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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
ASRS; compensation; definition
Purpose
Bifurcates, by date of hire, the definition of compensation for the Arizona State Retirement System (ASRS) members, and revises that definition for members hired on or after January 1, 2020.
Background
Contributions means the gross amount paid to an ASRS 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. Defines compensation, for those members of the ASRS who are hired on or after January 1, 2020, as only gross wages paid to a member by the employer for services rendered to the employer during the period considered as credited service, including amounts reported as wages and tips and other compensation on the member's federal form W-2 wage and tax statement, including pretax deductions, except for:
a) payments made for accrued leave that is not being used to replace regular work hours, whether paid in a lump sum or in installments;
b) payments made on termination from employment, whether paid in a lump sum or in installments or as a bonus or an incentive for termination or retirement;
c) employer-paid contributions that are made to, and any distributions from, plans, programs or arrangements qualified under the Internal Revenue Code (IRC), e.g., deferred compensation plans;
d) payments for allowances;
e) reimbursements for employee business expenses or employee personal expenses;
f) employer-paid contributions for coverage under, or distributions from, an accident, health or life insurance plan, program or arrangement;
g) payments made in lieu of any employer-paid insurance coverage;
h) workers' compensation, unemployment compensation payments and disability payments;
i) merit awards;
j) payments paid pursuant to a court order or settlement agreement;
k) payments made in the form of goods or services in lieu of gross wages;
l) any other payment that is not reported as wages and tips and other compensation on the member's federal form W-2 wage and tax statement;
m) payments in excess of IRC limits;
n) payments for any other employment benefit; and
o) payments for which employer or employee contributions have not been paid.
2. Makes technical changes.
3. Becomes effective on the general effective date.
Prepared by Senate Research
January 18, 2019
CS/kja