IMPORTANT INFORMATION ON ASRS CONTRIBUTIONS

Dear ASRS Employer:

This email is the latest in a series of updates on the ASRS contribution rate and the rate split between employees and employers brought about by litigation and legislation over the past several months.

Please review carefully.

House Bill 2264, which calls for a reversion of the ASRS contribution rateback to an equal 50/50 split between members and employers,was signed into lawby Governor Jan Brewer on May 7, 2012and is effective immediately.

This new law reverses legislation passed last year that mandated a 53/47 percent member/employer split of the total ASRS contribution rate for the defined benefit plan and the long term disability income plan for all ASRS members.

The new legislation also calls for employers to refund employees the excess contributions paid above the 50 percent rate since enactment of last year’s legislation, which was July 1, 2011. Refunds are to be paid by employers, not the ASRS. The legislation includes an appropriation to cover the reimbursement to state employees and education employees, which includes public schools and charter schools. Other employers, including municipal and county governments and special districts, are expected to reimburse eligible employees from their own budgets.

Be sure to note that the refund of excess retirement contributions is taxable wages, but the refund of excess LTD contributions is not taxable (this is opposite from the “normal” reporting structure). Additionally, the refunds should not have ASRS contributions withheld from them, but they are subject to any other garnishment or withholding in place for the employee. The refunds will be reported on W-2s for calendar year 2012.

HB 2264goes further than a recent court Judgment entered on April 12, 2012 in Maricopa County Superior Court in the case Barnes vs. ASRS and the State of Arizona. That Judgment directed that the ASRS retirement contribution (not LTD) rate split, for pre-July 2011 ASRS members only, return to a 50/50 percent member/employer split prospectively.The new law applies to all ASRS members regardless of membership date, includes the LTD plan contributions, and applies the 50/50 percent split retroactively.

The revised contribution rate, retroactive to July 1, 2011 and effective through June 30, 2012, now is:

Retirement Pension &
Health Insurance Benefit / Long Term Disability
Income Plan / TOTAL
Employee / 10.50% / 0.24% / 10.74%
Employer / 10.50% / 0.24% / 10.74%

IMPORTANT INFORMATION:

  • Employers must provide rebalancing records to the ASRS no later than June 30, 2012. Employers will be able to utilize 1) the standard contributions reporting method if their payroll system is capable of generating a file for upload, 2) the adjustment template for non-ASRS web-based reporting users, or 3) the adjustment entry module for web-based reporting users. The adjustments can be sent by an off-cycle payroll or be included in your regular pay period. In the comment section of either the file upload page or the ACH payment page, type in “FY 2012 rate adjustment.”
  • Remember, all rebalancing records must be submitted to the ASRS by June 30, 2012, regardless if the employer reimburses the employee at a later date.HB 2264 requires that employersreimburseeligible employeesno later than September 30, 2012.
  • If you are an employer who uses a third party payroll company, please advise them of these changes. An employer may refer to Chapter 6 of the ASRS Employer Manual available on the ASRS website for additional information on adjustments.
  • A file listing those employees who have already been made whole through an ASRS disbursement process and are not eligible for a refund will be sent in a separate email by close of business Wednesday, May 9 to your employer’s designated administrator on file with the ASRS. Be sure that your contact information with the ASRS is up-to-date.
  • An information sheet for members has been posted to the ASRS website, should you receive inquiries from your employees.

Employers may direct questions to

Sincerely,

Employer Relations

Arizona State Retirement System