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ARIZONA STATE SENATE
Fifty-Seventh Legislature, Second Regular Session
PSPRS; service requirement; cost-of-living adjustment
Purpose
Modifies the normal retirement date, for members of the Public Safety Personnel Retirement System (PSPRS) hired on or after January 1, 2012, by allowing an employee to retire after completing 25 years of service, without meeting a minimum age requirement. Reduces, from seven years to three years, the waiting period after retirement when a retiree becomes eligible to receive a cost-of-living adjustment (COLA).
Background
PSPRS provides a uniform, consistent and equitable statewide retirement program for Arizona’s municipal firefighters and police, highway patrol and other public safety personnel. Membership in PSPRS is designated as Tier 1, 2 or 3 based on the member's participation date. Tier 2 and Tier 3 members are eligible to participate in the PSPRS Defined Benefit Plan (DB Plan) or the PSPRS Defined Contribution Plan and some members may contribute towards a hybrid plan that consists of both.
For members participating in the DB Plan, retirement benefits are determined by member salaries and credited service during employment. Credited service means the member's total period of service before the member's effective date of participation, plus those compensated periods of service thereafter for which the member made contributions to the PSPRS Fund. If a member takes leave and does not receive a salary, the member accrues service but not credited service.
For Tier 2 members, the normal retirement date is the first day of the calendar month immediately following the employee's completion of either 25 years of service or 15 years of credited service if the employee is at least 52.5 years old. For Tier 3 members, the normal retirement date is the first day of the calendar month immediately following the employee's completion of 15 years of credited service if the employee is at least 55 years old (A.R.S. §§ 38-841 and 38-842).
For Tier 2 DB members, a member who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for a normal retirement if the member attains the service requirement, or the credited service requirement for Tier 3 DB members, for normal retirement. Once a Tier 2 or Tier 3 DB member reaches the normal retirement age, the member may receive retirement benefit payments (A.R.S. § 38-846.01).
For Tier 3 DB members, each eligible retired member or survivor of a retired member may receive a compounding COLA in the base benefit. A retired member or survivor of a retired member is eligible to receive COLA beginning the earlier of the first calendar year after the seventh retirement anniversary or when the retired member is or would have been 60 years old. A COLA must be paid on July 1 each year that the funded ratio is 70 percent or more with the amount of the COLA depending on the funded ratio (A.R.S. § 38-856.06).
If modifying the definition of normal retirement date for Tier 2 and Tier 3 DB members changes PSPRS's actuarial funded status and results in a change to employer contribution rates, there may be a fiscal impact to the state General Fund.
Provisions
1. Applies the age requirement of 52.5 years old for a normal retirement, within the definition of normal retirement date, to Tier 2 members who retire after 15 years of credited service, rather than after 25 years of service or 15 years of credited service.
2. Adds, to the definition of normal retirement date for the purposes of Tier 3 members, the option to retire after 25 years of service, rather than only after 15 years of credited service and reaching 55 years old.
3. Allows a Tier 2 or Tier 3 member to receive retirement benefit payments once the member reaches the normal retirement date, rather than the normal retirement age.
4. Modifies the definition of retirement or retired, for the purposes of Tier 2 members, to mean termination of employment after a member attains the service requirements or the age and credited service requirements, rather than the age and service requirements, for a normal retirement date.
5. Modifies the definition of retirement or retired, for the purposes of Tier 3 members, to mean termination of employment after a member attains the service requirements or the age and credited service requirements, rather than the age and credited service requirements, for a normal retirement date.
6. Reduces, from seven years to three years, the waiting period after retirement when a retiree becomes eligible to receive annual COLA adjustments.
7. Becomes effective on the general effective date.
Prepared by Senate Research
February 9, 2026
MG/hk