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ARIZONA STATE SENATE
Fifty-Fifth Legislature, Second Regular Session
public retirement systems; 2022-2023.
Purpose
Makes statutory and session law changes relating to retirement necessary to implement the FY 2023 state budget.
Background
The Arizona Constitution prohibits substantive law from being included in the general appropriations, capital outlay appropriations and supplemental appropriations bills. However, it is often necessary to make statutory and session law changes to effectuate the budget. Thus, separate bills called budget reconciliation bills (BRBs) are introduced to enact these provisions. Because BRBs contain substantive law changes, the Arizona Constitution provides that they become effective on the general effective date, unless an emergency clause is enacted.
S.B. 1737 contains the budget reconciliation provisions for changes relating to retirement.
Provisions
Arizona
Department of Administration (ADOA)
Group Health and Accident Coverage
1. Requires, beginning January 3, 2023, an eligible retired person who elects to obtain ADOA's group health and accident coverage to maintain continuous coverage as follows:
a) in a provided health plan to retain eligibility for state health insurance coverage;
b) in a provided dental plan to retain eligibility for state dental insurance coverage; and
c) in a provided vision plan to retain eligibility for state vision insurance coverage.
2. Requires, beginning January 3, 2023, and within 31 days after becoming eligible for ADOA's group health and accident coverage, a person to make an election for insurance coverage from the health, dental or vision insurance plans made available by ADOA or the person forfeits further eligibility for the coverage.
3. Deems, as ineligible to enroll in the coverage at a later time, a person and the person's eligible dependents, if the person does not maintain continuous enrollment in a health, dental or vision plan made available by ADOA.
4. Requires a person who retires before January 3, 2023, in order to remain eligible for enrollment, to elect health, dental or vision insurance coverage in the next open enrollment period following the general effective date or within 31 days after becoming eligible for the coverage, whichever is later.
Arizona State Retirement System Board (ASRS Board) and Public Safety
Personnel Retirement System Board of Trustees (PSPRS Board)
5. Prescribes the following scenarios, in addition to any other statistical and financial data that may be necessary, for inclusion in the PSPRS stress test:
a) assuming a 20-year period of investment returns that are two and four percentage points lower than the assumed rate of return; and
b) assuming there is a one-year loss on investments of 20 percent followed by a 20-year period of investment returns that are two percentage points lower than the assumed rate of return.
6. Requires the ASRS Board to develop a policy regarding routine stress testing of ASRS and requires the stress test to use industry standards, such as the inclusion of assumptions regarding investment returns, inflation, population growth, payroll growth and employer contributions.
7. Requires the ASRS Board's stress test to meet the requirements prescribed for the PSPRS Board's stress test.
8. Requires the ASRS Board and PSPRS Board to include the stress test in their annual actuarial valuations.
9. Requires the ASRS Board and PSPRS Board, by December 1 annually, to submit to the Governor, President of the Senate and Speaker of the House of Representatives an annual investment report and provide the report to the Secretary of State.
10. Requires the annual report, in addition to any other statistical and financial data that may be necessary, to include:
a) the current investment portfolio weights by asset class;
b) a comparison of net-of-fee returns to target benchmarks adopted by the system; and
c) the final, net-of-fee return for:
i. the prior month, 3 months and 12 months;
ii. the fiscal year to date; and
iii. the annualized return over the prior 3, 5, 7, and 10 years.
11. Defines stress test as an assessment of the risk exposure of the retirement system or plan, including scenario analysis, simulation analysis and sensitivity analysis.
Miscellaneous
12. Makes technical changes.
13. Becomes effective on the general effective date.
Prepared by Senate Research
June 20, 2022
MG/slp