SB 1085
Initials SJ Page 1 House Engrossed
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-fifth Legislature
Second Regular Session
Senate: FIN DP 9-0-1-0 | 3
rd
Read 27-0-3-0
House: GE DP 13-0-0-0
SB 1085: PSPRS; funded ratio; asset transfers
Sponsor: Senator Livingston, LD 22
House Engrossed
Overview
Outlines procedures for a Public Safety Personnel Retirement System (PSPRS) employer to
request an asset transfer and modifies the actuarial funding requirements when an employer's
funded status is greater than 100%.
History
The minimum PSPRS employer contribution that is paid and is in excess of the normal cost plus
the actuarially determined amount required to amortize the unfunded accrued liability must be
used to reduce future employer contribution increases and not be used to pay for an increase in
benefits that are otherwise payable to members. After the close of any fiscal year, if it is
determined that the actuarial valuation of an employer's account contains excess valuation assets
and is more than 100% funded, the board of trustees (board) must account for 50% of the excess
valuation assets in a stabilization reserve account (A.R.S. § 38-843).
Current law stipulates that in any fiscal year, an employer's contribution to the system in
combination with member contributions may not be less than the actuarially determined normal
cost for that fiscal year. The board is prohibited from suspending contributions to the system
unless both the retirement system actuary determines that continuing to accrue excess earning
could result in disqualification of the tax-exempt status of the system and the board determines
that the receipt of any additional contributions conflict with its fiduciary responsibility (A.R.S. § 38-
843).
Provisions
1. Removes language requiring the employer contribution rate to not be less than 8% of
compensation beginning with FY 2007. (Sec. 1)
2. Deletes language that stipulates an employer whose actual contribution rate is less than 8%
of compensation for FY 2007 is not subject to the 8% minimum, but for FY 2007 and later,
must be at least 5% and not more than the employer's actual contribution rate. (Sec. 1)
3. Stipulates that the board must account for the excess valuation assets up to 100% of present
value of all future benefits of the employer in a stabilization reserve account if the employer's
account contains excess valuation assets and is more than 100% funded. (Sec. 1)
4. Prohibits the amount of the member's contribution that exceeds 7.65% of the member's
compensation to be used to reduce the employer's contributions until the employer's funded
ratio as expressed as a percentage of the employer's actuarial value of assets to accrued
actuarial liability as determined by actuarial valuations reported is at or above 100%. (Sec. 1)
5. States that if the employer's funded ratio falls below 100%, the amount of the member's
contributions above 7.65% must accumulate from that time and not be used to reduce the SB 1085
Initials SJ Page 2 House Engrossed
employer's contribution rate until the employer's funded ratio returns to 100% funded. (Sec.
1)
6. Maintains that the board may not suspend contributions to the system unless both:
a) The retirement system actuary, based on the annual valuation, determines the
stabilization reserve of an employer's account is funded to 100% of present value of all
future benefits of the employer; and
b) The board determines that suspending the normal cost contributions would not be in
conflict with its fiduciary responsibility. (Sec. 1)
7. Allows an employer to request that the board transfer excess assets of an employer's account
that has no liabilities or beneficiaries to another account managed by the board. (Sec. 1)
8. States that the board may authorize the transfer of assets if all of the following apply:
a) The board verifies that the employer's liabilities have been reconciled with the
administrator and there are no potential or remaining beneficiaries or liabilities of the
employer's account;
b) The board and the system bear no liability that the proposed transfer conforms with any
other restrictions on the transfer or use of the assets of the proposed transfer; and
c) The transfer does not violate the Internal Revenue Code or threaten to impair the system's
status as a qualified plan. (Sec. 1)
9. Specifies that an employer must meet both of the following requirements for the purposes of
requesting a transfer of assets:
a) The governing body of the employer adopts a resolution requesting the transfer of assets
in an open session where public comment is allowed; and
b) The employer submits a written request and the adopted resolution to the administrator of
the board for the transfer of assets. (Sec. 1)
10. Allows the Joint Legislative Budget Committee (JLBC) to request confirmation that a state
employer's account meets the requirements to transfer the account assets. (Sec. 1)
11. Instructs the Legislature to pass a bill directing the board to transfer the assets from the eligible
state employer account to another account of the employer. (Sec. 1)
12. Directs JLBC to confirm with the administrator of the board that the assets are eligible for
transfer and discuss the matter in a scheduled public meeting before the Legislature passes
the bill. (Sec. 1)
13. Makes conforming changes. (Sec. 1)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☒ Fiscal Note