May 10, 2023
Public Safety Personnel Retirement System
State of Arizona
Contact: Christian Palmer
Phone: 602-296-3736
Tier 2 public safety member contribution rate reduction bill signed into law
Lower rate effective July 1, 2023, with no negative impact to employer FY24 budgets
ARIZONA – Tier 2 public safety member contribution rates will drop to 7.65 percent beginning July 1, 2023, as a result of legislation passed by lawmakers and signed by Governor Katie Hobbs. The law (HB2028, Laws 2023, Chapter 102) also impacts so-called Tier 1 “gap” members who pay Tier 2 contribution rates.
“The PSPRS Board of Trustees is grateful for the cooperation with legislative and stakeholder groups and the approval of this board-supported legislation,” said PSPRS Board Chairman Scott McCarty. “This law creates lower, level, and equitable contribution rates for more than 4,000 Tier 2 members while protecting the benefits they earn working to make our communities safer.”
Tier 2 members of the public safety plan were hired between Jan. 1, 2012, and June 30, 2017. Tier 1 ‘gap’ members who receive Tier 1 benefits and pay Tier 2 contribution rates were hired between July 20, 2011, and Dec. 31, 2011.
Currently, public safety Tier 2 and Tier 1 “gap” member contribution rates are applied on a sliding scale that takes individual employer funding levels into account. The new law establishes a static 7.65 percent contribution rate for these members and eliminates the 7.65 to 11.65 percent rate range in place.
The new law provides Tier 2 and Tier 1 gap public safety members permanent contribution rate savings, in many cases up to 4 percent of members’ salaries, beginning July 1, 2023. It does not provide excess contribution refunds for prior service.
As a result of the new law, PSPRS will work with its actuaries to create revised employer valuations for the coming 2024 fiscal year. Employers will be notified when revised valuations become available in the coming weeks.
The contribution rates paid by employers for Tier 1 and 2 members beginning July 1, 2023, will stay the same or decrease due to the law’s effect of applying accrued employer balances, known as “maintenance of effort,” towards employers’ contribution rates.
“PSPRS will communicate with employers when the revised valuations are ready, but employers can be assured that the new law won’t bring negative consequences for their 2024 fiscal year budgets as rates will remain constant or decrease,” said Mike Townsend, PSPRS administrator. “Also on our list of priorities is working with our actuaries to revise the employer modeler to account for the new Tier 2 contribution rates.”
