ASRS; retirement; elected officials

HB2502 - 572R - H Ver

House Engrossed

ASRS; retirement;
elected officials

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

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