Latest News

PSPRS Pension Reform

GET READY FOR PENSION REFORM IN 2017

 In the New Year, PSPRS, employers and local boards must prepare for several changes due to 2016 pension reforms.

The most immediate of changes impact current employees who were hired on or after Jan. 1, 2012 (Tier 2 employees). The most sweeping of changes includes the creation of a new and third public safety employee tier starting July 1, 2017.

Future Tier 3 employees will be able to choose between a defined benefit (pension) plan and, for the first time, a defined contribution plan (similar to a private sector 401k). Those hired by employers whose public safety members do not contribute to Social Security and choose the defined benefit plan will be in a “hybrid” plan consisting of both a pension and a defined contribution plan. The DC component of the “hybrid” option requires a 3 percent employee contribution and equal employer match.

 Read More

 

NEW PSPRS BOARD OF TRUSTEES APPOINTED

The governance of PSPRS-managed plans also got a shake-up from 2016 pension reforms. Most notable is the expansion of the Board of Trustees to 9 from 7 members.

So far, eight appointments have been made by Governor Doug Ducey, past-House Speaker David Gowan and past-Senate President Andy Biggs. Two serving trustees, Chairman Brian Tobin and Trustee Bill Davis were reappointed to the board. Tobin is a deputy chief and 34-year firefighting veteran of the Phoenix Fire Department while Davis is a managing director of public finance investment with Piper Jaffray and a chartered financial analyst.

As governor, Ducey appointed four trustees and will select the ninth and final trustee from nominees provided by the eight newly appointed PSPRS Board of Trustees.

Other board members include: Read More

 

PSPRS PENSION REFORM EDUCATION CAMPAIGN UNDERWAY

   
 

Above: PSPRS Local Board Training Coordinator Don Mineer covers SB1428.

PSPRS will spend 2017 engaging employers, boards and members about the pending changes to the public safety pension system. The changes require policy and operational adjustments for things like payroll submissions, member enrollments and investment options for the new defined contribution plan.

The campaign kicked off with a January 10th event-webinar for employers and local board members to cover the broad strokes of the reforms passed last year. PSPRS staff will also host a January 31 event to review the Defined Contribution Tier 2 opt-out process and provisions with employers.

Similar events are planned for March and April in Coconino and Pima counties, and PSPRS is conducting outreach meetings with employers to solicit feedback and improve services.

Read More

 

JAN. 31 EMPLOYER EVENT FOR TIER 2 OPT-OUT PROCESS

The coming defined contribution (DC) plan to be administered by PSPRS for Tier 3 employees will actually impact Tier 2 employees first.

Understanding the plan is critical for employers, who PSPRS is urging to attend or view a Jan. 31 seminar to discuss the “opt-out” process for certain employees.

As written in state law, Tier 2 employees who do not contribute to Social Security will be automatically enrolled into the DC plan starting July 1, 2017. Read More

The event will be held at the PSPRS office in Phoenix at 10 am to noon. Those wishing to attend the seminar must register with PSPRS Member Services Director Robert Ortega via email to rortega@psprs.com or by calling 602-296-2560.

Those wishing to participate in the meeting online can register by clicking here.

 

GETTING BACK ON TRACK

Questions abound – especially in light of the Hall decision – about the funding status and future viability of PSPRS-managed pension plans.

Comparisons by NASRA found the median funding level to be 73.4 percent while the range varied from as low as 24 percent to as high as 127 percent. Data collected from financial media outlets and other organizations supports the NASRA median estimates.

The most recent valuations for PSPRS plans were completed after the Arizona Supreme Court ruled on the Hall lawsuit, and many understandably concluded the lawsuit created the actuarial declines for PSPRS and EORP.

Read More

 

THE LATE$T WITH THE HALL LAW$UIT

The timetable for a conclusion to the Hall lawsuit – and the related Parker lawsuit impacting PSPRS – is still difficult to estimate.

As advised in mid-December, EORP, the Hall lawsuit defendant, filed a motion to reconsider with the Arizona Supreme Court that will likely extend the timeframe for refunding excess contributions.

The motion seeks additional explanation to the court’s conclusion that the 2011 contribution rate changes violated the state constitution but does not amount to an “appeal” of the court’s actual decision. Read More

 

SO LONG PBI, HELLO COLA

Voter approval of Prop 124 brings an end to the retiree PBI, which has been in effect for 30 years and is credited for playing an enormous role in the funding level slide of PSPRS over the past three decades.

The awarding of the PBI is conditional on the rate of PSPRS investment returns exceeding 9 percent a year. When this happens, half of the excess investment returns over 9 percent were set aside to annually pay a flat dollar increase to every eligible retiree based on a maximum 4 percent of the average pension in the System, regardless of their individual benefit amount. Read More and View PBI Table

 

BOARD CONSOLIDATION, RISK-POOLING STUDY UPDATE

The closest thing to “action” on the local board consolidation and risk pooling study mandated by S1428 could occur this week. The Board of Trustees meets Friday morning to continue their review of the draft report and the recommendations given therein by independent governance consultants.

Authored by Cortex Applied Research, the study was contracted to determine what, if any, methods for risk pooling and board consolidation are in the best interests of PSPRS members and employers.

The occasion marks the second time the “new” trustees will hear presentations and engage in discussions on the topic for possible action. Under law, the board must present recommendations to the Senate president, the House of Representatives speaker and the governor by Feb. 15, 2017. The board is not forced to accept any recommendations and the Legislature is not required to act on any suggestions. Read More

 

PSPRS CHIEF INVESTMENT OFFICER RECOGNIZED

The PSPRS investment strategy and performance continues to grab attention and accolades.

PSPRS learned recently that Chief Investment Officer Ryan Parham was named among the Top 30 Pension Fund Chief Investment Officers by Trusted Insight, a financial/investment publication. Parham and 29 other CIOs got credit for structuring pension portfolios that “mitigate risk” and deliver in “highly uncertain” political and economic times.

Parham was also nominated in 2016 as “CIO of the Year” by Institutional Investor magazine, while the same publication also nominated PSPRS “Small Public Pension Plan of the Year.” Read More

 

 

 

GOODBYE TO A GREAT FRIEND AND COLLEAGUE

The PSPRS family said goodbye to a friend, colleague and outstanding member of the investment team who played a critical role in developing and executing the low-risk investment strategy for PSPRS-managed portfolios.

Martin “Marty” Anderson passed away unexpectedly on Dec. 13, 2016, leaving behind grieving family and friends.

Hired by PSPRS in 2003, Anderson managed every single asset class in the PSPRS portfolio at one time or another. He was the deputy chief investment officer and most recently was responsible for evaluating and recommending investments in real assets, including the energy, mining, agricultural and real estate sectors.

Anderson was a dedicated and gifted hunter, fisherman and outdoorsman. Read More

 

 

 

 

SB1428 Pension Reform Matrix of Changes

 

Tier 1

Tier 2

Tier 3

Hire Date

Before January 1, 2012

On or after January 1, 2012

On or after July 1, 2017

Plan Type

Defined Benefit

Defined Benefit w/ Hybrid (for non-Social Security only; may opt out by 06/30/17)

Defined Contribution only or Defined Benefit w/ Hybrid

(for non-Social Security only)

Determination

Automatic

Irrevocable choice

(90 days; default to Hybrid)

Employee

Contribution Rate

11.65%

(includes 4%

maintenance of effort)

DB: 11.65% (includes moe)

Hybrid: DB + 3%

DB: 50/50 split with ER

DC: 9%

Hybrid: DB + 3%

Employer

Contribution Rate

Based on individual actuarial valuation

DB: Individual Valuation

Hybrid: DB + 4% for short period of time; then 3%

DB: 50/50 split with ER

DC: 9%

Hybrid: DB + 3%

Salary Cap

As set by Internal Revenue Code

$110,000

adjusted by custom index

Inter-System Transfers

Total liability is transferred to new employer

with assets transferred at market funding level.

Total liability stays with previous employer.

Average Salary

High 3 in past 20 years

High 5 in past 20 years

High 5 in past 15 years

Normal Retirement

(age and service)

20 years of service; no age

15 years of service; age 62

25 years of service; age 52.5

(not mutually attained)

15 years of cred service; age 55

(not mutually attained; actuarially reduced at 52.5)

Disability and

Survivor Benefits

All 4 types of disability (Accidental, Catastrophic, Ordinary and Temporary) and survivor benefits are available to each tier where the determination, process and benefit amount will be the same as they are now. However, those who choose the DC only option will contribute to a separate disability fund where an actuarially determined equivalent amount will paid in conjunction with their DC fund. No survivor benefits are available for DC only participants.

Multipliers

(80% max)

50% plus

2.0% for years >20 and <25

2.5% for years >25

(reduced by 4% for <20 yrs)

62.5% plus

2.5% for years >25

(reduced by 4% for <25 yrs)

15 to <17 years: 1.50%

17 to <19 years: 1.75%

19 to <22 years: 2.00%

22 to <25 years: 2.25%

25+ years: 2.50%

Deferred Annuity

At least 10 years

(double contributions)

Not Available

Benefit Increases

CPI-based COLA utilizing metro Phoenix-Mesa data published by Bureau of Labor Statistics

Up to 2%

No funding requirement

No waiting period

Payable after 7 years or age 60

70% to <80% funded: 1.0% cap

80% to <90% funded: 1.5% cap

90% or more funded: 2.0% cap

Smoothing Period

Determined by Board (currently 7 years)

Not more than 5 years

Amortization Period

Closed period of not more than 20 years

Not more than 10 years

Unfunded Liability

Applied to Tiers 1, 2, 3 and DC payroll

Applied to Tier 3 payroll

         

 

 

 

Public Safety 

Personnel 

Retirement System

 

Contact Information:

PSPRS Administrative Offices

(Also for CORP & EORP)

 

3010 E. Camelback Rd., Suite 200

Phoenix, AZ 85016

 

602.255.5575  Telephone

602.255.5572  Fax

 

 

 

Comments are closed.

Scroll To Top
Main menu