SB 1082
Initials SJ Page 1 Caucus & COW
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-fifth Legislature
Second Regular Session
Senate: FIN DP 8-0-2-0 | 3
rd
Read 27-0-3-0
House: GE DPA 11-1-0-1
SB 1082: ASRS; lease-purchase agreements; contributions; prepayment
Sponsor: Senator Livingston, LD 22
Caucus & COW
Overview
Allows a school district to enter into lease-purchase agreements and authorizes an Arizona State
Retirement System (ASRS) employer to prepay 401(a) pension contributions.
History
Statute outlines the many discretionary powers of a school district governing board. Included in
those discretionary powers is the authority to enter into leases or lease-purchase agreements for
school grounds or buildings, or both, as lessor or lessee, for periods of less than 20 years subject
to voter approval for construction of school buildings as prescribed in statute (A.R.S. § 15-342).
All ASRS employer contributions and allocations to the ASRS trust fund are irrevocable and must
be used as benefits or to pay expenses of ASRS. The required employer contributions are
determined on an annual basis by an actuary who is selected by the board of trustees of ASRS
and who is a fellow of the society of actuaries (A.R.S. § 38-737).
Provisions
School District Lease-Purchase Agreements
1. Authorizes a school district governing board to enter into lease-purchase agreements of
school buildings or grounds, or both, for periods of up to the maximum amortization period as
determined by ASRS. (Sec. 1)
2. States that the school district governing board may apply amounts received under the lease-
purchase agreement as lessor to pay amounts to ASRS and to create reserves to supplement
the payments as deemed necessary by the governing board. (Sec. 1)
3. Stipulates that lease payments payable as lessee under the lease-purchase agreements must
be budgeted and payable from the same source where payments of amounts to ASRS are
otherwise made and any other legally available sources. (Sec. 1)
4. Maintains that authorization by the school district electors in an election called by the
governing board is not required for lease-purchase agreements as prescribed in the
provisions. (Sec. 1)
ASRS Prepayments
5. Allows an employer to prepay the employer's 401(a) pension contributions directly to ASRS
according to a written agreement between the employer and ASRS as follows:
a) Authorizes prepaid 401(a) pension contribution payments to be deposited, as determined
by the employer and managed by ASRS, directly into a Section 115 trust or the ASRS
trust fund;
b) Outlines the options that are available to the employer;
c) Requires the 401(a) pension contributions the employer prepays and the accrued earnings
to be managed at the discretion of ASRS; SB 1082
Initials SJ Page 2 Caucus & COW
d) Stipulates that the employer prepaid 401(a) pension contributions and the accrued
earnings must only be used to reduce the employer's future 401(a) pension contributions;
e) States that the employer determines when to use the 401(a) pension contributions that
the employer prepays and the accrued earnings from those contributions;
f) Directs ASRS to provide the employer with an annual statement of 401(a) pension
contributions the employer prepaid and the accrued earnings;
g) Prohibits an employer from prepaying 401(a) pension contributions after the employer
reports zero or less than zero net pension liability on their most recent applicable
governmental accounting standards report;
h) Directs the employer, after the employer reports zero or less than zero net pension liability
on the most recent applicable governmental accounting standards report, to elect an
amortization schedule by written agreement with ASRS, and the amortization period must
begin the following fiscal year;
i) Instructs ASRS to provide the employer with an annual amortization schedule that is
current and based on the employer's election;
j) Maintains that any 401(a) pension contributions and accrued earnings remaining on
account, if ASRS determines to no longer offer the prepayment option, must be used for
future obligations according to the written agreement between the employer and ASRS;
k) Exempts assets transferred in or out of or held in the ASRS trust fund or a Section 115
trust, and the accrued earnings, from state, county and municipal taxes;
l) States that the Legislature intends the accrued earnings to not be subject to federal
income tax and allows ASRS to adopt additional rules, policies and procedures deemed
necessary to fulfill the Legislature's intent; and
m) Declares that if ASRS receives notification from the United States Internal Revenue
Service that any portion of the provisions will jeopardize the tax-exempt status of the
prepaid 401(a) pension contributions and the accrued earnings, the portion that will cause
disqualification does not apply. (Sec. 2)
6. Permits any employer to enter into an agreement and borrow to fund any amounts to be paid
pursuant to the agreement by any means legally available to the employer. (Sec. 2)
Miscellaneous
7. Repeals statute relating to the powers and duties of the Auditor General. (Sec. 3)
8. Requires lease payments made by a school district for the purposes of the Arizona school
district spending report to be associated with the functional spending category in the same
proportion as the school district's retirement contributions. (Sec. 4)
9. Defines 401(a) pension contributions and Section 115 trust. (Sec. 2)
10. Makes technical and conforming changes. (Sec. 1, 4)
11. Contains an emergency clause. (Sec. 5)
Amendments
Committee on Government & Elections
1. Modifies the instances when an employer may not prepay 401(a) pension contributions.
2. Outlines the required amortization schedule and when it must begin.
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☒ Emergency (40 votes) ☐ Fiscal Note