Pssst! ..... Trying to get a grip on PSRS . so confused

Supreme Court ruling to cost public-safety pension trust $220M in refunds to members

Craig Harris , The Republic | azcentral.com 3:37 p.m. MT Nov. 14, 2016

The divided court upheld a Maricopa County Superior Court ruling that found a 2011 pension-reform law unconstitutional
Read entire article Arizona Investigations

A state Supreme Court ruling will require refunds to elected officials and public-safety officers who since 2011 were required to pay more for their pensions, with local governments likely to cover the projected $220 million cost to an already fragile public-pension trust fund.The divided court upheld a Maricopa County Superior Court ruling that found a 2011 pension-reform law was unconstitutional. Specifically, it overturned provisions in the law that increased employee contributions to their own retirement and curtailed certain benefit increases. The law was intended to improve the financial health of the Public Safety Personnel Retirement System trust fund.
The decision means hundreds of PSPRS members whose employee contributions were increased will receive refunds, while some retirees will receive retroactive benefit increases . . .
The court ruling is likely to force local and state governments, which already pay the majority of retirement contributions, to increase their payments to the retirement system for their employees,
Despite the 2011 reform law, some cities and towns held back on hiring additional police officers and firefighters in the past few years because of the enormous cost of their per-employee contributions to the retirement system.
While the case focused on the elected officials' retirement plan, the ruling also is expected to affect those in retirement plans for public-safety officers and correctional officers.  Elected officials, public-safety officers and correctional officers have separate plans, but all are under the umbrella of the PSPRS.
PSPRS Administrator Smout said while the ruling is a setback, the system is poised for recovery due to another pension reform measure voters approved earlier this year. That plan is projected to save $475 million in long-term costs.

Firefighters and police officers will have their contributions rolled back to 7.65 percent of their salaries, down from 11.65 percent. Employers, on average, paid in 32.54 percent as June 30, 2015. Some employers, however, paid more than 50 percent, with Bisbee paying nearly 88 percent.


Arizona Enacts Groundbreaking Public Safety Pension Reform

Collaborative process yielded consensus on wide-ranging reforms

Leonard Gilroy, Pete Constant and Anthony Randazzo
February 16, 2016
Link to entire report: here

This afternoon, Arizona Gov. Doug Ducey signed into law comprehensive pension reform legislation that will put Arizona’s beleaguered public safety pension system on a path to financial solvency. The Arizona Public Safety Personnel Retirement System (PSPRS)—which covers all law enforcement personnel and firefighters statewide—has accumulated $6.6 billion in unfunded liabilities over the past dozen years and stands at only 48% funded today.

The Need for Reform

The deterioration of PSPRS’s financial health over the past 12 years has led to skyrocketing annual pension costs for the local government and state agency employers participating in PSPRS and, by extension, taxpayers. Specifically, the growing costs for many local governments are attributable to rising payments on the large unfunded liabilities for public safety pension benefits. The growth of these pension debt payments has threatened the continued delivery of public services and budgets in those jurisdictions, since the growing costs of pensions effectively crowd out other areas of the budget. Further, the courts have struck down previous legislative reforms to PSPRS enacted in recent years, and other reforms remain under litigation, creating the need for a new solution.
First, for current employees and retirees, the reform will replace the uncertain, inequitable, unsustainable PBI with a traditional, pre-funded cost of living adjustment (COLA) that provides certainty and equity in retirement. This will serve the public interest by fixing the broken PBI mechanism that has been a major factor causing increased unfunded liabilities:

• The new COLA will be based on the changes in the consumer price index for the Phoenix region, with a cap of 2% maximum.
• The COLA will be equitable because the percentage will be applied to each PSPRS retiree’s actual benefit level (as opposed to a level dollar amount granted under the current PBI, regardless of the individual retiree’s benefit level).
• Further, the new COLA will be pre-funded and actuarially accounted for in advance as part of normal cost determination, which has historically not been the case with the current PBI.

Replacing the PBI with a traditional COLA for current personnel and retirees will require a constitutional amendment that will require voter approval at the ballot box in an election this May.
Second, the reform creates an entirely new retirement plan design for all new employees hired on or after July 1, 2017 that will:

• For the first time, allow public safety employees the choice of entering a full defined contribution plan or a defined benefit hybrid plan.
• Reduce the pensionable pay cap from $265,000 per year to $110,000 per year, significantly limiting pension spiking.
• Change the pension benefit multiplier from a flat 2.5% to a graded multiplier that ranges from 1.5% to 2.5% depending on years of service.
• Increase the retirement benefit eligibility age from 52.5 years to 55 years old.
• Implement the same CPI, with a cap of 2%.
• Restrict or eliminate cost of living adjustments when the plan falls below 90% funded.
• Require employees to pay 50% of all retirement costs, including normal costs, administrative costs, and any potential future unfunded liabilities if the plan’s experience does not meet actuarial assumptions.

 

 

Big Prop. 124 win to change public-safety pensions

Craig Harris , The Republic | azcentral.com Published 8:48 p.m. MT May 17, 2016 | Updated 6:25 a.m. MT May 18, 2016

Prop. 124 wins big, following support from firefighters, police officers and lawmakers. It will lower increases to retirement benefits, but is expected to improve ailing retirement trust.
Starting Jan. 1, the measure will change the way permanent pension-benefit increases are paid to retirees. Supporters say Prop. 124 over the next 30 years will save $1.5 billion for the retirement trust for first responders. However, an Arizona Supreme Court ruling could throw a wrench in Tuesday's electoral decision.

Prop. 124 will link retirees' pension cost-of-living adjustments to the regional Consumer Price Index, with an annual cap of 2 percent. An annual 4 percent compounded increase has been paid out to retirees for the past two decades, significantly cutting into the amount of money remaining to pay future retirement benefits.

Although the measure will reduce pension benefits, first responders urged voters to back the plan in order to provide sustainability to a trust that has about half of the money needed to fund current and future pensions

The State of Arizona has 2 retirement systems, the Arizona State Retirement System and the Public Safety Personnel Retirement System. These retirement plans qualify under 401(a) of the Internal Revenue Code. They are “defined benefit plans”, which is a retirement plan that promises to pay a certain amount usually based on the number of years of service and on the average salary in the period before retirement.   The Public Safety Personnel Retirement System (PSPRS) was created by the state legislature for elected officials, judges, certain full-time certified peace officers, fire fighters and other public safety personnel assigned to hazardous duty. The PSPRS has 3 plan categories: EORP, PSRS, and CORP described below:              
Deadlines: Correct missed contributions for the current fiscal year within 30 days, or the end of the fiscal year, whichever is sooner. GAO-73A due by 12 pm (noon) on compute Tuesday.
ELECTED OFFICIALS RETIREMENT PLAN (EORP)  Retirement plan for Elected Officials, Justices of the Supreme Court and Judges of the Court of Appeals. 
PUBLIC SAFETY RETIREMENT SYSTEM (PSRS) Retirement plan for Certified Peace Officers, Fire Fighters, Game & Fish wardens, Attorney General investigators, Liquor Control Officers and State Park Rangers.  
CORRECTIONS OFFICER RETIREMENT PLAN (CORP) Retirement plan for Correctional Officers and other positions within Department of Correction (DOC) and Department of Juvenile Corrections (DJC) and Public Safety Dispatchers and Detention Officers

RETIREMENT: PUBLIC SAFETY PERSONNEL RETIREMENT SYSTEM