Arizona

Overview

The Arizona State Retirement System (ASRS) administers pension and other benefits for most state employees, public and charter school teachers, and employees of other political subdivisions that have elected to participate. The state maintains separate plans for public safety personnel, correctional officers, and elected officials; and the cities of Phoenix and Tucson maintain their plans.

The Arizona Public Safety Personnel Retirement System (PSPRS) administers pension and other benefits for police and firefighters employed by the state and political subdivisions that have elected to participate.

The City of Phoenix Employees Retirement System (COPERS) administers pension, disability, and survivors benefits for city employees except those eligible for membership in the Arizona PSPRS.

Plan Design

Defined benefit plans serve as the primary retirement benefit for substantially all public employees in Arizona. Public safety personnel hired after June 30, 2017 (or hired between January 1, 2012 and June 30, 2017, who did not opt-out of joining Tier III) must choose between a (default) defined benefit plan and a defined contribution plan. Those whose are not covered by Social Security who elect or default into the defined benefit plan also participate in a defined contribution plan. 

According to the US Government Accountability Office, 92 percent of employees of state and local government in Arizona participate in Social Security.

Access plan design detail

Authorizing Statutes and Board Structure

AZ Rev Stat § 38-713 establishes the ASRS Board of Trustees, which includes 9 members.

AZ Rev Stat § 38-848 establishes the PSPRS Board of Trustees, which includes 9 members.

Details regarding the composition of these and other retirement boards is accessible via the Retirement and Investment Board Characteristics search tool located at the bottom of this page.

Fiduciary Duty/Prudence Standard

ASRS
AZ Rev Stat § 38-718(E) states
An investment manager shall discharge the duties of the position with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with the same matters would use in the conduct of an enterprise of a like character and with like aims as that of ASRS.

Sections H-L proscribe certain investment restrictions:
H. No more than eighty per cent of ASRS assets may be invested at any given time in equities, measured at market value.

I. No more than forty per cent of ASRS assets may be invested in non-United States public investments, measured at market value.

J. No more than sixty per cent of ASRS assets may be invested internally, measured at market value.

K. No more than five per cent of ASRS assets may be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of or fully guaranteed by the United States government or mortgage backed securities and agency debentures issued by federal agencies, measured at market value.

L. No more than ten per cent of ASRS assets may be invested in bonds or other evidences of indebtedness of those multinational development banks in which the United States is a member nation, including the international bank for reconstruction and development, the African development bank, the Asian development bank and the inter-American development bank, measured at market value.

Arizona PSPRS
AZ Rev Stat § 38-848.04 describes the fiduciary obligations and duties of the Arizona PSPRS Board of Trustees. 

A. The board and any other fiduciary of the system shall discharge their duties:

1. Solely in the interest of the members and beneficiaries.
2. For the exclusive purpose of providing benefits to members and beneficiaries and paying reasonable expenses in administering the plans and systems administered by the board.
3. With the care, skill and caution under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with those matters would use in the conduct of an activity of like character and purpose.
4. Impartially, taking into account any differing interests of members and beneficiaries.
5. Incurring only costs that are appropriate and reasonable.
6. Pursuant to a good faith interpretation of the law governing the retirement plans and systems administered by the board.

§ 38-848 proscribes certain investment restrictions:

1. Not more than eighty percent of the combined assets of the system or other plans that the board manages is invested at any given time in corporate stocks, based on the cost value of the stocks irrespective of capital appreciation.

2. Not more than five percent of the combined assets of the system or other plans that the board manages is invested in corporate stock issued by any one corporation, other than corporate stock issued by corporations chartered by the United States government or corporate stock issued by a bank or insurance company.

3. Not more than five percent of the voting stock of any one corporation is owned by the system and other plans that the board administers, except that this limitation does not apply to membership interests in limited liability companies.

Legal Protections of Retirement Benefits

Membership in a public retirement system is a contractual relationship that is subject to Article II, §25, and public retirement system benefits shall not be diminished or impaired. See Yeazel! v. Copins, 98 Ariz. 109, 402 P.2d541, 545 (Ariz. 1965)(holding rights vest upon employment acceptance and cannot thereafter be altered without mutual assent); Op.Atty.Gen. No.I09-009, 2009 WL4100152 (plain language of Article 29 of the Arizona Constitution prohibits reduction of benefit payments to retirees; as regards the lawful source or sources of funds to satisfy a shortfall in the System fund balance, the Plan trust fund would furnish the benefit payments of those individuals who retired on or after July 1, 1981, since those individuals now have benefits and accounts that are funded through the Plan. For those System members who retired before July 1, 1981, if there are insufficient monies remaining in the System trust fund to pay all of their guaranteed benefits, those remaining benefits would require a legislative appropriation). (AZ CONST., Article XIX, §1) Source: Robert Klausner, Esq., State Constitutional Protections for Public Sector Retirement Benefits

See also the following search tools:

Retirement System Account Interest Policies	Economic Actuarial Assumptions	Retirement and Investment Board Characteristics
Information about interest rates applied to account balances of inactive plan participants	Assumed rates of investment return and inflation	Composition and characteristics of public retirement and investment oversight boards
Mortality Assumptions	Plan Design Features	Post-retirement Employment Policies
Public retirement system actuarial assumptions for mortality	Numerous elements of retirement plan design	Policies governing return-to-work for retirement system annuitants

More Data

• Public Fund Survey Summary of Findings
• Roll Call (NASRA members-only)