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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Friday, May 24, 2013

First they came for the Elected Officials Retirement Plan (EORP) . . .

This previous post discussed House Bill (HB) 2608, which would close the Elected Officials Retirement Plan (EORP) to new hires, and this article by Associated Press reporter Bob Christie, Arizona bill on politicians' pensions passes Senate on 2nd try, gives the latest information of HB 2608's progrss.

HB 2608 would lead to the eventual elimination of defined benefit pensions for elected officials and judges in Arizona.  The pension will continue for those retirees already in EORP as well as for those active members of EORP who have not yet retired, but future hires will be put into a new defined contribution plan.  As current Arizona legislators retire, lose reelection, or are term-limited out, the number of state-level decision-makers with a defined benefit pension like PSPRS will dwindle down over the years.  Judges with defined benefit pensions will also become rarer and rarer as current judges are replaced over the years.

HB 2608 will still need to return to the Arizona House to approve amendments made in the Senate and need Governor Jan Brewer's signature to be passed into law.  It has already passed in the Arizona House once and should easily pass again.  While I can find nothing that indicates the Governor's intentions, it seems unlikely that Republican legislators would have brought forth this bill without a good expectation that she would sign it.  While the passage of HB 2608 ostensibly should have no tangible impact on PSPRS since they are two separate systems, the symbolic impact of this bill is highly significant.

The legislature appears to be voluntarily giving up their own defined benefit pension.  Of course, none of those who are currently voting for it are giving up their own personal defined benefit pensions, but they are committing future legislators and judges to a less generous retirement.  This will create a two-tier system, not unlike the two-tier system in PSPRS for those hired before 2012 and those hired in 2012 and after, though the disparities between the two tiers for elected officials will be much greater than those in PSPRS.  Of course, today's legislators will save future legislators from any charges of hypocrisy if those future legislators want or need to enact more reforms to PSPRS, the Arizona State Retirement System, or the Corrections Officer Retirement Plan.  Going forward, this will be the real impact of HB 2608.

Friday, May 17, 2013

Vesting of benefits for PSPRS members (an update)

With sincere apologies for the long time between posts, here is a further update about the vesting of benefits for PSPRS members.  This Pension Committee Report comes courtesy of the Fraternal Order of Police Arizona Valley Lodge 44's Facebook page and is dated July 7, 2012.  It is a summary of a PSPRS monthly meeting held on June 6, 2012.  It contains specific information from PSPRS Administrator Jim Hacking about the Arizona Revised Statutes (A.R.S.) that deal with the vesting of benefits for PSPRS, EORP, and CORP members.  These statutes are pertinent to the lawsuits against PSPRS relating to reforms made by SB 1609.  As web links can often disappear without notice, the following is taken verbatim from the Facebook post:

PSPRS: A.R.S 38-844.01
Effective 07/27/1983. This states those hired after 07/27/1983 are not vested until the member applies for and is approved for retirement benefits.

CORP: A.R.S. 38-900.01
Effective 07/18/2000, but is retroactive to, from and after 06/30/1986. This states those hired after 06/30/1986 are not vested until the member applies for and is approved for retirement benefits.

EORP: A.R.S. 38.810.02

Effective 07/18/2000, but is retroactive to, from and after 08/06/1985. This states those hired after 08/06/1985 are not vested until the member applies for and is approved for retirement benefits.

This post is extremely helpful because it gives firm dates when the relevant vesting statutes went into effect.  According to this, only those who joined PSPRS before July 28, 1983 would be affected by a victory in the Parker vs. PSPRS lawsuit.  This would seem to mean that a PSPRS member would have to have nearly 30 years in the PSPRS system in order to be affected by a victory.  I do not know the length of PSPRS service of the plaintiffs in the Parker lawsuit, but PSPRS' 2012 Consolidated Annual Financial Report shows only 58 active PSPRS members with at least 30 years of service as of June 30, 2012.  A layman's read of this would mean that a victory in the Parker lawsuit would have no effect on the vast majority of active PSPRS members as it relates to the new contribution rates and new cost of living allowance (COLA) formulas that were imposed by SB 1609.

However, this is in the courts and will eventually get to the Arizona Supreme Court.  A recent victory (PSPRS lawsuit update: Arizona Judges 2, EORP 0) by active judges against EORP shows that the judge in that case did not allow the use of retroactive vesting back to1985 referenced above and instead used the year 2000.  This shows that the situation will be highly dependent on the judgment of a small number of judges and Supreme Court justices, whose opinions are the only ones that matter.  Stay tuned.