Update: Legislative Pension Reform Proposal as of January 16, 2016

capitolOn January 16, 2016, the Arizona FOP held a pension reform briefing in Phoenix.  The Reason Foundation presented the reform measures approved by Senator Lesko, Chair of the legislature’s Pension Reform Working Group.

The legislature is expected to debate and pass the Pension Reform Proposal by the end of this month.  The portion of the Pension Reform Proposal that requires voter approval is expected to be on the May, 2016, ballot.

Below is the presentation given to FOP members in attendance.

Important:  It’s expected that the legislature will begin deliberating this pension reform proposal next week.  Arizona FOP State Lodge President, John Ortolano, will be asked if the Arizona Fraternal Order of Police supports the proposal.  In preparation for answering that question, worthy President Ortolano has notified lodge leadership to poll their members and forward the info to him by next week. While it’s short notice, lodges were advised at the last State FOP full Board meeting, the FOP position must be established by late January.

Below is a Quick Summary of the Pension Reform Proposal (as taken from the presentation):

Provisions Impacting Current Retirees and all Active Officers:

Replace uncertain, inequitable, unsustainable PBI with pre-funded COLA that provides certainty and equity for retirees.

  • Requires constitutional amendment (preserves Pension Protection clause in the AZ Constitution)
  • An exchange of benefit with greater value for retirees
  • Serves public interest by correcting broken PBI that has been a major cause of increased unfunded liabilities
  • Compounding COLA based on regional CPI, capped at 2% max

Note: It’s become increasingly clear the current PBI system, which relies upon investment returns greater than 9%, or 10.5% for those who retired after August, 2011, is much less likely to provide the opportunity for for a retirement pay increase for current retirees and current active officers who will retire in the future.

Provisions impacting officers hired after June 30, 2017:

Option of electing to participate in either a new:
1.  Defined Contribution Only Plan, or
2.  Defined Benefit Hybrid Plan.Tier3Select

*See Proposal Details for Tier 3.