Arizona State Retirement System

May 9, 2012

Arizona State Retirement System

AASBO Bi-Monthly Membership MeetingAASBO Bi-Monthly Membership Meeting

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Arizona StateRetirement System

ASRS Contribution Rate SplitSB1614Barnes vs. ASRS and State of ArizonaHB2264

Alternate Contribution RateSB1609

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Senate Bill 1614

Became effective 07/20/2011 Retroactive to 07/01/2011 Changed the contribution rate split from

50/50 to 53/47 Transfers the employer savings to the

General Fund for the state, university, school district and charter schools

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Barnes vs. ASRS and State of Arizona

Judgment entered 04/12/2012 Directs that the 53/47 split for pre-July, 2011

members be returned to 50/50 Judgment did not amend the 53/47 split for LTD Judgment did not amend the 53/47 split for

post-June, 2011 members Judgment did not require refunding employee

contributions paid in excess of 50%

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(In Maricopa County Superior Court)


House Bill 2264

Directs a reversion to the 50/50 split beginning 07/01/2011 for pension and LTD contributions

On or before 09/30/2012, employer to return employee contributions in excess of 50% except for forfeited members

Returned pension contributions are to be considered taxable wages in 2012

Returned LTD contributions are not taxable wages Adjustment transactions shall be reported to the ASRS on or

before 06/30/2012 The state and the Department of Education are to receive

appropriated funds for purposes of refunding ASRS eligible members for excess contributions

HB 2264 has an emergency clause

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Rate Split Resolution

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IMPORTANT INFORMATION ON ASRS CONTRIBUTIONS

Dear ASRS Employer:

This email is the latest in a series of updates on the ASRS contribution rate and the rate split between employees and employers brought about by litigation and legislation over the past several months. Please review carefully.

House Bill 2264, which calls for a reversion of the ASRS contribution rate back to an equal 50/50 split between membersand employers, was signed into law by Governor Jan Brewer on May 7, 2012 and is effective immediately.

This new law reverses legislation passed last year that mandated a 53/47 percent member/employer split of the total ASRScontribution rate for the defined benefit plan and the long term disability income plan for all ASRS members.

The new legislation also calls for employers to refund employees the excess contributions paid above the 50 percentrate since enactment of last year’s legislation, which was July 1, 2011. Refunds are to be paid by employers, not the ASRS.The legislation includes an appropriation to cover the reimbursement to state employees and education employees, whichincludes public schools and charter schools. Other employers, including municipal and county governments and specialdistricts, are expected to reimburse eligible employees from their own budgets.

Be sure to note that the refund of excess retirement contributions is taxable wages, but the refund of excess LTDcontributions is not taxable (this is opposite from the “normal” reporting structure). Additionally, the refunds should not haveASRS contributions withheld from them, but they are subject to any other garnishment or withholding in place for the employee.The refunds will be reported on W-2s for calendar year 2012.

HB 2264 goes further than a recent court Judgment entered on April 12, 2012 in Maricopa County Superior Court in the caseBarnes vs. ASRS and the State of Arizona. That Judgment directed that the ASRS retirement contribution (not LTD) rate split,for pre-July 2011 ASRS members only, return to a 50/50 percent member/employer split prospectively. The new law appliesto all ASRS members regardless of membership date, includes the LTD plan contributions, and applies the 50/50 percent split retroactively.


Rate Split Resolution (cont.)

The revised contribution rate, retroactive to July 1, 2011 and effective through June 30, 2012, now is:

IMPORTANT INFORMATION:•Employers must provide rebalancing records to the ASRS no later than June 30, 2012. Employers will be able to utilize 1) the standard contributions reporting method if their payroll system is capable of generating a file for upload, 2) the adjustment template for non-ASRS web-based reporting users, or 3) the adjustment entry module for web-based reporting users. The adjustments can be sent by an off-cycle payroll or be included in your regular pay period. In the comment section of either the file upload page or the ACH payment page, type in “FY 2012 rate adjustment.”

•Remember, all rebalancing records must be submitted to the ASRS by June 30, 2012, regardless if the employer reimburses the employee at a later date. HB 2264 requires that employers reimburse eligible employees no later than September 30, 2012.

•If you are an employer who uses a third party payroll company, please advise them of these changes. An employer may refer to Chapter 6 of the ASRS Employer Manual available on the ASRS website for additional information on adjustments.

•A file listing those employees who have already been made whole through an ASRS disbursement process and are not eligible for a refund will be sent in a separate email by close of business Wednesday, May 9 to your employer’s designated administrator on file with the ASRS. Be sure that your contact information with the ASRS is up-to-date.

•An information sheet for members has been posted to the ASRS website, should you receive inquiries from your employees. Employers may direct questions to [email protected] Sincerely,Employer RelationsArizona State Retirement System

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Retirement Pension & Health Insurance Benefit

Long Term DisabilityIncome Plan

TOTAL

Employee 10.50% 0.24% 10.74%

Employee 10.50% 0.24% 10.74%


Alternate Contribution Rate Senate Bill 1609

Becomes effective 07/01/2012 Establishes an Alternate Contribution Rate (ACR)

that employers pay for return to work retirees Required to be assessed regardless of hours worked

or the 12-month grace period Assessed against salary, compensation, or fee paid

for direct hire, contractor, or leased Assessed against any retiree who returns to work

with an ASRS employer and who fills a position normally filled by an employee

Employer responsible for remitting ACR contributions using the ASRS contribution remittance program on the secure ASRS website

● ACR will be 8.64% effective 07/01/20128


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Documents

Arizona State Retirement System