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Arizona Pension Reform Signed

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.