Arizona Gov. Doug Ducey (R) on Feb. 16 signed a reform of the Arizona Public Safety Personnel Retirement System (PSPRS) — the state pension system that serves state police and firefighters. The reform is contained in SB 1428 and 1429, which Sen. Debbie Lesko (R-Peoria) introduced.
In a press release, Ducey hailed the legislation, saying “It’s been a long process, but the result is a bipartisan, well-informed and meaningful plan that will protect our taxpayers while providing a sustainable pension system for the women and men who risk their lives every day to keep us safe.”
The measures will:
- require new public employees to serve until age 55 before being eligible for full pension benefits;
- cap pension benefits for new hires;
- split the cost of pensions evenly between employers and new employees, as is done with other state retirement plans;
- provide new hires the option of a 100% DC plan; and
- replace the pension benefit increase (PBI) mechanism with a cost-of-living adjustment (COLA).
The Reason Foundation reports that the COLA provision would:
- replace the PBI with a traditional, pre-funded COLA for current employees and retirees;
- create a COLA that would be based on the changes in the consumer price index for the Phoenix region, with a cap of 2% maximum;
- apply the COLA percentage to each PSPRS retiree’s actual benefit level (as opposed to a level dollar amount granted under the current PBI, regardless of the individual retiree’s benefit level); and
- require that the new COLA be pre-funded and actuarially accounted for in advance as part of normal cost determination.
The provision of the reform package that would replace the PBI with a COLA will not go into effect without voter approval. A vote is scheduled for May 17.