HB2140 - 481R

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

Section 1. Section 9-956, Arizona Revised Statutes, is amended to read:

START_STATUTE9-956. Annual audit; report of secretary; sanction

A. The board shall cause an annual audit and report of the fund.

B. The secretary shall report, using a form approved by the state fire marshal, annually on or before January 1 to the board the condition of the fund and the receipts and disbursements, with a complete list of its beneficiaries and the amounts paid.

C. The board shall send a copy of the annual audit and report of the fund to the state fire marshal and the Arizona state library, archives and public records.

D. If the annual pension fund report is not received by January 31 by the state fire marshal, the participating MUNICIPALITY or fire district is not eligible to receive its share of fire insurance premium tax monies under section 9‑952. END_STATUTE

Sec. 2. Section 20-224, Arizona Revised Statutes, is amended to read:

START_STATUTE20-224. Premium tax

A. On or before March 1 of each year each authorized domestic insurer, each other insurer and each formerly authorized insurer referred to in section 20‑206, subsection B, shall file with the director a report in a form prescribed by the director showing total direct premium income including policy membership and other fees and all other considerations for insurance from all classes of business whether designated as a premium or otherwise received by it during the preceding calendar year on account of policies and contracts covering property, subjects or risks located, resident or to be performed in this state, after deducting from such total direct premium income applicable cancellations, returned premiums, the amount of reduction in or refund of premiums allowed to industrial life policyholders for payment of premiums direct to an office of the insurer and all policy dividends, refunds, savings coupons and other similar returns paid or credited to policyholders within this state and not reapplied as premiums for new, additional or extended insurance. No deduction shall be made of the cash surrender values of policies or contracts. Considerations received on annuity contracts, as well as the unabsorbed portion of any premium deposit, shall not be included in total direct premium income, and neither shall be subject to tax. The report shall separately indicate the total direct premium income received from fire insurance premiums on property located in an incorporated city or town that procures the services of a private fire company.

B. Coincident with the filing of such tax report each insurer shall pay to the director for deposit, pursuant to sections 35‑146 and 35‑147, a tax of 2.0 per cent of such net premiums, except that the tax on fire insurance premiums on property located in an incorporated city or town which that procures the services of a private fire company is .66 per cent, the tax on all other fire insurance premiums is 2.2 per cent and the tax on health care service and disability insurance premiums is as prescribed under sections 20‑837, 20‑1010 and 20‑1060. Any payments of tax pursuant to subsection E of this section shall be deducted from the tax payable pursuant to this subsection. Each insurer shall reflect the cost savings attributable to the lower tax in fire insurance premiums charged on property located in an incorporated city or town that procures the services of a private fire company.

C. Eighty‑five per cent of the tax paid hereunder by an insurer on account of premiums received for fire insurance shall be separately specified in the report and shall be apportioned in the manner provided by sections 9‑951, 9‑952 and 9‑972, except that all of the tax so allocated to a fund of a municipality which or fire district that has no volunteer fire fighters or pension obligations to volunteer fire fighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system and all of the tax so allocated to a fund of a municipality which or fire district that has both full‑time paid fire fighters and volunteer fire fighters or pension obligations to full‑time paid fire fighters or volunteer fire fighters shall be appropriated to the account of the municipality or fire district in the public safety personnel retirement system where it shall be reallocated by actuarial procedures proportionately to the municipality or fire district for the account of the full‑time paid fire fighters and to the municipality or fire district for the account of the volunteer fire fighters. Municipalities and fire districts shall provide to the public safety personnel retirement system all information that the system deems necessary to perform the reallocation prescribed by this section. A full accounting of such reallocation shall be forwarded to the municipality or fire district and both their local boards.

D. This section shall not apply to title insurance, and such insurers shall be taxed as provided in section 20‑1566.

E. Any insurer which that paid or is required to pay a tax of two thousand dollars or more on net premiums received during the preceding calendar year, pursuant to subsection B of this section and sections 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07, shall file on or before the fifteenth day of each month from March through August a report for that month, on a form prescribed by the director, accompanied by a payment in an amount equal to fifteen per cent of the amount paid or required to be paid during the preceding calendar year pursuant to subsection B of this section and sections 20‑224.01, 20‑837, 20‑1010, 20‑1060 and 20‑1097.07. The payments are due and payable on or before the fifteenth day of each month and shall be made to the director for deposit, pursuant to sections 35‑146 and 35‑147.

F. Except for the tax paid on fire insurance premiums pursuant to subsections B and C of this section, an insurer may claim a premium tax credit if the insurer qualifies for a credit pursuant to section 20‑224.03 or 20‑224.04.END_STATUTE

Sec. 3. Section 38-801, Arizona Revised Statutes, is amended to read:

START_STATUTE38-801. Definitions

In this article, unless the context otherwise requires:

1. "Accumulated contributions" means the sum of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A plus the amount transferred to the fund on behalf of the member plus the amount deposited in the fund pursuant to section 38‑816.

2. "Average yearly salary" means the result obtained by dividing the total salary paid to an employee during a considered period by the number of years, including fractional years, in which the salary was received. The considered period shall be the three consecutive years within the last ten completed years of credited service which that yield the highest average.

3. "Credited service" means the number of whole and fractional years of a member's service as an elected official after the elected official's effective date of participation for which member and employer contributions are on deposit with the fund, plus credited service as an elected official transferred to the plan from another retirement system or plan for public employees of this state, plus service as an elected official before the elected official's effective date of participation which that is being funded pursuant to a joinder agreement in accordance with section 38‑810, subsection C and section 38‑815 or which that was redeemed pursuant to section 38‑816. Credited service does not include periods of service for which an active member is uncompensated by the employer and for which no contributions to the plan are made.

4. "Effective date of participation" means August 7, 1985, except with respect to employers and their elected officials whose contributions to the plan commence after that date, in which case the effective date of their participation in the plan is specified in the applicable joinder agreement.

5. "Elected official" means:

(a) Every elected official of this state.

(b) Every elected official of each county of this state.

(c) Every justice of the supreme court, every judge of the court of appeals, every judge of the superior court and every full‑time superior court commissioner, except full‑time superior court commissioners who failed to make a timely election of membership under the judges' retirement plan, repealed on August 7, 1985.

(d) The administrator of the fund manager if the administrator is a natural person.

(e) Each elected official of an incorporated city or town whose employer has executed a proper joinder agreement for coverage of its elected officials.

6. "Eligible child" means an unmarried child of a deceased active or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty‑three years of age and remains a dependent of the surviving spouse or guardian.

6. 7. "Fund" means the elected officials' retirement plan fund.

7. 8. "Fund manager" means the fund manager of the system.

9. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

8. 10. "Pension" means a series of monthly payments to a person who is entitled to receive benefits under the plan.

9. 11. "Plan" means the elected officials' retirement plan.

12. "Qualified governmental excess benefit arrangement" means a portion of the plan if:

(a) The portion is maintained solely to provide to members of the plan that part of a member's annual benefit that is otherwise payable under the terms of the plan and that exceeds the limitations imposed by section 415 of the internal revenue code.

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the plan unless the trust is maintained solely for the purpose of providing excess benefits.

10. 13. "Retired member" means a person who is being paid a pension based on the person's credited service as a member of the plan.

11. 14. "System" means the public safety personnel retirement system.END_STATUTE

Sec. 4. Section 38-802, Arizona Revised Statutes, is amended to read:

START_STATUTE38-802. Elected officials' retirement plan and fund; administration

A. The elected officials' retirement plan is established.

B. The elected officials' retirement plan fund is established. The fund shall be made up of the assets of the judges' retirement plan and the elected officials' retirement plan terminated on August 7, 1985 plus the assets generated by this plan and the assets of the administrator of the fund manager in the state employees retirement plan on the date of transfer plus any assets transferred to the fund in accordance with a joinder agreement. The fund shall be used exclusively for payment of benefits to retired members or their beneficiaries as provided in this article and for payment of the administration, operation and investment expenses of the plan. In no case shall any portion of the fund revert or otherwise be paid to an employer.

C. The fund manager shall administer, manage and operate the plan and fund.

D. The elected officials' retirement plan is a jural entity that may sue and be sued.END_STATUTE

Sec. 5. Section 38-803, Arizona Revised Statutes, is amended to read:

START_STATUTE38-803. Powers and duties of the fund manager

A. The fund manager, in the administration, management and operation of the plan and fund, shall:

1. Account for the operation, administration and investment expenses and allocate them against investment income.

2. Contract on a fee basis with an actuary to make an actuarial valuation of the plan based on the valuation method and valuation assumptions recommended by the actuary and approved by the fund manager. The actuary shall be a member of the American academy of actuaries.

3. Contract on a fee basis with an independent auditing firm to make an annual audit of the accounting records of the fund and file a copy of the audit with the auditor general.

4. Invest the monies in the fund as provided in section 38‑848.

5. Within a period of six months after the close of each fiscal year, submit a detailed report of the operation and the investment performance of the plan to the governor, the legislature and the members of the plan.

6. By November 1 of each year provide a preliminary report and by December 15 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

B. The fund manager, in the administration, management and operation of the plan and fund, may:

1. Employ services as it deems necessary.

2. Either keep invested monies separate or commingle invested monies as it deems appropriate.

3. Delegate authority as it deems necessary and prudent to the administrator employed pursuant to section 38‑848, subsection K, paragraph 6.

4. Do all acts, whether expressly authorized, which that may be deemed necessary or proper for the protection of the fund.

5. Appear on behalf of the plan in a court through counsel or an appointed representative to protect the plan. The attorney general shall obtain the written consent of the fund manager in order to settle a claim on behalf of the fund manager or the plan pursuant to section 41-192. Without this consent, the plan is not bound by any settlement purported to be negotiated on its behalf by the attorney general. END_STATUTE

Sec. 6. Section 38-803.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-803.01. Qualified governmental excess benefit arrangement

A. The fund manager may establish a qualified governmental excess benefit arrangement for the sole purpose of enabling the fund manager to continue to apply the same formula for determining benefits payable to all employees covered by the plan whose benefits under the plan are limited by section 415 of the internal revenue code.

B. The fund manager shall administer the qualified governmental excess benefit arrangement. The fund manager has full discretionary fiduciary authority to determine all questions arising in connection with the arrangement, including its interpretation and any factual questions arising under the arrangement.

C. All members and retired members of the plan are eligible to participate in the qualified governmental excess benefit arrangement if their benefits under the plan would exceed the limitations imposed by section 415 of the internal revenue code.

D. On or after the effective date of the qualified governmental excess benefit arrangement, the employer shall pay to each eligible member of the plan who retires on or after the effective date and to each retired member who retired before the effective date and that member's beneficiary, if required, a supplemental pension benefit equal to the amount by which the benefit that would have been payable under the plan, without regard to any provisions in the plan incorporating the limitation on benefits imposed by section 415 of the internal revenue code, exceeds the benefit actually payable taking into account the limitation imposed on the plan by section 415 of the internal revenue code. The fund manager shall compute and pay the supplemental pension benefits under the same terms and conditions and to the same person as the benefits payable to or on account of a retired member under the plan.

E. The employer shall not fund benefits payable under the qualified governmental excess benefit arrangement. The employer shall pay benefits payable under the qualified governmental excess benefit arrangement out of the general assets of the employer. For administrative purposes, the employer may establish a grantor trust for the benefit of eligible members. The employer shall be treated as grantor of the trust for purposes of section 677 of the internal revenue code. The rights of any person to receive benefits under the qualified governmental excess benefit arrangement are limited to those of a general creditor of the employer.

F. The terms and conditions contained in the plan, other than those relating to the benefit limitation imposed by section 415 of the internal revenue code, apply, unless the terms and conditions are inconsistent with the purpose of the qualified governmental excess benefit arrangement.

G. For the purposes of this section:

1. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

2. "Qualified governmental excess benefit arrangement" means a portion of the plan if:

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the plan unless the trust is maintained solely for the purpose of providing excess benefits.END_STATUTE

Sec. 7. Section 38-804, Arizona Revised Statutes, is amended to read:

START_STATUTE38-804. Membership; termination; reinstatement of credited service

A. All elected officials are members of the plan, except that a state elected official who is subject to term limits may elect not to participate in the plan. The state elected official who is subject to term limits shall make the election in writing and file the election with the fund manager within thirty days after the state elected official assumes office. The election is effective on the first day of the state elected official's eligibility for that term of office. The election not to participate is specific for that term of office. If a state elected official who is subject to term limits fails to make an election as provided in this subsection, the state elected official is deemed to have elected to participate in the plan. The election not to participate in the plan is irrevocable and constitutes a waiver of all benefits provided by the plan for the state elected official's entire term, except for any benefits accrued by the state elected official in the plan for periods of participation prior to being elected to an office subject to term limits or any benefits expressly provided by law. The state elected official who elects not to participate in the plan shall participate in the Arizona state retirement system unless the state elected official makes an irrevocable election not to participate in the Arizona state retirement system as provided in section 38‑727.

B. If a member ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the fund manager, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:

1. If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.

2. If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty‑five per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(b) 6.0 to 6.9 years of credited service, forty per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(c) 7.0 to 7.9 years of credited service, fifty‑five per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(d) 8.0 to 8.9 years of credited service, seventy per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(e) 9.0 to 9.9 years of credited service, eighty‑five per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

(f) 10.0 or more years of credited service, one hundred per cent of all member contributions deducted from the member's salary pursuant to section 38‑810, subsection A.

C. If a member has more than ten years of credited service with the plan, leaves the monies prescribed in subsection B of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection B of this section plus interest at a rate determined by the fund manager for each year computed from and after the member's termination of employment.

D. If the amount prescribed in subsection B or C of this section includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee‑to‑trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the fund manager. A member who receives the amount prescribed in subsection B or C of this section from the plan or who elects a transfer pursuant to this subsection forfeits the member's credited service, and all rights to benefits under the plan and membership in the plan terminate.

E. If an elected official who has terminated the member's membership in the plan pursuant to subsection B of this section is subsequently elected or otherwise becomes eligible for membership in the plan pursuant to subsection A of this section, credited service only accrues from the date of the member's most recent eligibility as an elected official.

F. Notwithstanding subsection E of this section, if an elected official files a written election form with the fund manager within ninety days after the day of the member's reemployment as an elected official and repays the amount previously withdrawn pursuant to subsection B or C of this section within one year after the date of the member's reemployment as an elected official, with interest on that amount at the rate of nine per cent for each year, compounded each year from the date of withdrawal to the date of repayment, credited service shall be restored. Credited service shall not be restored until complete repayment is made to the fund.

G. If a retired member subsequently becomes an elected official, contributions shall not be made by the retired member or the retired member's employer and credited service shall not accrue while the retired member is holding office.

H. In addition to the provisions of subsection G of this section, if a retired member subsequently becomes, by reason of election or reelection, an elected official of the same office from which the member retired within a time period following the member's retirement that is less than one full term for that office, the member shall not receive a pension. If the elected official ceases to hold the same office, the elected official is entitled to receive the same pension the elected official was receiving when the elected official's pension was discontinued pursuant to this subsection. Nothing in this subsection prohibits a retired judge called by the supreme court to active duties of a judge pursuant to section 38‑813 from receiving retirement benefits.

Sec. 8. Section 38-807, Arizona Revised Statutes, is amended to read:

START_STATUTE38-807. Survivor pensions

A. The surviving spouse of a deceased retired member shall be paid a surviving spouse's pension which terminates on the death of the surviving spouse if the retired member was married to the surviving spouse for at least two years. The surviving spouse's pension under this subsection is three‑fourths of the amount the retired member was receiving at the time of the member's death.

B. The surviving spouse of an active or inactive member who dies before retirement shall be paid a pension which terminates on the death of the surviving spouse if the active or inactive member was married to the surviving spouse for at least two years.

C. The surviving spouse's pension under subsection B of this section is three‑fourths of the amount of pension computed according to section 38‑808, subsection B, paragraph 2 under the assumption that the member had retired for reason of disability immediately before death. If the spouse was married to the member for a period of at least two consecutive years at the time of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the retired member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. The amount of pension paid a surviving spouse is equal to three-fourths of the amount of the deceased retired member's pension at the time of death. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.

B. The surviving spouse of a deceased active or inactive member shall be paid a surviving spouse's pension if the spouse was married to the member on the date of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. For the purposes of this subsection, the surviving spouse's pension shall be three-fourths of the amount calculated in the same manner as a disability pension is calculated pursuant to section 38-806. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.

D. c. If the deceased retired or active or inactive member does not have an eligible surviving spouse or the pension of the eligible surviving spouse is terminated, each surviving unmarried child of the deceased retired or active or inactive member shall be paid a eligible child is ENTITLED to receive a child's pension which terminates on adoption or the attainment of age eighteen unless the child is a full‑time student under the age of twenty‑three or the child is under a disability which began before the child attained the age of twenty‑three. A child's pension terminates if the child is adopted. In the case of a disabled child, the child's pension terminates if the child ceases to be under a disability or ceases to be a dependent of the surviving spouse or guardian. The amount of the pension of each surviving minor child of a deceased retired or active or inactive member eligible child is an equal share of the amount of the surviving spouse's pension. The surviving minor or disabled child's pension shall be paid to the person who is the legally appointed guardian or custodian of the eligible child.

E. d. If a member dies and no pension is payable on account of the member's death, the deceased member's accumulated contributions shall be paid to the person or persons designated by the deceased member in writing and filed with the fund manager. If the designated person or persons do not survive the deceased member, the accumulated contributions shall be paid to the estate of the deceased member. END_STATUTE

Sec. 9. Section 38-809, Arizona Revised Statutes, is amended to read:

START_STATUTE38-809. Correction of pension payment errors; assignments prohibited; civil liability; restitution or payment of fine; violation; classification; offset of benefis

A. If the plan has made pension payments based on incorrect information and a person or an estate has been paid more or less than the person or estate would should have been paid if the information had been correct, the fund manager shall adjust future payments so that the proper amount is paid. The adjustment may be made in such a manner that the equivalent actuarial present value of the benefit to which the person or estate is correctly entitled is paid.

B. Notwithstanding any other statute, benefits, member contributions or court fees including interest earnings and all other credits payable under the plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by the person entitled to the benefit, contribution, earning or credit under the terms of the plan, and any attempt to dispose of any right under the terms of the plan as proscribed in this subsection is void. The fund is not liable for or subject to the debts, contracts, liabilities, enlargements or torts of any person entitled to a benefit, contribution, earning or credit under the terms of the plan.

C. Nothing in this section exempts employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

D. A person who defrauds the plan or who takes, converts, steals or embezzles monies owned by or from the plan and who fails or refuses to return the monies to the plan on the fund manager's written request is subject to a civil suit by the plan in the superior court of in Maricopa county. On entry of an order finding the person has defrauded the plan or taken, converted, stolen or embezzled monies owned by or from the plan, the court shall enter an order against that person and for the plan awarding the plan all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the plan a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the plan, plus interest at the rate prescribed by section 44-1201, subsection A, until all amounts owed are paid to the plan.

E. If a member is convicted of, or discharged because of, theft, embezzlement, fraud or misappropriation of an employer's property or property under the control of the employer, the member is subject to restitution and fines imposed by a court of competent jurisdiction. The court may order the restitution or fines to be paid from any payments otherwise payable to the member from the plan.

F. A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the plan with an intent to defraud the plan is guilty of a class 6 felony. If any change or error in the records results in any member or beneficiary receiving from the plan more or less than the member or beneficiary would have been entitled to receive had the records been correct, the plan shall correct the error, and as far as practicable shall adjust the payments in such a manner that the actuarial equivalent of the benefit to which the member or beneficiary was correctly entitled to receive shall be paid. If a member is convicted of a crime pursuant to this subsection, the member is entitled to receive a lump sum payment of the member's accumulated contributions but forfeits any future compensation and benefits that would otherwise accrue to the member or the member's estate under this article.

E. g. Notwithstanding any other provision of this article, the fund manager may offset against any benefits otherwise payable by the plan to an active or retired member or survivor any court ordered amounts awarded to the fund manager and plan and assessed against the member or survivor. END_STATUTE

Sec. 10. Section 38-815, Arizona Revised Statutes, is amended to read:

START_STATUTE38-815. Joinder agreement

A. Elected officials of an incorporated city or town may participate in the plan if the governing body of the city or town enters into a joinder agreement with the fund manager on behalf of its elected officials and the employer unconditionally accepts the provisions of the plan and binds its elected officials thereto. All elected officials shall be designated for membership unless written consent to the contrary is obtained from the fund manager. A member shall be qualified for participation in order to obtain written consent to the contrary from the fund manager.

B. The effective date of participation shall be specifically stipulated in the joinder agreement.

C. Any city or town which that is considering participation in the plan shall request a preliminary actuarial survey to determine the estimated cost of participation, the benefits to be derived and such other information as may be deemed appropriate. The cost of such survey shall be paid by the city or town requesting it.

D. All assets under any existing public employee defined benefit retirement program, to the extent attributable to the city's or town's elected officials, shall be transferred from the program to this fund no later than sixty days after the city's or town's effective date of participation. That portion of the transferred assets which that is attributable to the elected official's contributions, including interest credits thereon, shall be properly allocated to each affected elected official of the city or town and credited to the elected official's accumulated contributions, in accordance with a schedule furnished by the city or town to the fund manager.

E. If a city or town has paid assets into the plan pursuant to a joinder agreement and no longer has elected officials participating in the plan, any surplus monies deposited in the plan revert to the plan.

Sec. 11. Section 38-817, Arizona Revised Statutes, is amended to read:

START_STATUTE38-817. Group health and accident coverage for retired members; payment

A. The fund manager shall pay from the assets of the fund part of the single coverage premium of any group health and accident insurance for each retired member or survivor of the elected officials' retirement plan who receives a pension if the retired member had eight or more years of credited service under the plan. In order to qualify for payment pursuant to this subsection, the retired member or survivor shall elect single coverage and must have elected to participate in the coverage provided in section 38‑651.01 or 38‑782 or any other health and accident insurance coverage provided or administered by a participating employer of the elected officials' retirement plan. The fund manager shall pay up to:

1. One hundred fifty dollars per month, or the actual cost of the monthly insurance premium, whichever is less, for each retired member or survivor of the plan who is not eligible for medicare.

2. One hundred dollars per month, or the actual cost of the monthly insurance premium, whichever is less, for each retired member or survivor of the plan who is eligible for medicare.

B. The fund manager shall pay from the assets of the fund part of the family coverage premium of any group health and accident insurance each month for a benefit recipient retired member or survivor who elects family coverage and who otherwise qualifies for payment pursuant to subsection A of this section. The fund manager shall pay up to:

1. Two hundred sixty dollars per month, or the actual cost of the monthly insurance premium, whichever is less, if the retired member or survivor of the plan and one or more dependents are not eligible for medicare.

2. One hundred seventy dollars per month, or the actual cost of the monthly insurance premium, whichever is less, if the retired member or survivor of the plan and one or more dependents are eligible for medicare.

3. Two hundred fifteen dollars per month, or the actual cost of the monthly insurance premium, whichever is less, if either:

(a) The retired member or survivor of the plan is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the plan is eligible for medicare and one or more dependents are not eligible for medicare.

C. Each retired member or survivor of the plan with less than eight years of credited service and a dependent of such a retired member or survivor who participates in the coverage provided by section 38‑651.01 or 38‑782 or who participates in any other health and accident insurance coverage provided or administered by a participating employer of the plan is entitled to receive a proportion of the full benefit prescribed by subsection A, or B, E, F, G or H of this section according to the following schedule:

1. 7.0 to 7.9 years of credited service, ninety per cent.

2. 6.0 to 6.9 years of credited service, seventy‑five per cent.

3. 5.0 to 5.9 years of credited service, sixty per cent.

4. Those with less than five years of credited service do not qualify for the benefit.

D. The fund manager shall not pay more than the amount prescribed in this section for a benefit recipient as a retired member or survivor of the plan.

E. In addition to the payments provided by subsection A of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area as follows:

1. Up to three hundred dollars per month for a retired member or survivor of the plan who is not eligible for medicare and who has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred twenty‑five dollars per month.

2. Up to one hundred seventy dollars per month for a retired member or survivor of the plan who is eligible for medicare and who has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

F. In addition to the payments provided by subsection B of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to six hundred dollars per month if the retired member or survivor of the plan and one or more dependents are not eligible for medicare and the retired member or survivor of the plan has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred twenty‑five dollars per month.

2. Up to three hundred fifty dollars per month if the retired member or survivor of the plan and one or more dependents are eligible for medicare and the retired member or survivor of the plan has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

3. If the retired member or survivor of the plan has eight or more years of credited service, up to four hundred seventy dollars per month if either:

(a) The retired member or survivor of the plan is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the plan is eligible for medicare and one or more dependents are not eligible for medicare.

To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

G. In addition to the payments provided by subsection A of this section, beginning July 1, 2005 through June 30, 2007, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each medicare eligible retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area of up to one hundred seventy dollars per month for a retired member or survivor of the plan who is eligible for medicare and who has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

H. In addition to the payments provided by subsection B of this section, beginning July 1, 2005 through June 30, 2007, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a medicare eligible retired member or survivor of the plan who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to three hundred fifty dollars per month if the retired member or survivor of the plan and one or more dependents are eligible for medicare and the retired member or survivor of the plan has eight or more years of credited service. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

2. If the retired member or survivor of the plan has eight or more years of credited service, up to four hundred seventy dollars per month if the retired member or survivor of the plan is eligible for medicare and one or more dependents are not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

I. A retired member or survivor of the plan who is enrolled in a managed care program in a nonservice area is not eligible for the payment prescribed in subsection E, F, G or H of this section if the member terminates coverage under the managed care program.

J. E. A retired member or survivor of the plan may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's employer if that employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired member or survivor of the plan.

F. This section does not apply to a retired member or survivor of the plan who is reemployed by this state or a political subdivision of this state and who participates in coverage provided by this state or a political subdivision of this state as a current employee. Those retired members or survivors who are reemployed by this state or a political subdivision of this state and who are currently receiving the subsidy provided by this section on the effective date of this amendment to this section may continue to receive the subsidy as long as the retired member or survivor continues employment with the same state agency or political subdivision. On termination of the employment or on transfer to another state agency or political subdivision, the fund manager shall discontinue the payments provided by this section, until the retired member or survivor again becomes qualified to receive a subsidy pursuant to this section.

K. For the purposes of this section, "nonservice area" means an area in this state in which the Arizona state retirement system pursuant to section 38‑782, the department of administration pursuant to section 38‑651.01 or the member's or survivor's participating employer does not provide or administer a health care services organization program, excluding any preferred provider organization program or individual health indemnity policy, for which the retired member or survivor of the plan is eligible. END_STATUTE

Sec. 12. Section 38-820, Arizona Revised Statutes, is amended to read:

START_STATUTE38-820. Credit for military service; national guard or reserve members; payment of contributions during active military service

A. A member of the plan may receive credited service for periods of active military service performed before employment with the member's current employer if:

1. The member was honorably separated from the military service.

2. The period of military service for which the member receives credited service does not exceed forty‑eight months.

3. The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736.

4. The member pays the cost to purchase the prior active military service. The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the credit using the actuarial methods and assumptions adopted by the plan's actuary.

B. Except as provided in subsection C, the cost to the member to purchase military credited service pursuant to this section is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the credit.

C. For a period of time of active military service but for not more than forty‑eight months, an employer shall make employer contributions and member contributions for a person who was an active member of the plan on the day before the person began active military service, who satisfies the requirement of subsection A, paragraph 3 and who satisfies the following requirements:

B. Except as required by the uniformed services employment and reemployment rights act (38 United States Code section 4312(c)), a member of the plan may receive credited service for not more than sixty months of military service performed while employed by the member's current employer if:

1. The member is a member of the Arizona national guard or is a member of the reserves of any military establishment of the United States.

2. Volunteers or is ordered into active military service of the United States as part of a presidential call‑up.

2. The member was a member of the plan on the day before the member began military service.

3. The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 united states code section 12736.

3. 4. The member is honorably separated from active military service and returns to employment for the same employer from which the person member left for active military service within ninety days after the date active military service is terminated or is hospitalized as a result of military service and returns to employment for the same employer from which the person member left for active military service within ninety days after release from service related hospitalization or dies as a result of the military service.

C. For periods of time of active military service due to a presidential call-up, not to exceed forty-eight months, an employer shall make employer and member contributions pursuant to subsection G.

D. Except as otherwise provided in this section, for periods of time of active military service due to a presidential call-up in excess of forty‑eight months, and for all other periods of military service, an employer shall make employer contributions and the member shall make member contributions. The employer may elect to make both the employer and the member contributions corresponding to periods of military service being purchased pursuant to this section except as prohibited by law.

D. e. Contributions made pursuant to subsection C or D shall be for the period of time beginning on the date the member began active military service and ending on one of the following dates:

1. The date the member is separated from active military service.

2. The date the member is released from service related hospitalization or one year after initiation of service related hospitalization, whichever date is earlier.

3. The date the member dies as a result of active military service.

E. f. Notwithstanding any other law, on payment of the contributions made pursuant to subsection C or d, the member shall be credited with service for retirement purposes for the period of time of active military service of not more than forty‑eight sixty months.

F. g. For periods of active military service due to a presidential call-up, the employer shall make contributions pursuant to subsection C or D based on the salary being received by the member immediately before the member volunteered or was ordered into active military service that the member would have received but for the period of military service in a lump sum and without penalty when the member returns to employment or on receipt of the member's death certificate. If a member suffers a military service related death, the employer shall make the employer and member contributions up to and including the date of the member's death. Death benefits shall be calculated as prescribed by law. For all other periods of military service, the member has up to three times the period of military service, up to a maximum of five years, to make member contributions pursuant to subsection d based on the salary that the member would have received but for the period of military service. Once the member makes the member contributions, the employer shall pay the employer contributions.

G. h. Service credits for active military service shall not be applied to the member's account until such time as complete payment as determined in either subsection B or C this section is made to the retirement plan.

H. i. A member an applicant shall submit a copy of the military discharge certificate (DD‑256A) and a copy of the military service record (DD‑214) or its equivalent with the member's application when applying for credited service for active the military service credit, except that members of the Arizona national guard and military reserves ordered into active military service as part of a presidential call‑up are only required to submit a copy of the military service record (DD‑214) or its equivalent.

I. J. Notwithstanding any other law, the member is not required to reimburse the member's employer or the plan for any employer contribution made pursuant to subsection C or D. END_STATUTE

Sec. 13. Section 38-841, Arizona Revised Statutes, is amended to read:

START_STATUTE38-841. Purpose; vested benefits

A. Prior to the establishment of the public safety personnel retirement system, municipal firemen and policemen, employees of the Arizona highway patrol, and other public safety personnel in the state of Arizona were covered under various local, municipal, and state retirement programs. These heterogeneous programs provided for wide and significant differentials in employee contribution rates, benefit eligibility provisions, types of benefit protection, and benefit formulas.

B. In order to provide a uniform, consistent and equitable statewide program for public safety personnel who are regularly assigned hazardous duty in the employ of the state of Arizona or a political subdivision thereof, this retirement system was created effective as of July 1, 1968, as an amendment to and continuation of three prior systems. Groups of employees covered under the three prior systems as of June 30, 1968, and the assets and liabilities accumulated thereunder for such employees, are transferred with prior service credits to this retirement system as of the effective date, and both they and their employers shall be required to make stipulated contributions to support the system's benefit structure on a sound actuarial basis. Future employees in such groups shall commence participation in, and contributions to, the system immediately upon commencement of covered employment.

C. The provisions of this system shall not be construed to authorize the granting of any retirement benefits to persons who are retired as of the effective date of this article, except as described in sections 38‑849 and 38‑853.

D. Additional eligible groups of public safety personnel will participate in the system pursuant to election by their employer for such coverage under an appropriate joinder agreement.

E. The public safety personnel retirement system is a jural entity that may sue and be sued. END_STATUTE

Sec. 14. Section 38-842, Arizona Revised Statutes, is amended to read:

START_STATUTE38-842. Definitions

In this article, unless the context otherwise requires:

1. "Accidental disability" means a physical or mental condition which that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's job classification and was incurred in the performance of the employee's duty.

2. "Accumulated contributions" means, for each member, the sum of the amount of the member's aggregate contributions made to the fund and the amount, if any, attributable to the employee's contributions prior to the member's effective date under another public retirement system, other than the federal social security act, and transferred to the fund minus the benefits paid to or on behalf of the member.

3. "Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the fund manager. The fund manager may from time to time change the mortality and interest assumptions.

4. "Allowable catastrophic disability pensions" means for calendar year 2004, ten, and for subsequent calendar years the number of allowable catastrophic disability pensions allowed in the prior calendar year minus the number of catastrophic disability pensions approved by the local boards in the prior calendar year plus four.

5. "Annuitant" means a person who is receiving a benefit pursuant to section 38-846.01.

4. 6. "Average monthly benefit compensation" means the result obtained by dividing the total compensation paid to an employee during a considered period by the number of months, including fractional months, in which such compensation was received. The considered period shall be the three consecutive years within the last twenty completed years of credited service which that yield the highest average. In the computation under this paragraph a period of nonpaid or partially paid industrial leave shall be considered based on the compensation the employee would have received in the employee's job classification if the employee was not on industrial leave.

5. 7. "Catastrophic disability" means a physical and not a psychological condition that the local board determines prevents the employee from totally and permanently engaging in any gainful employment and that results from a physical injury incurred in the performance of the employee's duty.

6. 8. "Certified peace officer" means a peace officer certified by the Arizona peace officers standards and training board.

7. 9. "Claimant" means any member or beneficiary who files an application for benefits pursuant to this article.

8. 10. "Compensation" means, for the purpose of computing retirement benefits, base salary, overtime pay, shift differential pay and holiday pay paid to an employee by the employer on a regular monthly, semimonthly or biweekly payroll basis and longevity pay paid to an employee at least every six months for which contributions are made to the system pursuant to section 38‑843, subsection D. Compensation does not include, for the purpose of computing retirement benefits, payment for unused sick leave, payment in lieu of vacation, payment for compensatory time or payment for any fringe benefits. For the purposes of this paragraph, "base salary" means the amount of compensation each employee is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, longevity pay, fringe benefit pay and similar extra payments.

9. 11. "Credited service" means the member's total period of service prior to the member's effective date of participation, plus those compensated periods of the member's service thereafter for which the member made contributions to the fund.

10. 12. "Depository" means a bank in which all monies of the system are deposited and held and from which all expenditures for benefits, expenses and investments are disbursed.

11. 13. "Effective date of participation" means July 1, 1968, except with respect to employers and their covered employees whose contributions to the fund commence thereafter, the effective date of their participation in the system is as specified in the applicable joinder agreement.

12. 14. "Effective date of vesting" means the date a member's rights to benefits vest pursuant to section 38‑844.01.

13. 15. "Eligible child" means the an unmarried child of a deceased member or retired member who meets one of the following qualifications:

(a) Is under the age of eighteen years of age. or

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full‑time student. who is under the age of twenty‑three or

(c) Is under a disability which that began before the child attained the age of twenty‑three years of age and who remains a dependent of the surviving spouse or guardian.

14. 16. "Eligible groups" means only the following who are regularly assigned to hazardous duty:

(a) Municipal police officers who are certified peace officers.

(b) Municipal fire fighters.

(c) Paid full‑time fire fighters employed directly by a fire district organized pursuant to section 48‑803 or 48‑804 with three or more full‑time fire fighters, but not including fire fighters employed by a fire district pursuant to a contract with a corporation.

(d) State highway patrol officers who are certified peace officers.

(e) State fire fighters.

(f) County sheriffs and deputies who are certified peace officers.

(g) Fish and game wardens who are certified peace officers.

(h) Police officers who are certified peace officers and fire fighters of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424. A police officer shall be designated pursuant to section 28‑8426 to aid and supplement state and local law enforcement agencies and a fire fighter's sole duty shall be to perform fire fighting services, including services required by federal regulations.

(i) Police officers who are certified peace officers and who are appointed by the Arizona board of regents.

(j) Police officers who are certified peace officers and who are appointed by a community college district governing board.

(k) State attorney general investigators who are certified peace officers.

(l) County attorney investigators who are certified peace officers.

(m) Police officers who are certified peace officers and who are employed by an Indian reservation police agency.

(n) Fire fighters who are employed by an Indian reservation fire fighting agency.

(o) Police officers who are certified peace officers and who are appointed by the department of administration.

(p) Department of liquor licenses and control investigators who are certified peace officers.

(q) Arizona department of agriculture officers who are certified peace officers.

(r) Arizona state parks board rangers and managers who are certified peace officers.

(s) County park rangers who are certified peace officers.

15. 17. "Employee" means any person who is employed by a participating employer and who is a member of an eligible group but does not include any persons compensated on a contractual or fee basis. If an eligible group requires certified peace officer status and at the option of the local board, employee may include a person who is training to become a certified peace officer.

16. 18. "Employers" means:

(a) Cities contributing to the fire fighters' relief and pension fund as provided in sections 9‑951 through 9‑971 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their full‑time paid fire fighters.

(b) Cities contributing under the state police pension laws as provided in sections 9‑911 through 9‑934 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their municipal policemen.

(d) The state, or any political subdivision thereof, including but not limited to towns, cities, fire districts, counties and nonprofit corporations operating public airports pursuant to sections 28‑8423 and 28‑8424, which has elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.

(e) Indian tribes which that have elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.

17. 19. "Fund" means the public safety personnel retirement fund, which is the fund established to receive and invest contributions accumulated under the system and from which benefits are paid.

18. 20. "Fund manager" means the fund manager of the system, who are the persons appointed to invest and operate the fund.

21. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

22. "Killed in the line of duty" means the decedent's death was the direct and proximate result of the performance of the decedent's public safety duties and does not include suicide.

19. 23. "Local board" means the retirement board of the employer, who are the persons appointed to administer the system as it applies to their members in the system.

20. 24. "Member" means any employee who meets all of the following qualifications:

(a) Who is either a full‑time paid municipal police officer, a full‑time paid fire fighter, a law enforcement officer who is employed by the state including the director thereof, a state fire fighter who is primarily assigned to fire fighting duties, a fire fighter or police officer of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, all ranks designated by the Arizona law enforcement merit system council, a state attorney general investigator who is a certified peace officer, a county attorney investigator who is a certified peace officer, a police officer who is appointed by the department of administration and who is a certified peace officer, a department of liquor licenses and control investigator who is a certified peace officer, an Arizona department of agriculture officer who is a certified peace officer, an Arizona state parks board ranger or manager who is a certified peace officer, a county park ranger who is a certified peace officer, a person who is a certified peace officer and who is employed by an Indian reservation police agency, a fire fighter who is employed by an Indian reservation fire fighting agency or an employee included in a group designated as eligible employees under a joinder agreement entered into by their employer after July 1, 1968 and who is or was regularly assigned to hazardous duty.

(b) Who, on or after the employee's effective date of participation, is receiving compensation for personal services rendered to an employer or would be receiving compensation except for an authorized leave of absence.

(d) Whose customary employment is at least forty hours per week and for more than six months in a calendar year.

(e) Who has not attained age sixty‑five prior to the employee's effective date of participation or who was over age sixty‑five with twenty‑five years or more of service prior to the employee's effective date of participation.

25. "Net assets of the fund" means net assets of the fund as described in section 38-856.

21. 26. "Normal retirement date" means the first day of the calendar month immediately following an employee's completion of twenty years of service or the employee's sixty‑second birthday and the employee's completion of fifteen years of service.

22. 27. "Ordinary disability" means a physical condition which that the local board determines will prevent an employee totally and permanently from performing a reasonable range of duties within the employee's department or a mental condition which that the local board determines will prevent an employee totally and permanently from engaging in any substantial gainful activity.

23. 28. "Pension" means a series of monthly amounts which that are payable to a person who is entitled to receive benefits under the plan, but does not include an annuity that is payable pursuant to section 38-846.01.

29. "Qualified governmental excess benefit arrangement" means a portion of the system if:

(a) The portion is maintained solely to provide to members of the system that part of a member's annual benefit that is otherwise payable under the terms of the system and that exceeds the limitations imposed by section 415 of the internal revenue code.

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the system unless the trust is maintained solely for the purpose of providing excess benefits.

24. 30. "Regularly assigned to hazardous duty" means regularly assigned to duties of the type normally expected of municipal police officers, municipal or state fire fighters, eligible fire district fire fighters, state highway patrol officers, county sheriffs and deputies, fish and game wardens, fire fighters and police officers of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, police officers who are appointed by the Arizona board of regents or a community college district governing board, state attorney general investigators who are certified peace officers, county attorney investigators who are certified peace officers, police officers who are appointed by the department of administration and who are certified peace officers, department of liquor licenses and control investigators who are certified peace officers, Arizona department of agriculture officers who are certified peace officers, Arizona state parks board rangers and managers who are certified peace officers, county park rangers who are certified peace officers, police officers who are certified peace officers and are employed by an Indian reservation police agency or fire fighters who are employed by an Indian reservation fire fighting agency. Those individuals who are assigned solely to support duties such as secretaries, stenographers, clerical personnel, clerks, cooks, maintenance personnel, mechanics and dispatchers are not assigned to hazardous duty regardless of their position classification title. Since the normal duties of municipal police officers, municipal or state fire fighters, eligible fire district fire fighters, state highway patrol officers, county sheriffs and deputies, fish and game wardens, fire fighters and police officers of a nonprofit corporation operating a public airport pursuant to sections 28‑8423 and 28‑8424, police officers who are appointed by the Arizona board of regents or a community college district governing board, state attorney general investigators who are certified peace officers, county attorney investigators who are certified peace officers, police officers who are appointed by the department of administration and who are certified peace officers, department of liquor licenses and control investigators who are certified peace officers, Arizona department of agriculture officers who are certified peace officers, Arizona state parks board rangers and managers who are certified peace officers, county park rangers who are certified peace officers, police officers who are certified peace officers and are employed by an Indian reservation police agency and fire fighters who are employed by an Indian reservation fire fighting agency are constantly changing, questions as to whether a person is or was previously regularly assigned to hazardous duty shall be resolved by the local board on a case‑by‑case basis. Resolutions by local boards are subject to rehearing and appeal.

25. 31. "Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension. Retirement shall be considered as commencing on the first day of the month immediately following a member's last day of employment or authorized leave of absence, if later.

32. "Same position" means the member is in a position in which the member performs duties that are the same duties that were performed, and exercises authority that is the same authority that was exercised, by the member before the member's retirement.

26. 33. "Service" means the last period of continuous employment of an employee by the employers prior to the employee's retirement or the employee's sixty‑fifth birthday, whichever first occurs, except that if such period includes employment during which the employee would not have qualified as a member had the system then been effective, such as employment as a volunteer fire fighter, then only twenty‑five per cent of such noncovered employment shall be considered as service. Any absence which that is authorized by an employer shall not be considered as interrupting continuity of employment if the employee returns within the period of authorized absence. Transfers between employers also shall not be considered as interrupting continuity of employment. Any period during which a member is receiving sick leave payments or a temporary disability pension shall be considered as service. Any period during which a person was employed as a full‑time paid fire fighter by a fire district pursuant to a contract with a corporation within that fire district shall be considered as service if it is part of the person's last period of continuous employment with that corporation in that fire district and the fire district has elected to treat the period as service in its applicable joinder agreement. Any reference in this system to the number of years of service of an employee shall be deemed to include fractional portions of a year.

27. 34. "State" means the state of Arizona, including any department, office, board, commission, agency or other instrumentality of the state.

28. 35. "System" means the public safety personnel retirement system established by this article.

29. 36. "Temporary disability" means a physical or mental condition which that the local board finds totally and temporarily prevents an employee from performing a reasonable range of duties within the employee's department and which that was incurred in the performance of the employee's duty. END_STATUTE

Sec. 15. Section 38-844, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844. Requirements for retirement benefits and disability pensions

A. A member shall be is eligible for a normal pension upon on retirement on or after the member's normal retirement date. Payment of a normal pension shall commence as of the first day of the month following the date of retirement, and the last payment shall be made as of the last day of the month in which the death of the retired member occurs.

B. A member is eligible for an accidental disability pension if the member's employment is terminated by reason of accidental disability.

c. A member is eligible for an ordinary disability pension if the member's employment is terminated before the member's normal retirement date by reason of ordinary disability. A member shall file an application for a disability pension after the disabling incident or within one year after the date the member ceases to be an employee. Timely application for an accidental, catastrophic or ordinary disability pension is a prerequisite to receipt of the pension. Payment of an accidental, catastrophic or ordinary disability pension shall commence as of the first day of the month following the date of retirement or the expiration of a period during which the member is receiving sick leave payments or a temporary disability pension, whichever is later. The last payment shall be made as of the last day of the month in which the death of the retired member occurs, or if disability ceases prior to the member's normal retirement date, the first day of the month in which disability ceases.

C. d. A member is eligible for a catastrophic disability pension if the member's employment is terminated by reason of catastrophic disability. If more than the allowable catastrophic disability pensions are approved by the local boards in a calendar year, from and after December 31 of the following calendar year a member of the system is not eligible to apply for a catastrophic disability pension. On or before January 31, the fund manager shall report to the president of the senate and the speaker of the house of representatives the number of catastrophic disability pensions that were approved by the local boards in the preceding calendar year. For the purposes of this subsection, "allowable catastrophic disability pensions" means for calendar year 2004, ten, and for subsequent calendar years the number of allowable catastrophic disability pensions allowed in the prior calendar year minus the number of catastrophic disability pensions approved by the local boards in the prior calendar year plus four.

E. A member shall file an application for an accidental, catastrophic or ordinary disability pension after the disabling incident or within one year after the date the member ceases to be an employee. Timely application for an accidental, catastrophic or ordinary disability pension is a prerequisite to receipt of the pension. Payment of an accidental, catastrophic or ordinary disability pension commences as of the first day of the month following the date of retirement or the expiration of a period during which the member is receiving sick leave payments or a temporary disability pension, whichever is later. The last payment shall be made as of the last day of the month in which the death of the retired member occurs, or if disability ceases before the member's normal retirement date, the first day of the month in which the disability ceases. For the purposes of this section and sections 38-844.02 through 38-844.10, a member who is receiving a disability pension is deemed to have terminated employment by reason of the disability.

D. f. Notwithstanding any other provision of this section, no member shall qualify for an accidental, catastrophic or ordinary disability pension if the local board determines that the member's disability results from the following:

1. An injury suffered while engaged in a felonious criminal act or enterprise.

2. Service in the armed forces of the United States which that entitles the member to a veteran's disability pension.

3. A physical or mental condition or injury that existed or occurred prior to the member's date of membership in the system.

E. g. Accidental or ordinary disability shall be considered to have ceased and an accidental or ordinary disability pension terminates if the member:

1. Has sufficiently recovered, in the opinion of the local board, based on a medical examination by a physician or clinic appointed by the local board, to be able to engage in a reasonable range of duties within the member's department and the member refuses an offer of employment by an employer in the system.

2. Refuses to undergo any medical examination requested by the board, provided that a medical examination shall not be required more frequently than once in any calendar year.

F. h. Sixty months after the award of a catastrophic disability pension, the local board shall reevaluate the member to determine whether the member is still catastrophically disabled. If the member still qualifies for the catastrophic disability pension, the member is entitled to continue to receive the pension at the reduced amount prescribed in section 38‑845, subsection E. A catastrophic disability shall be considered to have ceased and a catastrophic disability pension terminates if the local board determines that the member has sufficiently recovered and is able to engage in gainful employment based on a medical examination by a physician or a clinic appointed by the local board. After the sixty month review, the catastrophic disability shall be considered to have ceased and a catastrophic disability pension terminates if the local board determines that the member has sufficiently recovered and is able to engage in gainful employment based on a medical examination by a physician or a clinic appointed by the local board, except that the medical examination shall not be required more frequently than once in a calendar year. The medical review after the sixty month period does not apply after the date the catastrophic disability pensioner would have attained twenty‑five years of service assuming the pensioner remained a member of the system. The local board shall also terminate a catastrophic disability pension if the member refuses to undergo any medical examination requested by the board. A member whose catastrophic disability pension is terminated may apply for and if eligible is entitled to receive an accidental disability pension as provided in this section.

G. i. Subsection E g of this section does not apply after a disability pensioner's normal retirement date. The amount of a disability pension shall not be recomputed at a disability pensioner's normal retirement date.

H. j. An ordinary disability pension shall be reduced in the period prior to the member's normal retirement date if the member engages in any employment and if the member's income from this employment is greater than the member's pension unreduced by this subsection. The amount of the reduction shall be equal to the difference between the member's income from employment and the member's unreduced pension. The local board shall have the right to suspend payments of an ordinary disability pension if the disabled member fails to report earned income. Such suspension shall be for the period there is no satisfactory report with restoration of benefits upon on the local board's acceptance of such report or until the member's normal retirement date, whichever occurs earlier. If, in the opinion of the local board, the reduction provided in this subsection is insufficient to recover monies previously paid to a member, each local board, in its sole discretion, may bring an action to recover any outstanding balance due, notwithstanding any other rights the local board possesses.

I. k. If accidental or ordinary disability ceases before a retired member attains the member's normal retirement date and the member is reemployed by an employer, the pension payable upon the member's subsequent retirement shall be determined as provided in section 38‑849, subsection D.

J. l. A member shall be eligible for a temporary disability pension if the member's employment is terminated prior to the member's normal retirement date by reason of temporary disability. Payment of a temporary disability pension shall commence as of the first day of the month following the date of disability or the expiration of a period during which the member is receiving any compensation and sick leave payments, whichever is later. The last payment shall be made as of the first day of the month in which either the death of the member occurs or the local board deems the member is no longer under temporary disability, whichever first occurs, provided that no more than twelve monthly temporary disability payments shall be made in total to the member.

K. m. If upon the expiration of a temporary disability pension the local board finds upon application that the member has an accidental or ordinary disability, the member shall be eligible for an accidental or ordinary disability pension, as provided in this section. END_STATUTE

Sec. 16. Section 38-844.03, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.03. Eligibility; participation

A. Any member who is eligible for a normal pension pursuant to section 38‑844, subsection A, and who has at least twenty years of credited service, who has not elected to participate in the reverse deferred retirement option plan pursuant to section 38-844.10 or who is not awarded an ordinary, catastrophic or accidental disability pension is eligible to participate in the deferred retirement option plan. In addition, any member who is subject to section 38‑858, subsection C b is eligible to participate in the deferred retirement option plan retroactive to the member's twentieth year of credited service or on the day before the member began active military service, whichever is later, if the member makes the election pursuant to this section on or before resuming employment with the member's employer.

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

1. Designate a period of participation that is not more than sixty consecutive months.

2. Beginning on the date the member elects to participate in the deferred retirement option plan, cease to accrue benefits under any other provision of this article. The member's effective date of participation is the first day of the month following the date the member elects to participate.

3. Have deferred retirement option plan benefits credited to a deferred retirement option plan participation account pursuant to section 38‑844.05.

4. Receive benefits from the system on termination of employment at the same time and in the same manner as otherwise prescribed in this article.

5. Agree to terminate employment on completion of the deferred retirement option plan participation period designated by the member on the appropriate deferred retirement option plan participation form.

C. If a member fails to terminate employment on completion of the designated deferred retirement option plan participation period:

1. The member is not entitled to the interest accumulation on the deferred retirement option plan participation account.

2. The deferred retirement option plan participation account shall not be credited with the monthly amount prescribed in section 38‑844.05, subsection C, paragraph 1 and that amount shall not be paid directly to the member.

3. The payment prescribed in section 38‑844.08, subsection A, paragraph 1 shall not be paid until the member terminates employment and is payable at the same time as the pension amount is paid on retirement.

4. The member does not acquire any further credited service in the system. END_STATUTE

Sec. 17. Section 38-844.10, Arizona Revised Statutes, is amended to read:

START_STATUTE38-844.10. Reverse deferred retirement option plan

A. 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. 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. 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, who is not awarded an accidental, catastrophic or ordinary disability and who has at least twenty years of credited service is eligible to participate in the reverse deferred retirement option plan.

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

G. 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.

H. 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. 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. 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. 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. 18. Section 38-846, Arizona Revised Statutes, is amended to read:

START_STATUTE38-846. Death benefits

A. If the spouse of a member or retired member is surviving at such member's death, the spouse shall be eligible for a surviving spouse's pension, provided that such spouse had been married to the decedent either for a period of at least two years prior to such member's date of death or during such member's service. The surviving spouse of a deceased retired member shall be paid a surviving spouse's pension if the spouse was married to the member for a period of at least two consecutive years at the time of the member's death. Payment of a surviving spouse's pension shall commence as of the last day of the month following the member's or retired member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs.

B. The surviving spouse of a deceased member shall be paid a surviving spouse's pension if the spouse was married to the member on the date of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs.

c. The surviving spouse of a deceased retired member shall is entitled to receive a monthly amount equal to four‑fifths of the monthly amount of pension which that the decedent would have received immediately before death. The surviving spouse of a deceased member who was not killed in the line of duty or did not die from injuries suffered in the line of duty shall receive a monthly amount computed as for the surviving spouse of a deceased retired member, under the assumption that the member had retired for reason of accidental disability immediately before death. The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member's average monthly benefit compensation less any amount payable for an eligible child under this section. A member who was eligible for or receiving a temporary disability pension at the time of the member's death is not deemed to be retired for the purposes of this subsection. For the purposes of this subsection, "killed in the line of duty" means the decedent's death was the direct and proximate result of the performance of the decedent's public safety duties and does not include suicide.

D. The surviving spouse of a deceased member who was not killed in the line of duty or did not die from injuries suffered in the line of duty is entitled to receive a monthly amount calculated in the same manner as an accidental disability pension is calculated pursuant to section 38-845, subsection B. The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member's average monthly benefit compensation less any amount payable for an eligible child under this section. A member who was eligible for or receiving a temporary disability pension at the time of the member's death is not deemed to be retired for the purposes of this subsection.

E. A surviving spouse shall file a written application with the system in order to receive a survivor benefit.

C. F. If at least one eligible child is surviving at the death of a member or retired member, but no surviving spouse's pension then becomes payable, a guardian's or conservator's pension shall be payable to the person who is serving, or who is deemed by the local board to be serving, as the legally appointed guardian or custodian of the eligible child. If an eligible child of a member or retired member is surviving at the member's or retired member's death, the eligible child is entitled to receive a child's pension payable to the person who is serving or who is deemed by the local board to be serving as the legally appointed guardian or custodian of the eligible child. A child's pension or a guardian's or conservator's pension terminates if the child is adopted. In the case of a disabled child, the child's pension or the guardian's or conservator's pension terminates if the child ceases to be under a disability or ceases to be a dependent of the surviving spouse or guardian. The member may also direct by designation to the local board that the guardian or conservator pension or child's pension be paid to the trustee of a trust created for the benefit of the eligible child. A guardian's or conservator's pension shall also become payable if at least one eligible child is surviving when a surviving spouse's pension terminates. The guardian or conservator shall file a written application with the system in order to receive the guardian's or conservator's pension and child's pension.

D. G. The fund manager shall pay a guardian's or conservator's pension during the same period in which a pension is payable to at least one eligible child. The guardian, conservator or designated trustee is entitled to receive the same monthly amount as would have been payable to the decedent's surviving spouse had a surviving spouse's pension become payable upon the decedent's death.

E. H. Each eligible child is entitled to a monthly amount equal to one‑tenth of the monthly amount of pension which that the deceased member or retired member would have received immediately prior to death. The pension for a child of a deceased member shall be calculated in the same manner as an accidental disability is calculated pursuant to section 38-845, subsection B. A deceased member shall be assumed to be retired for reasons of accidental disability immediately before the member's death. If there are three or more children eligible for a child's pension, a maximum of two shares of the child's pension shall be payable, the aggregate of such shares to be apportioned in equal measure to each eligible child.

F. I. If a member has accumulated contributions remaining in the system at the date of death of the last beneficiary, a lump sum refund of such accumulated contributions shall be payable to the person whom the member has designated as the member's refund beneficiary, or if the member's refund beneficiary is not then surviving, to the designated contingent refund beneficiary, or if the designated contingent refund beneficiary is not then surviving, to such person nearest of kin as selected by the local board. The amount of the lump sum refund shall be the remaining accumulated contributions. The beneficiary or person who is selected as nearest of kin shall file a written application in order to receive the refund.

G. J. In calculating the right to and the amount of the surviving spouse's pension, the law in effect on the date of the death of the member or retired member controls, unless the law under which the member retired provides for a greater benefit amount for a surviving spouse. END_STATUTE

Sec. 19. Section 38-846.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-846.01. Deferred annuity

If any member who has at least ten years of credited service terminates his employment for reasons other than retirement or disability, he the person may elect to receive a deferred retirement allowance annuity, except that if the member person withdraws all or part of his the person's accumulated contributions from the system, all his rights in and to a deferred retirement allowance shall be annuity are forfeited by him and he ceases to be a member. A deferred retirement allowance shall be annuity is a life‑time lifetime monthly pension payment that is actuarially equivalent to the member's annuitant's accumulated contributions in the system plus an equal amount paid by the employer and shall commence on application on or after the sixty‑second birthday of the member annuitant. The deferred annuity is not a retirement benefit and annuitants are not entitled to receive any amount provided by section 38-845, subsection F or section 38-846, 38-856 or 38-857. END_STATUTE

Sec. 20. Section 38-847, Arizona Revised Statutes, is amended to read:

START_STATUTE38-847. Local boards

A. The administration of the system and responsibility for making the provisions of the system effective for each employer are vested in a local board. The department of public safety, the Arizona game and fish department, the department of emergency and military affairs, the university of Arizona, Arizona state university, northern Arizona university, each county sheriff's office, each county attorney's office, each county parks department, each municipal fire department, each eligible fire district, each community college district, each municipal police department, the department of law, the department of administration, the department of liquor licenses and control, the Arizona department of agriculture, the Arizona state parks board, each Indian reservation police agency and each Indian reservation fire fighting agency shall have a local board. A nonprofit corporation operating pursuant to sections 28‑8423 and 28‑8424 shall have one board for all of its members. Each local board shall be constituted as follows:

1. For political subdivisions or Indian tribes, the mayor or chief elected official or a designee of the mayor or chief elected official approved by the respective governing body as chairman, two members elected by secret ballot by members employed by the appropriate employer and two citizens, one of whom shall be the head of the merit system if it exists for the group of members, appointed by the mayor or chief elected official and with the approval of the governing body of the city or the governing body of the employer. The appointed two citizens shall serve on both local boards in a city or Indian tribes where both fire and police department employees are members.

2. For state agencies and nonprofit corporations operating pursuant to sections 28‑8423 and 28‑8424, two members elected by secret ballot by members employed by the appropriate employer and three citizens appointed by the governor. Each state agency local board shall elect a chairman.

3. For fire districts organized pursuant to section 48‑804, the secretary‑treasurer as chairman, two members elected by secret ballot by members employed by the fire district and two citizens appointed by the secretary‑treasurer, one of whom is a resident of the fire district and one of whom has experience in personnel administration but who is not required to be a resident of the fire district.

B. Upon the taking effect of this system for an employer, the appointments and elections of board members shall take place with one elective and appointive board member serving a term ending two years after the effective date of participation for the employer and other local board members serving a term ending four years after the effective date. Thereafter, every second year, and as a vacancy occurs, an office shall be filled for a term of four years in the same manner as previously provided.

C. Each member of a local board shall, within ten days after the member's appointment or election, shall take an oath of office that, so far as it devolves upon the member, the member shall diligently and honestly administer the affairs of the local board and that the member shall not knowingly violate or willingly permit to be violated any of the provisions of law applicable to the system.

D. Except as limited by subsection E of this section, a local board shall have such powers as may be necessary to discharge the following duties:

1. To decide all questions of eligibility and service credits, and determine the amount, manner and time of payment of any benefits under the system.

2. To prescribe procedures to be followed by claimants in filing applications for benefits.

3. To make a determination as to the right of any claimant to a benefit and to afford any claimant or the fund manager, or both, a right to a rehearing on the original determination.

4. To request and receive from the employers and from members such information as is necessary for the proper administration of the system and action on claims for benefits and to forward such information to the fund manager.

5. To distribute, in such manner as the local board determines to be appropriate, information explaining the system received from the fund manager.

6. To furnish the employer, the fund manager, and the legislature, upon request, with such annual reports with respect to the administration of the system as are reasonable and appropriate.

7. To receive and review the actuarial valuation of the system for its group of members.

8. To receive and review reports of the financial condition and of the receipts and disbursements of the fund from the fund manager.

9. To appoint medical boards as provided in section 38‑859.

10. To sue and be sued to effectuate the duties and responsibilities set forth in this article.

E. A local board shall have no power to add to, subtract from, modify or waive any of the terms of the system, change or add to any benefits provided by the system or waive or fail to apply any requirement of eligibility for membership or benefits under the system.

F. A local board shall, from time to time, establish and adopt such rules as it deems necessary or desirable for its administration, including rules to govern the conduct of hearings and the award of retirement and disability benefits. All rules and decisions of a local board shall be uniformly and consistently applied to all members in similar circumstances.

G. Any action by a majority vote of the members of a local board which that is not inconsistent with the provisions of the system shall be final, conclusive and binding upon all persons affected by it unless a timely application for a rehearing or appeal is filed as provided in this article.

H. A claimant or the fund manager may apply for a rehearing before the local board within the time period prescribed in this subsection. An application for a rehearing shall be filed in writing with a member of the local board or its secretary within sixty days after:

1. The applicant‑claimant receives notification of the local board's original action by certified mail, by attending the meeting at which the action is taken or by receiving benefits from the system pursuant to the local board's original action, whichever occurs first.

2. The applicant‑fund manager receives notification of the local board's original action by certified mail or by receipt of written directions from the local board pursuant to its original action, whichever occurs first.

I. A hearing before a local board on a matter remanded from the superior court is not subject to a rehearing before the local board.

J. Decisions of local boards are subject to judicial review pursuant to title 12, chapter 7, article 6.

K. When making a ruling, determination or calculation, the local board shall be entitled to rely upon information furnished by the employer, the fund manager, independent legal counsel, or the actuary for the system.

L. Each member of a local board is entitled to one vote. A majority of the appointed and elected members is necessary for a decision by the members of a local board at any meeting of the local board.

M. The local board shall adopt such bylaws as it deems desirable. The local board shall elect a secretary who may, but need not, be a member of the local board. The secretary of the local board shall keep a record and prepare minutes of all meetings, forward the minutes to the fund manager within forty‑five days after each meeting and forward all necessary communications to the fund manager.

N. The employer shall pay the fees of the medical board and of local legal counsel and all other expenses of the local board necessary for the administration of the system, shall be paid by the employer including any legal fees incurred in connection with appeals of the local board's decisions, at such rates and in such amounts as the local board shall approve.

O. The local board shall issue directions to the fund manager concerning all benefits which that are to be paid from the employer's account pursuant to the provisions of the fund. The local board shall keep on file, in such manner as it may deem convenient or proper, all reports from the fund manager and the actuary.

P. The local board and the individual members of the local board shall be indemnified from the assets of the employer's account in the fund against any and all liabilities arising by reason of any act, or failure to act, made in good faith pursuant to the provisions of the system, including expenses reasonably incurred in the defense of any claim relating to the act or failure to act.END_STATUTE

Sec. 21. Section 38-848, Arizona Revised Statutes, is amended to read:

START_STATUTE38-848. Fund manager

A. The fund manager shall consist of five members and shall have the rights, powers and duties that are set forth in this section. The term of office of members shall be three years to expire on the third Monday in January of the appropriate year. Members are eligible to receive compensation in an amount of fifty dollars a day, but not to exceed one thousand dollars in any one fiscal year, and are eligible for reimbursement of expenses pursuant to chapter 4, article 2 of this title. The fund manager consists of the following members appointed by the governor pursuant to section 38‑211:

1. One elected member from a local board to represent the employees.

2. One member to represent this state as an employer of public safety personnel. This member shall have the qualifications prescribed in subsection R of this section.

3. One member to represent the cities as employers of public safety personnel.

4. An elected county or state official or a judge of the superior court, court of appeals or supreme court.

5. One public member. This member shall have the qualifications prescribed in subsection R of this section.

B. All monies in the fund shall be deposited and held in a public safety personnel retirement system depository. Monies in the fund shall be disbursed from the depository separate and apart from all monies or funds of the state and the agencies, instrumentalities and subdivisions thereof. The monies shall be secured by the depository in which they are deposited and held to the same extent and in the same manner as required by the general depository law of the state. The fund is subject to the sole management of the fund manager for the purpose of this article, except that the fund manager may delegate management of the fund to one or more qualified outside investment managers if such a delegation appears to be appropriate and prudent. If such a delegation occurs, the fund manager shall exercise supervision over the outside investment manager's conduct and performance. An outside investment manager is qualified if the manager has the following minimum experience:

1. For all managers, other than those designated to manage or develop real estate or improvements on real estate, venture capital or private equity, a minimum of three years' experience at handling institutional investments of at least two hundred fifty million dollars.

2. For all managers designated to manage or develop real estate or improvements on real estate, venture capital or private equity, demonstration, to the fund manager's satisfaction, that the managers have sufficient judgment, experience, competency and capability to achieve superior returns on the assets placed under their management.

C. All contributions under this system shall be forwarded to the fund manager and shall be held, invested and reinvested by the fund manager or outside investment managers. All property and funds of the fund, including income from investments and from all other sources, shall be retained for the exclusive benefit of members, as provided in the system, and shall be used to pay benefits to members or their beneficiaries or to pay expenses of operation and administration of the system and fund.

D. The fund manager shall have the full power in its sole discretion to invest and reinvest, alter and change the monies accumulated under the system. In addition to its power to delegate investment authority to qualified outside investment managers, the fund manager may delegate the authority the fund manager deems necessary and prudent to the administrator, employed by the fund manager pursuant to subsection K, paragraph 6 of this section, and any assistant administrators to invest the monies of the system if the administrator and any assistant administrators follow the investment policies that are promulgated by the fund manager. The fund manager may commingle securities and monies of the fund subject to the crediting of receipts and earnings and charging of payments to the account of the appropriate employer. In making every investment, the fund manager and its authorized investment managers shall exercise the judgment and care under the circumstances then prevailing which that persons of ordinary prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income from their funds as well as the probable safety of their capital, provided:

1. That not more than seventy per cent of the pension fund shall be invested at any given time in corporate stocks, based on cost value of such stocks irrespective of capital appreciation.

2. 1. That no more than five per cent of the pension fund shall be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of and fully guaranteed by the United States government.

3. 2. That not more than five per cent of the voting stock of any one PUBLICLY traded corporation shall be owned.

4. 3. That corporate stocks and exchange traded funds eligible for purchase shall be restricted to stocks and exchange traded funds that, except for bank stocks, insurance stocks and membership interests in limited liability companies, are either:

(a) Listed or approved on issuance for listing on an exchange registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78ll).

(b) Designated or approved on notice of issuance for designation on the national market system of a national securities association registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78ll).

(c) Listed or approved on issuance for listing on an exchange registered under the laws of this state or any other state.

(d) Listed or approved on issuance for listing on an exchange of a foreign country with which the United States is maintaining diplomatic relations at the time of purchase, except that no more than ten thirty per cent of the pension fund shall be invested in foreign equity securities on these exchanges, based on the cost value of the stocks irrespective of capital appreciation.

(e) An exchange traded fund that is recommended by the chief investment officer of the system, that is registered under the investment company act of 1940 (15 United States Code section 80a-1 through 80a-64) and that is both traded on a public exchange and based on a publicly recognized index.

E. Notwithstanding any other law, the fund manager and its authorized investment managers shall not be required to invest in any type of investment that is dictated or required by any entity of the federal government and that is intended to fund economic development projects, public works or social programs, but may consider such economically targeted investments pursuant to its their fiduciary responsibility. The fund manager and its authorized investment managers, on behalf of the system, may invest in, lend monies to or guarantee the repayment of monies by a limited liability company, limited partnership, joint venture, partnership, limited liability partnership or trust in which the system has a financial interest, whether the entity is closely held or publicly traded and that, in turn, may be engaged in any lawful activity, including the ownership, development, management, improvement or operation of real property and any improvements or businesses on real property or the lending of monies.

F. Conference call meetings of the fund manager of the public safety personnel retirement system which that are held for investment purposes only are not subject to chapter 3, article 3.1 of this title, except that the fund manager shall maintain minutes of these conference call meetings and make them available for public inspection within twenty‑four hours after the meeting. The fund manager shall review the minutes of each conference call meeting and shall ratify all legal actions taken during each conference call meeting at the next scheduled meeting of the fund manager.

G. The fund manager shall not be held liable for the exercise of more than ordinary care and prudence in the selection of investments and performance of its duties under the system and shall not be limited to so‑called "legal investments for trustees", but all funds of the system shall be invested subject to all of the conditions, limitations and restrictions imposed by law.

H. Except as provided in subsection D of this section, the fund manager may:

1. Invest and reinvest the principal and income of the pension fund without distinction between principal and income.

2. Sell, exchange, convey, transfer or otherwise dispose of any investments of the fund held in the name of the system by private contract or at public auction.

3. Also:

(a) Vote upon any stocks, bonds or other securities.

(b) Give general or special proxies or powers of attorney with or without power of substitution.

(c) Exercise any conversion privileges, subscription rights or other options and make any payments incidental to the exercise of the conversion privileges, subscription rights or other options.

(d) Consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities, delegate discretionary powers and pay any assessments or charges in connection therewith.

(e) Generally exercise any of the powers of an owner with respect to stocks, bonds, securities or other investments held in the fund.

4. Make, execute, acknowledge and deliver any other instruments that may be necessary or appropriate to carry out the powers granted in this section.

5. Register any investment held in the fund in the name of the fund or in the name of a nominee.

6. At the expense of the system, enter into an agreement with any bank or banks for the safekeeping and handling of securities and other investments coming into the possession of the fund manager. The agreement shall be entered into under terms and conditions that secure the proper safeguarding, inventory, withdrawal and handling of the securities and other investments. No access to and no deposit or withdrawal of the securities from any place of deposit selected by the fund manager shall be permitted or made except as the terms of the agreement may provide.

7. Appear before local boards and the courts of this state and political subdivisions of this state through counsel or appointed representative to protect the fund. The fund manager is not responsible for the actions or omissions of the local boards under this system but may seek review or rehearing of actions or omissions of local boards. The fund manager does not have a duty to review actions of the local boards but may do so in its discretion in order to protect the fund.

8. Empower the fund administrator to take actions on behalf of the fund manager that are necessary for the protection and administration of the fund in accordance with the guidelines of the fund manager.

9. To protect the fund from internal theft and notwithstanding any other law, conduct background checks on current and prospective employees of the system and obtain social security numbers for this purpose.

9. 10. Do all acts, whether or not expressly authorized that may be deemed necessary or proper for the protection of the investments held in the fund.

I. Investment expenses and operation and administrative expenses of the fund manager shall be accounted for separately and allocated against investment income.

J. The fund manager, as soon as possible within a period of six months following the close of any fiscal year, shall transmit to the governor and the legislature an annual statement a comprehensive annual financial report on the operation of the system containing, among other things:

1. A balance sheet.

2. A statement of income and expenditures for the year.

3. A report on an actuarial valuation of its assets and liabilities.

4. A detailed statement of the investments acquired and disposed of during the year.

5. A list of investments owned.

5. A list of the ten largest stock and bond investments that are held by the fund.

6. The total rate of return, yield on cost, and per cent of cost to market value of the fund.

7. Any other statistical and financial data that may be necessary for the proper understanding of the financial condition of the system and the results of its operations. A synopsis of the annual report shall be published for the information of members of the system.

K. The fund manager shall:

1. Maintain the accounts of the system and issue statements to each employer annually and to each member who may request it.

2. Report the results of the actuarial valuations to the local boards and employers.

3. Contract on a fee basis with an independent investment counsel to advise the fund manager in the investment management of the fund and with an independent auditing firm to audit the fund manager's accounting.

4. Permit the auditor general to make an annual audit and the results shall be transmitted to the governor and the legislature.

5. Contract on a fee basis with an actuary who shall make actuarial valuations of the system, be the technical adviser of the fund manager on matters regarding the operation of the funds created by the provisions of the system and perform other duties required in connection therewith. The actuary must be a member of a nationally recognized association or society of actuaries.

6. Employ, as administrator, a person, state department or other body to serve at the pleasure of the fund manager.

7. Establish procedures and guidelines for contracts with actuaries, auditors, investment counsel and legal counsel and for safeguarding of securities.

8. If deemed necessary or appropriate, contract on a fee basis with one or more qualified outside investment managers to manage one or more of the fund's investments, assets or investment portfolios, subject to the fund manager's exercise of supervision.

L. The administrator, under the direction of the fund manager, shall:

1. Administer this article.

2. Invest the funds of the system as the fund manager deems necessary and prudent as provided in subsections D and H of this section and subject to the investment policies and fund objectives promulgated by the fund manager.

3. Establish and maintain an adequate system of accounts and records for the system which shall be integrated with the accounts, records and procedures of the employers so that the system operates most effectively and at minimum expense and that duplication of records and accounts is avoided.

4. In accordance with the fund manager's governance policy and personnel rules and procedures and the budget adopted by the fund manager, hire such employees and services the administrator deems necessary and prescribe their duties, including the hiring of one or more assistant administrators to manage the system's operations, investments and legal affairs.

5. Be responsible for income, the collection of the income and the accuracy of all expenditures.

6. Recommend to the fund manager annual contracts for the system's actuary, auditor, investment counsel, legal counsel, qualified outside investment managers, if any, and safeguarding of securities.

7. Perform additional duties and powers prescribed by the fund manager and delegated to the administrator.

M. The system is an independent trust fund and the fund manager, the administrator, the assistant administrators and all persons employed by them are not under the jurisdiction of the department of administration or any other agency, department or instrumentality of this state or subject to section 38‑611 or title 41, chapter 4 or 6. The salaries of the administrator, assistant administrators and other employees of the fund manager are the sole determination of the fund manager. Contracts for goods and services approved by the fund manager are not subject to title 41, chapter 23. As an independent trust fund whose assets are separate and apart from all other funds of this state, the system and the fund manager are not subject to the restrictions prescribed in section 35-154 or article ix, sections 5 and 8, Constitution of Arizona.

N. The attorney general or an attorney approved by the attorney general and paid by the fund shall be the attorney for the fund manager and shall represent the fund manager in any legal proceeding or forum that the fund manager deems appropriate. The attorney general shall obtain the written consent of the fund manager in order to settle a claim on behalf of the fund manager, the system or any pension plan administered by the fund manager. Without this consent, the fund manager and the plans it administers are not bound by any settlement purported to be negotiated on their behalf by the attorney general. The fund manager, administrator, assistant administrators and employees of the fund manager are not personally liable for any acts done in their official capacity in good faith reliance on the written opinions of the fund manager's attorney.

O. At least once in each five‑year period after the effective date, the actuary shall make an actuarial investigation into the mortality, service and compensation experience of the members and beneficiaries of the system and shall make a special valuation of the assets and liabilities of the funds of the system. Taking into account the results of the investigation and special valuation, the fund manager shall adopt for the system such mortality, service and other tables deemed necessary.

P. On the basis of the tables the fund manager adopts, the actuary shall make a valuation of the assets and liabilities of the funds of the system not less frequently than every year. By November 1 of each year the fund manager shall provide a preliminary report and by December 15 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

Q. Neither the fund manager nor any member, or employee or authorized investment manager of the fund manager shall directly or indirectly, for himself or as an agent, in any manner use the monies or deposits of the fund except to make current and necessary payments, nor shall the fund manager or any member, or employee or authorized investment manager become an endorser or surety or in any manner an obligor for monies loaned by or borrowed from the fund.

R. The members of the fund manager who are appointed pursuant to subsection A, paragraphs 2 and 5 of this section shall have at least ten years' substantial experience as any one or a combination of the following:

1. A portfolio manager acting in a fiduciary capacity.

2. A securities analyst.

3. An employee or principal of a trust institution, investment organization or endowment fund acting either in a management or an investment related capacity.

4. A chartered financial analyst in good standing as determined by the association for investment management and research.

5. A professor at the university level teaching economics or investment related subjects.

6. An economist.

7. Any other professional engaged in the field of public or private finances.

S. Financial or commercial information that is provided to the fund manager, employees of the fund manager, authorized investment managers or agents of the fund manager and attorneys of the fund manager in connection with investments in which the fund manager has invested or investments the fund manager has considered for investment is confidential, proprietary and not a public record if the information is information that would customarily not be released to the public by the person or entity from whom the information was obtained. END_STATUTE

Sec. 22. Section 38-848.01, Arizona Revised Statutes, is amended to read:

START_STATUTE38-848.01. Qualified governmental excess benefit arrangement

A. The fund manager may establish a qualified governmental excess benefit arrangement for the sole purpose of enabling the fund manager to continue to apply the same formula for determining benefits payable to all employees covered by the system whose benefits under the system are limited by section 415 of the internal revenue code.

C. All members and retired members of the system are eligible to participate in the qualified governmental excess benefit arrangement if their benefits under the system would exceed the limitations imposed by section 415 of the internal revenue code.

D. On or after the effective date of the qualified governmental excess benefit arrangement, the employer shall pay to each eligible member of the system who retires on or after the effective date and to each retired member who retired before the effective date and that member's beneficiary, if required, a supplemental pension benefit equal to the amount by which the benefit that would have been payable under the system, without regard to any provisions in the system incorporating the limitation on benefits imposed by section 415 of the internal revenue code, exceeds the benefit actually payable taking into account the limitation imposed on the system by section 415 of the internal revenue code. The fund manager shall compute and pay the supplemental pension benefits under the same terms and conditions and to the same person as the benefits payable to or on account of a retired member under the system.

F. The terms and conditions contained in the system, other than those relating to the benefit limitation imposed by section 415 of the internal revenue code, apply, unless the terms and conditions are inconsistent with the purpose of the qualified governmental excess benefit arrangement.

G. For the purposes of this section:

1. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

2. "Qualified governmental excess benefit arrangement" means a portion of the system if:

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the system unless the trust is maintained solely for the purpose of providing excess benefits. END_STATUTE

Sec. 23. Section 38-848.02, Arizona Revised Statutes, is amended to read:

START_STATUTE38-848.02. Reports; global security risk

A. The fund manager shall submit a report on or before January 10 and July 10 of each year to the senate finance committee and the house of representatives government public institutions and retirement committee, or their successor committees, on the economic impact of global security risks of investments of the fund monies managed by the fund manager, including:

1. A list of those companies that are held in portfolio by the fund manager, if the fund manager can make such a determination from public information, and that have or that are reasonably known by the fund manager to have business activities in or with countries identified as those countries currently designated pursuant to section 6(j) of the export administration act (50 United States Code App. section 2405) as supporting international terrorism.

2. A summary description of the business activities of those companies identified in paragraph 1 if the fund manager can make such a determination.

3. The total amount invested in each company identified in paragraph 1 as of ninety days before the report is submitted.

4. An assessment by the fund manager based on the prudent investor rule of the level of the global security risk attributable to the investments.

B. If a report fails to provide any of the required information, the fund manager shall explain the reasons why the information was not provided.

C. For the purposes of this section, companies do not include corporations whose shares are held by mutual funds, exchange traded funds or any pooled investments in which the fund manager owns shares or interests. END_STATUTE

Sec. 24. Section 38-849, Arizona Revised Statutes, is amended to read:

START_STATUTE38-849. Limitations on receiving pension; violation; classification; reemployment after severance; reinstatement of service credits; reemployment of retired member

A. If a member is convicted of, or discharged because of, theft, embezzlement, fraud or misappropriation of an employer's property or property under the control of the employer, the member shall be subject to restitution and fines imposed by a court of competent jurisdiction. The court may order the restitution or fines to be paid from any payments otherwise payable to the member from the retirement system.

B. A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the system with an intent to defraud the system is guilty of a class 6 felony. If any change or error in the records results in any member or beneficiary receiving from the system more or less than the member or beneficiary would have been entitled to receive had the records been correct, the local board shall correct such error, and as far as practicable shall adjust the payments in such manner that the actuarial equivalent of the benefit to which such member or beneficiary was correctly entitled shall be paid. If a member is convicted of a crime specified in this subsection the member shall be entitled to receive a lump sum payment of the member's accumulated contributions but forfeits any future compensation and benefits which that would otherwise accrue to the member or the member's estate under this article.

C. If a member who received a severance refund upon termination of employment, as provided in section 38‑846.02, is subsequently reemployed by an employer, the member's prior service credits shall be cancelled and service shall be credited only from the date the member's most recent reemployment period commenced. However, if the former member's reemployment with the same employer occurred within two years after the former member's termination date, and, within ninety days after reemployment the former member signs a written election consenting to reimburse the fund within one year, the former member shall be required to redeposit the amount withdrawn at the time of the former member's separation from service, with interest thereon at the rate of nine per cent for each year compounded each year from the date of withdrawal to the date of repayment. Upon satisfaction of this obligation the member's prior service credits shall be reinstated.

D. If a retired member is reemployed by an employer, no contributions shall be made on the retired member's account, nor any service credited, during the period of such reemployment. Notwithstanding this subsection, if a retired member subsequently becomes employed in the same position by the employer from which the member retired, the system shall not make pension payments to the retired member during the period of reemployment. Within ten days after a retired member is reemployed by the employer from which the member retired, the employer shall advise the fund manager in writing as to whether the retired member has been reemployed in the same position from which the member retired. On subsequent termination of employment by the retired member, the retired member is entitled to receive a pension based on the member's service and compensation before the date of the member's reemployment. If a member who retired under disability is reemployed by an employer as an employee, that member shall be treated as if the member had been on an uncompensated leave of absence during the period of the member's disability retirement and shall be a contributing member of the system. For the purposes of this subsection, "same position" means the member is in a position where the member performs duties and exercises authority that are the same duties that were performed and the same authority that was exercised by the member before the member's retirement.

E. A person who defrauds the system or who takes, converts, steals or embezzles monies owned by or from the system and who fails or refuses to return the monies to the system on the fund manager's written request is subject to civil suit by the system in the superior court of in Maricopa county. On entry of an order finding the person has defrauded the system or taken, converted, stolen or embezzled monies owned by or from the system, the court shall enter an order against that person and for the system awarding the system all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the system a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the system, plus interest at the rate prescribed by section 44-1201, subsection A, until all amounts owed are paid to the system.

F. Notwithstanding any other provision of this article, the fund manager may offset against any benefits otherwise payable by the system to an active or retired member or survivor any court ordered amounts awarded to the fund manager and system and assessed against the member or survivor. END_STATUTE

Sec. 25. Section 38-851, Arizona Revised Statutes, is amended to read:

START_STATUTE38-851. Participation of new employers

A. This state, any municipality, county or other political subdivision of the state, any Indian tribe or any public or quasi‑public organization created wholly or partly by, or deriving its powers from, the legislature, may request to become a participating employer in the system on behalf of a designated eligible employee group. Such a request shall be made by the state departmental director or after a proper resolution has been adopted by the governing body of the political subdivision, Indian tribe or public organization, and after such resolution has been approved by any other party or officer required by law to approve the resolution. A certified copy of such resolution shall be filed with the fund manager. This state or the political subdivision, Indian tribe or public organization shall be considered as a participating employer upon proper execution of a joinder agreement in which the employer unconditionally accepts the provisions of the system and binds the employer's designated eligible employees to those provisions. All members of an eligible group shall be designated for membership, unless written consent to the contrary is obtained from the fund manager. A member shall be qualified for participation in order to obtain written consent to the contrary from the fund manager.

B. The effective date of participation in the system by this state or a political subdivision, Indian tribe or public organization shall be the July 1 next succeeding the approval of its participation, unless the fund manager consents to another date, as shall be specifically stipulated in the joinder agreement.

C. The new employer shall designate the departments, groups or other classifications of public safety employees which that shall be eligible to participate in the system and shall agree to make contributions each year which that shall be sufficient to meet both the normal cost on a level cost method attributable to inclusion of its employees and the past service cost of its employees, together with any prescribed interest on the past service cost for its employees.

D. This state or any political subdivision, Indian tribe or public organization which that is contemplating participation in the system shall request a preliminary actuarial survey to determine the estimated cost of participation, the benefits to be derived and such other information as may be deemed appropriate. The cost of such a survey shall be paid by this state or the political subdivision, Indian tribe or public organization requesting it.

E. As a condition to participation in the system an Indian tribe employer, by resolution of the governing body, shall:

1. Agree that all disputes involving interpretation of state statutes involving the system, and any amendments to such statutes, will be resolved through the court system of this state.

2. Agree to be bound by state statutes and laws which that regulate and interpret the provisions of the system, including eligibility to membership in the system, service credits and the rights of any claimant to benefits and the amount of such benefits.

3. Agree to meet any requirement which that the fund manager may prescribe to ensure timely payment of member and employer contributions and any other amounts due from the employer to the system.

4. Include in the joinder agreement any other provision deemed necessary by the fund manager for the administration or enforcement of the agreement.

F. Assets under any existing public employee defined benefit retirement program, except a military retirement program, necessary to equal the actuarial present value of projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation attributable to the employer's designated employee group, calculated using the actuarial methods and assumptions adopted by the existing public employee retirement program, shall be transferred from such program to this fund no later than sixty days after the employer's effective date. That portion of the transferred assets which that is attributable to employee contributions, including interest credits thereon, shall be properly allocated to each affected employee of the employer and credited to the employee's initial accumulated contributions, in accordance with a schedule furnished by the employer to the fund manager.END_STATUTE

Sec. 26. Section 38-857, Arizona Revised Statutes, as amended by Laws 2005, chapter 297, section 3, is amended to read:

START_STATUTE38-857. Group health and accident coverage for retired members; payment

A. The fund manager of the public safety personnel retirement system shall pay part of the single coverage premium of any group health and accident insurance for each retired member or survivor of the system who receives a pension and who has elected to participate in the coverage provided by section 38‑651.01 or 38‑782 or any other health and accident insurance coverage provided or administered by a participating employer of the system. The fund manager shall pay up to:

1. One hundred fifty dollars per month, or the actual cost of the monthly insurance premium, whichever is less, for each retired member or survivor of the system who is not eligible for medicare.

2. One hundred dollars per month, or the actual cost of the monthly insurance premium, whichever is less, for each retired member or survivor of the system who is eligible for medicare.

B. The fund manager of the system shall pay from assets of the fund part of the family coverage premium of any group health and accident insurance each month for a benefit recipient who elects family coverage and otherwise qualifies for payment pursuant to subsection A of this section. The fund manager shall pay up to:

1. Two hundred sixty dollars per month, or the actual cost of the monthly insurance premium, whichever is less, if the retired member or survivor of the system and one or more dependents are not eligible for medicare.

2. One hundred seventy dollars per month, or the actual cost of the monthly insurance premium, whichever is less, if the retired member or survivor of the system and one or more dependents are eligible for medicare.

3. Two hundred fifteen dollars per month, or the actual cost of the monthly insurance premium, whichever is less, if either:

(a) The retired member or survivor of the system is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the system is eligible for medicare and one or more dependents are not eligible for medicare.

C. The fund manager shall not pay from assets of the fund more than the amount prescribed in this section for a benefit recipient as a member or survivor of the system.

D. This section does not apply to a retired member or survivor of the system who is reemployed by this state or a political subdivision of this state and who participates in coverage provided by this state or a political subdivision of this state as an active a current employee. Those retired members or survivors who are reemployed by this state or a political subdivision of this state and who were receiving the subsidy provided by this section on July 21, 1997 may continue to receive the subsidy as long as the retired member or survivor continues employment with the same state agency or political subdivision. On termination of the employment or on transfer to another state agency or political subdivision, the fund manager shall discontinue the payments provided by this section, unless the retired member or survivor again becomes qualified to receive a subsidy pursuant to this section.

E. In addition to the payments provided by subsection A of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area as follows:

1. Up to three hundred dollars per month for a retired member or survivor of the system who is not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred twenty‑five dollars per month.

2. Up to one hundred seventy dollars per month for a retired member or survivor of the system who is eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

F. In addition to the payments provided by subsection B of this section, through June 30, 2005, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to six hundred dollars per month if the retired member or survivor of the system and one or more dependents are not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred twenty‑five dollars per month.

2. Up to three hundred fifty dollars per month if the retired member or survivor of the system and one or more dependents are eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

3. Up to four hundred seventy dollars per month if either:

(a) The retired member or survivor of the system is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the system is eligible for medicare and one or more dependents are not eligible for medicare.

To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

G. In addition to the payments provided by subsection A of this section, beginning July 1, 2005 through June 30, 2007, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for each medicare eligible retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection A of this section and who lives in a nonservice area of up to one hundred seventy dollars per month for a retired member or survivor of the system who is eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least one hundred dollars per month.

H. In addition to the payments provided by subsection B of this section, beginning July 1, 2005 through June 30, 2007, the fund manager shall pay an insurance premium benefit for medical coverage, not including limited benefit coverage as defined in section 20‑1137, for a medicare eligible retired member or survivor of the system who is entitled to a premium benefit payment pursuant to subsection B of this section, who is enrolled in a family medical plan and who lives in a nonservice area as follows:

1. Up to three hundred fifty dollars per month if the retired member or survivor of the system and one or more dependents are eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least two hundred dollars per month.

2. Up to four hundred seventy dollars per month if the retired member or survivor of the system is eligible for medicare and one or more dependents are not eligible for medicare. To qualify for this additional benefit, a retired member or survivor shall pay out‑of‑pocket medical insurance premiums of at least four hundred dollars per month.

I. A retired member or survivor of the system who is enrolled in a managed care program in a nonservice area is not eligible for the payment prescribed in subsection E, F, G or H of this section if the member terminates coverage under the managed care program.

J. E. through June 30, 2008, a retired member or survivor of the system may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's prior employer if that employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired member or survivor of the system.

F. Beginning July 1, 2008, a retired member or survivor of the system may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's employer. If the retired member or survivor makes the election under this subsection, the retired member's employer shall provide the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance. The retired member or survivor is responsible for providing the written evidence of coverage to the employer. Eligibility for and payment of the subsidy shall begin on the last day of the month following the month in which the written evidence is received by the employer. The employer is not responsible for making, and is not obligated to make, retroactive subsidy payments to the insurance carrier if the retired member or survivor does not supply the written evidence of coverage in a timely manner. The payment allowed pursuant to this subsection is limited to no more than twenty‑five dollars per month.

K. For the purposes of this section, "nonservice area" means an area in this state in which the Arizona state retirement system pursuant to section 38‑782, the department of administration pursuant to section 38‑651.01 or the retired member's or survivor's participating employer does not provide or administer a health care services organization program, excluding any preferred provider organization program or individual health indemnity policy, for which the retired member or survivor of the system is eligible. END_STATUTE

Sec. 27. Repeal

Section 38-857, Arizona Revised Statutes, as amended by Laws 2004, chapter 325, section 6, is repealed.

Sec. 28. Section 38-858, Arizona Revised Statutes, is amended to read:

START_STATUTE38-858. Credit for military service; national guard or reserve members; payment of contributions during active military service

A. A member of the system may receive credit credited service for periods of active military service for active military service performed before employment with the member's current participating employer if:

1. The member was honorably separated from the military service.

2. The period of military service for which the member receives credit for service does not exceed forty‑eight months.

3. The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 united states code section 12736.

B. Except as provided in subsection C, the cost to purchase the military service credit is based on the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the credit.

C. For a period of time of active military service but for not more than forty‑eight months, an employer shall make employer contributions and member contributions for a person who was an active member of the system on the day before he began active military service, who satisfies the requirements of subsection A, paragraph 3 and who meets the following requirements:

B. Except as required by the uniformed services employment and reemployment rights act (38 United States Code section 4312(c)), a member of the system may receive credited service for not more than sixty months of military service performed while employed by the member's current participating employer if:

1. The member is a member of the Arizona national guard or is a member of the reserves of any military establishment of the United States.

2. Volunteers or is ordered into active military service of the United States as part of a presidential call‑up.

2. The member was a member of the system on the day before the member began military service.

3. The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736.

3. 4. The member is honorably separated from active military service and returns to employment for the same employer from which he the member left for active military service within ninety days after the date active military service is terminated or is hospitalized as a result of military service and returns to employment for the same employer from which he the member left for active military service within ninety days after release from service related hospitalization or dies as a result of the military service.

C. For periods of time of active military service due to a presidential call-up, not to exceed forty-eight months, an employer shall make employer and member contributions pursuant to subsection G.

D. e. Contributions made pursuant to subsection C or d shall be for the period of time beginning on the date the member began active military service and ending on one of the following dates:

1. The date the member is separated from active military service.

2. The date the member is released from service related hospitalization or one year after initiation of service related hospitalization, whichever date is earlier.

3. The date the member dies as a result of active military service.

F. g. For period of active military service due to a presidential call-up, the employer shall make contributions pursuant to subsection C or D based on the salary being received by the member immediately before the member volunteered or was ordered into active military service that the member would have received but for the period of military service in a lump sum and without penalty when the member returns to employment or on receipt of the member's death certificate. If the member suffers a military service related death, the employer shall make the employer and member contributions up to and including the date of the member's death. Death benefits shall be calculated as prescribed by law. For all other periods of military service, the member has up to three times the period of military service, up to a maximum of five years, to make member contributions pursuant to subsection d based on the salary that the member would have received but for the period of military service. Once the member makes the member contributions, the employer shall pay the employer contributions.

G. h. In computing the length of service of a member for the purpose of determining retirement benefits or eligibility, the period of military service, as prescribed by this section, shall be included.

H. i. An applicant shall submit a copy of the military discharge certificate (DD‑256A) and a copy of the military service record (DD‑214) or its equivalent with the application when applying for the military service credit, except that members of the Arizona national guard and military reserves ordered into active military service as part of a presidential call‑up are only required to submit a copy of the military service record (DD‑214) or its equivalent.

I. j. Notwithstanding any other law, the member is not required to reimburse his the member's employer or the system for any employer contribution made pursuant to subsection C or D. END_STATUTE

Sec. 29. Section 38-859, Arizona Revised Statutes, is amended to read:

START_STATUTE38-859. Medical boards; purposes; composition; medical examinations

A. The purposes of a medical board are to:

1. Identify a physical or mental condition or injury that existed or occurred prior to the member's date of membership in the system and for which benefits may otherwise be limited by section 38‑844, subsection D f.

2. Evaluate a member's eligibility for an accidental disability pension.

3. Evaluate a member's eligibility for an ordinary disability pension.

4. Evaluate a member's eligibility for a temporary disability pension.

5. Evaluate a member's eligibility for a catastrophic disability pension.

B. For the purpose of determining a disability, the medical board shall be composed of a designated physician or a clinic other than the employer's regular employee or contractee. Employees employed after October 1, 1992 shall undergo a medical examination for the purpose of identifying a physical or mental condition or injury that existed or occurred prior to a member's date of membership in the system and for which benefits may otherwise be limited by section 38‑844, subsection D f, and for this purpose, the medical board shall be composed of a designated physician or a clinic that may be the employer's regular employee or contractee.

C. A finding of accidental, ordinary, temporary or catastrophic disability shall be based on medical evidence by a physician or clinic appointed by the local board pursuant to section 38‑847, subsection D, paragraph 9 that established the disability. The local board shall resolve material conflicts in medical evidence. If required, the local board may employ other physicians or clinics to report on special cases. With the approval of the local board, a physician or clinic employed by the local board may employ occupational specialists to assist the physician or clinic in rendering an opinion.

C. Local boards shall retain a physician or clinic to examine a member who applies for an accidental, ordinary, temporary or catastrophic disability pension. The physician or clinic who is appointed by the local board shall opine as to whether or not the member qualifies for an accidental, ordinary, temporary or catastrophic disability pension. With the approval of the local board, the physician or clinic may refer the member to a specialist and may rely on the opinion of that specialist in rendering the physician's or clinic's opinion. The physician or clinic may also rely on any medical evidence that is provided by the member or the member's physicians. The local board shall base a finding of accidental, ordinary, temporary or catastrophic disability solely on the opinion of its appointed physician or clinic. If the local board retains more than one physician or clinic in connection with any application, the local board shall resolve material conflicts in the medical evidence that is presented by the physicians or clinics.

D. All employees shall undergo medical examinations before a physician or clinic appointed by the local board pursuant to and for the reasons prescribed in this article. An employee who fails to comply with this subsection waives all rights to disability benefits under this article.

E. The examining physician or clinic shall report the results of examinations to the local board, and the secretary of the local board shall preserve the report as a permanent record. Medical examinations conducted pursuant to this article shall not be conducted or utilized for the purposes of hiring, advancement, discharge, job training or other terms, conditions and privileges of employment unrelated to the receipt of or qualification for pension benefits or service credits under the system.

F. This section does not affect or impair the right of an employer to prescribe medical or physical standards for employees or prospective employees. END_STATUTE

Sec. 30. Section 38-881, Arizona Revised Statutes, as amended by Laws 2006, chapter 264, section 13 and chapter 308, section 1, is amended to read:

START_STATUTE38-881. Definitions

In this article, unless the context otherwise requires:

1. "Accidental disability" means a physical or mental condition that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's department, was incurred in the performance of the employee's duties and was the result of any of the following:

(a) Physical contact with inmates, prisoners, parolees or persons on probation.

(b) Responding to a confrontational situation with inmates, prisoners, parolees or persons on probation.

(c) A job related motor vehicle accident while on official business for the employee's employer. A job related motor vehicle accident does not include an accident that occurs on the way to or from work. Persons found guilty of violating a personnel rule, a rule established by the employee's employer or a state or federal law in connection with a job related motor vehicle accident do not meet the conditions for accidental disability.

2. "Accumulated member contributions" means for each member the sum of the amount of all member the member's contributions deducted from a the member's salary and paid to the fund, plus member contributions transferred to the fund by another retirement plan covering public employees of this state, plus previously withdrawn accumulated member contributions which that are repaid to the fund in accordance with this article, minus any benefits paid to or on behalf of a member.

3. "Annuitant" means a person who is receiving a benefit pursuant to section 38-910.

3. 4. "Average monthly salary" means one‑thirty‑sixth of the aggregate amount of salary that is paid a member by a participating employer during a period of thirty‑six consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service. Average monthly salary means the aggregate amount of salary that is paid a member divided by the member's months of service if the member has less than thirty‑six months of service. In the computation under this paragraph, a period of nonpaid or partially paid industrial leave shall be considered based on the salary the employee would have received in the employee's job classification if the employee was not on industrial leave.

4. 5. "Beneficiary" means an individual who is being paid or who has entitlement to the future payment of a pension on account of a reason other than the individual's membership in the retirement plan.

5. 6. "Claimant" means a member, beneficiary or estate that files an application for benefits with the retirement plan.

6. 7. "Credited service" means credited service transferred to the retirement plan from another retirement system or plan for public employees of this state, plus those compensated periods of service as a member of the retirement plan for which member contributions are on deposit in the fund.

7. 8. "Designated position" means:

(a) For a county:

(i) A county detention officer.

(ii) A nonuniformed employee of a sheriff's department whose primary duties require direct contact with inmates.

(b) For the state department of corrections and the department of juvenile corrections, only the following specifically designated positions:

(i) Food service.

(ii) Nursing personnel.

(iii) Corrections physician assistant.

(iv) Therapist.

(v) Corrections dental assistant.

(vi) Hygienist.

(vii) Corrections medical assistant.

(viii) Correctional service officer, including assistant deputy warden, deputy warden, warden and superintendent.

(ix) State correctional program officer.

(x) Parole or community supervision officers.

(xi) Investigators.

(xii) Teachers.

(xiii) Institutional maintenance workers.

(xiv) Youth corrections officer.

(xv) Youth program officer.

(xvi) Behavioral health treatment unit managers.

(xvii) The director and assistant directors of the department of juvenile corrections and the superintendent of the state educational system for committed youth.

(xviii) The director, deputy directors and assistant directors of the state department of corrections.

(xix) Other positions designated by the local board of the state department of corrections or the local board of the department of juvenile corrections pursuant to section 38‑891, subsection E.

(c) For a city or town an employer of an eligible group as defined in section 38-842, a city or town detention officer officers.

(d) For an employer of an eligible group as defined in section 38‑842, full‑time dispatchers.

(e) For the judiciary, probation, surveillance and juvenile detention officers.

9. "Eligible child" means an unmarried child of a deceased active or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty‑three years of age and remains a dependent of the surviving spouse or guardian.

8. 10. "Employee" means a person determined by the local board to be employed by a participating employer in a designated position.

9. 11. "Employer" means an agency or department of this state or a political subdivision of this state which that has one or more employees in a designated position and Indian tribes that have elected to participate in the plan on behalf of an eligible group of dispatchers or detention officers pursuant to a joinder agreement entered into after July 1, 1986.

10. 12. "Fund" means the corrections officer retirement plan fund.

11. 13. "Fund manager" means the fund manager of the public safety personnel retirement system.

14. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

12. 15. "Juvenile detention officer" means a juvenile detention officer responsible for the direct custodial supervision of juveniles who are detained in a county juvenile detention center.

16. "Killed in the line of duty" means the decedent's death was the direct and proximate result of physical injuries incurred in the performance of the decedent's public safety duties and does not include suicide.

13. 17. "Local board" means the retirement board of the employer that consists of persons appointed or elected to administer the plan as it applies to the employer's members in the plan.

14. 18. "Member" means any employee who meets all of the following qualifications:

(a) Who is a full‑time paid person employed by a participating employer in a designated position.

(b) Who is receiving salary for personal services rendered to a participating employer or would be receiving salary except for an authorized leave of absence.

15. 19. "Normal retirement date" means the first day of the calendar month immediately following an employee's completion of twenty years of service or, in the case of a dispatcher, twenty‑five years of service, the employee's sixty‑second birthday and completion of ten years of service or the month in which the sum of the employee's age and years of credited service equals eighty.

20. "Ordinary disability" means a physical condition that the local board determines will prevent an employee from totally and permanently performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will prevent an employee from totally and permanently engaging in any substantial gainful activity.

16. 21. "Participating employer" means an employer which that the fund manager has determined to have one or more employees in a designated position or a county, city or town which that has entered into a joinder agreement pursuant to section 38‑902.

17. 22. "Pension" means a series of monthly payments by the retirement plan but does not include an annuity that is payable pursuant to section 38‑910.

18. 23. "Probation or surveillance officer" means an officer appointed pursuant to section 8-203, 12-251 or 12-259 but does not include other personnel, office assistants or support staff.

24. "Qualified governmental excess benefit arrangement" means a portion of the plan if:

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the plan unless the trust is maintained solely for the purpose of providing excess benefits.

19. 25. "Retired member" means an individual who is being paid a pension on account of the individual's membership in the retirement plan terminates employment and is receiving a pension pursuant to either section 38-885 or 38-886.

20. 26. "Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension.

21. 27. "Retirement plan" or "plan" means the corrections officer retirement plan established by this article.

22. 28. "Salary" means the base salary, shift differential pay and holiday pay paid a member in a designated position for personal services rendered to a participating employer on a regular monthly, semimonthly or biweekly payroll basis. Salary includes amounts that are subject to deferred compensation or tax shelter agreements. Salary does not include payment for any remuneration or reimbursement other than as prescribed by this paragraph. For the purposes of this paragraph, "base salary" means the amount of compensation each member is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, fringe benefit pay and similar extra payments.

23. 29. "Service" means employment rendered to a participating employer as an employee in a designated position. Any absence that is authorized by an employer, including any periods during which the employee is on an employer sponsored long‑term disability program, is considered as service if the employee returns or is deemed by the employer to have returned to a designated position within the period of the authorized absence.

24. 30. "Total and permanent disability" means a physical or mental condition that is not an accidental disability, that the local board finds totally and permanently prevents a member from engaging in any gainful employment and that is the direct and proximate result of the member's performance of the member's duty as an employee of a participating employer. END_STATUTE

Sec. 31. Section 38-881, Arizona Revised Statutes, as amended by Laws 2006, chapter 264, section 14 and chapter 308, section 2, is amended to read:

START_STATUTE38-881. Definitions

In this article, unless the context otherwise requires:

(a) Physical contact with inmates, prisoners, parolees or persons on probation.

(b) Responding to a confrontational situation with inmates, prisoners, parolees or persons on probation.

3. "Annuitant" means a person who is receiving a benefit pursuant to section 38-910.

5. 6. "Claimant" means a member, beneficiary or estate that files an application for benefits with the retirement plan.

7. 8. "Designated position" means:

(a) For a county:

(i) A county detention officer.

(ii) A nonuniformed employee of a sheriff's department whose primary duties require direct contact with inmates.

(b) For the state department of corrections and the department of juvenile corrections, only the following specifically designated positions:

(i) Food service.

(ii) Nursing personnel.

(iii) Corrections physician assistant.

(iv) Therapist.

(v) Corrections dental assistant.

(vi) Hygienist.

(vii) Corrections medical assistant.

(viii) Correctional service officer, including assistant deputy warden, deputy warden, warden and superintendent.

(ix) State correctional program officer.

(x) Parole or community supervision officers.

(xi) Investigators.

(xii) Teachers.

(xiii) Institutional maintenance workers.

(xiv) Youth corrections officer.

(xv) Youth program officer.

(xvi) Behavioral health treatment unit managers.

(xvii) The director and assistant directors of the department of juvenile corrections and the superintendent of the state educational system for committed youth.

(xviii) The director, deputy directors and assistant directors of the state department of corrections.

(xix) Other positions designated by the local board of the state department of corrections or the local board of the department of juvenile corrections pursuant to section 38‑891, subsection E.

(c) For a city or town an employer of an eligible group as defined in section 38-842, a city or town detention officer officers.

(d) For an employer of an eligible group as defined in section 38‑842, full‑time dispatchers.

(e) For the judiciary, probation, surveillance and juvenile detention officers.

9. "Eligible child" means an unmarried child of a deceased active or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty‑three years of age and remains a dependent of the surviving spouse or guardian.

8. 10. "Employee" means a person determined by the local board to be employed by a participating employer in a designated position.

10. 12. "Fund" means the corrections officer retirement plan fund.

11. 13. "Fund manager" means the fund manager of the public safety personnel retirement system.

14. "Internal revenue code" has the same meaning prescribed in section 42‑1001.

12. 15. "Juvenile detention officer" means a detention officer responsible for the direct custodial supervision of juveniles who are detained in a county juvenile detention center.