in a qualifying plan under this section and who reside outside the area of a qualifying health maintenance organization shall be offered the option to enroll with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization provided that:

1. All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.

2. All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the retiree to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the retiree.

3. All emergency or urgent travel, ambulatory and other expenses from the residence area of the retiree to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization shall be paid pursuant to any agreement between the health maintenance organization and the retiree living outside the area of the qualifying health maintenance organization.

J. Public funds shall not be expended to pay all or any part of the premium of insurance pursuant to this section except for monies authorized to be paid for any insured from the retirement plan from which the insured is receiving benefits.END_STATUTE

Sec. 12. Section 38-782, Arizona Revised Statutes, is amended to read:

START_STATUTE38-782. Group health and accident coverage for retired public employees and elected officials and their dependents

A. The board shall establish group health and accident coverage for eligible retired and disabled members and their dependents. Eligible retired and disabled members are those members who are receiving retirement benefits from ASRS or long‑term disability benefits pursuant to section 38‑651.03 or article 2.1 of this chapter and who elect not to obtain health and accident insurance through their former employer. If an insured retired or disabled member dies before the insured member's dependent beneficiary or an insured surviving dependent, the dependent beneficiary or insured surviving dependent is entitled to coverage at group rates if the dependent beneficiary or surviving dependent elects to continue in the coverage within six months of the insured member's death and the dependent beneficiary or surviving dependent agrees to pay the cost of the premium for group health and accident insurance. On notification of the insured member's death, the board shall immediately notify a dependent beneficiary or an insured surviving dependent of the provisions of this section.

B. Retired members of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to sections 15‑1451 and 15‑1628 and their dependents who are receiving benefits from the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to sections 15‑1451 and 15‑1628 and who are not covered by section 38‑651.01 may participate in group health and accident coverage provided pursuant to this section. On the death of an insured member of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan or the optional retirement programs authorized pursuant to sections 15‑1451 and 15‑1628, the insured surviving dependent is entitled to coverage at group rates. Except as provided in subsection H of this section, the surviving dependent shall be charged amounts that are sufficient to pay for the premium and administrative expense of providing the coverage.

C. The board may enter into agreements with retired and disabled members of ASRS who elect to obtain the coverage provided pursuant to subsection A of this section. Those agreements may include provision provisions for the deduction from the retirement benefits of the members who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing the coverage.

D. The fund manager board of trustees of the public safety personnel retirement system may enter into agreements with retired members of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan and their dependents who elect to obtain the coverage provided pursuant to this section. Those agreements may include provisions for the deduction from the retirement benefits of the members who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under their retirement benefits and the administrative expense of providing the coverage.

E. The board may enter into agreements with retired members of the optional retirement programs authorized pursuant to sections 15‑1451 and 15‑1628 and their dependents who elect to obtain the coverage provided pursuant to this section. Those agreements may include provisions for the payment of amounts sufficient to pay for the premium and administrative expense of providing the coverage.

F. If an insured member receiving long‑term disability benefits pursuant to article 2.1 of this chapter becomes ineligible for the long‑term disability benefits, the member and the covered dependents of the member may continue to participate in the group health and accident coverage provided pursuant to this section subject to the following conditions:

1. Participation in the coverage is limited to twelve months from the date the member ceases eligibility for benefits under article 2.1 of this chapter or the member commences employment, whichever occurs first.

2. The member shall pay the full premium cost of the coverage selected, and the member is not eligible for benefits pursuant to section 38‑783.

3. If a member who participates in the coverage dies during the twelve month period provided by this subsection, covered dependents of the member may continue coverage after the death of the member through the end of the twelve month period. Covered dependents of the member who continue coverage pursuant to this paragraph shall pay the full premium cost of the coverage selected and are not eligible for benefits pursuant to section 38‑783.

G. Retired or disabled members who are not eligible for medicare, who live in this state, who enroll in a qualifying health maintenance organization under this section and who reside outside the area of a qualifying health maintenance organization shall be offered the option of enrolling with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization provided that:

1. All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.

2. All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the member to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the member.

3. All emergency or urgent travel, ambulatory and other expenses from the residence area of the member to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization shall be paid pursuant to any agreement between the health maintenance organization and the member living outside the area of the qualifying health maintenance organization.

H. Public monies shall not be spent to pay all or any part of the insurance premium pursuant to this section except for monies authorized to be paid for any insured from the retirement plan from which the insured is receiving benefits.END_STATUTE

Sec. 13. Section 38-801, Arizona Revised Statutes, is amended to read:

START_STATUTE38-801. Definitions

In this article, unless the context otherwise requires:

1. "Accumulated contributions" means the sum of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A plus the amount transferred to the fund on behalf of the member plus the amount deposited in the fund pursuant to section 38‑816.

2. "Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the fund manager board.

3. "Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.

4. "Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.

5. "Average yearly salary" means the result obtained by dividing the total salary paid to an employee during a considered period by the number of years, including fractional years, in which the salary was received. The considered period shall be the three consecutive years within the last ten completed years of credited service as an elected official that yield the highest average. If an employee does not have three consecutive years of credited service as an elected official, the considered period is the employee's last consecutive period of employment with a plan employer immediately before retirement.

6. "Board" means the board of trustees of the system.

6. 7. "Credited service" means the number of whole and fractional years of a member's service as an elected official after the elected official's effective date of participation for which member and employer contributions are on deposit with the fund, plus credited service transferred to the plan from another retirement system or plan for public employees of this state, plus service as an elected official before the elected official's effective date of participation that is being funded pursuant to a joinder agreement pursuant to section 38‑810, subsection C and section 38‑815 or service that was redeemed pursuant to section 38‑816.

7. 8. "Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the plan issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.

8. 9. "Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.

9. 10. "Determination period" means the ninety-day period in which the plan must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the plan mails a notice of receipt to the participant and alternate payee.

10. 11. "Direct rollover" means a payment by the plan to an eligible retirement plan that is specified by the distributee.

11. 12. "Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.

12. 13. "Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.

13. 14. "Effective date of participation" means August 7, 1985, except with respect to employers and their elected officials whose contributions to the plan commence after that date, in which case the effective date of their participation in the plan is specified in the applicable joinder agreement.

14. 15. "Elected official" means:

(a) Every elected official of this state.

(b) Every elected official of each county of this state.

(c) Every justice of the supreme court, every judge of the court of appeals, every judge of the superior court and every full‑time superior court commissioner, except full‑time superior court commissioners who failed to make a timely election of membership under the judges' retirement plan, repealed on August 7, 1985.

(d) The administrator of the fund manager board if the administrator is a natural person.

(e) Each elected official of an incorporated city or town whose employer has executed a proper joinder agreement for coverage of its elected officials.

15. 16. "Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

(f) An eligible deferred compensation plan described in section 457(b) of the internal revenue code that is maintained by a state, a political subdivision of a state or any agency or instrumentality of a state or a political subdivision of a state and that agrees to separately account for amounts transferred into the eligible deferred compensation plan from this plan.

16. 17. "Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:

(a) Any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the member or the joint lives or joint life expectancies of the member and the member's beneficiary or for a specified period of ten years or more.

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

17. 18. "Fund" means the elected officials' retirement plan fund.

18. "Fund manager" means the fund manager of the system.

19. "Notice of receipt" means a written document that is issued by the plan to a participant and alternate payee and that states that the plan has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.

20. "Participant" means a member who is subject to a domestic relations order.

21. "Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.

22. "Pension" means a series of monthly payments to a person who is entitled to receive benefits under the plan.

23. "Personal representative" means the personal representative of a deceased alternate payee.

24. "Plan" means the elected officials' retirement plan.

25. "Plan approved domestic relations order" means a domestic relations order that the plan approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.

26. "Retired member" means a person who is being paid a pension based on the person's credited service as a member of the plan.

27. "Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the plan, or a domestic relations order submitted to the plan that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.

28. "System" means the public safety personnel retirement system. END_STATUTE

Sec. 14. Section 38-802, Arizona Revised Statutes, is amended to read:

START_STATUTE38-802. Elected officials' retirement plan and fund; administration

A. The elected officials' retirement plan is established.

B. The elected officials' retirement plan fund is established. The fund shall be made up of the assets of the judges' retirement plan and the elected officials' retirement plan terminated on August 7, 1985 plus the assets generated by this plan and the assets of the administrator of the fund manager board in the state employees retirement plan on the date of transfer plus any assets transferred to the fund in accordance with a joinder agreement. The fund shall be used exclusively for payment of benefits to retired members or their beneficiaries as provided in this article and for payment of the administration, operation and investment expenses of the plan. In no case shall any portion of the fund revert or otherwise be paid to an employer.

C. The fund manager board shall administer, manage and operate the plan and fund. END_STATUTE

Sec. 15. Section 38-803, Arizona Revised Statutes, is amended to read:

START_STATUTE38-803. Powers and duties of the board

A. The fund manager board, in the administration, management and operation of the plan and fund, shall:

1. Account for the operation, administration and investment expenses and allocate them against investment income.

2. Contract on a fee basis with an actuary to make an actuarial valuation of the plan based on the valuation method and valuation assumptions recommended by the actuary and approved by the fund manager board. The actuary shall be a member of the American academy of actuaries.

3. Contract on a fee basis with an independent auditing firm to make an annual audit of the accounting records of the fund and file a copy of the audit with the auditor general.

4. Invest the monies in the fund as provided in article 4 of this chapter.

5. Within a period of six months after the close of each fiscal year, submit a detailed report of the operation and the investment performance of the plan to the governor, the legislature and the members of the plan.

6. By November 1 of each year provide a preliminary report and by December 15 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

B. The fund manager board, in the administration, management and operation of the plan and fund, may:

1. Employ services as it deems necessary.

2. Either keep invested monies separate or commingle invested monies as it deems appropriate.

3. Delegate authority as it deems necessary and prudent to the administrator employed pursuant to section 38‑848, subsection K, paragraph 6.

4. Do all acts, whether expressly authorized, which may be deemed necessary or proper for the protection of the fund. END_STATUTE

Sec. 16. Section 38-803.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-803.01. Qualified governmental excess benefit arrangement; definitions

A. The fund manager board may establish a qualified governmental excess benefit arrangement for the sole purpose of enabling the fund manager board to continue to apply the same formula for determining benefits payable to all employees covered by the plan whose benefits under the plan are limited by section 415 of the internal revenue code.

B. The fund manager board shall administer the qualified governmental excess benefit arrangement. The fund manager board has full discretionary fiduciary authority to determine all questions arising in connection with the arrangement, including its interpretation and any factual questions arising under the arrangement.

C. All members and retired members of the plan are eligible to participate in the qualified governmental excess benefit arrangement if their benefits under the plan would exceed the limitations imposed by section 415 of the internal revenue code.

D. On or after the effective date of the qualified governmental excess benefit arrangement, the employer shall pay to each eligible member of the plan who retires on or after the effective date and to each retired member who retired before the effective date and that member's beneficiary, if required, a supplemental pension benefit equal to the amount by which the benefit that would have been payable under the plan, without regard to any provisions in the plan incorporating the limitation on benefits imposed by section 415 of the internal revenue code, exceeds the benefit actually payable taking into account the limitation imposed on the plan by section 415 of the internal revenue code. The fund manager board shall compute and pay the supplemental pension benefits under the same terms and conditions and to the same person as the benefits payable to or on account of a retired member under the plan.

E. The employer shall not fund benefits payable under the qualified governmental excess benefit arrangement. The employer shall pay benefits payable under the qualified governmental excess benefit arrangement out of the general assets of the employer. For administrative purposes, the employer may establish a grantor trust for the benefit of eligible members. The employer shall be treated as grantor of the trust for purposes of section 677 of the internal revenue code. The rights of any person to receive benefits under the qualified governmental excess benefit arrangement are limited to those of a general creditor of the employer.

F. The terms and conditions contained in the plan, other than those relating to the benefit limitation imposed by section 415 of the internal revenue code, apply, unless the terms and conditions are inconsistent with the purpose of the qualified governmental excess benefit arrangement.

G. For the purposes of this section:

1. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

2. "Qualified governmental excess benefit arrangement" means a portion of the plan if:

(a) The portion is maintained solely to provide to members of the plan that part of a member's annual benefit that is otherwise payable under the terms of the plan and that exceeds the limitations imposed by section 415 of the internal revenue code.

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the plan unless the trust is maintained solely for the purpose of providing excess benefits.END_STATUTE

Sec. 17. Section 38-804, Arizona Revised Statutes, is amended to read:

START_STATUTE38-804. Membership; termination; reinstatement of credited service

A. 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 fund manager 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 prior to 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. If a member ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the fund manager 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 per cent 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 per cent 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 per cent 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 per cent 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 per cent 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 per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

C. If a member has more than ten years of credited service with the plan, leaves the monies prescribed in subsection B 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 of this section plus interest at a rate determined by the fund manager board for each year computed from and after the member's termination of employment.

D. If the amount prescribed in subsection 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 fund manager board. A member who receives the amount prescribed in subsection B or C 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.

E. If an elected official who has terminated the member's membership in the plan pursuant to subsection B of this section is subsequently elected or otherwise becomes eligible for membership in the plan pursuant to subsection A of this section, credited service only accrues from the date of the member's most recent eligibility as an elected official.

F. Notwithstanding subsection E of this section, if an elected official files a written election form with the fund manager 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 B or C 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 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.

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

H. In addition to the provisions of subsection G 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. 18. Section 38-806, Arizona Revised Statutes, is amended to read:

START_STATUTE38-806. Disability retirement pensions

A. A member who becomes permanently mentally or physically incapacitated for the purpose of performing the duties of the member's office may receive disability retirement benefits if the fund manager board of trustees finds that all of the following apply:

1. The member submits either personally or by a guardian an affidavit as to the nature of the member's incapacity.

2. The member is medically examined by a board of three physicians, one designated by the administrator of the fund, one designated by the member or the member's guardian and one designated by the governor.

3. A majority of the board of physicians certifies to the fund manager board of trustees that:

(a) The member is mentally or physically incapacitated for the purpose of performing the duties of the member's office.

(b) The member's incapacity occurred during the member's term of office and is expected to be of an indefinite duration.

B. On retirement by reason of disability under this section, a retired member shall receive a pension computed pursuant to section 38‑808, subsection B, paragraph 2 until the member's death or until the member's pension is suspended, revoked or discontinued pursuant to this section.

C. If the fund manager board of trustees has reason to believe that a member, retired pursuant to this section but not yet eligible for normal retirement, may no longer be mentally or physically incapacitated from performing the duties of the public office from which the member retired, the fund manager board of trustees may require such retired member to be medically examined. The examination shall be conducted by a board of three physicians, one designated by the administrator of the fund, one designated by the retired member or the member's guardian and one designated by the governor.

D. The fund manager board of trustees shall discontinue pension payments to a member retired pursuant to this section, if the board of physicians certifies that the member is mentally and physically capable of performing the duties of the public office from which the member retired.

E. If the retired member refuses to submit to the medical examination, the administrator of the fund may suspend payment of the member's pension until the member submits to the medical examination. If the retired member refuses for one year or more to submit to medical examination, the fund manager board of trustees shall revoke the pension of a member retired under this section. END_STATUTE

Sec. 19. Section 38-807, Arizona Revised Statutes, is amended to read:

START_STATUTE38-807. Survivor pensions

A. The surviving spouse of a retired member shall be paid a pension which terminates on the death of the surviving spouse if the retired member was married to the surviving spouse for at least two years. The surviving spouse's pension under this subsection is three‑fourths of the amount the retired member was receiving at the time of the member's death.

B. The surviving spouse of an active or inactive member who dies before retirement shall be paid a pension which terminates on the death of the surviving spouse if the active or inactive member was married to the surviving spouse for at least two years.

C. The surviving spouse's pension under subsection B of this section is three‑fourths of the amount of pension computed according to section 38‑808, subsection B, paragraph 2 under the assumption that the member had retired for reason of disability immediately before death.

D. If the deceased retired or active or inactive member does not have an eligible surviving spouse or the pension of the eligible surviving spouse is terminated, each surviving unmarried child of the deceased retired or active or inactive member shall be paid a pension which terminates on adoption or the attainment of age eighteen unless the child is a full‑time student under the age of twenty‑three or the child is under a disability which began before the child attained the age of twenty‑three. The amount of the pension of each surviving minor child of a deceased retired or active or inactive member is an equal share of the amount of the surviving spouse's pension. The surviving minor child's pension shall be paid to the person who is the legally appointed guardian or custodian of the eligible child.

E. If a member dies and no pension is payable on account of the member's death, the deceased member's accumulated contributions shall be paid to the person or persons designated by the deceased member in writing and filed with the fund manager board. If the designated person or persons do not survive the deceased member, the accumulated contributions shall be paid to the estate of the deceased member. END_STATUTE

Sec. 20. Section 38-808, Arizona Revised Statutes, is amended to read:

START_STATUTE38-808. Pension payments; computation of amounts; termination

A. Plan retirement commences on the first day of the month following the date of the member's retirement or death. Pension payments shall be received on or about the first day of the month next following the member's plan retirement. The last pension payment shall be made as of the last day of the month in which the death of the retired member or the surviving spouse or minor children occurs. Pension payments shall not be made in advance.

B. The monthly pension shall be equal to one‑twelfth of the following amount:

1. Four per cent of the member's average yearly salary multiplied by the member's credited service, not to exceed eighty per cent of the member's average yearly salary. This amount shall be reduced if the member takes early retirement pursuant to section 38‑805, subsection B. The amount of reduction is three‑twelfths of one per cent for each month the retired member's early retirement age precedes the member's normal retirement age pursuant to section 38‑805, subsection A, except that the reduction shall not be more than thirty per cent.

2. A member who meets the requirements for a disability retirement pension shall receive a disability pension equal to four per cent of the member's average yearly salary multiplied by twenty years of credited service if the member has ten or more years of credited service, four per cent of the member's average yearly salary multiplied by ten years of credited service if the member has five or more years of credited service but fewer than ten years of credited service or four per cent of the member's average yearly salary multiplied by five years of credited service if the member has fewer than five years of credited service.

C. The plan shall make payments pursuant to section 401(a)(9) of the internal revenue code and the regulations that are issued under that section. Notwithstanding any other provision of this plan, beginning January 1, 1987 payment of benefits to a member shall commence no later than April 1 of the calendar year following the later of:

1. The calendar year in which the member attains seventy and one‑half years of age.

2. The date the member terminates employment.

D. If all pension payments terminate before an amount equal to the member's accumulated contributions has been paid, the difference between the member's accumulated contributions and the aggregate amount of pension payments shall be paid to the person or persons and in such shares as designated by the retired member in writing and filed with the fund manager board. If the designated person or persons do not survive the retired member, the difference shall be paid to the estate of the retired member. END_STATUTE

Sec. 21. Section 38-809, Arizona Revised Statutes, is amended to read:

START_STATUTE38-809. Correction of pension payment errors; assignments prohibited; liability

A. If the plan has made pension payments based on incorrect information and a person or an estate has been paid more or less than the person or estate would have been paid if the information had been correct, the fund manager board shall adjust future payments so that the proper amount is paid. The adjustment may be made in such a manner that the equivalent actuarial present value of the benefit to which the person or estate is correctly entitled is paid.

B. Notwithstanding any other statute, benefits, member contributions or court fees including interest earnings and all other credits payable under the plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by the person entitled to the benefit, contribution, earning or credit under the terms of the plan, and any attempt to dispose of any right under the terms of the plan as proscribed in this subsection is void. The fund is not liable for or subject to the debts, contracts, liabilities, enlargements or torts of any person entitled to a benefit, contribution, earning or credit under the terms of the plan.

C. Nothing in this section exempts employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

D. A person who defrauds the plan or who takes, converts, steals or embezzles monies owned by or from the plan and who fails or refuses to return the monies to the plan on the fund manager's board's written request is subject to a civil suit by the plan in the superior court of in Maricopa county. On entry of an order finding the person has defrauded the plan or taken, converted, stolen or embezzled monies owned by or from the plan, the court shall enter an order against that person and for the plan awarding the plan 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 plan 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 plan, plus interest at the rate prescribed by section 44-1201, subsection A, until all amounts owed are paid to the plan.

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

Sec. 22. Section 38-810, Arizona Revised Statutes, is amended to read:

START_STATUTE38-810. Contributions

A. Each member shall contribute to the fund an amount equal to seven per cent of the member's gross salary. Contributions of members shall be made by payroll deductions. Every member is deemed to consent to these deductions. Payment of a member's compensation, less these payroll deductions, constitutes a full and complete discharge and satisfaction of all claims and demands by the member relating to remuneration for the member's services rendered during the period covered by the payment, except with respect to the benefits provided under the plan.

B. The fund manager's board's office shall be credited monthly with monies collected pursuant to section 12‑119.01, subsection B, paragraph 2, section 12‑120.31, subsection D, paragraph 2, section 12‑284.03, subsection A, paragraph 6, section 22‑281, subsection C, paragraph 3 and section 41‑178. The monies credited to the fund pursuant to this subsection shall be deposited in the fund on a monthly basis, and there shall be a complete accounting of the determination of these monies deposited in the fund.

C. As determined by actuarial valuations performed by the plan's actuary, each employer shall make level per cent compensation contributions sufficient under the actuarial valuation to meet both the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability over, beginning July 1, 2005, a rolling period of at least twenty and not more than thirty years that is established by the fund manager board taking into account the recommendation of the plan's actuary, except that, beginning with fiscal year 2006‑2007, the employer contribution rate shall not be less than ten per cent of salary. The monies deposited in the fund pursuant to subsection B of this section shall be used to reduce the contributions required of state and county employers only. Employers that entered the system plan under a joinder agreement shall also contribute an amount equal to the unfunded accrued liability for that employer. The unfunded liability for each new employer shall be actuarially determined by the plan's actuary as of the effective date of participation of each employer and shall be payable on the effective date of participation. 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 fund manager board shall separately account for these monies in the fund. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of the fund contains excess valuation assets and is more than one hundred per cent funded, the fund manager board shall account for fifty per cent of the excess valuation assets in a stabilization reserve account. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of the fund has a valuation asset deficiency and an unfunded actuarial accrued liability, the fund manager board shall use any valuation assets in the stabilization reserve account, to the extent available, to limit the decline in the fund's funding ratio to not more than two per cent.

D. The department of administration and the treasurer of each county and participating city and town shall transfer to the fund manager board the contributions provided for in subsections A and C of this section within ten working days after each payroll date. The state, county treasurers and clerks of the superior court shall transfer the monies credited under subsection B of this section to the fund manager board on or before the fifteenth day of each calendar month that follows the month in which the court fees were collected. Contributions and monies credited under subsection B of this section and transferred after these dates shall include a penalty equal to ten per cent a year, compounded annually, for each day that the contributions or monies credited under subsection B of this section are late. Delinquent payments due under this subsection, together with interest charges as provided in this subsection and court costs, may be recovered by action in a court of competent jurisdiction against the person or persons responsible for the payments or, at the request of the fund manager board, may be deducted from any other monies, including excise revenue taxes, payable to a political subdivision by any department or agency of this state. If requested by the fund manager board, the state, county treasurers or clerks of the superior court shall transfer the monies credited under subsection B of this section, in an amount determined by the fund manager board, directly to the qualified governmental excess benefit arrangement established pursuant to section 38‑803.01.

E. The employer shall pay the member contributions required of members on account of compensation earned after August 7, 1985. The paid contributions shall be treated as employer contributions for the purpose of determining tax treatment under the United States internal revenue code. The effective date of the employer payment shall not be before the date the retirement plan has received notification from the United States internal revenue service that pursuant to section 414(h) of the United States internal revenue code the member contributions paid will not be included in gross income for income tax purposes until the paid contributions are distributed by refund or pension payments. The employer shall pay the member contributions from monies established and available in the retirement deduction account, which monies would otherwise have been designated as member contributions and paid to the retirement plan. Member contributions paid pursuant to this subsection shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before August 7, 1985.END_STATUTE

Sec. 23. Section 38-810.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-810.01. Internal revenue code qualification

The legislature intends that the plan is a qualified pension plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that the trust is exempt from taxation under section 501 of the internal revenue code, as amended. The assets of the fund are held in trust for the exclusive benefit of the members and beneficiaries of the plan. The fund manager board may adopt such additional provisions to the plan as are necessary to fulfill this intent.END_STATUTE

Sec. 24. Section 38-810.03, Arizona Revised Statutes, is amended to read:

START_STATUTE38-810.03. Compensation limitation; adjustments

A. The annual compensation of each member taken into account for purposes of the plan shall not exceed the following:

1. Beginning January 1, 1996 through December 31, 2001, one hundred fifty thousand dollars.

2. Beginning January 1, 2002, two hundred thousand dollars.

B. If compensation under the plan is determined for a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.

C. The fund manager board shall adjust the annual compensation limits under this section at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this subsection for a calendar year applies to annual compensation for the plan year that begins with or within the calendar year. END_STATUTE

Sec. 25. Section 38-814, Arizona Revised Statutes, is amended to read:

START_STATUTE38-814. Termination of plan

A. If the plan terminates, each member's accrued benefits to the date of termination become one hundred per cent 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 may be implemented through the existing trust, a new trust instrument for that purpose or the purchase by the fund manager 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 fund manager board to provide benefits in accordance with subsection A.

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

Sec. 26. Section 38-815, Arizona Revised Statutes, is amended to read:

START_STATUTE38-815. Joinder agreement

A. Elected officials of an incorporated city or town may participate in the plan if the governing body of the city or town enters into a joinder agreement with the fund manager board on behalf of its elected officials and the employer unconditionally accepts the provisions of the plan and binds its elected officials thereto. All elected officials shall be designated for membership unless written consent to the contrary is obtained from the fund manager board. A member shall be qualified for participation in order to obtain written consent to the contrary from the fund manager board.

B. The effective date of participation shall be specifically stipulated in the joinder agreement.

C. Any city or town which that is considering participation in the plan shall request a preliminary actuarial survey to determine the estimated cost of participation, the benefits to be derived and such other information as may be deemed appropriate. The cost of such survey shall be paid by the city or town requesting it.

D. All assets under any existing public employee defined benefit retirement program, to the extent attributable to the city's or town's elected officials, shall be transferred from the program to this fund no later than sixty days after the city's or town's effective date of participation. That portion of the transferred assets which that is attributable to the elected official's contributions, including interest credits thereon, shall be properly allocated to each affected elected official of the city or town and credited to the elected official's accumulated contributions, in accordance with a schedule furnished by the city or town to the fund manager board.END_STATUTE

Sec. 27. Section 38-816, Arizona Revised Statutes, is amended to read:

START_STATUTE38-816. Redemption of prior service

A. Any present active elected official may elect to redeem any part of the following prior service or employment by paying into the fund the amounts required under subsection B of this section if the prior service or employment is not on account with any other retirement system or plan:

1. Prior service in this state as an elected official with an employer now covered by the plan before the effective date of participation if the elected official has received a refund from a prior retirement system or plan on termination of employment before the elected official's application for redemption of prior service.

2. Prior service in this state as an elected official with an employer now covered by the plan before the effective date of participation if the elected official was not covered by a retirement system or plan during the elected official's prior elected official service.

3. Prior service as an elected official of this state or a city, town or county of this state if the elected official was not covered by a retirement system or plan during that service whether or not the city, town or county is an employer now covered by the plan.

4. Prior employment with the United States government, a state of the United States or a political subdivision of a state of the United States.

B. Any present active elected official who elects to redeem any part of the prior service or employment for which the elected official is deemed eligible by the fund manager board under this section shall pay into the plan the amounts previously withdrawn by the elected official as a refund of the elected official's accumulated contributions, if any, plus the additional amount, if any, that is computed by the plan's actuary and 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 that are prescribed by the plan's actuary.

C. On approval by the governing body of an incorporated city or town that executes a joinder agreement under section 38‑815, the city or town may pay into the fund all or any part of the amount sufficient to provide retirement benefits for elected officials or former elected officials for the time of service as an elected official of the city or town before the joinder agreement if no retirement benefits were in effect for elected officials during the time of service being redeemed under this section.

D. A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the plan, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.END_STATUTE

Sec. 28. Section 38-817, Arizona Revised Statutes, is amended to read:

START_STATUTE38-817. Group health and accident coverage for retired members; payment

A. The fund manager board shall pay from the assets of the fund part of the single coverage premium of any group health and accident insurance for each retired member or survivor of the elected officials' retirement plan who receives a pension if the retired member had eight or more years of credited service under the plan. In order to qualify for payment pursuant to this subsection, the retired member or survivor shall elect single coverage and must have elected to participate in the coverage provided in section 38‑651.01 or 38‑782 or any other health and accident insurance coverage provided or administered by a participating employer of the elected officials' retirement plan. The fund manager board shall pay up to:

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

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

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

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

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

C. Each retired member or survivor of the plan with less than eight years of credited service and a dependent of such a retired member or survivor who participates in the coverage provided by section 38‑651.01 or 38‑782 or who participates in any other health and accident insurance coverage provided or administered by a participating employer of the plan is entitled to receive a proportion of the full benefit prescribed by subsection A, or B, E, F, G or H of this section according to the following schedule:

1. 7.0 to 7.9 years of credited service, ninety per cent.

2. 6.0 to 6.9 years of credited service, seventy‑five per cent.

3. 5.0 to 5.9 years of credited service, sixty per cent.

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

D. The fund manager board shall not pay more than the amount prescribed in this section for a benefit recipient as a member or survivor of the plan.

E. In addition to the payments provided by subsection A of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area as follows:

1. Up to three hundred dollars per month for a retired member or survivor of the plan who is not eligible for medicare and who has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred twenty‑five dollars per month.

2. Up to one hundred seventy dollars per month for a retired member or survivor of the plan who is eligible for medicare and who has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

F. In addition to the payments provided by subsection B of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to six hundred dollars per month if the retired member or survivor of the plan and one or more dependents are not eligible for medicare and the retired member or survivor of the plan has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred twenty‑five dollars per month.

2. Up to three hundred fifty dollars per month if the retired member or survivor of the plan and one or more dependents are eligible for medicare and the retired member or survivor of the plan has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

3. If the retired member or survivor of the plan has eight or more years of credited service, up to four hundred seventy dollars per month if either:

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

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

To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

G. In addition to the payments provided by subsection A of this section, beginning July 1, 2005 through June 30, 2009, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each medicare eligible retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area of up to one hundred seventy dollars per month for a retired member or survivor of the plan who is eligible for medicare and who has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

H. In addition to the payments provided by subsection B of this section, beginning July 1, 2005 through June 30, 2009, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a medicare eligible retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to three hundred fifty dollars per month if the retired member or survivor of the plan and one or more dependents are eligible for medicare and the retired member or survivor of the plan has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

2. If the retired member or survivor of the plan has eight or more years of credited service, up to four hundred seventy dollars per month if the retired member or survivor of the plan is eligible for medicare and one or more dependents are not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

I. A retired member or survivor of the plan who is enrolled in a managed care program in a nonservice area is not eligible for the payment prescribed in subsection E, F, G or H of this section.

J. e. A retired member or survivor of the plan may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's employer if that 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 plan.

K. For the purposes of this section, "nonservice area" means an area in this state in which the Arizona state retirement system pursuant to section 38‑782, the department of administration pursuant to section 38‑651.01 or the member's or survivor's participating employer does not provide or administer a health care services organization program, excluding any preferred provider organization program or individual health indemnity policy, for which the retired member or survivor of the plan is eligible. END_STATUTE

Sec. 29. Section 38-819, Arizona Revised Statutes, is amended to read:

START_STATUTE38-819. Lump sum payment of benefit increases

Notwithstanding any provision of this article, the fund manager board, at the request of a retired member, a survivor or the retired member's or survivor's guardian or conservator, may pay any increase in retirement benefits pursuant to this article in a lump sum payment based on the actuarial present value of the increase in the retirement benefits if the payment of the increase in retirement benefits would result in ineligibility for, reduction of or elimination of social service programs provided to the retired member or survivor by this state, a political subdivision of this state or the federal government. Lump sum payments made pursuant to this section are eligible for a direct rollover distribution. END_STATUTE

Sec. 30. Section 38-842, Arizona Revised Statutes, is amended to read:

START_STATUTE38-842. Definitions

In this article, unless the context otherwise requires:

1. "Accidental disability" means a physical or mental condition that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's job classification and that was incurred in the performance of the employee's duty.

2. "Accumulated contributions" means, for each member, the sum of the amount of the member's aggregate contributions made to the fund and the amount, if any, attributable to the employee's contributions before the member's effective date under another public retirement system, other than the federal social security act, and transferred to the fund minus the benefits paid to or on behalf of the member.

3. "Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the fund manager board.

4. "Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.

5. "Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.

6. "Annuitant" means a person who is receiving a benefit pursuant to section 38-846.01.

7. "Average monthly benefit compensation" means the result obtained by dividing the total compensation paid to an employee during a considered period by the number of months, including fractional months, in which such compensation was received. The considered period shall be the three consecutive years within the last twenty completed years of credited service that yield the highest average. In the computation under this paragraph, a period of nonpaid or partially paid industrial leave shall be considered based on the compensation the employee would have received in the employee's job classification if the employee was not on industrial leave.

8. "Board" means the board of trustees of the system, who are the persons appointed to invest and operate the fund.

8. 9. "Catastrophic disability" means a physical and not a psychological condition that the local board determines prevents the employee from totally and permanently engaging in any gainful employment and that results from a physical injury incurred in the performance of the employee's duty.

9. 10. "Certified peace officer" means a peace officer certified by the Arizona peace officers standards and training board.

10. 11. "Claimant" means any member or beneficiary who files an application for benefits pursuant to this article.

11. 12. "Compensation" means, for the purpose of computing retirement benefits, base salary, overtime pay, shift differential pay, military differential wage pay and holiday pay paid to an employee by the employer on a regular monthly, semimonthly or biweekly payroll basis and longevity pay paid to an employee at least every six months for which contributions are made to the system pursuant to section 38‑843, subsection D. Compensation does not include, for the purpose of computing retirement benefits, payment for unused sick leave, payment in lieu of vacation, payment for compensatory time or payment for any fringe benefits. In addition, compensation does not include, for the purpose of computing retirement benefits, payments made directly or indirectly by the employer to the employee for work performed for a third party on a contracted basis or any other type of agreement under which the third party pays or reimburses the employer for the work performed by the employee for that third party, except for third party contracts between public agencies for law enforcement, training, wildfire and emergency management activities. For the purposes of this paragraph, "base salary" means the amount of compensation each employee is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, longevity pay, fringe benefit pay and similar extra payments.

12. 13. "Credited service" means the member's total period of service before the member's effective date of participation, plus those compensated periods of the member's service thereafter for which the member made contributions to the fund.

13. 14. "Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the system issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.

14. 15. "Depository" means a bank in which all monies of the system are deposited and held and from which all expenditures for benefits, expenses and investments are disbursed.

15. 16. "Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.

16. 17. "Determination period" means the ninety-day period in which the system must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the system mails a notice of receipt to the participant and alternate payee.

17. 18. "Direct rollover" means a payment by the system to an eligible retirement plan that is specified by the distributee.

18. 19. "Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.

19. 20. "Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.

20. 21. "Effective date of participation" means July 1, 1968, except with respect to employers and their covered employees whose contributions to the fund commence thereafter, the effective date of their participation in the system is as specified in the applicable joinder agreement.

21. 22. "Effective date of vesting" means the date a member's rights to benefits vest pursuant to section 38‑844.01.

22. 23. "Eligible child" means the unmarried child of a deceased member who is under the age of eighteen or a full‑time student who is under the age of twenty‑three or under a disability that began before the child attained the age of twenty‑three and who remains a dependent of the surviving spouse or guardian.

23. 24. "Eligible groups" means only the following who are regularly assigned to hazardous duty:

(a) Municipal police officers who are certified peace officers.

(b) Municipal fire fighters.

(c) Paid full‑time fire fighters employed directly by a fire district organized pursuant to section 48‑803 or 48‑804 with three or more full‑time fire fighters, but not including fire fighters employed by a fire district pursuant to a contract with a corporation.

(d) State highway patrol officers who are certified peace officers.

(e) State fire fighters.

(f) County sheriffs and deputies who are certified peace officers.

(g) Game and fish wardens who are certified peace officers.

(h) Police officers who are certified peace officers and fire fighters of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424. A police officer shall be designated pursuant to section 28‑8426 to aid and supplement state and local law enforcement agencies and a fire fighter's sole duty shall be to perform fire fighting services, including services required by federal regulations.

(i) Police officers who are certified peace officers and who are appointed by the Arizona board of regents.

(j) Police officers who are certified peace officers and who are appointed by a community college district governing board.

(k) State attorney general investigators who are certified peace officers.

(l) County attorney investigators who are certified peace officers.

(m) Police officers who are certified peace officers and who are employed by an Indian reservation police agency.

(n) Fire fighters who are employed by an Indian reservation fire fighting agency.

(o) Police officers who are certified peace officers and who are appointed by the department of administration.

(p) Department of liquor licenses and control investigators who are certified peace officers.

(q) Arizona department of agriculture officers who are certified peace officers.

(r) Arizona state parks board rangers and managers who are certified peace officers.

(s) County park rangers who are certified peace officers.

24. 25. "Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

25. 26. "Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

26. 27. "Employee" means any person who is employed by a participating employer and who is a member of an eligible group but does not include any persons compensated on a contractual or fee basis. If an eligible group requires certified peace officer status and at the option of the local board, employee may include a person who is training to become a certified peace officer.

27. 28. "Employers" means:

(a) Cities contributing to the fire fighters' relief and pension fund as provided in sections 9‑951 through 9‑971 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their full‑time paid fire fighters.

(b) Cities contributing under the state police pension laws as provided in sections 9‑911 through 9‑934 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their municipal policemen.

(d) The state, or any political subdivision of this state, including towns, cities, fire districts, counties and nonprofit corporations operating public airports pursuant to sections 28‑8423 and 28‑8424, that has elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.

(e) Indian tribes that have elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.

28. 29. "Fund" means the public safety personnel retirement fund, which is the fund established to receive and invest contributions accumulated under the system and from which benefits are paid.

29. "Fund manager" means the fund manager of the system, who are the persons appointed to invest and operate the fund.

30. "Local board" means the retirement board of the employer, who are the persons appointed to administer the system as it applies to their members in the system.

31. "Member" means any employee who meets all of the following qualifications:

(a) Who is either a full‑time paid municipal police officer, a full‑time paid fire fighter, a law enforcement officer who is employed by this state including the director thereof, a state fire fighter who is primarily assigned to fire fighting duties, a fire fighter or police officer of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, all ranks designated by the Arizona law enforcement merit system council, a state attorney general investigator who is a certified peace officer, a county attorney investigator who is a certified peace officer, a police officer who is appointed by the department of administration and who is a certified peace officer, a department of liquor licenses and control investigator who is a certified peace officer, an Arizona department of agriculture officer who is a certified peace officer, an Arizona state parks board ranger or manager who is a certified peace officer, a county park ranger who is a certified peace officer, a person who is a certified peace officer and who is employed by an Indian reservation police agency, a fire fighter who is employed by an Indian reservation fire fighting agency or an employee included in a group designated as eligible employees under a joinder agreement entered into by their employer after July 1, 1968 and who is or was regularly assigned to hazardous duty.

(b) Who, on or after the employee's effective date of participation, is receiving compensation for personal services rendered to an employer or would be receiving compensation except for an authorized leave of absence.

(d) Who has not attained age sixty‑five before the employee's effective date of participation or who was over age sixty‑five with twenty‑five years or more of service prior to the employee's effective date of participation.

32. "Normal retirement date" means the first day of the calendar month immediately following an employee's completion of twenty years of service or the employee's sixty‑second birthday and the employee's completion of fifteen years of service.

33. "Notice of receipt" means a written document that is issued by the system to a participant and alternate payee and that states that the system has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.

34. "Ordinary disability" means a physical condition that the local board determines will prevent an employee totally and permanently from performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will prevent an employee totally and permanently from engaging in any substantial gainful activity.

35. "Participant" means a member who is subject to a domestic relations order.

36. "Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.

37. "Pension" means a series of monthly amounts that are payable to a person who is entitled to receive benefits under the plan but does not include an annuity that is payable pursuant to section 38-846.01.

38. "Personal representative" means the personal representative of a deceased alternate payee.

39. "Plan approved domestic relations order" means a domestic relations order that the system approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.

40. "Regularly assigned to hazardous duty" means regularly assigned to duties of the type normally expected of municipal police officers, municipal or state fire fighters, eligible fire district fire fighters, state highway patrol officers, county sheriffs and deputies, fish and game wardens, fire fighters and police officers of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, police officers who are appointed by the Arizona board of regents or a community college district governing board, state attorney general investigators who are certified peace officers, county attorney investigators who are certified peace officers, police officers who are appointed by the department of administration and who are certified peace officers, department of liquor licenses and control investigators who are certified peace officers, Arizona department of agriculture officers who are certified peace officers, Arizona state parks board rangers and managers who are certified peace officers, county park rangers who are certified peace officers, police officers who are certified peace officers and who are employed by an Indian reservation police agency or fire fighters who are employed by an Indian reservation fire fighting agency. Those individuals who are assigned solely to support duties such as secretaries, stenographers, clerical personnel, clerks, cooks, maintenance personnel, mechanics and dispatchers are not assigned to hazardous duty regardless of their position classification title. Since the normal duties of those jobs described in this paragraph are constantly changing, questions as to whether a person is or was previously regularly assigned to hazardous duty shall be resolved by the local board on a case‑by‑case basis. Resolutions by local boards are subject to rehearing and appeal.

41. "Retirement" means termination of employment after a member has fulfilled all requirements for a pension. Retirement shall be considered as commencing on the first day of the month immediately following a member's last day of employment or authorized leave of absence, if later.

42. "Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the system, or a domestic relations order submitted to the system that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.

43. "Service" means the last period of continuous employment of an employee by the employers before the employee's retirement, except that if such period includes employment during which the employee would not have qualified as a member had the system then been effective, such as employment as a volunteer fire fighter, then only twenty‑five per cent of such noncovered employment shall be considered as service. Any absence that is authorized by an employer shall not be considered as interrupting continuity of employment if the employee returns within the period of authorized absence. Transfers between employers also shall not be considered as interrupting continuity of employment. Any period during which a member is receiving sick leave payments or a temporary disability pension shall be considered as service. Notwithstanding any other provision of this paragraph, any period during which a person was employed as a full‑time paid fire fighter for a corporation that contracted with an employer to provide firefighting services on behalf of the employer shall be considered as service if the employer has elected at its option to treat part or all of the period the firefighter worked for the company as service in its applicable joinder agreement. Any reference in this system to the number of years of service of an employee shall be deemed to include fractional portions of a year.

44. "State" means the state of Arizona, including any department, office, board, commission, agency or other instrumentality of the state.

45. "System" means the public safety personnel retirement system established by this article.

46. "Temporary disability" means a physical or mental condition that the local board finds totally and temporarily prevents an employee from performing a reasonable range of duties within the employee's department and that was incurred in the performance of the employee's duty. END_STATUTE

Sec. 31. 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 fund manager board of trustees, each employer shall make level per cent of compensation contributions sufficient under such actuarial valuations to meet both the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability over, beginning July 1, 2005, a rolling period of at least twenty and not more than thirty years that is established by the fund manager 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 per cent of compensation. For any employer whose actual contribution rate is less than eight per cent of compensation for fiscal year 2006-2007, that employer's contribution rate is not subject to the eight per cent minimum but, for fiscal year 2006-2007 and each year thereafter, shall be at least five per cent and not more than the employer's actual contribution rate. An employer shall have the option of paying a higher level per cent 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, 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. 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 fund manager 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 per cent funded, the fund manager board shall account for fifty per cent 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 fund manager 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 per cent.

C. Each member, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to 7.65 per cent of the member's compensation, except as provided in subsection B. 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.

D. Each employer shall transfer to the fund manager board the employer and employee contributions provided for in subsections B and C within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten per cent 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 fund manager board, may be deducted from any other monies, including excise revenue taxes, payable to such employer by any department or agency of this state. END_STATUTE

Sec. 32. Section 38-843.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-843.01. Internal revenue code section 414(h) pickup of member contributions

Each employer shall pick up the contributions required of members on account of compensation paid after the effective date specified in the resolution of the fund manager board activating the provisions of this section. The picked up contributions shall be treated as employer contributions for the purpose of tax treatment under the United States internal revenue code. The specified effective date shall not be before the date the system receives notification from the internal revenue service that pursuant to section 414(h) of the internal revenue code the member contributions picked up shall not be included in gross income for income tax purposes until the time that the picked up contributions are distributed by refund or pension payments. The employers shall pick up the member contributions from monies established and available in a retirement deduction account, which monies would otherwise have been designated as member contributions and paid to the system. Member contributions picked up pursuant to this section shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before the effective date. END_STATUTE

Sec. 33. Section 38-843.02, Arizona Revised Statutes, is amended to read:

START_STATUTE38-843.02. Internal revenue code qualification

The legislature intends that the system is a qualified pension plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that the trust is exempt from taxation under section 501 of the internal revenue code, as amended. The assets of the fund are held in trust for the exclusive benefit of the members and beneficiaries of the system. The fund manager board may adopt such additional provisions to the system as are necessary to fulfill this intent.END_STATUTE

Sec. 34. Section 38-843.04, Arizona Revised Statutes, is amended to read:

START_STATUTE38-843.04. Compensation limitation; adjustments

A. The annual compensation of each member taken into account for purposes of the system shall not exceed the following:

1. Beginning January 1, 1996 through December 31, 2001, one hundred fifty thousand dollars.

2. Beginning January 1, 2002, two hundred thousand dollars.

B. If compensation under the system is determined on a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.

Sec. 35. Section 38-844, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844. Requirements for retirement benefits and disability pensions

A. A member shall be eligible for a normal pension on retirement on or after the member's normal retirement date. Payment of a normal pension shall commence as of the first day of the month following the date of retirement, and the last payment shall be made as of the last day of the month in which the death of the retired member occurs.

B. A member is eligible for an accidental disability pension if the member's employment is terminated by reason of accidental disability. A member is eligible for an ordinary disability pension if the member's employment is terminated before the member's normal retirement date by reason of ordinary disability. A member shall file an application for a disability pension after the disabling incident or within one year after the date the member ceases to be an employee. Timely application for an accidental, catastrophic or ordinary disability pension is a prerequisite to receipt of the pension. Payment of an accidental, catastrophic or ordinary disability pension shall commence as of the first day of the month following the date of retirement or the expiration of a period during which the member is receiving sick leave payments or a temporary disability pension, whichever is later. The last payment shall be made as of the last day of the month in which the death of the retired member occurs, or if disability ceases before the member's normal retirement date, the first day of the month in which disability ceases.

C. A member is eligible for a catastrophic disability pension if the member's employment is terminated by reason of catastrophic disability. If more than the allowable catastrophic disability pensions are approved by the local boards in a calendar year, from and after December 31 of the following calendar year a member of the system is not eligible to apply for a catastrophic disability pension. On or before January 31, the fund manager board of trustees shall report to the president of the senate and the speaker of the house of representatives the number of catastrophic disability pensions that were approved by the local boards in the preceding calendar year. For the purposes of this subsection, "allowable catastrophic disability pensions" means for calendar year 2004, ten, and for subsequent calendar years the number of allowable catastrophic disability pensions allowed in the prior calendar year minus the number of catastrophic disability pensions approved by the local boards in the prior calendar year plus four.

D. Notwithstanding any other provision of this section, no member shall qualify for an accidental, catastrophic or ordinary disability pension if the local board determines that the member's disability results from the following:

1. An injury suffered while engaged in a felonious criminal act or enterprise.

2. Service in the armed forces of the United States that entitles the member to a veteran's disability pension.

3. A physical or mental condition or injury that existed or occurred before the member's date of membership in the system.

E. Accidental or ordinary disability shall be considered to have ceased and an accidental or ordinary disability pension terminates if the member:

1. Has sufficiently recovered, in the opinion of the local board, based on a medical examination by a physician or clinic appointed by the local board, to be able to engage in a reasonable range of duties within the member's department and the member refuses an offer of employment by an employer in the system.

2. Refuses to undergo any medical examination requested by the local board, provided that a medical examination shall not be required more frequently than once in any calendar year.

F. Sixty months after the award of a catastrophic disability pension, the local board shall reevaluate the member. If the member still qualifies for the catastrophic disability pension, the member is entitled to continue to receive the pension at the reduced amount prescribed in section 38‑845, subsection E. A catastrophic disability shall be considered to have ceased and a catastrophic disability pension terminates if the local board determines that the member has sufficiently recovered and is able to engage in gainful employment based on a medical examination by a physician or a clinic appointed by the local board. After the sixty month review, the catastrophic disability shall be considered to have ceased and a catastrophic disability pension terminates if the local board determines that the member has sufficiently recovered and is able to engage in gainful employment based on a medical examination by a physician or a clinic appointed by the local board, except that the medical examination shall not be required more frequently than once in a calendar year. The medical review after the sixty month period does not apply after the date the catastrophic disability pensioner would have attained twenty‑five years of service assuming the pensioner remained a member of the system. The local board shall also terminate a catastrophic disability pension if the member refuses to undergo any medical examination requested by the local board. A member whose catastrophic disability pension is terminated may apply for and if eligible is entitled to receive an accidental disability pension as provided in this section.

G. Subsection E of this section does not apply after a disability pensioner's normal retirement date. The amount of a disability pension shall not be recomputed at a disability pensioner's normal retirement date.

H. An ordinary disability pension shall be reduced in the period before the member's normal retirement date if the member engages in any employment and if the member's income from this employment is greater than the member's pension unreduced by this subsection. The amount of the reduction shall be equal to the difference between the member's income from employment and the member's unreduced pension. The local board shall have the right to suspend payments of an ordinary disability pension if the disabled member fails to report earned income. Such suspension shall be for the period there is no satisfactory report with restoration of benefits on acceptance of such report or until the member's normal retirement date, whichever occurs earlier. If, in the opinion of the local board, the reduction provided in this subsection is insufficient to recover monies previously paid to a member, each local board, in its sole discretion, may bring an action to recover any outstanding balance due, notwithstanding any other rights the local board possesses.

I. If accidental or ordinary disability ceases before a retired member attains the member's normal retirement date and the member is reemployed by an employer, the pension payable on the member's subsequent retirement shall be determined as provided in section 38‑849, subsection D.

J. A member shall be eligible for a temporary disability pension if the member's employment is terminated before the member's normal retirement date by reason of temporary disability. Payment of a temporary disability pension shall commence as of the first day of the month following the date of disability or the expiration of a period during which the member is receiving compensation and sick leave payments, whichever is later. The last payment shall be made as of the first day of the month in which either the death of the member occurs or the local board deems the member is no longer under temporary disability, whichever first occurs, provided that no more than twelve monthly temporary disability payments shall be made in total to the member.

K. If on the expiration of a temporary disability pension the local board finds on application that the member has an accidental or ordinary disability, the member shall be eligible for an accidental or ordinary disability pension, as provided in this section.

L. The system shall make payments pursuant to section 401(a)(9) of the internal revenue code and the regulations that are issued under that section. Notwithstanding any other provision of the system, beginning January 1, 1987 payment of benefits to a member shall commence no later than April 1 of the calendar year following the later of:

1. The calendar year in which the member attains seventy and one-half years of age.

2. The date the member terminates employment. END_STATUTE

Sec. 36. Section 38-844.02, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.02. Deferred retirement option plan; purpose

A. A deferred retirement option plan is established. The purpose of the deferred retirement option plan is to add flexibility to the system and to provide members who elect to participate in the deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.

B. The fund manager board shall offer the deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the system.END_STATUTE

Sec. 37. Section 38-844.05, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.05. Deferred retirement option benefits and participation accounts

A. A deferred retirement option plan participation account is an account established within the system on behalf of each deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the deferred retirement option plan participation account. A deferred retirement option plan participant does not have a claim on the assets of the system with respect to the member's deferred retirement option plan participation account and assets shall not be set aside for any deferred retirement option plan participant that are separate from all other system assets.

B. All amounts credited to a member's deferred retirement option plan participation account are fully vested.

C. A member's deferred retirement option plan participation account shall be credited with the following:

1. An amount, credited monthly, that is computed in the same manner as a normal retirement benefit using the factors of credited service and average monthly benefit compensation in effect on the date of deferred retirement option plan participation.

2. An amount, credited monthly, that represents interest at a rate equal to the assumed rate of return determined by the fund manager board.

D. The participant is not entitled to receive any amount prescribed by section 38‑856 or 38‑857 during the deferred retirement option plan participation period. END_STATUTE

Sec. 38. Section 38-844.09, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.09. Internal revenue code compliance

The deferred retirement plan option shall not jeopardize in any way the tax qualified status of the system under the rules of the internal revenue service. The fund manager board may adopt additional provisions to the extent necessary or appropriate for the deferred retirement option plan to comply with applicable federal laws or rules. END_STATUTE

Sec. 39. Section 38-846, Arizona Revised Statutes, is amended to read:

START_STATUTE38-846. Death benefits

A. If the spouse of a member or retired member is surviving at such member's death, the spouse shall be eligible for a surviving spouse's pension, provided that such spouse had been married to the decedent either for a period of at least two years prior to such member's date of death or during such member's service. Payment of a surviving spouse's pension shall commence as of the last day of the month following the member's or retired member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs.

B. The surviving spouse of a deceased retired member shall receive a monthly amount equal to four‑fifths of the monthly amount of pension which that the decedent would have received immediately before death. The surviving spouse of a deceased member who was not killed in the line of duty or did not die from injuries suffered in the line of duty shall receive a monthly amount computed as for the surviving spouse of a deceased retired member, under the assumption that the member had retired for reason of accidental disability immediately before death. The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member's average monthly benefit compensation less any amount payable for an eligible child under this section. A member who was eligible for or receiving a temporary disability pension at the time of the member's death is not deemed to be retired for the purposes of this subsection. For the purposes of this subsection, "killed in the line of duty" means the decedent's death was the direct and proximate result of the performance of the decedent's public safety duties and does not include suicide.

C. If at least one eligible child is surviving at the death of a member or retired member, but no surviving spouse's pension then becomes payable, a guardian's or conservator's pension shall be payable to the person who is serving, or who is deemed by the local board to be serving, as the legally appointed guardian or custodian of the eligible child. If an eligible child of a member or retired member is surviving at the member's or retired member's death, the eligible child is entitled to receive a child's pension payable to the person who is serving or who is deemed by the local board to be serving as the legally appointed guardian or custodian of the eligible child. The member may also direct by designation to the local board that the guardian or conservator pension or child's pension be paid to the trustee of a trust created for the benefit of the eligible child. A guardian's or conservator's pension shall also become payable if at least one eligible child is surviving when a surviving spouse's pension terminates.

D. The fund manager board shall pay a guardian's or conservator's pension during the same period in which a pension is payable to at least one eligible child. The guardian, conservator or designated trustee is entitled to receive the same monthly amount as would have been payable to the decedent's surviving spouse had a surviving spouse's pension become payable upon on the decedent's death.

E. Each eligible child is entitled to a monthly amount equal to one‑tenth of the monthly amount of pension which that the deceased member or retired member would have received immediately prior to death. A deceased member shall be assumed to be retired for reasons of accidental disability immediately before the member's death. If there are three or more children eligible for a child's pension, a maximum of two shares of the child's pension shall be payable, the aggregate of such shares to be apportioned in equal measure to each eligible child.

F. If a member has accumulated contributions remaining in the system at the date of death of the last beneficiary, a lump sum refund of such accumulated contributions shall be payable to the person whom the member has designated as the member's refund beneficiary, or if the member's refund beneficiary is not then surviving, to the designated contingent refund beneficiary, or if the designated contingent refund beneficiary is not then surviving, to such person nearest of kin as selected by the local board. The amount of the lump sum refund shall be the remaining accumulated contributions.

G. In calculating the right to and the amount of the surviving spouse's pension, the law in effect on the date of the death of the member or retired member controls, unless the law under which the member retired provides for a greater benefit amount for a surviving spouse. END_STATUTE

Sec. 40. 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 fund manager board, a member 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 per cent 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 per cent 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 per cent 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 per cent 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 per cent 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 per cent of all member contributions deducted from the member's salary pursuant to section 38‑843, subsection C.

B. If a member 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 fund manager board for each year computed from and after the member's termination of employment.

C. If the amount prescribed in subsection A or B 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 fund manager board. A member who withdraws the amount prescribed in subsection A or B 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.END_STATUTE

Sec. 41. Section 38-847, Arizona Revised Statutes, is amended to read:

START_STATUTE38-847. Local boards

A. The administration of the system and responsibility for making the provisions of the system effective for each employer are vested in a local board. The department of public safety, the Arizona game and fish department, the department of emergency and military affairs, the university of Arizona, Arizona state university, northern Arizona university, each county sheriff's office, each county attorney's office, each county parks department, each municipal fire department, each eligible fire district, each community college district, each municipal police department, the department of law, the department of administration, the department of liquor licenses and control, the Arizona department of agriculture, the Arizona state parks board, each Indian reservation police agency and each Indian reservation fire fighting agency shall have a local board. A nonprofit corporation operating pursuant to sections 28‑8423 and 28‑8424 shall have one local board for all of its members. Each local board shall be constituted as follows:

1. For political subdivisions or Indian tribes, the mayor or chief elected official or a designee of the mayor or chief elected official approved by the respective governing body as chairman, two members elected by secret ballot by members employed by the appropriate employer and two citizens, one of whom shall be the head of the merit system if it exists for the group of members, appointed by the mayor or chief elected official and with the approval of the governing body of the city or the governing body of the employer. The appointed two citizens shall serve on both local boards in a city or Indian tribes where both fire and police department employees are members.

2. For state agencies and nonprofit corporations operating pursuant to sections 28‑8423 and 28‑8424, two members elected by secret ballot by members employed by the appropriate employer and three citizens appointed by the governor. Each state agency local board shall elect a chairman.

3. For fire districts organized pursuant to section 48‑804, the secretary‑treasurer as chairman, two members elected by secret ballot by members employed by the fire district and two citizens appointed by the secretary‑treasurer, one of whom is a resident of the fire district and one of whom has experience in personnel administration but who is not required to be a resident of the fire district.

B. Upon On the taking effect of this system for an employer, the appointments and elections of local board members shall take place with one elective and appointive local board member serving a term ending two years after the effective date of participation for the employer and other local board members serving a term ending four years after the effective date. Thereafter, every second year, and as a vacancy occurs, an office shall be filled for a term of four years in the same manner as previously provided.

C. Each member of a local board, within ten days after the member's appointment or election, shall take an oath of office that, so far as it devolves upon on the member, the member shall diligently and honestly administer the affairs of the local board and that the member shall not knowingly violate or willingly permit to be violated any of the provisions of law applicable to the system.

D. Except as limited by subsection E of this section, a local board shall have such powers as may be necessary to discharge the following duties:

1. To decide all questions of eligibility and service credits, and determine the amount, manner and time of payment of any benefits under the system.

2. To prescribe procedures to be followed by claimants in filing applications for benefits.

3. To make a determination as to the right of any claimant to a benefit and to afford any claimant or the fund manager board of trustees, or both, a right to a rehearing on the original determination. Unless all parties involved in a matter presented to the local board for determination otherwise agree, the local board shall commence a hearing on the matter within ninety days after the date the matter is presented to the local board for determination. If a local board fails to commence a hearing as provided in this paragraph, on a matter presented to the local board for determination, the relief demanded by the party petitioning the local board is deemed granted and approved by the local board. The granting and approval of this relief is considered final and binding unless a timely request for rehearing or appeal is made as provided in this article.

4. To request and receive from the employers and from members such information as is necessary for the proper administration of the system and action on claims for benefits and to forward such information to the fund manager board of trustees.

5. To distribute, in such manner as the local board determines to be appropriate, information explaining the system received from the fund manager board of trustees.

6. To furnish the employer, the fund manager, board of trustees and the legislature, upon on request, with such annual reports with respect to the administration of the system as are reasonable and appropriate.

7. To receive and review the actuarial valuation of the system for its group of members.

8. To receive and review reports of the financial condition and of the receipts and disbursements of the fund from the fund manager board of trustees.

9. To appoint medical boards as provided in section 38‑859.

10. To sue and be sued to effectuate the duties and responsibilities set forth in this article.

E. A local board shall have no power to add to, subtract from, modify or waive any of the terms of the system, change or add to any benefits provided by the system or waive or fail to apply any requirement of eligibility for membership or benefits under the system.

F. A local board, from time to time, shall establish and adopt such rules as it deems necessary or desirable for its administration. All rules and decisions of a local board shall be uniformly and consistently applied to all members in similar circumstances. If a claim or dispute is presented to a local board for determination but the local board has not yet adopted uniform rules of procedure for adjudication of the claim or dispute, the local board shall adopt and use the model uniform rules of local board procedure that are issued by the fund manager's board of trustees' fiduciary counsel to adjudicate the claim or dispute.

G. Any action by a majority vote of the members of a local board which that is not inconsistent with the provisions of the system shall be final, conclusive and binding upon on all persons affected by it unless a timely application for a rehearing or appeal is filed as provided in this article.

H. A claimant or the fund manager board of trustees may apply for a rehearing before the local board within the time period prescribed in this subsection. An application for a rehearing shall be filed in writing with a member of the local board or its secretary within sixty days after:

1. The applicant‑claimant receives notification of the local board's original action by certified mail, by attending the meeting at which the action is taken or by receiving benefits from the system pursuant to the local board's original action, whichever occurs first.

2. The applicant‑fund manager applicant‑board of trustees receives notification of the local board's original action by certified mail or by receipt of written directions from the local board pursuant to its original action, whichever occurs first.

I. A hearing before a local board on a matter remanded from the superior court is not subject to a rehearing before the local board.

J. Decisions of local boards are subject to judicial review pursuant to title 12, chapter 7, article 6.

K. When making a ruling, determination or calculation, the local board shall be entitled to rely upon on information furnished by the employer, the fund manager board of trustees, independent legal counsel or the actuary for the system.

L. Each member of a local board is entitled to one vote. A majority of the appointed and elected members is are necessary for a decision by the members of a local board at any meeting of the local board.

M. The local board shall adopt such bylaws as it deems desirable. The local board shall elect a secretary who may, but need not, be a member of the local board. The secretary of the local board shall keep a record and prepare minutes of all meetings, forward the minutes to the fund manager board of trustees within forty‑five days after each meeting and forward all necessary communications to the fund manager board of trustees.

N. The fees of the medical board and of the local board's independent legal counsel and all other expenses of the local board necessary for the administration of the system shall be paid by the employer at such rates and in such amounts as the local board shall approve. Legal counsel that is employed by the local board is independent of the employer and any employee organization or member and owes its duty of loyalty only to the local board in connection with its representation of the local board.

O. The local board shall issue directions to the fund manager board of trustees concerning all benefits which that are to be paid from the employer's account pursuant to the provisions of the fund. The local board shall keep on file, in such manner as it may deem convenient or proper, all reports from the fund manager board of trustees and the actuary.

P. The local board and the individual members of the local board shall be indemnified from the assets of the employer's account in the fund against any and all liabilities arising by reason of any act, or failure to act, made in good faith pursuant to the provisions of the system, including expenses reasonably incurred in the defense of any claim relating to the act or failure to act.END_STATUTE

Sec. 42. Section 38-848, Arizona Revised Statutes, is amended to read:

START_STATUTE38-848. Board of trustees; powers and duties; independent trust fund; administrator; agents and employees

A. The fund manager board of trustees shall consist of five seven members and shall have the rights, powers and duties that are set forth in this section. The term of office of members shall be three five years to expire on the third Monday in January of the appropriate year. Members are eligible to receive compensation in an amount of fifty dollars a day, but not to exceed one thousand dollars in any one fiscal year, and are eligible for reimbursement of expenses pursuant to chapter 4, article 2 of this title. The fund manager BOARD consists of the following members appointed by the governor pursuant to section 38‑211:

1. One Two elected member members from a local board to represent the employees.

2. One member to represent this state as an employer of public safety personnel. This member shall have the qualifications prescribed in subsection R of this section.

3. One member to represent the cities as employers of public safety personnel.

4. An elected county or state official or a judge of the superior court, court of appeals or supreme court.

5. One Two public member. This member members. These members shall have the qualifications prescribed in subsection R of this section.

B. All monies in the fund shall be deposited and held in a public safety personnel retirement system depository. Monies in the fund shall be disbursed from the depository separate and apart from all monies or funds of this state and the agencies, instrumentalities and subdivisions of this state, except that the fund manager BOARD may commingle the assets of the fund and the assets of all other plans entrusted to its management, subject to the crediting of receipts and earnings and charging of payments to the appropriate employer, system or plan. The monies shall be secured by the depository in which they are deposited and held to the same extent and in the same manner as required by the general depository law of this state. For purposes of making the decision to invest in securities owned by the fund or any plan administered by the fund manager BOARD, the fund and assets of the plans are subject to the sole management of the fund manager BOARD for the purpose of this article except that, on the fund manager's BOARD'S election to invest in a particular security or make a particular investment, the assets comprising the security or investment may be chosen and managed by third parties approved by the fund manager board. The fund manager BOARD may invest in portfolios of securities chosen and managed by a third party. The fund manager's BOARD'S decision to invest in securities such as mutual funds, commingled investment funds, exchange traded funds, private equity or venture capital limited partnerships, real estate limited partnerships or limited liability companies and real estate investment trusts whose assets are chosen and managed by third parties does not constitute an improper delegation of the fund manager's BOARD'S investment authority.

C. All contributions under this system and other retirement plans that the fund manager BOARD administers shall be forwarded to the fund manager BOARD and shall be held, invested and reinvested by the fund manager board as provided in this article. All property and monies of the fund and other retirement plans that the fund manager BOARD administers, including income from investments and from all other sources, shall be retained for the exclusive benefit of members, as provided in the system and other retirement plans that the fund manager BOARD administers, and shall be used to pay benefits to members or their beneficiaries or to pay expenses of operation and administration of the system and fund and other retirement plans that the fund manager BOARD administers.

D. The fund manager board shall have the full power in its sole discretion to invest and reinvest, alter and change the monies accumulated under the system and other retirement plans that the fund manager BOARD administers as provided in this article. In addition to its power to make investments managed by others, the fund manager BOARD may delegate the authority the fund manager BOARD deems necessary and prudent to investment management pursuant to section 38‑848.03, as well as to the administrator, employed by the fund manager BOARD pursuant to subsection K, paragraph 6 of this section, and any assistant administrators to invest the monies of the system and other retirement plans that the fund manager BOARD administers if the administrator, investment management and any assistant administrators follow the investment policies that are promulgated by the fund manager BOARD. The fund manager BOARD may commingle securities and monies of the fund, the elected officials' retirement plan, the corrections officer retirement plan and other plans or monies entrusted to its care, subject to the crediting of receipts and earnings and charging of payments to the account of the appropriate employer, system or plan. In making every investment, the fund manager BOARD shall exercise the judgment and care under the circumstances then prevailing which persons of ordinary prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income from their funds as well as the probable safety of their capital, provided:

1. That not more than eighty per cent of the combined assets of the system or other plans that the fund manager BOARD manages shall be invested at any given time in corporate stocks, based on cost value of such stocks irrespective of capital appreciation.

2. That no more than five per cent of the combined assets of the system or other plans that the fund manager BOARD manages shall be invested in corporate stock issued by any one corporation, other than corporate stock issued by corporations chartered by the United States government or corporate stock issued by a bank or insurance company.

3. That not more than five per cent of the voting stock of any one corporation shall be owned by the system and other plans that the fund manager BOARD administers, except that this limitation does not apply to membership interests in limited liability companies.

4. That corporate stocks and exchange traded funds eligible for purchase shall be restricted to stocks and exchange traded funds that, except for bank stocks, insurance stocks and membership interests in limited liability companies, are either:

(a) Listed or approved on issuance for listing on an exchange registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78ll).

(b) Designated or approved on notice of issuance for designation on the national market system of a national securities association registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78ll).

(c) Listed or approved on issuance for listing on an exchange registered under the laws of this state or any other state.

(d) Listed or approved on issuance for listing on an exchange of a foreign country with which the United States is maintaining diplomatic relations at the time of purchase, except that no more than twenty per cent of the combined assets of the system and other plans that the fund manager BOARD manages shall be invested in foreign securities, based on the cost value of the stocks irrespective of capital appreciation.

(e) An exchange traded fund that is recommended by the chief investment officer of the system, that is registered under the investment company act of 1940 (15 United States Code sections 80a-1 through 80a-64) and that is both traded on a public exchange and based on a publicly recognized index.

E. Notwithstanding any other law, the fund manager BOARD shall not be required to invest in any type of investment that is dictated or required by any entity of the federal government and that is intended to fund economic development projects, public works or social programs, but may consider such economically targeted investments pursuant to its fiduciary responsibility. The fund manager BOARD, on behalf of the system, may invest in, lend monies to or guarantee the repayment of monies by a limited liability company, limited partnership, joint venture, partnership, limited liability partnership or trust in which the system has a financial interest, whether the entity is closely held or publicly traded and that, in turn, may be engaged in any lawful activity, including venture capital, private equity, the ownership, development, management, improvement or operation of real property and any improvements or businesses on real property or the lending of monies.

F. Conference call meetings of the fund manager of the public safety personnel retirement system BOARD that are held for investment purposes only are not subject to chapter 3, article 3.1 of this title, except that the fund manager BOARD shall maintain minutes of these conference call meetings and make them available for public inspection within twenty‑four hours after the meeting. The fund manager BOARD shall review the minutes of each conference call meeting and shall ratify all legal actions taken during each conference call meeting at the next scheduled meeting of the fund manager BOARD.

G. The fund manager BOARD shall not be held liable for the exercise of more than ordinary care and prudence in the selection of investments and performance of its duties under the system and shall not be limited to so‑called "legal investments for trustees", but all monies of the system and other plans that the fund manager BOARD administers shall be invested subject to all of the conditions, limitations and restrictions imposed by law.

H. Except as provided in subsection D of this section, the fund manager BOARD may:

1. Invest and reinvest the principal and income of all assets that the fund manager BOARD manages without distinction between principal and income.

2. Sell, exchange, convey, transfer or otherwise dispose of any investments made on behalf of the system or other plans the fund manager BOARD administers in the name of the system or plans by private contract or at public auction.

3. Also:

(a) Vote on any stocks, bonds or other securities.

(b) Give general or special proxies or powers of attorney with or without power of substitution.

(c) Exercise any conversion privileges, subscription rights or other options and make any payments incidental to the exercise of the conversion privileges, subscription rights or other options.

(d) Consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities, delegate discretionary powers and pay any assessments or charges in connection therewith.

(e) Generally exercise any of the powers of an owner with respect to stocks, bonds, securities or other investments held in or owned by the system or other plans whose assets the fund manager BOARD administers.

4. Make, execute, acknowledge and deliver any other instruments that may be necessary or appropriate to carry out the powers granted in this section.

5. Register any investment held by the system or other plans whose assets the fund manager BOARD administers in the name of the system or plan or in the name of a nominee.

6. At the expense of the system or other plans that the fund manager BOARD administers, enter into an agreement with any bank or banks for the safekeeping and handling of securities and other investments coming into the possession of the fund manager BOARD. The agreement shall be entered into under terms and conditions that secure the proper safeguarding, inventory, withdrawal and handling of the securities and other investments. No access to and no deposit or withdrawal of the securities from any place of deposit selected by the fund manager BOARD shall be permitted or made except as the terms of the agreement may provide.

7. Appear before local boards and the courts of this state and political subdivisions of this state through counsel or appointed representative to protect the fund or the assets of other plans that the fund manager BOARD administers. The fund manager BOARD is not responsible for the actions or omissions of the local boards under this system but may seek review or rehearing of actions or omissions of local boards. The fund manager BOARD does not have a duty to review actions of the local boards but may do so in its discretion in order to protect the fund.

8. Empower the fund administrator to take actions on behalf of the fund manager BOARD that are necessary for the protection and administration of the fund or the assets of other plans that the fund manager BOARD administers pursuant to the guidelines of the fund manager BOARD.

9. Do all acts, whether or not expressly authorized, that may be deemed necessary or proper for the protection of the investments held in the fund or owned by other plans that the fund manager BOARD administers.

I. Investment expenses and operation and administrative expenses of the fund manager BOARD shall be accounted for separately and allocated against investment income.

J. The fund manager BOARD, as soon as possible within a period of six months following the close of any fiscal year, shall transmit to the governor and the legislature a comprehensive annual financial report on the operation of the system and other plans that the fund manager BOARD administers containing, among other things:

1. A balance sheet.

2. A statement of income and expenditures for the year.

3. A report on an actuarial valuation of its assets and liabilities.

4. A detailed statement of the investments acquired and disposed of during the year.

5. A list of investments owned.

6. The total rate of return, yield on cost, and per cent of cost to market value of the fund and the assets of other plans that the fund manager BOARD administers.

7. Any other statistical and financial data that may be necessary for the proper understanding of the financial condition of the system and other plans that the fund manager BOARD administers and the results of their operations. A synopsis of the annual report shall be published for the information of members of the system, the elected officials' retirement plan or the corrections officer retirement plan.

K. The fund manager BOARD shall:

1. Maintain the accounts of the system and other plans that the fund manager BOARD administers and issue statements to each employer annually and to each member who may request it.

2. Report the results of the actuarial valuations to the local boards and employers.

3. Contract on a fee basis with an independent investment counsel to advise the fund manager BOARD in the investment management of the fund and assets of other plans that the fund manager BOARD administers and with an independent auditing firm to audit the fund manager's BOARD'S accounting.

4. Permit the auditor general to make an annual audit and the results shall be transmitted to the governor and the legislature.

5. Contract on a fee basis with an actuary who shall make actuarial valuations of the system and other plans that the fund manager BOARD administers, be the technical adviser of the fund manager BOARD on matters regarding the operation of the funds created by the provisions of the system, the elected officials' retirement plan, the corrections officer retirement plan and the fire fighter and peace officer cancer insurance policy program and perform other duties required in connection therewith. The actuary must be a member of a nationally recognized association or society of actuaries.

6. Employ, as administrator, a person, state department or other body to serve at the pleasure of the fund manager BOARD.

7. Establish procedures and guidelines for contracts with actuaries, auditors, investment counsel and legal counsel and for safeguarding of securities.

L. The administrator, under the direction of the fund manager BOARD, shall:

1. Administer this article.

2. Invest the funds of the system and other plans that the fund manager BOARD administers as the fund manager BOARD deems necessary and prudent as provided in subsections D and H of this section and subject to the investment policies and fund objectives promulgated by the fund manager BOARD.

3. Establish and maintain an adequate system of accounts and records for the system and other plans that the fund manager BOARD administers, which shall be integrated with the accounts, records and procedures of the employers so that the system and other plans that the fund manager BOARD administers operates most effectively and at minimum expense and that duplication of records and accounts is avoided.

4. In accordance with the fund manager's BOARD'S governance policy and personnel rules and procedures and the budget adopted by the fund manager BOARD, hire such employees and services the administrator deems necessary and prescribe their duties, including the hiring of one or more assistant administrators to manage the system's operations, investments and legal affairs.

5. Be responsible for income, the collection of the income and the accuracy of all expenditures.

6. Recommend to the fund manager BOARD annual contracts for the system's actuary, auditor, investment counsel, legal counsel and safeguarding of securities.

7. Perform additional duties and powers prescribed by the fund manager BOARD and delegated to the administrator.

M. The system is an independent trust fund and the fund manager BOARD, the administrator, the assistant administrators and all persons employed by them are not under the jurisdiction of the department of administration or any other agency, department or instrumentality of this state or subject to section 38‑611 or title 41, chapter 4 or 6. The salaries of the administrator, assistant administrators and other employees of the fund manager BOARD are the sole determination of the fund manager board. Contracts for goods and services approved by the fund manager BOARD are not subject to title 41, chapter 23. As an independent trust fund whose assets are separate and apart from all other funds of this state, the system and the fund manager BOARD are not subject to the restrictions prescribed in section 35-154 or article IX, sections 5 and 8, Constitution of Arizona.

N. The attorney general or an attorney approved by the attorney general and paid by the fund shall be the attorney for the fund manager BOARD and shall represent the fund manager BOARD in any legal proceeding or forum that the fund manager BOARD deems appropriate. The fund manager BOARD, administrator, assistant administrators and employees of the fund manager BOARD are not personally liable for any acts done in their official capacity in good faith reliance on the written opinions of the fund manager's BOARD'S attorney.

O. At least once in each five‑year period after the effective date, the actuary shall make an actuarial investigation into the mortality, service and compensation experience of the members and beneficiaries of the system and other plans that the fund manager BOARD administers and shall make a special valuation of the assets and liabilities of the monies of the system and plans. Taking into account the results of the investigation and special valuation, the fund manager BOARD shall adopt for the system and other plans that the fund manager BOARD administers those mortality, service and other tables deemed necessary.

P. On the basis of the tables the fund manager BOARD adopts, the actuary shall make a valuation of the assets and liabilities of the funds of the system and other plans that the fund manager BOARD administers not less frequently than every year. By November 1 of each year the fund manager BOARD shall provide a preliminary report and by December 15 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

Q. Neither the fund manager BOARD nor any member or employee of the fund manager board shall directly or indirectly, for himself or as an agent, in any manner use the monies or deposits of the fund except to make current and necessary payments, nor shall the fund manager BOARD or any member or employee become an endorser or surety or in any manner an obligor for monies loaned by or borrowed from the fund or the assets of any other plans that the fund manager BOARD administers.

R. The members of the fund manager BOARD who are appointed pursuant to subsection A, paragraphs 2 and 5 of this section shall have at least ten years' substantial experience as any one or a combination of the following:

1. A portfolio manager acting in a fiduciary capacity.

2. A securities analyst.

3. An employee or principal of a trust institution, investment organization or endowment fund acting either in a management or an investment related capacity.

4. A chartered financial analyst in good standing as determined by the association for investment management and research.

5. A professor at the university level teaching economics or investment related subjects.

6. An economist.

7. Any other professional engaged in the field of public or private finances.

S. Financial or commercial information that is provided to the fund manager board, employees of the fund manager board and attorneys of the fund manager board in connection with investments in which the fund manager board has invested or investments the fund manager board has considered for investment is confidential, proprietary and not a public record if the information is information that would customarily not be released to the public by the person or entity from whom the information was obtained. END_STATUTE

Sec. 43. Section 38-848.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-848.01. Qualified governmental excess benefit arrangement; definitions

A. The fund manager board may establish a qualified governmental excess benefit arrangement for the sole purpose of enabling the fund manager board to continue to apply the same formula for determining benefits payable to all employees covered by the system whose benefits under the system are limited by section 415 of the internal revenue code.

C. All members and retired members of the system are eligible to participate in the qualified governmental excess benefit arrangement if their benefits under the system would exceed the limitations imposed by section 415 of the internal revenue code.

D. On or after the effective date of the qualified governmental excess benefit arrangement, the employer shall pay to each eligible member of the system who retires on or after the effective date and to each retired member who retired before the effective date and that member's beneficiary, if required, a supplemental pension benefit equal to the amount by which the benefit that would have been payable under the system, without regard to any provisions in the system incorporating the limitation on benefits imposed by section 415 of the internal revenue code, exceeds the benefit actually payable taking into account the limitation imposed on the system by section 415 of the internal revenue code. The fund manager board shall compute and pay the supplemental pension benefits under the same terms and conditions and to the same person as the benefits payable to or on account of a retired member under the system.

F. The terms and conditions contained in the system, other than those relating to the benefit limitation imposed by section 415 of the internal revenue code, apply, unless the terms and conditions are inconsistent with the purpose of the qualified governmental excess benefit arrangement.

G. For the purposes of this section:

1. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

2. "Qualified governmental excess benefit arrangement" means a portion of the system if:

(a) The portion is maintained solely to provide to members of the system that part of a member's annual benefit that is otherwise payable under the terms of the system and that exceeds the limitations imposed by section 415 of the internal revenue code.

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the system unless the trust is maintained solely for the purpose of providing excess benefits.END_STATUTE

Sec. 44. Section 38-848.03, Arizona Revised Statutes, is amended to read:

START_STATUTE38-848.03. Appointed investment management

A. The fund manager board may appoint investment management. Investment management shall have:

1. The highest professional and fiduciary recommendations.

2. Not less than three years' experience at handling institutional investments of at least two hundred fifty million dollars. This paragraph is satisfied if investment management, the individual retained by investment management or individual employees in a firm of investment managers meet this requirement.

3. Had responsibility for investment decision making as an insurance company investment fund, an investment division of a bank, a mutual fund, an investment organization or institution, a pension fund or an investment adviser who is designated as a chartered financial analyst by the chartered financial analyst institute.

B. A bank serving as investment management does not have a conflict of interest because it is also a depository in which any monies administered by the fund manager board are deposited.

C. The fund manager board shall appoint investment management for a term of one year and may appoint the investment management to succeeding terms. The fund manager board may remove investment management for not complying with this article or for failure to comply with or adhere to the fund manager's board's investment goals, objectives or policies.

D. Investment management appointed by the fund manager board:

1. May purchase and sell in the name of the system and other plans that the fund manager board administers any of the securities and investments held by the system or plans.

2. Subject to any restrictions imposed by the fund manager board, are is responsible for making all investment decisions relating to the investments the fund manager board has assigned investment management to manage.

E. Investment management shall not directly or indirectly:

1. Except for the fees agreed to be paid by the fund manager board to investment management or as otherwise agreed by the fund manager board, have any interest in the investments being managed by investment management for the fund manager board.

2. Borrow monies, funds or deposits of the system or other plans that the fund manager board administers or use these monies in any manner except as directed under this article.

3. Be an endorser, surety or obligor on investments made under this article.

F. Subject to the limitations in this article, the fund manager board may authorize the administrator, any assistant administrators and other in‑house investment professionals employed by the fund manager board to make investments for the system and other plans that the fund manager board administers that do not exceed fifty per cent of the assets of the system and other plans measured at cost.

G. To exercise the responsibilities prescribed in this section, the fund manager board may enter into contracts that may be interpreted and enforced under the laws of a jurisdiction other than this state and that are not subject to section 35-214 or 38-511 or title 41, chapter 23. END_STATUTE

Sec. 45. 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 or disabled member

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 6 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 the member shall be entitled to receive a lump sum payment of the member's accumulated contributions but forfeits any future compensation and benefits that would otherwise accrue to the member or the member's estate under this article.

C. 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, if the former member's reemployment with the same employer occurred within two years after the former member's termination date, and, within ninety days after reemployment the former member signs a written election consenting to reimburse the fund within one year, the former member shall be required to redeposit the amount withdrawn at the time of the former member's separation from service, with interest thereon at the rate of nine per cent for each year compounded each year from the date of withdrawal to the date of repayment. On satisfaction of this obligation the member's prior service credits shall be reinstated.

D. If a retired member becomes employed in any capacity by the employer from which the member retired before sixty consecutive days after the member's date of retirement, the system shall not make pension payments to the retired member during the period of reemployment. If a retired member is reemployed by an employer, no contributions shall be made on the retired member's account, nor any service credited, during the period of the reemployment. The fund manager shall review all reemployment determinations. Notwithstanding this subsection, if a retired member subsequently becomes employed in the same position by the employer from which the member retired, the system shall not make pension payments to the retired member 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. If a member who retired under disability is reemployed by an employer as an employee, that member shall be treated as if the member had been on an uncompensated leave of absence during the period of the member's disability retirement and shall be a contributing member of the system. the board shall review all reemployment determinations. For the purposes of this subsection, "same position" means the member is in a position where the member performs substantially similar duties that were performed and exercises substantially similar authority that was exercised by the retired member before retirement.

E. 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 fund manager's 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, subsection A, until all amounts owed are paid to the system.

F. Notwithstanding any other provision of this article, the fund manager 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 fund manager board and system and assessed against the member or survivor. END_STATUTE

Sec. 46. Section 38-850, Arizona Revised Statutes, is amended to read:

START_STATUTE38-850. Assurances and liabilities; board of trustee discretion; overpayments; underpayments

A. Nothing contained in the system shall be construed as a contract of employment between an employer and any employee, or as a right of any employee to be continued in the employment of an employer, or as a limitation of the rights of an employer to discharge any of its employees, with or without cause.

B. No employee shall have any right to, or interest in, any assets of the fund upon on termination of his employment or otherwise, except as provided from time to time under the system, and then only to the extent of the benefits payable to such employee out of the assets of the fund. All payments of benefits as provided for in the system shall be made solely out of the assets of the fund, and neither the employers, the fund manager, nor board and any member of the board shall be are not liable therefor for payment of benefits in any manner.

C. Benefits, employee contributions or employer contributions, including interest, earnings and all other credits, payable under this system shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by the person entitled to the benefit, contribution, earning or credit, under the terms of the system, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any such right hereunder shall be void. The fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to such rights hereunder. This subsection does not preclude arrangements for the withholding of taxes from benefit payments, arrangements for the recovery of benefit overpayments, arrangements for the transfer of benefit rights to another plan or arrangements for direct deposit of benefit payments in an account in a bank, savings and loan association or credit union if the arrangement is not part of an arrangement constituting an assignment or alienation.

D. Neither The employers, the fund manager board of trustees, the fund manager's board of trustees' administrator, assistant administrators and employees or and any member of a local board guarantees do not guarantee the fund in any manner against loss or depreciation, and none of them shall be liable for any act or failure to act, which that is made in good faith pursuant to the provisions of the system. The employers shall not be responsible for any act or failure to act of a local board or any of its members or for any act or failure to act of the fund manager board of trustees. A local board and the individual members of a local board shall not be responsible for any act or failure to act of any employer or the fund manager board of trustees.

E. The fund manager board, in its discretion, may make payment to a person entitled to any payment under the system who is under a legal disability in any one or more of the following ways:

1. Directly to such person.

2. To his legal guardian or conservator.

3. To his spouse or to any other person charged with his support to be expended for his benefit.

F. If, through misstatement or computation error, benefits are underpaid or overpaid, there is no liability for any more than the correct benefit sums under the system. Overpayments may be deducted from future payments under the system, and underpayments may be added to future payments under the system. A member or other benefit recipient may elect to repay in a lump sum any overpayment in lieu of receiving reduced benefits under the system.

G. Nothing in this section exempts employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record which are the result of a judgment taken for arrearages for child support or for a child support debt or restitution or fines imposed in accordance with section 38‑849, subsection A. END_STATUTE

Sec. 47. Section 38-851, Arizona Revised Statutes, is amended to read:

START_STATUTE38-851. Participation of new employers

A. This state, any municipality, county or other political subdivision of the state, any Indian tribe or any public or quasi‑public organization created wholly or partly by, or deriving its powers from, the legislature, may request to become a participating employer in the system on behalf of a designated eligible employee group. Such a request shall be made by the state departmental director or after a proper resolution has been adopted by the governing body of the political subdivision, Indian tribe or public organization, and after such resolution has been approved by any other party or officer required by law to approve the resolution. A certified copy of such resolution shall be filed with the fund manager board. This state or the political subdivision, Indian tribe or public organization shall be considered as a participating employer upon on proper execution of a joinder agreement in which the employer unconditionally accepts the provisions of the system and binds the employer's designated eligible employees to those provisions. All members of an eligible group shall be designated for membership, unless written consent to the contrary is obtained from the fund manager board. A member shall be qualified for participation in order to obtain written consent to the contrary from the fund manager board.

B. The effective date of participation in the system by this state or a political subdivision, Indian tribe or public organization shall be the July 1 next succeeding the approval of its participation, unless the fund manager board consents to another date, as shall be specifically stipulated in the joinder agreement.

C. The new employer shall designate the departments, groups or other classifications of public safety employees which shall be that are eligible to participate in the system and shall agree to make contributions each year which shall be that are sufficient to meet both the normal cost on a level cost method attributable to inclusion of its employees and the prescribed interest on the past service cost for its employees.

D. This state or any political subdivision, Indian tribe or public organization which that is contemplating participation in the system shall request a preliminary actuarial survey to determine the estimated cost of participation, the benefits to be derived and such other information as may be deemed appropriate. The cost of such a survey shall be paid by this state or the political subdivision, Indian tribe or public organization requesting it.

E. As a condition to participation in the system an Indian tribe employer, by resolution of the governing body, shall:

1. Agree that all disputes involving interpretation of state statutes involving the system, and any amendments to such statutes, will be resolved through the court system of this state.

2. Agree to be bound by state statutes and laws which that regulate and interpret the provisions of the system, including eligibility to membership in the system, service credits and the rights of any claimant to benefits and the amount of such benefits.

3. Agree to meet any requirement which that the fund manager board may prescribe to ensure timely payment of member and employer contributions and any other amounts due from the employer to the system.

4. Include in the joinder agreement any other provision deemed necessary by the fund manager board for the administration or enforcement of the agreement.

F. Assets under any existing public employee defined benefit retirement program, except a military retirement program, necessary to equal the actuarial present value of projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation attributable to the employer's designated employee group, calculated using the actuarial methods and assumptions adopted by the existing public employee retirement program, shall be transferred from such program to this fund no later than sixty days after the employer's effective date. That portion of the transferred assets which that is attributable to employee contributions, including interest credits thereon, shall be properly allocated to each affected employee of the employer and credited to the employee's initial accumulated contributions, in accordance with a schedule furnished by the employer to the fund manager board.END_STATUTE

Sec. 48. Section 38-853, Arizona Revised Statutes, is amended to read:

START_STATUTE38-853. Transfer of credited service

A. A member who terminates employment with an employer and accepts, within two years, a position with the same or another employer participating in the system shall have the member's credited service transferred to the member's record with the new employer provided the member leaves the member's accumulated contributions on deposit with the fund. The termination of employment shall not constitute a break in service. However, the period not employed shall not be considered as service.

B. The new employer's account shall be credited with the member's accumulated contributions plus the amount, if any, necessary to equal the increase in the actuarial present value of projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation resulting from the transfer as calculated by the system's actuary using the actuarial methods and assumptions adopted by the fund manager board. END_STATUTE

Sec. 49. Section 38-853.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-853.01. Redemption of prior service

A. Each present active member of the system may elect to redeem any part of the following prior service or employment by paying into the system any amounts required under subsection B if the prior service or employment is not on account with any other retirement system:

1. Prior service in this state as an employee with an employer now covered by the system or prior service with an agency of the United States government, a state of the United States or a political subdivision of a state of the United States as a full‑time paid firefighter or full‑time paid certified peace officer.

2. Subject to any limitations prescribed by federal law, prior employment as an employee with a corporation that contracted with an employer now covered by the system to provide firefighting services on behalf of that employer as a full-time paid firefighter.

B. Any present active member who elects to redeem any part of the prior service or employment for which the employee is deemed eligible by the fund manager board under this section shall pay into the system the amounts previously withdrawn by the member, if any, as a refund of the member's accumulated contributions plus accumulated interest as determined by the fund manager board and the additional amount, if any, 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.

C. A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the system, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code. END_STATUTE

Sec. 50. Section 38-855, Arizona Revised Statutes, is amended to read:

START_STATUTE38-855. Transfer outside the public safety personnel retirement system

A member who changes employment or transfers or is assigned to a position in which such member is no longer eligible to be a member of this system, because of a change in duties or otherwise, with the same or another public employer of this state maintaining a retirement program for public officers or employees authorized by law may have all credited service transferred to the retirement system or program applicable to the new position. If the member does not transfer credited service as provided in this section within two years after the change in employment or transfer, the member shall request a refund of member contributions or shall have the credited service transferred pursuant to this section. Any transfer of credited service pursuant to this section to a state retirement system or plan shall be made pursuant to article 7 of this chapter and must be approved by the fund manager board. END_STATUTE

Sec. 51. Section 38-856.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-856.01. Lump sum payment of benefit increases

Sec. 52. Section 38-857, Arizona Revised Statutes, is amended to read:

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

A. The fund manager of the public safety personnel retirement system board shall pay 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 health and accident insurance coverage provided or administered by a participating employer of the system. The fund manager 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. The fund manager of the system board shall pay from assets of the fund 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 fund manager 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 fund manager 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. This section does not apply to a retired member or survivor of the system who is reemployed by this state or a political subdivision of this state and who participates in coverage provided by this state or a political subdivision of this state as an active employee.

E. In addition to the payments provided by subsection A of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area as follows:

1. Up to three hundred dollars per month for a retired member or survivor of the system who is not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred twenty‑five dollars per month.

2. Up to one hundred seventy dollars per month for a retired member or survivor of the system who is eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

F. In addition to the payments provided by subsection B of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to six hundred dollars per month if the retired member or survivor of the system and one or more dependents are not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred twenty‑five dollars per month.

2. Up to three hundred fifty dollars per month if the retired member or survivor of the system and one or more dependents are eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

3. Up to four hundred seventy 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.

To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

G. In addition to the payments provided by subsection A of this section, beginning July 1, 2005 through June 30, 2009, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each medicare eligible retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area of up to one hundred seventy dollars per month for a retired member or survivor of the system who is eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

H. In addition to the payments provided by subsection B of this section, beginning July 1, 2005 through June 30, 2009, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a medicare eligible retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to three hundred fifty dollars per month if the retired member or survivor of the system and one or more dependents are eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

2. Up to four hundred seventy dollars per month if the retired member or survivor of the system is eligible for medicare and one or more dependents are not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

I. A retired member or survivor of the system who is enrolled in a managed care program in a nonservice area is not eligible for the payment prescribed in subsection E, F, G or H of this section.

J. e. 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 employer if that 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.

Sec. 53. Section 38-881, Arizona Revised Statutes, as amended by Laws 2009, chapter 35, section 21 and chapter 83, section 1, is amended to read:

START_STATUTE38-881. Definitions

In this article, unless the context otherwise requires:

1. "Accidental disability" means a physical or mental condition that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's department, was incurred in the performance of the employee's duties and was the result of any of the following:

(a) Physical contact with inmates, prisoners, parolees or persons on probation.

(b) Responding to a confrontational situation with inmates, prisoners, parolees or persons on probation.

(c) A job related motor vehicle accident while on official business for the employee's employer. A job related motor vehicle accident does not include an accident that occurs on the way to or from work. Persons found guilty of violating a personnel rule, a rule established by the employee's employer or a state or federal law in connection with a job related motor vehicle accident do not meet the conditions for accidental disability.

2. "Accumulated member contributions" means for each member the sum of the amount of all the member's contributions deducted from the member's salary and paid to the fund, plus member contributions transferred to the fund by another retirement plan covering public employees of this state, plus previously withdrawn accumulated member contributions that are repaid to the fund in accordance with this article, minus any benefits paid to or on behalf of a member.

4. "Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.

5. "Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.

6. "Annuitant" means a person who is receiving a benefit pursuant to section 38-911.

7. "Average monthly salary" means one‑thirty‑sixth of the aggregate amount of salary that is paid a member by a participating employer during a period of thirty‑six consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service. Average monthly salary means the aggregate amount of salary that is paid a member divided by the member's months of service if the member has less than thirty‑six months of service. In the computation under this paragraph, a period of nonpaid or partially paid industrial leave shall be considered based on the salary the employee would have received in the employee's job classification if the employee was not on industrial leave.

8. "Beneficiary" means an individual who is being paid or who has entitlement to the future payment of a pension on account of a reason other than the individual's membership in the retirement plan.

9. "Board" means the board of trustees of the public safety personnel retirement system.

9. 10. "Claimant" means a member, beneficiary or estate that files an application for benefits with the retirement plan.

10. 11. "Credited service" means credited service transferred to the retirement plan from another retirement system or plan for public employees of this state, plus those compensated periods of service as a member of the retirement plan for which member contributions are on deposit in the fund.

11. 12. "Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the plan issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.

12. 13. "Designated position" means:

(a) For a county:

(i) A county detention officer.

(ii) A nonuniformed employee of a sheriff's department whose primary duties require direct contact with inmates.

(b) For the state department of corrections and the department of juvenile corrections, only the following specifically designated positions:

(i) Food service.

(ii) Nursing personnel.

(iii) Corrections physician assistant.

(iv) Therapist.

(v) Corrections dental assistant.

(vi) Hygienist.

(vii) Corrections medical assistant.

(viii) Correctional service officer, including assistant deputy warden, deputy warden, warden and superintendent.

(ix) State correctional program officer.

(x) Parole or community supervision officers.

(xi) Investigators.

(xii) Teachers.

(xiii) Institutional maintenance workers.

(xiv) Youth corrections officer.

(xv) Youth program officer.

(xvi) Behavioral health treatment unit managers.

(xvii) The director and assistant directors of the department of juvenile corrections and the superintendent of the state educational system for committed youth.

(xviii) The director, deputy directors and assistant directors of the state department of corrections.

(xix) Other positions designated by the local board of the state department of corrections or the local board of the department of juvenile corrections pursuant to section 38‑891.

(d) For an employer of an eligible group as defined in section 38‑842, full‑time dispatchers.

(e) For the judiciary, probation, surveillance and juvenile detention officers and those positions designated by the local board of the judiciary pursuant to section 38-891.

(f) For the department of public safety, state detention officers.

13. 14. "Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.

14. 15. "Determination period" means the ninety-day period in which the plan must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the plan mails a notice of receipt to the participant and alternate payee.

15. 16. "Direct rollover" means a payment by the plan to an eligible retirement plan that is specified by the distributee.

16. 17. "Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.

17. 18. "Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.

18. 19. "Eligible child" means an unmarried child of a deceased active or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty‑three years of age and remains a dependent of the surviving spouse or guardian.

19. 20. "Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

20. 21. "Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

21. 22. "Employee" means a person employed by a participating employer in a designated position.

22. 23. "Employer" means an agency or department of this state or a political subdivision of this state that has one or more employees in a designated position.

23. 24. "Fund" means the corrections officer retirement plan fund.

24. "Fund manager" means the fund manager of the public safety personnel retirement system.

25. "Juvenile detention officer" means a juvenile detention officer responsible for the direct custodial supervision of juveniles who are detained in a county juvenile detention center.

26. "Local board" means the retirement board of the employer that consists of persons appointed or elected to administer the plan as it applies to the employer's members in the plan.

27. "Member" means any employee who meets all of the following qualifications:

(a) Who is a full‑time paid person employed by a participating employer in a designated position.

(b) Who is receiving salary for personal services rendered to a participating employer or would be receiving salary except for an authorized leave of absence.

28. "Normal retirement date" means the first day of the calendar month immediately following an employee's completion of twenty years of service or, in the case of a dispatcher, twenty‑five years of service, the employee's sixty‑second birthday and completion of ten years of service or the month in which the sum of the employee's age and years of credited service equals eighty.

29. "Notice of receipt" means a written document that is issued by the plan to a participant and alternate payee and that states that the plan has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.

30. "Ordinary disability" means a physical condition that the local board determines will totally and permanently prevent an employee from performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will totally and permanently prevent an employee from engaging in any substantial gainful activity.

31. "Participant" means a member who is subject to a domestic relations order.

32. "Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.

33. "Participating employer" means an employer that the fund manager board has determined to have one or more employees in a designated position or a county, city, town or department of this state that has entered into a joinder agreement pursuant to section 38‑902.

34. "Pension" means a series of monthly payments by the retirement plan but does not include an annuity that is payable pursuant to section 38‑911.

35. "Personal representative" means the personal representative of a deceased alternate payee.

36. "Plan approved domestic relations order" means a domestic relations order that the plan approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.

37. "Probation or surveillance officer" means an officer appointed pursuant to section 8‑203, 12‑251 or 12‑259 but does not include other personnel, office assistants or support staff.

38. "Retired member" means an individual who terminates employment and who is receiving a pension pursuant to either section 38‑885 or 38‑886.

39. "Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension.

40. "Retirement plan" or "plan" means the corrections officer retirement plan established by this article.

41. "Salary" means the base salary, shift differential pay, military differential wage pay and holiday pay paid a member for personal services rendered in a designated position to a participating employer on a regular monthly, semimonthly or biweekly payroll basis. Salary includes amounts that are subject to deferred compensation or tax shelter agreements. Salary does not include payment for any remuneration or reimbursement other than as prescribed by this paragraph. For the purposes of this paragraph, "base salary" means the amount of compensation each member is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, fringe benefit pay and similar extra payments.

42. "Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the plan, or a domestic relations order submitted to the plan that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.

43. "Service" means employment rendered to a participating employer as an employee in a designated position. Any absence that is authorized by an employer, including any periods during which the employee is on an employer sponsored long‑term disability program, is considered as service if the employee returns or is deemed by the employer to have returned to a designated position within the period of the authorized absence.

44. "Total and permanent disability" means a physical or mental condition that is not an accidental disability, that the local board finds totally and permanently prevents a member from engaging in any gainful employment and that is the direct and proximate result of the member's performance of the member's duty as an employee of a participating employer. END_STATUTE

Sec. 54. Section 38-881, Arizona Revised Statutes, as amended by Laws 2009, chapter 35, section 22 and chapter 83, section 2, is amended effective on the date prescribed in Laws 2005, chapter 324, section 2, but only on the occurrence of the condition prescribed by Laws 2005, chapter 324, section 2, to read: