Assigned to FIN AS
PASSED BY COMMITTEE
Assigned to FIN AS
PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
ASRS; nonparticipating employers; liability
Purpose
Redefines what constitutes an Arizona State Retirement System (ASRS) nonparticipating employer and clarifies the calculation methodology.
Background
In 2011, the State Compensation Fund was converted from a state entity to a private entity, and statute was conformed to reflect the termination of the fund (Laws 2011, Chapter 157).
Laws 2012, Chapter 79 required ASRS to allocate a liability to an employer that is no longer participating in ASRS, if: 1) the character of the employer changes from a public entity to a private entity; 2) an employer, other than this state or a charter school, files for bankruptcy or otherwise dissolves; 3) an employer is no longer participating; or 4) for this state, the character of a state agency, board or commission changes from public to private.
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires ASRS to establish a separate fund for an employer other than a charter school that is no longer participating in ASRS as a result of:
a) the character of the employer changing from a public entity to a private entity, an employer other than this state dissolving, or through legislative action, the employer is no longer enrolling new employees in ASRS or no longer contributing to ASRS on behalf of current employees or groups of employees who otherwise would be eligible for ASRS membership; or
b) based on the number of contributing employees as of the effective date, both of the following apply:
i. considered to employ a minimum of 50 employees as of one year preceding the employer's nonparticipation date; and
ii. is no longer participating in ASRS as a result of reducing the number of actively contributing employees by 30 percent or more over a three-year period or by 50 percent or more over any period of time. These reductions would be accomplished by filling a position ordinarily filled by an employee with an employee who is not otherwise actively contributing, unless the employee participates in another Arizona retirement plan specified by statute. These reductions must be the result of hiring one or more leased employees
2. Requires ASRS to allocate an actuarial accrued liability and a designated asset amount to a nonparticipating employer's separate fund as of the nonparticipation date.
3. Requires ASRS to allocate an actuarial accrued liability and designated asset amount to a nonparticipating employer's separate fund as of the nonparticipation date. The actuarial accrued liability shall equal the sum of the plan employer actuarial accrued liability and the long-term disability (LTD) program employer actuarial accrued liability.
4. Requires that the actuarial accrued liability be calculated based on the same actuarial assumptions and methods as the valuation performed immediately preceding the nonparticipation date.
5. Requires the designated asset amount to equal the sum of the following:
plus
6. Requires that all monies and securities transferred to the nonparticipating employer's separate fund shall be credited to the fund.
7. Requires a record to be maintained of the market value and the cost value of these transferred contributions.
8. Requires ASRS to make all decisions regarding the separate fund.
9. Requires adjustment of the fund for all of the following:
a) all contributions made by employees of the nonparticipating employer and employee;
b) all plan and LTD program benefits paid to the nonparticipating employer's members who are active, inactive, retired or on long-term disability;
c) all plan, LTD program and any other benefits paid to the survivors of the nonparticipating employer's members;
d) the applicable share of the investment gains and losses; and
e) expenses associated with the administration of the separate fund, including any administrative, development, actuarial, legal, custodial and investment management costs. Requires that these expenses be paid directly by the employer or included in the employer's liability.
10. Requires the nonparticipating employer's separate fund, the nonparticipating employer and any employees of that employer who are enrolled in ASRS to continue to have contribution requirements to the separate fund.
11. Calculates the contribution as follows:
a) all employees of the nonparticipating employer who are enrolled in ASRS shall continue to make contributions through payroll deductions based on the normal contribution rate; and
b) the contributions for the nonparticipating employer shall be determined on an annual basis and shall be:
i. the normal cost of any employees of the nonparticipating employer who are enrolled in ASRS; and
ii. the amount required to amortize the past service funding requirement in the nonparticipating employer's separate fund over a period that is determined by the ASRS Board (Board).
12. Requires the Board to seek to improve the funded status whenever the nonparticipating employer's separate fund is less than 100 percent funded, when determining the past service funding period.
13. Requires the ASRS actuary to determine the actuarial assumptions used to determine the contribution requirement.
14. Specifies that the contribution for the nonparticipating employer shall not be determined as a percentage of compensation due to the anticipated decline of compensation for employees participating in ASRS.
15. Requires that each fiscal year amounts that are not remitted through payroll contributions shall be invoiced to the employer and shall be paid within the same fiscal year.
16. Specifies that members who are active, inactive, retired or on LTD are considered employees of the nonparticipating employer if the member's most recent employer was the nonparticipating employer as of the nonparticipation date, for purposes of calculating an employer's liability.
17. Specifies that an employer that is no longer participating is not eligible to participate in ASRS after the employer's nonparticipation date.
18. Specifies that this legislation does not apply to an employer whose existence was terminated by legislative action or otherwise became a nonparticipating employer on or before January 1, 2013.
19. Provides definitions.
20. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Clarifies the inclusion of state agencies.
2. States that the reduction of actively contributing employees is the result of leased employees.
3. States that this legislation does not apply to agencies terminated before January 1, 2013.
Senate Action
FIN 2/14/17 DPA 6-1-0
Prepared by Senate Research
February 15, 2018
CS/lb