Arizona’s first responders – police officers and firefighters – have relied on the Public Safety Personnel Retirement System (PSPRS) for retirement benefits since its inception in 1968. PSPRS is a defined benefit pension plan, that distributes monthly retirement benefits that are based on member salaries and years of credited service.
These benefits are constitutionally guaranteed in Arizona and adjusted for inflation, providing lifetime financial security to nearly 23,000 plan retirees and surviving spouses. Unlike traditional investment-based retirement plans, PSPRS pension benefits are unaffected by stock market fluctuations or adverse economic conditions.
In PSPRS, member benefits, contribution rates and requirements to retire are determined by member hiring dates. There are three public safety membership tiers with the most recent, Tier 3, covering first responders hired on or after July 1, 2017. Those hired between January 1, 2012, and June 30, 2017, are Tier 2 members, while all of those hired prior to January 1, 2012, are Tier 1 members.
Tier 1 Members
Hired into PSPRS position before January 1, 2012
Tier 2 Members
Hired into PSPRS position on/after January 1, 2012
Tier 3 Members
Hired into PSPRS position on/after July 1, 2017
PSPRS pension benefits are paid from contributions made by members and employers, and interest earned by these funds when they are invested by the investment team who manage financial risk on behalf of plan participants.
Tier 1 and 2 members under state law pay the same flat contribution rate towards their pensions. However, many Tier 2 members also contribute towards a “hybrid” benefit plan that consists of a pension and a 401(a) defined contribution plan account. This benefit, the Public Safety Personnel Defined Contribution Retirement Plan, was created for Tier 2 (and Tier 3) members who do not contribute to Social Security through their employers and will not collect Social Security related to their public service in retirement.
Like the Tier 2 membership, Tier 3 public safety members can contribute towards a pension and defined contribution benefits, depending on the Social Security status of their employer. But, unlike Tiers 1 and 2, Tier 3 members can elect to contribute towards and receive their retirement benefit solely through the 401(a) defined contribution account.
Member contribution rates for pension benefits are also different for Tier 3 members under state law. Required contributions are split equally between members and employers. Pension contribution rates for Tier 3 members are comparable but can vary from employer to employer.
Member contributions to PSPRS pension and 401(a) defined contribution benefits are made on a pre-tax basis. This means that the money contributed is deducted from member salaries before taxes are applied, which reduces taxable income.
Members of all three tiers are covered by the PSPRS Cancer Insurance Program and may receive disability retirement benefits provided they meet the necessary eligibility requirements. Line of duty death benefits are also available for surviving and eligible spouses or family members. Health insurance subsidies are also available to members of all three tiers upon retirement.
Highlights
Tier 1 and Tier 2 members::
- Contribution rates: Both tiers pay the same flat rate towards their pensions under state law
- Tier 2 members not contributing to social security: May also contribute towards a “hybrid” benefit plan, consisting of a pension and a 401(a) defined contribution plan account
- Cancer Insurance Program: Covered benefit
- Disability: Eligible for disability retirement benefits
- Line of duty death: Eligible for benefits for surviving spouses or family members
- Health insurance subsidies: Available to members of both tiers upon retirement
Tier 3 Members:
- Contribution rates: Rates are split equally between members and employers under state law
- Tier 3 members not contributing to social security: May also contribute towards a “hybrid” benefit plan, consisting of a pension and a 401(a) defined contribution plan account
- Defined contribution only option: Can choose to contribute towards and receive retirement benefit solely through the 401(a) defined contribution account
- Cancer Insurance Program: Covered benefit
- Disability: Eligible for disability retirement benefits
- Line of Duty Death: Eligible for benefits for surviving spouses or family members
- Health insurance subsidies: Available upon retirement to members who elected to contribute
Public Safety Personnel Defined Contribution Retirement Plan
The PSPDCRP is a 401(a) retirement account that both members and employers contribute towards to create a retirement funding source for participants. The 401(a) accounts are managed by Nationwide Retirement Solutions and are overseen by the PSPRS Defined Contribution Committee, which consists of PSPRS trustees and members of the public safety, corrections and elected officials retirement plans.
PSPDCRP participants can allocate contributions to investment options within their 401(a) account. These options include target date funds, mutual funds, index funds and bond funds. The benefit available upon retirement is determined by contributions and investment performance of the funds chosen by participants. Defined contribution plans are a proven wealth and retirement security building tool, but participants bear the risk of market volatility and economic conditions.
For additional information, members can review the AZ PSPRS Plan Overview and the PSPRS Summary of Plan Provisions.
Keeping track of pension contributions and 401(a) DC plan balances
Tier 1 and 2 members can check their pension contribution balances at any time during their careers by accessing their Members Only account or by calling PSPRS at (602) 255-5575 or emailing [email protected].
Members can check their 401(a) defined contribution account balances through their account or by contacting Nationwide Retirement Services by calling 1-855-297-8228, or emailing [email protected] for assistance.
Please note that all PSPRS members and retirees can use defined contribution plans available under state law and through Nationwide Retirement Services. These accounts include a 401(a) supplemental plan and a 457 plan. Members can contact their employers for assistance.