Assigned to APPROP AS
PASSED BY HOUSE
Assigned to APPROP AS
PASSED BY HOUSE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
Purpose
An emergency measure that requires each Elected Officials' Retirement Plan (EORP) employer to make contributions, as determined by actuarial valuations performed by the Plan's actuary, on a level percent of compensation basis for all employees.
Background
In EORP's Consolidated Actuarial Valuation dated June 30, 2017, the actuary opines that the contribution rate increased in the current valuation due to: 1) the November 2016 Hall vs. Elected Officials' Retirement Plan decision related to the permanent benefit increase; 2) changes in actuarial assumptions, including updated mortality tables and a decrease in the assumed investment return rate; 3) statutorily required contribution amounts that are much less than the actuarially determined contribution; and 4) ever decreasing payroll since the plan was closed to new members.
The FY 2019 Baseline Book produced by the Joint Legislative Budget Committee indicates that EORP plan actuaries estimate that given current funding levels, the closed EORP will have enough assets to pay member benefits for only the next nine years. In order ot fully fund state personnel in EORP, actuaries have estimated that the state would need to increase the employer contribution rate to EORP from 23.5% to 61.0%.
Including the $5.0 million annual state General Fund deposit, current state EORP costs with the fixed 23.5% contribution rate are $8.1 million in FY 2019. Increasing the EORP contribution rate to 61.0% would increase state EORP costs by $4.9 million to a total of $13.0 million, with most of this increase ($4.7 million) being paid from the state General Fund.
Provisions
1. Strikes the specific employer contribution rate of 23.5 percent of compensation.
2. Requires each EORP employer, beginning on July 1, 2018, to make contributions, as determined by actuarial valuations performed by the Plan's actuary, on a level percent of compensation basis for all employees. Under current law, this requirement begins in 2044.
3. Requires that these contributions be sufficient under the actuarial valuation to meet both the normal cost plus the actuarially determined amount required to amortize the unfunded
accrued liability over a closed period of at least 20 and not more than 30 years that is established by the Board considering the recommendation of the Plan's actuary.
4. Requires that in any fiscal year, an employer's contribution to the plan in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year.
5. Contains technical and conforming changes.
6. Becomes effective on signature of the Governor, if the emergency clause is enacted.
Amendments Adopted by the House of Representatives
· The House adopted a strike everything amendment.
Senate Action House Action
FIN 2/7/18 DP 7-0-0-0 APPROP 3/28/18 DPA/SE 13-0-0
3rd Read 2/15/18 29-0-1 3rd Read 5/3/18 57-3-0
Prepared by Senate Research
May 3, 2018
CS/lat