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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
ASRS; ineligible contributions; unfunded liability
Purpose
Requires employers in the Arizona State Retirement System (ASRS) to pay the unfunded liability for ineligible contributions.
Background
Current statute requires an employer to pay to ASRS any unfunded liability resulting from the provision of benefits or credit to any person who is not eligible for ASRS membership.
Unfunded liability is defined as the amount, if any, that the present value of the person's benefit or credit, using the actuarial assumptions approved by ASRS, exceeds the amount in the person's ASRS account calculated as of the date that ASRS or a court first determines that ASRS is legally obligated to provide any benefit or credit to the person (A.R.S. § 38-748).
Contributions means the gross amount paid to an ASRS member (member) by an employer as salary or wages, including amounts that are subject to deferred compensation or tax shelter agreements, for services rendered to or for an employer, or that would have been paid to the member except for the member's election or a legal requirement that all or part of the gross amount be used for other purposes, but does not include amounts paid in excess of compensation limits. Compensation does not include:
1) lump sum payments, on termination of employment, for accumulated vacation or annual leave, sick leave, compensatory time or any other form of termination pay whether the payments are made in one payment or by installments;
2) damages, costs, attorney fees, interest or other penalties paid pursuant to a court order or a compromise settlement or agreement to satisfy a grievance or claim;
3) payment, at the member's option, in lieu of fringe benefits that are normally paid for or provided by the employer;
4) merit awards; or
5) amounts that are paid as salary or wages to a member for which employer contributions have not been paid (A.R.S. § 38-711).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires an ASRS employer that has paid contributions on compensation that is not eligible by statute or rule for ASRS contributions to pay to ASRS any unfunded liability resulting from the provision of benefits or credit to the person.
2. Applies current statute to contributions made on behalf of any person who is not eligible by rule, in addition to statute.
3. Redefines unfunded liability to include contributions on compensation that is not eligible by statute or rule for ASRS contributions, the difference, if any, of the amount that the present value of a person's benefit or credit, using the actuarial assumptions approved by ASRS, exceeds the amount of the present value of the benefit or credit the person would receive if the ineligible contributions, and the compensation and credit associated with those ineligible contributions, had not been reported to ASRS and the amount in the person's ASRS account that is associated with the ineligible contributions on compensation.
4. Makes technical and conforming changes.
5. Becomes effective on the general effective date.
Prepared by Senate Research
January 18, 2019
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