SB1344 - 472R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 38-844.02, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.02. Deferred retirement option plan; purpose; employees hired before July 1, 2006

A. A deferred retirement option plan is established. The purpose of the deferred retirement option plan is to add flexibility to the system and to provide members who elect to participate in the deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.

B. The fund manager shall offer the deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the system.

C. This section and sections 38-844.03 through 38-844.09 only apply to those employees who are hired before July 1, 2006. Employees who are hired after June 30, 2006 are not entitled to participate in the deferred retirement option plan. END_STATUTE

Sec. 2. Section 38-844.10, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.10. Reverse deferred retirement option plan; employees hired before July 1, 2006

A. This section only applies to those employees who are hired before July 1, 2006. Employees who are hired after June 30, 2006 are not entitled to participate in the reverse deferred retirement option plan as prescribed by this section but may participate in the reverse deferred retirement option plan prescribed by section 38-844.11.

A. B. A reverse deferred retirement option plan is established. The purpose of the reverse deferred retirement option plan is to add flexibility to the system and to provide members who elect to participate in the reverse deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.

B. C. The fund manager shall offer the reverse deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the system.

C. D. Any member who is eligible for a normal pension pursuant to section 38‑844, subsection A, who has not elected to participate in the deferred retirement option plan pursuant to section 38‑844.03 and who has at least twenty years of credited service is eligible to participate in the reverse deferred retirement option plan.

D. E. A member who elects to participate in the reverse deferred retirement option plan shall voluntarily and irrevocably:

1. Designate a reverse deferred retirement option plan date that is the first day of the calendar month immediately following a member's completion of twenty years of credited service or a date not more than sixty consecutive months before the date the member elects to participate in the reverse deferred retirement option plan, whichever is later.

2. Agree to terminate employment on the date the member elects to participate in the reverse deferred retirement option plan.

3. Receive benefits from the system on termination of employment at the same time and in the same manner as otherwise prescribed in this article using the factors of credited service and average monthly benefit compensation in effect on the reverse deferred retirement option plan date.

E. F. On election, a reverse deferred retirement option plan participation account is established within the system on behalf of each reverse deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the reverse deferred retirement option plan participation account. A reverse deferred retirement option plan participant does not have a claim on the assets of the system with respect to the member’s reverse deferred retirement option plan participation account and assets shall not be set aside for any reverse deferred retirement option plan participant that are separate from all other system assets.

F. G. All amounts credited to a member’s reverse deferred retirement option plan participation account are fully vested.

G. H. A member’s reverse deferred retirement option plan participation account shall be credited with the following:

1. An amount that is credited as though accrued monthly from the reverse deferred retirement option plan date to the date the member elected to participate in the reverse deferred retirement option plan and that is computed in the same manner as a normal retirement benefit using the factors of credited service and average monthly benefit compensation in effect on the reverse deferred retirement option plan date.

2. An amount that is credited as though accrued monthly and that represents interest at a rate equal to three and one‑half per cent the yield on a five year treasury note as of the first day of the month.

H. I. Employee and employer contributions pursuant to section 38-843 that are deposited during the period of the reverse deferred retirement option plan are not eligible to be refunded to the employer or member.

I. J. The participant is not entitled to receive any amount prescribed by section 38‑856 or 38‑857 during the reverse deferred retirement option plan participation period.

J. K. The form of payment shall be a lump sum distribution. If allowed by the internal revenue service, the participant may elect to transfer the lump sum distribution to an eligible retirement plan or individual retirement account.

K. L. The reverse deferred retirement option plan shall not jeopardize in any way the tax qualified status of the system under the rules of the internal revenue service. The fund manager may adopt additional provisions to the extent necessary or appropriate for the reverse deferred retirement option plan to comply with applicable federal laws or rules. END_STATUTE

Sec. 3. Title 38, chapter 5, article 4, Arizona Revised Statutes, is amended by adding section 38-844.11, to read:

END_STATUTE38-844.11. Reverse deferred retirement option plan; employees hired after June 30, 2006

A. This section only applies to those employees who are hired after June 30, 2006. Employees who are hired before July 1, 2006 are not entitled to participate in the reverse deferred retirement option plan as prescribed by this section but may participate in the reverse deferred retirement option plan prescribed by section 38-844.10.

B. A reverse deferred retirement option plan is established. The purpose of the reverse deferred retirement option plan is to add flexibility to the system and to provide members who elect to participate in the reverse deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.

C. The fund manager shall offer the reverse deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the system.

D. Any member who is eligible for a normal pension pursuant to section 38‑844, subsection A and who has at least twenty-four years of credited service is eligible to participate in the reverse deferred retirement option plan.

E. A member who elects to participate in the reverse deferred retirement option plan shall voluntarily and irrevocably:

1. Designate a reverse deferred retirement option plan date that is the first day of the calendar month immediately following a member's completion of twenty-four years of credited service or a date not more than sixty consecutive months before the date the member elects to participate in the reverse deferred retirement option plan, whichever is later.

2. Agree to terminate employment on the date the member elects to participate in the reverse deferred retirement option plan.

F. On election, a reverse deferred retirement option plan participation account is established within the system on behalf of each reverse deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the reverse deferred retirement option plan participation account. A reverse deferred retirement option plan participant does not have a claim on the assets of the system with respect to the member’s reverse deferred retirement option plan participation account and assets shall not be set aside for any reverse deferred retirement option plan participant that are separate from all other system assets.

G. All amounts credited to a member’s reverse deferred retirement option plan participation account are fully vested.

H. A member’s reverse deferred retirement option plan participation account shall be credited with the following:

2. An amount that is credited as though accrued monthly and that represents interest at a rate equal to the assumed rate of return determined by the fund manager or the actual total rate of return for the fund for the preceding fiscal year if the actual total rate of return is positive, whichever is lower.

3. The amount of employee contributions made to the fund pursuant to section 38-843 during the reverse deferred retirement option plan participation period, without interest, but only if the funding status of the fund as of the prior fiscal year end is one hundred per cent funded as determined by the fund's actuary.

I. Employee and employer contributions pursuant to section 38-843 that are deposited during the reverse deferred retirement option plan participation period are not eligible to be refunded to the employer or member, except as provided by subsection H, paragraph 3 of this section.

J. The participant is not entitled to receive any amount prescribed by section 38‑856 or 38‑857 during the reverse deferred retirement option plan participation period.

K. The form of payment shall be a lump sum distribution. If allowed by the internal revenue service, the participant may elect to transfer the lump sum distribution to an eligible retirement plan or individual retirement account.

L. The reverse deferred retirement option plan shall not jeopardize in any way the tax qualified status of the system under the rules of the internal revenue service. The fund manager may adopt additional provisions to the extent necessary or appropriate for the reverse deferred retirement option plan to comply with applicable federal laws or rules.

Sec. 4. Laws 2005, chapter 258, section 2 is amended to read:

Sec. 2. Delayed repeal

Section 38-844.10, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2010 2011.

Sec. 5. Delayed repeal

Section 38-844.11, Arizona Revised Statutes, as added by this act, is repealed from and after June 30, 2011.

Sec. 6. Retroactivity

This act is effective retroactively to from and after June 30, 2006.