According to The Republic, Governor Jan Brewer signed House Bill 2608 into law last week. Under the new law, Arizona’s elected officials who take office after January 1, 2014, will be assigned to a 401(k)-type retirement plan.
The law is designed to eventually close the state’s Elected Officials’ Retirement Plan (EORP), which allows participants to retire after 20 years of service and receive a lifetime pension that starts at 80% of the participant’s ending salary. According to the news report, the EORP is heavily subsidized by state taxpayers and court fees, with the plan’s assets only covering 58% of its liabilities.
“The EORP is simply unsustainable in its existing framework, with a current underfunded liability in excess of $250 million,” said Matthew Benson, the governor’s spokesman, in the news report.
The new law will require Arizona’s state general fund to pay up to $5 million annually through 2043 to cover any underfunded liabilities in the EORP and eventually close it out. The defined contribution (DC) plan that new officials will begin participating in starting in 2014 will have participants contribute 8% of their pay into a savings account, while employers will contribute an amount equal to 6% of the participant’s pay into a retirement fund.
The law defines “elected officials” as elected judges and politicians. Prior to the bill becoming law, there was some discussion of exemptions, particularly for judges (see “Judges Seek Exemption from Arizona Pension Reform” and “Judges Win Partial Victory Against Ariz. Pension Reform”).