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IMPORTANT INFORMATION ABOUT YOUR RETIREMENT FROM THE FOP ARIZONA LABOR COUNCIL

SB1609 Passed by the House, Will Go to Senate, then to the Governor
By a 36 to 20 vote, the amended Senate Bill 1609 passed the House. The House has transmitted the bill to the Senate. However, the Senate has gone home for the weekend. We expect the Senate to Caucus the bill on Monday 4/18, where Senator Yarbrough will concur with the House changes. They will then take the bill to the floor for Final Pass. There is little doubt, this version of the retirement bill will pass the House and be signed by the governor. If the bill is accepted by the Senate and signed by the governor, the bill will become law 90 days after the legislature ends. See chart for synopsis of changes.
The bill had an emergency clause attached, which would have allowed a few provisions to take effect upon the governor's signature. The emergency clause was defeated. It needed 40 House members to vote 'Aye," and only 36 chose to do so. Four Republicans, voted against the bill.
What changes were made to DROP?
For officers with less than 20 years of credited service as of January 1, 2012, DROP is retained with two changes:

• First, DROP participants will be required to continue to make the regular employee retirement contributions when they go into DROP.
• Second, the rate of interest earned on the DROP amount will be the actuarial smoothed rate of return but no less than 2% nor more than the assumed earnings rate of the Fund which will be 8% at the time that this bill goes into effect.
• Example: FY Return %
  2010 13.47
  2009 -17.73
  2008 -7.27
  2007 17.05
  2006 8.32
  2005 9.11
  2004 14.97
  Total 7 Year Period % = 37.92
  Averaged over the 7 years = Smoothed Rate 5.42%

For officers with at least 20 years of credited service, as of January 1, 2012, DROP will remain exactly the same. Those officers will not pay an employee contribution and the rate of interest earned is the same as the assumed earnings rate (currently 8.25% and 8% beginning July 1, 2011).
There will be no DROP for those hired on or after January 1, 2012.
The CORP Reverse DROP is not changed.
How does the employee contribution rate increase work?
The PSPRS employee contribution rate (currently 7.65%) will be increased to 11.65% over 5 years as follows:
Fiscal year 2011 2012 = 8.65%
2012 2013 = 9.55%
2013 2014 = 10.35%
2014 2015 = 11.05%
2015 2016 and each fiscal year thereafter = 11.65%
The CORP employee contribution rate will not increase. Other than CORP, no state retirement system escaped contribution rate increases this session, including the similarly well funded ASRS plan, whose participants will be required to pay 3% more in employee contributions.
Will post-retirement benefits, also called a COLA, be provided to retirees?
The quick answer is that PSPRS retirees will get the full increase of $152.84 per month in July of 2011.
In July 2012, retirees will get either a full or partial increase.
In 2013, the new COLA structure will go into effect. Basically, in 2013, and each year thereafter, if the investment earnings exceed 10.5%, the raise would then depend upon the funded level; greater than 60% funded = 2%, greater than 65% funded = 2.5%, greater than 70% funded = 3%, greater than 75% funded = 3.5%, greater than 80% funded = 4%. However, only the money earned above 10.5% would be available to fund the raise.
The new COLA structure becomes effective "UNLESS" there are any funds left over in the "excess earnings account." If any funds are left in the account, the new structure is not implemented, and only those funds in the account will be used for a raise that year. Think about what would happen if there was only $1.95 left in the account. Several thousand retirees would split that amount.
For members hired after January 1, 2012, with the exception of line-of-duty widows and line-of-duty disability pensions, a member must be fifty five years old and have been retired for at least a year to receive the COLA.
For CORP, the COLA system is the same as described above, except that the July 2011 raise is 4%.
Can we still purchase of military and out-of-state law enforcement time?
This provision applies to all retirement systems; PSPRS, CORP, EORP and ASRS. SB1609 allows a member to purchase time from prior years of service under the following conditions:
Must have at least ten years as an active member of the retirement system.
Cannot use the same years to qualify for two separate pensions. EXAMPLE: You have 20 years of military service and you are collecting a military pension or are simply eligible to collect that pension you may not buy those years in PSPRS.
Allows the purchase of up to sixty months of service or other pension time rather than the current forty-eight months.
What does the pension forfeiture language and the effective date mean?
Upon conviction or plea, to a class 5 or higher felony, which occurred in the performance of official duties, all or part of the pension can be forfeited as follows:
Future hires will lose their entire pension.
For current actives, loss of the portion of the pension credited towards the period of time served after the effective date of SB1609.
There are mechanisms within the bill to provide a pension to the spouse and children as long as the spouse was not a participant in the crime or had knowledge of it.
What is the purpose of the study committee in SB1609?
The legislature ordered a study committee to examine specific pension issues and report back to the legislature. The items to be looked at include; defined contribution system, disability retirements and the possibility of abolishing local boards.
What are the changes for new hires?
In both PSPRS and CORP, officers hired after January 1, 2012, will no longer have a 20 year retirement. Officers must serve 25 years and be 52 1/2 years old in order to retire and get benefits. In addition, the "final average calculation" or FAC will be 60 months rather than the current 36 months.
One of the most disappointing provisions in SB1609 involves the "new hire" eligibility for receiving a COLA. No new hire is eligible for a COLA, after retirement, until age 55.
It could have been much worse...
Retirement Legislation UPDATE
As of 4/10/2011

Jim Mann FOP ALC

Your emails and calls worked. Legislators told me about the large number of law enforcement officers who sent email, called and met with them in their districts. Coupled with the TV campaign and direct mail campaign, which targeted specific legislative district voters, we were able to gather enough support in the legislature to mitigate the very worst of the initial proposals.
At some point in the future, after the bill is signed and the legislature is out of session, I will send out more details concerning which legislators helped us - even though, in the end, they had to vote yes on the bill.
We are bipartisan. Our loyalty is to police officers, not to any political organization.

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