Arizona Gov. Signs Public Safety Pension Reform; Measure Goes to Ballot

Arizona Gov. Doug Ducey on Tuesday signed a bill that affects pension benefits for the state’s new public safety hires.

The measure would slash and cap cost-of-living-adjustments and limit the amount of salary that can be used in calculating a pension, among other changes.

The measure still needs to be approved by voters.

More on the bill, from the Arizona Republic:

Voters will be asked to link retirees’ pension cost-of-living adjustments to the regional Consumer Price Index, with an annual cap of 2 percent. A 4 percent compounded increase has been paid out for the past two decades, significantly cutting into the trust’s money.

Legislation signed by Ducey would offer new workers a choice between a full-defined contribution plan and a traditional pension plan. It also would require new employees and their employers to split the cost of a pension. Currently, employees pay 11.65 percent of their salary toward pension benefits, but there is no cap on contributions by employers. On average, employers pay an amount equivalent to nearly 43 percent of each employee’s salary for retirement benefits.

The new law also would cap pension benefits for new employees by limiting the maximum salary on which it is calculated to $110,000 a year. The current cap is $265,000 a year. This would lower pension benefits and limit “pension spiking,” a method of enhancing retirement benefits by artificially increasing salary and other payments to employees during their last few years before retirement.

The bill also contains a governance change: it expands the board of the Public Safety Personnel Retirement System from seven members to nine.

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