SB 1082
Initials SJ Page 1 House Engrossed
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 | 3
rd
Read 43-14-3-0
SB 1082: ASRS; lease-purchase agreements; contributions; prepayment
Sponsor: Senator Livingston, LD 22
House Engrossed
Overview
Authorizes an Arizona State Retirement System (ASRS) employer to prepay 401(a) pension
contributions.
History
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
1. 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) The earnings accrual rate must be the ASRS total 401(a) pension fund rate of return;
d) Requires the 401(a) pension contributions the employer prepays and the accrued earnings
to be managed at the discretion of ASRS;
e) 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;
f) States that the employer determines when to use the 401(a) pension contributions that
the employer prepays and the accrued earnings from those contributions;
g) Directs ASRS to provide the employer with an annual statement of 401(a) pension
contributions the employer prepaid and the accrued earnings;
h) Prohibits an employer from prepaying 401(a) pension contributions either:
i. In an amount greater than the employer's net pension liability as reflected by ASRS in
its most recent governmental accounting standards report; or
ii. After the total of the unamortized prepaid 401(a) pension contributions and accrued
earnings is equal to or greater than the employer's net pension liability as reflected by
ASRS in its most recent governmental accounting standards report;
i) Directs the employer to elect an amortization schedule by written agreement with ASRS,
and the amortization period must begin in the fiscal year following the earlier occurrence
of:
i. The employer's net pension liability is zero or less as reflected by ASRS in its most
recent governmental accounting standards report; or SB 1082
Initials SJ Page 2 House Engrossed
ii. The total of the unamortized prepaid 401(a) pension contributions and accrued
earnings is equal to or greater than the employer's net pension liability as reflected by
ASRS in its most recent governmental accounting standards report;
j) Instructs ASRS to provide the employer with an annual amortization schedule that is
current and based on the employer's election;
k) 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;
l) 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;
m) 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
n) 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. 1)
2. Defines 401(a) pension contributions and Section 115 trust. (Sec. 1)
3. Contains an emergency clause. (Sec. 2)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☒ Emergency (40 votes) ☐ Fiscal Note