The Arizona State Retirement System was created in 1953, providing retirement and other benefits for state employees, university faculty and employees of the state’s political subdivisions (Laws 1953, Chapter 128). Teachers joined the ASRS on January 1, 1955. Statutory authority is found in A.R.S.§§ 38-711 et seq. Article 29 of the Arizona Constitution outlines conditions related to funding, assets and membership of public retirement systems. The constitutional amendment was approved by voters in the general election held November 3, 1998 (Laws 1998, Senate Concurrent Resolution 1009).
The ASRS provides retirement and other benefits, including survivor and disability benefits and health insurance, for most public sector employers in Arizona. Eligible employees include those who are employed by the state of Arizona as well as employees of state universities and colleges, public school districts, charter schools, all 15 counties, most cities and towns and a variety of special districts. A nine-member board, appointed by the Governor to three-year terms, is responsible for preservation and protection of the retirement trust fund. The Board also supervises the administration of the ASRS by its director.
The current ASRS defined benefit plan became effective July 1, 1971. ASRS invests assets in equities, bonds, and real estate. Each member and employer contributes an amount set by statute. When system members retire, their account balance is converted into a guaranteed annuity that pays a specified benefit on a monthly basis.
The ASRS is divided into three major programs:
Member Services – also includes financial and information services;
Administration and Support – includes the Director’s office, legal, internal audit and administrative services; and
Investment Management – responsible for oversight of the investment of ASRS assets.
Laws 1912, Chapter 95, outlined a method to provide a pension for teachers who had 25 years or more of service in Arizona public schools. The annual pension was set at $600 and was paid quarterly from the School Fund of the State of Arizona. From 1912 to 1943, specific conditions and qualifications relating to age and years of service were modified from time to time.
Laws 1943, Chapter 61 established the Teachers Retirement System and repealed related provisions of Arizona’s 1939 code (§54-1008). When ASRS was established in 1953, teachers were provided an opportunity to join, and voted to do so in 1954 (effective January, 1, 1955).
The ASRS was created by Laws 1953, Chapter 128 “…to effect economy and efficiency in the state service by providing a means whereby employees who become superannuated may, without hardship or prejudice, be replaced by more capable employees…” in order to supplement federal Social Security. Eligibility for the program typically required at least ten years “creditable service” and began at age 60 or 65, depending on how a member chose to have their retirement fund disbursed. Members of the ASRS were required to contribute three and one-half percent of their total wages. (Note: the contribution rate is adjusted annually.)
A State Retirement System Board of five members was also established. Members were appointed by the Governor to five-year terms. Board members were prohibited from having an interest in any investments made by the Board, borrowing money from the ASRS, or becoming an endorser or surety for any investment made by the Board.
The Board was authorized to conduct all business on behalf of the ASRS, enter into contracts, invest funds, purchase annuities, and appoint individuals for the general administration of the ASRS on their behalf. They were also granted the authority to adopt, amend, or rescind regulations to administer the ASRS and were required to submit an annual report to the Legislature and the Governor.
The following paragraphs provide information on numerous statutory changes adopted since the agency was established in 1953. Most address benefits, eligibility, formulas, years of service and administrative issues. Although these paragraphs do not represent a comprehensive listing or discussion of all amendments adopted over the years, they do provide a sampling of significant changes. The reader is encouraged to check current statute and conduct additional research as needed.
Laws 1953, Chapter 128, Section 16 addressed acceptable investment instruments, all of which were government bonds. This section also authorized the board to contract with a private legal reserve insurance carrier after the ASRS had been operational for three years to provide the benefits of the ASRS, provided said insurance carrier had already been in operation for at least ten years.
Laws 1955, Chapter 104 increased the number of members on the Board to seven.
Laws 1957, Chapter 96 updated and revised provisions regarding acceptable investment instruments, allowing investment in private entities in addition to government issued bonds. The qualifying period to receive ASRS was also reduced from ten years to five years of creditable service. A death benefit was created for those who had paid into the system, including those who had not had completed five years creditable service.
Laws 1965, Chapter 87 ensured that members of the ASRS would see the full balance of their retirement account pass to their beneficiary or estate and addressed temporary disability benefits as well.
Laws 1970, Chapter 136 abolished the existing ASRS Board and created a new board, an investment advisory council, and five new subsidiary boards. The subsidiary boards each represented different groups of state employees. The new ASRS Board no longer had the authority to determine how ASRS funds were invested; an investment management organization was created to be the sole arbiter of when and how ASRS funds were invested. The investment advisory council was created at that time and met once a quarter.
Laws 1972, Chapter 51 set a compulsory retirement age of 70 for most state employees and officers, though that was changed to age 65 by Laws 1974, Chapter 120. The measure provided for certain exceptions.
Laws 1975, Chapter 53 removed the administrator and finance manager positions and replaced them with a Board-appointed director position.
Laws 1981, Chapter 284 created an early retirement option for ASRS members, allowing a person who was least 50 years old with at least 5 years of creditable service to receive a reduced (by up to 65%) pension. The law also established an Elected Officials Retirement Plan (EORP) and provided for transition of members and monies into EORP.
Two different session laws capped ASRS earnings for individuals. Laws 1985, Chapter 196 prohibited bonuses from being included in the calculation of an ASRS member’s earnings. Laws 1985, Chapter 294 capped the annual dollar amount on annuities.
A study of the “mortality, disability, service and other experiences of the members, participants and employers participating in the system and plan” was required at least every five years by Laws 1991, Chapter 270.
Laws 1995, Chapter 134 placed the director of the ASRS on a series of one year contracts. The board has the option to reappoint the director each year and may still fire the director for cause at any time. The law also amended provisions related to purchase of service.
Laws 2006, Chapter 12 repealed statutes allowing creation of a Deferred Retirement Option Plan (DROP).
In 2008, several measures addressed divestment of retirement funds (Laws 2008, Chapter 1; Laws 2008, Chapter 29 and Laws 2008, Chapter 201).
Laws 2009, Chapter 36 addressed several issues including service purchases, return to work, dual employment, the long-term disability program, transfer of service from a charter city to ASRS, the retiree accumulated sick leave (RASL) program.
Laws 2010, Chapter 50 established conditions for new ASRS members who joined on or after July 1, 2011. Those conditions relate to the benefit formula, average monthly compensation and refunds of employer contributions.
Laws 2011, Chapter 26 changed the 50/50 split for employer and employee contribution rate to 47% for employers and 53% for employees. Laws 2012, Chapter 304 reversed the contribution split put in place in 2011.
Legislation adopted in 2011 created a waiting period of 27 weeks for a new employee to be eligible for ASRS membership (if membership criteria is met); established new retirement ages for new employees; established new requirements to purchase service credits; established an alternate contribution rate for members who return to work after retiring; and created a Defined Contribution and Retirement Study Committee with a final report due by December 31, 2012. (Laws 2011, Chapter 277 and Laws 2011, Chapter 357) Note: An Arizona Court of Appeals ruling in May 2104 concluded that statutory limits to purchase service for members with a membership date prior to July 20, 2011 are unconstitutional. ASRS now allows those members to purchase any and all eligible service.
Amendments related to naming spouses as beneficiaries were adopted in 2006, 2012 and 2013. (Laws 2006, Chapter 103; Laws 2012, Chapter 88 and Laws 2013, Chapter 110)
- Arizona Constitution, Article 29
- A.R.S.§§ 38-711 et seq.
- Session Laws
- Laws 1953, Chapter 128
- Laws 1954, Chapter 116
- Laws 1965, Chapter 87
- Laws 1970, Chapter 136
- Laws 1974, Chapter 120
- Laws 1975, Chapter 53
- Laws 1981, Chapter 284
- Laws 1985, Chapter 196
- Laws 1985, Chapter 294
- Laws 1991, Chapter 270
- Laws 1995, Chapter 134
- Laws 2006, Chapter 12
- Laws 2006, Chapter 103
- Laws 2006, Chapter 309
- Laws 2008, Chapter 1
- Laws 2008, Chapter 29
- Laws 2008, Chapter 201
- Laws 2009, Chapter 36
- Laws 2010, Chapter 50
- Laws 2011, Chapter 26
- Laws 2011, Chapter 277
- Laws 2011, Chapter 357
- Laws 2012, Chapter 88
- Laws 2012, Chapter 304
- Laws 2013, Chapter 110
- Master List of State Programs
- ASRS website: www.azasrs.gov