SB 1609 is another bill attempting to change our pension systems (PSPRS, EORP & CORP).  The bill passed out of the Senate Finance Committee with a 3-1 vote and three (3) amendments were adopted. CLICK HERE TO READ THE BILL AND ITS STATUS. On February 23rd, AHPA and APA spoke against SB 1609, as it was written.  Below are the major highlights of this bill:

Positives
-Continues to allow present employees to use their top three (3) base pay years for retirement
-Makes employers pay some contributions on “return to work”
-Leaves DROP in place for current members

-No changes were made to ASRS
-The bill did not include a provision that eliminated overtime included in “base compensation”

Negatives

-The bill significantly increases the employee’s contribution into the pension system.  Police officers throughout Arizona would be paying different amounts for the same pension benefit.  The change means:

FY 2011-2012, one would have to pay a two (2) percent increase (9.65%) into their retirement, and

FY 2012-2013, add an additional one (1) percent (10.65%), and

FY 2013-2014 & maximum contribution from the employee, add an additional two (2) percent (max rate of 11.65%)

OR

Pay one-third (1/3) of the rate and the state pays two third’s (2/3) – whichever is lower
-Changes the “COLA” fund so no new assets would flow into the fund for several years and no COLA’s for retirees

New Hires

-Minimum retirement age of 25 and 52.2 years of age

-Removes the match for employees who leave with less than 20 years of service

-No DROP benefit/option

-Top five (5) years of base pay toward retirement

-Increased contributions rates

During the hearing, AHPA members were well represented.  CLICK HERE TO VIEW THE VIDEO OF THE HEARING.  Many of the same remarks from last pension bill (HB 2726) were reiterated.

On your behalf, Kelsey Lundy (AHPA Lobbyist) stated the following key points (in the video at 1:07:03):

  1. When increasing the retirement age for new hires to 25 years, the only members of the system the bill would be negatively affecting are police officers. Police officers retire on average at 22 years. The proposal forwarded by the police groups set the new hire retirement at 20 years at 50%, 25 years at 60% and 30 years at 70% with a maximum benefit at 70%.  AHPA requested the committee consider the proposal.
  2. DROP has not been a drain on the PSPRS fund and has actually accomplished its goal of retaining experienced police officers. Prior to the implementation of DROP, the average length of service of a police officer was 20 years and three (3) months.  Currently, it is 22 years. DROP is not a benefit that all police officers choose; only 30% of police officers go into DROP.

On your behalf, Brian Livingston (APA Executive Director) stated the following key points (in the video at 1:20:00):

  1. Reemphasized that if there was not a $1.6 billion dollars loss to the pension system, our government would not have to deal with this issue.
  2. The part of the bill that is missing is “oversight”.   APA would like to see mandated accountability and everyone from the JLBC to the Governor should have a regular report on the pension system. 
  3. The employee contribution rate is too short and too much.  This bill (in its current condition) is heavily weighted for employers and their contributions.
  4. User fees: Police take a lot of actions to benefit of the public, namely insurance companies.  Fees should be applied to benefits they are receiving in order to have a reduction of contributions from employers.
  5. A full investigation should be done on PSPRS and the state should attempt to recapture expenditures not accounted for.
  6. Do use actuarial value versus market value.
  7. In 2011, to date, we have lost 43 law enforcement officials; Iraq lost 37.  We would not diminish the retirement of a US solider, so why would the state of Arizona do it to law enforcement?

We will continue to keep you updated on the status of this bill.  If you have any questions, please contact a board member.

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