What Types of Arizona State Pensions are offered?
Arizona’s main pension plan is controlled and maintained by the Arizona State Retirement System. The plan is offered for all qualifying employees working for state-sponsored programs and institutions. Nearly 200,000 employees are covered with the ASRS plan annually. In addition, Arizona offers several specialized pension plans for select groups of government employees. The state offers distinct pension plans for correction officers, public safety personnel, and elected officials. As of 2013, the state plans are approximately 75% funded, which is near the 80% recommended federal level.
ASRS Retirement Contribution and Benefits
The ASRS program is funded through a combination of individual and government employer contribution.
Every year, the Arizona State Retirement System board sets the contribution rate, depending on the finances of the state budget. For the 2013 – 2014 fiscal year, state employees will contribute 11.3% of their pre-tax income and their employers will match this with a 11.3% contribution of their own. This is up from the 10.9% contribution rate in the 2012 – 2013 fiscal year.
ASRS retirement benefits are a fixed monthly amount, based on a calculation of years of creditable service, total years of service at the time of retirement, and average monthly compensation. More information about how to calculate one’s monthly benefit can be found in the ASRS retirement handbook as the monthly benefit will vary by employee.
Retiring ASRS employees are also eligible to participate in a government-sponsored health insurance plan. Employees that receive health coverage from a different provider may still enter into the ASRS plan at a later date.
ASRS Creditable Service Options
Creditable service is calculated in hourly increments for most employees. There are also options to purchase additional service years, under the following situations:
- ASRS members who served in active duty in the Military or National Guard may convert their service into ASRS creditable service hours.
- ASRS members who accumulated public service hours under another state pension plan may convert those hours into ASRS creditable service hours.
- ASRS members who resume service with an ASRS employer may convert past forfeited creditable service hours into active hours.
Service hours may only be purchased after a member has already accumulated at least five years of creditable service.
All ASRS members receive partial vestment after five years of total creditable service, and 100% vestment occurs after ten years of service.
There are several options for both normal and early retirement, under the ASRS pension plan.
- The normal retirement for all plans is 65.
- Employees hired before July 1, 2011 may retire at age 62 with at least 10 years of creditable service, or with any combination of age and years of service totaling 80 points.
- Employees hired after July 1, 2011 may retire at age 62 with at least 10 years of creditable service, at age 60 with at least 25 years of service, or at age 55 with at least 30 years of service.
- Employees who are at least 50 with 5 years of creditable service are eligible for early retirement. However, a calculated reduction is applied to the monthly retirement benefit.
- Early retirement is available to members who are at least 50 years old and have five or more years of credited service. Under conditions of early retirement, a member receives a reduction of benefits offered. The reduction applied to the benefit is determined by age at early retirement and credited service at the time of retirement. The benefit remains at the reduced amount for the duration a member receives benefit payments.
- If you are at least age 50 with 5 or more years of credited service, you may retire before you reach normal retirement. However, a reduction is applied to your benefit depending upon your age and your credited service and when you became a member. Your benefit stays at the reduced amount as long as you are receiving retirement benefits.
- ASRS employees are also eligible for late retirement after age 65 and will accrue additional monthly retirement benefits, depending on their eventual retirement age.
ASRS Survivor Benefits
In the event of an ASRS member’s death, their designated beneficiary is eligible to receive the following retirement benefit options:
- ASRS provides several life annuity options, at the ASRS employee’s discretion. The terms for these annuities range from 5 years to 15 years. If, in the event of the employee’s death, the monthly payments have not been completed, the remaining monthly payments will be paid out to the employee’s beneficiary for the duration of the term.
- ASRS also offers joint and survivor benefits to be paid out to the employee’s beneficiary, which range from 100% to 50% of the calculated retirement benefit. Note that the 100% survivor benefit is not available if your beneficiary is more than 10 years younger than you.
- These beneficiary options are selected upon entering into the retirement plan. Employees may designate both a primary and secondary beneficiary.
Cost of Living Allowances
Arizona provides a cost of living adjustment on a yearly basis at the discretion of the Board, depending on the finances of the state budget. As of 2013, there was no COLA for employees working during the 2013 – 2014 fiscal year.
Other Arizona Pension Plans
In addition to the main ASRS pension plan, Arizona also offers several specialized benefit plans for select state employees.
The Correctional Officers Retirement Plan is available to state-employed correctional officers, including those employed by educational institutions. Employees under this plan contribute at a rate between 7.96% and 8.41%, depending on their full-time employment status. Retirement benefits begin on the first day after termination of employment and are calculated based on a combination of age and creditable service points.
The Public Safety Personnel Retirement System is available to eligible police officers and firefighters. Members of this pension plan contribute at a rate of 10.35%. The standard retirement age under this plan, is 52.5, with at least 25 years of accumulated service. However, employees may also retire at any age, provided they have at least 25 years of eligible service.
The Elected Officials Retirement Plan is the smallest pension plan available and is only available to elected Arizona state officials. The contribution rate changes every fiscal year, but, as of the 2013 – 2014 fiscal year, it was 13.0%. Early retirement is available for any elected official with at least 5 years of creditable service. However, standard retirement follows the ASRS schedule, with 65 being the standard age, and each age reduction needing a number of years of creditable service to become eligible.
Each of these pension plans provides its own individual survivor benefits and health insurance options. They are administered by the Public Safety Personnel Retirement System, and more information about the specific details of each plan is available through that administration body.
When You Retire
The Arizona State Retirement System has a program available for survivors of members who pass away. Upon the death of an active member, the beneficiary is entitled to twice the amount of the account balance. The surviving beneficiary is also entitled to the option to continue health insurance benefits. Upon the death of a retired member, the beneficiary is entitled to the benefits determined by the annuity option that was selected at the time of retirement. Additionally, a surviving beneficiary of a retired member is entitled to the option to continue health insurance benefits.
Recent news on the ASRS reports a stable 75.8% funding level for 2012. However, analyses on many recent investment programs for fiscal year 2012 are not as satisfactory as imagined at a conservative 7% investment rate. Further information of the Arizona State Retirement System (ASRS) is available at www.azasrs.gov and further information of the Public Safety Personnel Retirement System of Arizona (PSPRS) is available at http://www.psprs.com.