HB2502 - ASRS; retirement; elected officials

House Engrossed ASRS; retirement; elected officials State of Arizona House of Representatives Fifty-seventh Legislature Second Regular Session 2026 CHAPTER 201 HOUSE BILL 2502 AN ACT amending sections 38-764, 38-766.01 and 38-766.02, Arizona Revised Statutes; relating to the Arizona state retirement system. (TEXT OF BILL BEGINS ON NEXT PAGE) Be it enacted by the Legislature of the State of Arizona: Section 1. Section 38-764, Arizona Revised Statutes, is amended to read: START_STATUTE 38-764. Commencement of retirement; payment of retirement benefits; lump sum payments A. Retirement is deemed to commence on a date elected by the member. That date shall not be earlier than the day following the date of termination of employment, the date ASRS receives the member's completed retirement application or the date specified by the member pursuant to subsection I or J of this section. B. All retirement benefits: 1. Are normally payable in monthly installments beginning on the commencement of retirement as prescribed in subsection A of this section. 2. Continue to and include the first day of the month in which death occurs or continue until the date of their cessation in accordance with any optional method of payment that may have been elected. C. Except as provided in subsection D of this section, at the request of a retired member, a retired member's guardian or a court appointed conservator, the board may pay any increase in retirement benefits or the entire retirement benefit in a lump sum payment based on the actuarial present value of the benefit or the increase in the benefit if the payment of the benefits would result in ineligibility, reduction or elimination of social service programs provided to the member by this state, its political subdivisions or the federal government. D. The board may pay the entire retirement benefit in a lump sum pursuant to subsection C of this section only if continued membership in ASRS will result in additional requests for lump sum payments based on cost of living adjustments or the establishment of minimum benefit awards. E. If any benefit that is payable as a series of periodic payments amounts to less than a threshold amount determined by the board, the board, in its sole discretion and based on uniform rules it establishes, may order the amount to be paid in a lump sum. A member who receives a lump sum payment pursuant to this subsection remains a member of ASRS and is eligible for the coverage provided pursuant to section 38-782 and the payment pursuant to section 38-783 but is not eligible for a benefit increase pursuant to section 38-767. F. All distributions of retirement benefits to a member shall be distributed within the required distribution provisions of section 401(a)(9) of the internal revenue code and the regulations that are issued under that section by the United States secretary of the treasury as prescribed in section 38-775. G. Notwithstanding subsection H of this section, a member may elect to cancel the effective date of retirement within thirty days of retirement or before the member's receipt of retirement benefits, whichever is later. H. A member may elect to make changes to a retirement application before the member's retirement date. A member may exercise a onetime election to make changes to the retirement application within sixty days after the member's retirement date. The member may not change the member's retirement date, and any changes made to the retirement application are retroactive to the member's retirement date. I. A member who attains a normal retirement date may retire at any time without terminating employment if the member is employed for less than the hours required for active membership pursuant to section 38-711, paragraph 23, subdivision (b). The employer shall pay the alternate contribution rate on behalf of the retired member pursuant to section 38-766.02. On or before the date of retirement under this subsection, a member who retires pursuant to this subsection and the member's employer shall notify ASRS in writing of the member's retirement without terminating employment. J. Notwithstanding section 38-766, a member who is an elected official and who attains a normal retirement date may retire at any time without terminating the member's position as an elected official. a MEMBER WHO RETIRES PURSUANT TO THIS SUBSECTION IS A RETIRED MEMBER AS OF THE DATE OF RETIREMENT. The period of employment after retirement pursuant to this subsection is not eligible for purchase pursuant to section 38-743 or 38-744. A MEMBER WHO RETIRES pursuant to THIS subSECTION IS NOT ELIGIBLE FOR LONG-TERM DISABILITY AND DOES NOT EARN SERVICE CREDIT WHILE RETIRED. IF THE retired MEMBER IS EMPLOYED BY AN EMPLOYER IN A NONELECTED POSITION FOR WHICH THE retired MEMBER IS REQUIRED TO CONTRIBUTE UNDER THIS ARTICLE AND ARTICLE 2.1 of this chapter, THE retired MEMBER shall TERMINATE EMPLOYMENT FOR ALL NONELECTED POSITIONS WITH AN EMPLOYER OR REDUCE THE retired MEMBER'S HOURS WORKED IN the NONELECTED POSITION WITH ALL EMPLOYERS TO LESS THAN THE HOURS REQUIRED FOR ACTIVE MEMBERSHIP PURSUANT TO SECTION 38-711, PARAGRAPH 23, SUBDIVISION ( b ). THE EMPLOYER of the elected official SHALL PAY THE ALTERNATE CONTRIBUTION RATE ON BEHALF OF THE RETIRED MEMBER PURSUANT TO SECTION 38-766.02. On or before the date of retirement under this subsection, a member who retires pursuant to this subsection and the member's employer shall notify ASRS in writing of the member's retirement without terminating employment. END_STATUTE Sec. 2. Section 38-766.01, Arizona Revised Statutes, is amended to read: START_STATUTE 38-766.01. Retired members; return to work A. Notwithstanding section 38-766, at a retired member's election, a retired member may return to work and still be eligible to receive retirement benefits if all of the following requirements are satisfied: 1. The retired member has attained the member's normal retirement age. 2. The retired member terminated direct employment with an employer at least three hundred sixty-five consecutive days before returning to work. 3. If the retired member returns to work as a teacher, the retired member's employment is not subject to the requirements prescribed in sections 15-536, 15-538, 15-538.01 and 15-539 , through 15-540, 15-541, 15-542 and 15-543. B. Notwithstanding section 38-766 and subsection A of this section, at a retired member's election, a retired member who attains a normal retirement age may return to work as a state an elected official who is subject to term limits and still be eligible to receive retirement benefits. C. A retired member's election to return to work under this section is irrevocable for the remainder of the retired member's employment for which the retiree made the election. D. The retired member shall acknowledge this section in writing and file the acknowledgement acknowledgment with the employer within thirty days after returning to work. E. An employer of a retired member who returns to work pursuant to this section shall not pay contributions on behalf of the retired member pursuant to section 38-736, 38-737 or 38-797.05. F. A retired member who returns to work pursuant to this section does not accrue credited service, member service as provided in section 15-1628, subsection B, paragraph 4, additional account balances, retirement benefits or long-term disability program benefits pursuant to article 2.1 of this chapter for the period the retired member returns to work. The period the retired member returns to work is not eligible for purchase under section 38-743 or 38-744. END_STATUTE Sec. 3. Section 38-766.02, Arizona Revised Statutes, is amended to read: START_STATUTE 38-766.02. Retired members; return to work; employer contribution payments; exception; definitions A. Notwithstanding section 38-766.01, subsection E, beginning July 1, 2012, an employer shall pay contributions at an alternate contribution rate on behalf of a retired member who returns to work works with an ASRS employer after employment in any capacity in a position ordinarily filled by an employee of the employer or in a position that is similar in duties and responsibilities to that of a position ordinarily filled by an employee of the employer. This subsection applies to a retired member who has reached a normal retirement age or a retired member who retired under section 38-758 if the retired member's retirement benefit has not been suspended pursuant to section 38-766. B. The ASRS actuary shall determine the alternate contribution rate in an annual valuation performed as of June 30. For the fiscal year beginning on July 1 of the following calendar year, the valuation shall determine the percentage to be applied to the compensation, gross salary or contract fee of a retired member who meets the requirements of this section. C. The alternate contribution rate shall not be less than two percent in any fiscal year. The alternate contribution rate is equal to the lesser of: 1. The employer contribution rate established by the ASRS actuary pursuant to section 38-737 plus the employer contribution rate established by the ASRS actuary pursuant to section 38-797.06. 2. The total past service funding requirement rate established by the ASRS actuary pursuant to section 38-737 plus the total past service funding requirement rate established by the ASRS actuary pursuant to section 38-797.06. D. ASRS shall determine the schedule and method of payment of the alternate contribution rate. Subject to section 38-738, subsection A, all contributions made by the employer and allocated to the fund established by section 38-712 are irrevocable and shall be used as benefits under this article or to pay the expenses of ASRS. Payments made pursuant to this section by employers become delinquent after the due date prescribed in the board's rules and thereafter shall be increased by interest from and after that date until payment is received by ASRS. ASRS shall charge interest on the delinquent payments as prescribed in section 38-711. ASRS may recover delinquent payments due under this section, together with interest charges as provided in this section, by action in a court of competent jurisdiction against an employer liable for payments or, at the request of the director, ASRS may deduct the delinquent payments and interest charges from any other monies, including excise revenue taxes, payable to the employer by any department or agency of this state. E. An employer of a retired member shall submit any reports, data, paperwork or materials that are requested by ASRS and that are necessary to determine the compensation, gross salary or contract fee associated with a retired member who returns to work or to determine the function, utilization, efficacy or operation of the return to work program. F. An employer is not required to pay contributions at an alternate contribution rate on behalf of a retired member under subsection A of this section if the retired member returns to work with the employer in a position that is currently filled by an employee of the employer who is an active member and for which the employer is currently required to pay and is paying contributions on behalf of the active member in that same position pursuant to sections 38-736 and 38-737. An employer may pay contributions at an alternate contribution rate for a retired member who meets the requirements for an exemption under this subsection. G. For contributions made pursuant to subsection F of this section beginning July 1, 2019, if ASRS and the employer determine that the alternate contribution rate does not apply to a retired member who returns to work for whom the employer has paid contributions at the alternate contribution rate, the employer may request an employer credit, not including interest, for those contributions within ninety days after the end of the fiscal year in which the contributions were paid. If ASRS determines that an employer credit is not feasible, ASRS shall issue a refund to an employer in a form determined by ASRS. H. For the purposes of this section: 1. "Contract fee" means the gross amount paid to a retired member as an independent contractor minus an amount, not to exceed ten percent, for an administrative fee. 2. "Gross salary" means the gross amount paid to a retired member by a leasing company as salary or wages, including amounts that are subject to deferred compensation or tax shelter agreements, for services rendered or that would have been paid to the retired member except for the member's election or a legal requirement that all or part of the gross amount be used for other purposes. END_STATUTE APPROVED BY THE GOVERNOR JUNE 19, 2026. FILED IN THE OFFICE OF THE SECRETARY OF STATE JUNE 22, 2026.