Page 1, between lines 1 and 2, insert:
"Section 1. Section 38-847, Arizona Revised Statutes,
as amended by House Bill 2381, section 2, fifty-fifth legislature, first
regular session, as transmitted to the governor, is amended to read:
START_STATUTE38-847. Local
boards
A. To
the extent outlined in this section, 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 liquor licenses and
control, the Arizona department of agriculture, the Arizona state parks board,
each Indian reservation police agency and each Indian reservation firefighting
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 chairperson, 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, or the head's designee from among the other members
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 the members employed
by the appropriate employer and three citizens appointed by the
governor. Each state agency local board shall elect a chairperson.
3. For
fire districts, the chairperson of the fire district governing board or the
chairperson's designee, two members elected by secret ballot by members
employed by the fire district and two citizens appointed by the chairperson of
the fire district governing board, 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.
4. For
joint powers authorities organized pursuant to section 48-805.01, the
joint powers authority board chairperson or a designee approved by the
governing body, two members elected by secret ballot by members employed by the
joint powers authority and two citizens, one of whom is a resident of one of
the partner entities and one of whom has experience in personnel administration
but who is not required to be a resident of a partner entity.
B. 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
local board shall be fully constituted pursuant to subsection A of this section
within sixty days after the employer's effective date of participation in the
system. If the deadline is not met, on the written request of any
member who is covered by the local board or the employer to the board of
trustees, the board of trustees may appoint all vacancies of the local board
pursuant to subsection A of this section and designate whether each appointive
position is for a two-year or four-year term. If the
board of trustees cannot find individuals to serve on the local board who meet
the requirements of subsection A of this section, the board of trustees may
appoint individuals to serve as interim local board members until qualified
individuals are appointed or elected. Each local board shall meet at
least twice a year. 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 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 allow to be violated any of the provisions of
law applicable to the system. Within one hundred eighty days after
appointment or election, each board member shall complete local board training
as prescribed by the board of trustees, including open meeting laws, ethics,
legal review and fiduciary responsibilities and duties.
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 for membership and disability and in the
line of duty death benefits under the system.
2. To
prescribe procedures to be followed by claimants in filing applications for
disability and in the line of duty death benefits.
3. To
make a determination as to the right of any claimant to a disability and in the
line of duty death benefit, to issue opinions on questions of whether benefits
are consistent with and allowable under the system and to afford any claimant
or the board of trustees, or both, a right to a rehearing on the original
determination. Except as otherwise required by law, 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.
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
eligibility for membership and disability and in the line of duty death
benefits, and to forward such information to the board of trustees.
5. To
distribute, in such manner as the local board determines to be appropriate,
information explaining the system received from the board of trustees.
6. To
furnish the employer, the board of trustees and the legislature, 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 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 may not 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 disability and
in the line of duty death benefits under the system. Notwithstanding
any limitations periods imposed in this article, including subsection D,
paragraph 3 and subsections G and H of this section, if the board of trustees
determines a local board decision violates the internal revenue code or
threatens to impair the system's status as a qualified plan under the internal
revenue code, the local board's decision is not final and binding and the board
of trustees may refrain from implementing or complying with the local board
decision.
F. A
local board shall establish and adopt such rules as it deems necessary for its
administration and to adjudicate claims and disputes. At a minimum, the
board's rules shall incorporate the model uniform rules for local board
procedure that are issued by the board of trustees. 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 board of trustees' fiduciary counsel to adjudicate the claim
or dispute.
G. Except
as otherwise provided in this article, any action by a majority vote of the
members of a local board that is not inconsistent with the provisions of the
system and the internal revenue code shall be final, conclusive and binding on
all persons affected by it unless a timely application for a rehearing or
appeal is filed as provided in this article. Not later than twenty days after
taking action, the local board shall submit to the board of trustees the
minutes from the local board meeting that include the name of the member
affected by its decision, a description of the action taken and an explanation
of the reasons and all documents submitted to the local board for the action
taken, including the reports of a medical board. The board of
trustees may require additional records from the local board or the employer or
may require that the local board conduct a rehearing on the
matter. The board of trustees may not implement and comply with any
local board action that does not comply with the internal revenue code or that
threatens to jeopardize the system's status as a qualified plan under the
internal revenue code.
H. A
claimant may apply for or the board of trustees may require a rehearing before
the local board within the time periods prescribed in this subsection, except
that if a decision of a local board violates the internal revenue code or
threatens to jeopardize the system's status as a qualified plan under the
internal revenue code, any limitation period for the board of trustees to
require a rehearing of a local board decision does not apply. 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-board of trustees receives notification of the local board's original
action as prescribed by subsection G of this section by email or certified
mail.
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 on information furnished by the employer, a medical board, the
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 is
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 in compliance with chapter 3, article 3.1 of
this title and forward the minutes and all necessary communications to the
board of trustees as prescribed by subsection G of this section. Within one
hundred eighty days after election, the local board's secretary shall complete
local board training as prescribed by the board of trustees, including open
meeting laws, ethics, legal review and fiduciary responsibilities and duties.
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 and not the board of trustees or
system at such rates and in such amounts as the local board shall
approve. Each local board shall hire an independent legal counsel
who is not an employee of or contracted with the employer or 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. The independent legal counsel may not represent a member of the plan
before any local board or any judicial appeal of a local board decision. The
local board's independent legal counsel shall review the model uniform rules
for local board procedure that are issued by the board of trustees.
O. The
local board shall issue directions to the board of trustees concerning all
benefits 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 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 for any judgment against the local board or its
members, including attorney fees and costs, arising from 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.
Q. A
local board shall submit to the board of trustees the names of the members of
the local board and the local board's secretary and independent legal counsel
and shall submit any changes to those positions within ten days after the
change.
R. An
employer and a local board shall submit any reports, data, paperwork or other
materials that are requested by the board of trustees for any reason, including
local board action or inaction or to investigate a complaint regarding a local
board. If the board of trustees or its designee through an audit or
investigation finds that the local board is not in compliance with statute or
the model uniform rules for local board procedure, the board of trustees shall
notify the local board of the noncompliance and the local board shall have
sixty days to take corrective action. If the local board fails to take
adequate corrective action, the board of trustees may act on behalf of the
local board until the matter is resolved. The board of trustees or
its designee shall work with the local board members to take the appropriate
corrective actions, including appointing any vacant or noncompliant local board
member positions, if necessary, to bring the local board and its membership,
policies and procedures into compliance."END_STATUTE
Renumber to
conform
Page 8, between lines 39 and 40, insert:
"8. Issue a request for proposals every five years for an
external auditor. the board is not required to change its auditor after
issuing the request for proposalS.
9. develop a policy
regarding routine stress testing of the retirement systems and plans
administered by the board at the employer level and system level. the stress
test shall use industry standards, such as the inclusion of assumptions regarding
investment returns, inflation, population growth, payroll growth and employer
contributions. For the purposes of this paragraph, "stress test"
means an assessment of the risk exposure of the retirement system or plan,
including scenario analysis, simulation analysis and sensitivity analysis."
Page 11,
line 1, after the period insert "The president of the
senate and the speaker of the house of representatives shall each appoint to
the committee one member who is either a legislator or a legislative staff
member."; after "The" insert "remaining
members of the"
Line 6,
after "committee" insert "members appointed by
the chairperson of the board"
After line
17, insert:
"Sec. 3. Section
38-863.01, Arizona Revised Statutes, is amended to read:
START_STATUTE38-863.01. Pension
funding policies; employers
A. Beginning on or before July 1, 2019, Each governing body of an
employer shall annually:
1. Adopt
a pension funding policy for the system for employees who were hired before July
1, 2017. The pension funding policy shall include funding objectives that
address at least the following:
(a) How
to maintain stability of the governing body's contributions to the system.
(b) How
and when the governing body's funding requirements of the system will be met.
(c) Defining
the governing body's funded ratio target under the system and the timeline for
reaching the targeted funded ratio.
2. Formally
accept the employer's share of the assets and liabilities under the system
based on the system's actuarial valuation report.
B. The
governing body shall post the pension funding policy on the governing body's
public website and transmit the pension funding policy to the
board. END_STATUTE
Sec. 4. Title
38, chapter 5, article 4, Arizona Revised Statutes, is amended by adding
section 38-863.02, to read:
START_STATUTE38-863.02. Pension
funding policies; board; employers' pension funding policies; posting; popular
annual financial report
A. The
board shall annually review and adopt a pension funding policy for each defined
benefit retirement plan and system administered by the board that analyzes and
reviews the methods to ensure systematic funding of all retirement benefit
payments for the members of each defined benefit retirement plan and system and
that outlines the strategy to achieve financial solvency of each plan and
system.
B. The
board shall annually consolidate the pension funding policies of employers
adopted pursuant to section 38-863.01 and post the document on the
system's public website.
C. On
or before June 30 of each year, the board shall submit a popular annual
financial report to the governor, the president of the senate and the speaker
of the house of representatives and post to the system's public website that
includes the following:
1. For
each retirement system and plan that is administered by the board:
(a) Funding
status.
(b) Aggregate
contribution rates.
(c) Demographic
updates.
2. For
the aggregate of the systems and plans administered by the board:
(a) Investment
returns.
(b) An
analysis of the system's aggregate experience over the previous year.
(c) Major
policy and governance changes.
(d) Future
trends and objectives.END_STATUTE
Sec. 5. Section
38-893, Arizona Revised Statutes, as amended by House Bill 2381, section 5,
fifty-fifth legislature, first regular session, as transmitted to the
governor, is amended to read:
START_STATUTE38-893. Local
boards; powers and duties; rules; hearings; administrative review
A. To
the extent outlined in this section, the administration
of the plan and the responsibility for making the provisions of the plan
effective for each employer are vested in a local board. The state
department of corrections, the department of juvenile corrections, the
department of public safety, each participating county sheriff's department,
each participating city or town, each participating employer of full-time
dispatchers for eligible groups as defined in section 38-842 and the
judiciary shall have a local board. Each local board is constituted
as follows:
1. For
the state departments, two members who are elected by secret ballot by members
employed by that department in a designated position and two citizens who are
appointed by the governor. The director of each state department
shall appoint one member to the local board who is knowledgeable in personnel
actions. Each state department local board shall elect a
chairperson.
2. For
each participating county, the chairperson of the board of supervisors, or the
chairperson's designee who is approved by the board of supervisors, as
chairperson, two members who are elected by secret ballot by members employed
by the participating county in a designated position and two citizens, one of
whom shall be the head of the merit system if it exists for the group of
members, who are appointed by the chairperson of the board of supervisors with
the approval of the board of supervisors.
3. For
political subdivisions, the mayor or chief elected official or a designee of
the mayor or chief elected official approved by the respective governing body
as chairperson, 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 city council or governing
body of the employer.
4. For
the judiciary, two members who are elected by secret ballot by members who are
employed as a probation, surveillance or juvenile detention officer, a designee
of the chief justice of the Arizona supreme court and two citizens, one of whom
shall be the head of a human resource department for the group of members,
appointed by the chief justice.
B. The
appointments and elections of local board members shall take place with one
elective and one appointive board member, as designated by the appointing
authority, serving a term ending two years after the date of appointment or
election and the other local board members serving a term ending four years
after the date of appointment or election. 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 provided in this section. Each local board shall meet at least
twice each year.
C. Each
local board shall be fully constituted pursuant to subsection A of this section
within sixty days after the employer's effective date of participation in the
plan. If the deadline is not met, on the written request of any
member who is covered by the local board or the employer to the board of
trustees, the board of trustees shall appoint all vacancies of the local board
pursuant to subsection A of this section and designate whether each appointive
position is for a two-year or four-year term. If
the board of trustees cannot find individuals to serve on the local board who
meet the requirements of subsection A of this section, the board of trustees
may appoint individuals to serve as interim local board members until qualified
individuals are appointed or elected. Within ten days after the member's
appointment or election, each member of a local board shall take an oath of
office that, so far as it devolves on the member, the member shall diligently
and honestly administer the affairs of the local board and shall not knowingly
violate or willingly allow to be violated any of the provisions of law
applicable to the plan. Within one hundred eighty days after
appointment or election, each board member shall complete local board training
as prescribed by the board of trustees, including open meeting laws, ethics,
legal review and fiduciary responsibilities and duties.
D. Except
as limited by subsection E of this section, a local board shall:
1. Decide
all questions of eligibility for membership and disability and in the line of
duty death benefits under the plan.
2. Make
a determination as to the right of a claimant to a disability or in the line of
duty death benefit, issue opinions on questions of whether benefits are
consistent with and allowable under the plan and afford a claimant or the board
of trustees, or both, a right to a rehearing on the original
determination. Except as otherwise required by law, 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.
3. Request
and receive from the employers and from members information as is necessary for
the proper administration of the plan and action on claims for disability and
in the line of duty death benefits and forward the information to the board of
trustees.
4. Distribute,
in the manner the local board determines to be appropriate, information
explaining the plan that is received from the board of trustees.
5. Furnish
the employer, the board of trustees and the legislature, on request, with
annual reports with respect to the administration of the plan that are
reasonable and appropriate.
6. Appoint
a medical board that is composed of a designated physician or physicians
working in a clinic other than the employer's regular employee or
contractor. If required, the local board may employ other physicians
to report on special cases. The examining physician or clinic shall
report the results of examinations made to the local board, and the secretary
of the local board shall preserve the report as a permanent record.
7. Sue
and be sued to effectuate the duties and responsibilities set forth in this
article.
8. Prescribe
procedures to be followed by claimants in filing applications for benefits.
9. Receive
and review the actuarial valuation of the plan for its group of members.
10. Receive
and review reports of the financial condition and of the receipts and
disbursements of the fund from the board of trustees.
E. A
local board may not add to, subtract from, modify or
waive any of the terms of the plan, change or add to any benefits provided by
the plan or waive or fail to apply any requirement of eligibility for
membership or disability and in the line of duty death benefits under the
plan. Notwithstanding any limitations periods imposed in this
article, including subsections G and H of this section, if the board of
trustees determines a local board decision violates the internal revenue code
or threatens to impair the plan's status as a qualified plan under the internal
revenue code, the local board's decision is not final and binding and the board
of trustees may refrain from implementing or complying with the local board
decision.
F. A
local board shall establish and adopt rules as it deems necessary for its
administration and to adjudicate claims or
disputes. At a minimum the board's rules shall incorporate the model
uniform rules for local board procedure that are issued by the board of
trustees. 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
board of trustees' fiduciary counsel to adjudicate the claim or dispute.
G. Except
as otherwise provided in this article, an action by a majority vote of the
members of a local board that is not inconsistent with the provisions of the
plan and the internal revenue code is final, conclusive and binding on all
persons affected by it, unless a timely application for a rehearing or appeal
is filed as provided in this article. Not later than twenty days
after taking action, the local board shall submit to the board of trustees the
minutes from the local board meeting that include the name of the member
affected by its decision, a description of the action taken and an explanation
of the reasons and all documents submitted to the local board for the action
taken, including the reports of a medical board. The board of
trustees may require additional records from the local board or the employer or
may require that the local board conduct a rehearing on the
matter. The board of trustees may not implement and comply with any
local board action that does not comply with the internal revenue code or that
threatens to jeopardize the plan's status as a qualified plan under the
internal revenue code.
H. A
claimant may apply for or the board of trustees may
require a rehearing before the local board within the time periods prescribed
in this subsection, except that if a decision of a local board violates the
internal revenue code or threatens to jeopardize the plan's status as a
qualified plan under the internal revenue code, any limitation
period for the board of trustees to require a rehearing of a local board
decision does not apply. A claimant or the board of trustees shall
file an application for rehearing in writing with a member of the local board
or its secretary within sixty days after:
1. The
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 plan pursuant to the local board's original action, whichever
occurs first.
2. The
board of trustees receives notification of the local board's original action as
prescribed by subsection G of this section by email or certified
mail.
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 is entitled to
rely on information furnished by the employer, the board of trustees,
independent legal counsel or the actuary for the plan.
L. Each
member of a local board is entitled to one vote. A majority is
necessary for a decision by the members of a local board at any meeting of the
local board.
M. The
local board shall adopt bylaws as it deems necessary. 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 in compliance with chapter 3, article 3.1 of
this title and forward the minutes and all necessary communications to the
board of trustees as prescribed by subsection G of this section. Within one
hundred eighty days after election, the local board secretary shall complete
local board training as prescribed by the board of trustees, including open
meeting laws, ethics, legal review and fiduciary responsibilities and duties.
N. Each
local board shall hire an independent legal counsel. The local
board's independent legal counsel may not be employed by or contracted with the
employer or any employee organizations or member of the plan.
The independent legal counsel may not represent a member of the
plan before any local board or any judicial appeal of a local board decision. The
local board's independent legal counsel shall review the model uniform rules
for local board procedure that are issued by the board of trustees.
O. The
employer and not the board of trustees or plan shall pay the fees of the
medical board and of the local board's legal counsel and all other expenses of
the local board necessary for the administration of the plan at rates and in
amounts as the local board approves.
P. The
local board shall issue directions to the board of trustees concerning all
benefits 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 the
manner it deems convenient and proper, all reports from the board of trustees
and the actuary.
Q. The
local board and the individual members of the local board are indemnified from
the assets of the fund for any judgment against the local board or its members,
including attorney fees and costs, arising from any act, or failure to act,
made in good faith pursuant to the provisions of the plan.
R. A
local board shall submit to the board of trustees the names of the members of
the local board and the local board's secretary and independent legal counsel
and shall submit any changes to those positions within ten days after the
change.
S. An
employer and a local board shall submit any reports, data, paperwork or other
materials that are requested by the board of trustees for any reason, including
local board action or inaction or to investigate a complaint regarding a local
board. If the board of trustees or its designee through an audit or
investigation finds that the local board is not in compliance with statute or
the model uniform rules for local board procedure, the board of trustees shall
notify the local board of the noncompliance and the local board shall have
sixty days to take corrective action. If the local board fails to
take adequate corrective action, the board of trustees may act on behalf of the
local board until the matter is resolved. The board of trustees or
its designee shall work with the local board members to take the appropriate
corrective actions, including appointing any vacant or noncompliant local board
member positions, if necessary, to bring the local board and its membership,
policies and procedures into compliance. END_STATUTE
Sec.
6. Conditional enactment
Sections
38-847 and 38-893, Arizona Revised Statutes, as amended by this act, do not
become effective unless House Bill 2381, fifty-fifth legislature, first regular
session, relating to public retirement systems, becomes law."
Amend title to conform
Bill
Number: S.B. 1649