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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
EORP; CORP; funded ratio
Purpose
Prescribes procedures for a Corrections Officer Retirement Plan (CORP) employer to request an asset transfer. Outlines CORP and Elected Officials' Retirement Plan (EORP) employer contribution reductions if an employer's funded ratio is 100 percent or more and removes minimum CORP employer contribution rates.
Background
Each CORP and EORP employer must make contributions sufficient under the actuarial valuations to meet both the normal cost for members plus the actuarially determined amount required to amortize the unfunded accrued liability on a level percent of salary basis for all employees over a closed period of: 1) for CORP employers, not more than 20 years; or 2) for EORP employers, at least 20 years and not more than 30 years.
Statute prohibits the CORP employer contribution rate from being less than 6 percent of salary or, if the employer's contribution rate for FY 2007 was less than 6 percent, at least 5 percent of salary and not more than the employer's actual contribution rate. After the close of any fiscal year, if CORP's actuary determines that the actuarial valuation of an employer's account contains excess valuation assets other than excess valuation assets that were in the account as of FY 2005 and the account is more than 100 percent funded, the PSPRS Board must account for 50 percent of the excess valuation assets in a stabilization reserve account. The amount of the member's contribution that exceeds 8.41 percent of the member's salary, or 7.96 percent for a full-time dispatcher, may not be used to reduce the employer's contributions.
For EORP, an employer's contribution, in combination with member contributions, may not be less than the actuarially determined normal cost for that fiscal year. After the close of any fiscal year, if EORP's actuary determines that the actuarial valuation of the fund contains excess valuation assets and is more than 100 percent funded, the PSPRS Board of Trustees must account for 50 percent of the excess valuation assets in a stabilization reserve account. The amount of the member's contribution that exceeds 7 percent of the member's compensation may not be used to reduce the employer's contributions.
The PSPRS Board may not suspend contributions to CORP unless: 1) the actuary determines that continuing to accrue excess earnings could result in disqualification of CORP's tax-exempt status; and 2) the PSPRS Board determines that the receipt of any additional contributions would conflict with its fiduciary responsibility (A.R.S. ยงยง 38-810 and 38-891).
If a state CORP or EORP employer group reaches a 100 percent funded status resulting in a reduced employer contribution rate, there may be a fiscal impact to the state General Fund.
Provisions
EORP
1. Prohibits the amount of an EORP member's contribution that exceeds 7 percent of compensation from being used to reduce the employer's contributions only until the employer's funded ratio is 100 percent or more.
2. Requires, if an EORP employer's funded ratio falls below 100 percent, the amount of a member's contributions above 7 percent to accumulate from that time and not be used to reduce the employer's contribution rate until the employer's funded ratio returns to 100 percent.
3. Requires the PSPRS Board, if the actuarial valuation of an EORP employer's account contains excess valuation assets and is more than 100 percent funded, to account for the excess valuation assets up to 100 percent of present value of all future benefits, rather than 50 percent of the excess valuation assets.
CORP
4. Prohibits the amount of a CORP member's contribution that exceeds 8.41 or 7.96 percent of compensation, as applicable, from being used to reduce the employer's contributions only until the employer's funded ratio is 100 percent or more.
5. Requires, if a CORP employer's funded ratio falls below 100 percent, the amount of a member's contributions above 8.41 or 7.96 percent, as applicable, to accumulate from that time and not be used to reduce the employer's contribution rate until the employer's funded ratio returns to 100 percent.
6. Allows a CORP employer to request the PSPRS Board to transfer excess assets of an account that has no liabilities or beneficiaries to another PSPRS-managed employer account.
7. Requires, for an employer to be eligible to request an asset transfer, an employer's governing body to adopt a resolution requesting the transfer of assets in an open session where public comment is allowed and requires the employer to submit a written request to the PSPRS Board along with the adopted resolution.
8. Allows the PSPRS Board to authorize the asset transfer if:
a) the PSPRS Board verifies that the employer's liabilities have been reconciled and there are no remaining or potential liabilities or beneficiaries;
b) the PSPRS Board and PSPRS bear no liability that the proposed transfer conforms with any use or transfer restrictions; and
c) the transfer does not violate the U.S. Internal Revenue Code or impair PSPRS's status as a qualified plan.
9. Allows the Joint Legislative Budget Committee (JLBC), for a state employer that meets the asset transfer eligibility requirements, to request confirmation from the PSPRS Administrator that an employer's account meets the requirements for an asset transfer.
10. Directs the Legislature to pass a bill directing the PSPRS Board to transfer assets from the eligible state employer account to another account of the employer.
11. Directs JLBC, before the Legislature passes the bill, to confirm with the PSPRS Administrator that the state employer's assets are eligible for transfer to another employer account and to discuss the matter in a scheduled public meeting.
12. Requires the PSPRS Board, if the actuarial valuation of a CORP employer's account contains excess valuation assets, other than assets in the account as of FY 2005, and is more than 100 percent funded, to account for the excess valuation assets up to 100 percent of present value of all future benefits, rather than 50 percent of the excess valuation assets.
13. Removes the minimum employer contribution rate of 6 percent and removes the minimum employer contribution rate of 5 percent for employers whose actual contribution rate in FY 2007 was less than 6 percent.
Miscellaneous
14. Prohibits the PSPRS Board from suspending contributions to CORP or EORP, unless:
a) the actuary determines the stabilization reserve of an employer's account is funded to 100 percent of present value of all future benefits; and
b) the PSPRS Board determines that suspending the normal cost of contributions would not conflict with its fiduciary responsibility.
15. Makes technical and conforming changes.
16. Becomes effective on the general effective date.
House Action
WM 2/5/25 DP 8-0-0-1
3rd Read 2/13/25 49-2-0
Prepared by Senate Research
February 27, 2025
MG/ci