A.R.S. tit. 38 | Title 38 — Public Officers and Employees

Chapter 1 General Provisions

Article 1 Definitions

§ 38-101 Definitions

In this title, unless the context otherwise requires:

"Office", "board" or "commission" means any office, board or commission of the state, or any political subdivision thereof, the salary or compensation of the incumbent or members of which is paid from a fund raised by taxation or by public revenue.
"Public institution" means any institution maintained and paid for from a fund raised by taxation or by public revenue.
"Officer" or "public officer" means the incumbent of any office, member of any board or commission, or his deputy or assistant exercising the powers and duties of the officer, other than clerks or mere employees of the officer.

Chapter 2 Qualification and Tenure

Article 1 Qualifications

§ 38-201 General qualifications

A. Every officer shall be not less than eighteen years of age, a citizen of the United States and a resident of this state.

B. No person is eligible to any office, employment or service in any public institution in the state, or in any of the several counties thereof, of any kind or character, whether by election, appointment or contract, unless he is a citizen of the United States, but the provisions of this subsection shall not apply to the employment of any teacher, instructor or professor authorized to teach in the United States under the teacher exchange program as provided by federal statutes or the employment of university or college faculty members.

C. A person who is unable to speak, write and read the English language is not eligible to hold a state, county, city, town or precinct office in the state, whether elective or appointive, and no certificate of election or commission shall issue to a person so disqualified.

D. Except as provided in subsection E, a person is not eligible for employment by or service for the state or a political subdivision of the state, including all boards and commissions of the state or political subdivision, all multimember governing bodies of departments, agencies, institutions and instrumentalities of the state or political subdivisions unless the person has registered with the selective service system if required by the federal military selective service act (62 Stat. 604; 50 United States Code App. section 453).

E. A person may not be denied a right, privilege or benefit by reason of subsection D if either of the following applies:

The requirement for the person to so register has terminated or become inapplicable to the person.
The person shows by a preponderance of the evidence that the failure of the person to register with the selective service system was not a knowing and willful failure to register.

Article 2 Nomination and Confirmation of Appointive Officers

§ 38-211 Nominations by governor; consent of senate; appointment

A. When it is provided by law that a state officer shall be appointed pursuant to this section, the governor shall nominate and with the consent of the senate appoint such officer as prescribed in this section.

B. If the term of any state office that is appointive pursuant to this section expires, begins or becomes vacant during a regular legislative session, the governor shall during such session nominate a person who meets the requirements of law for such office and shall promptly transmit the nomination to the president of the senate. If the incumbent is capable of continuing to serve until his successor has qualified, a nominee to that position shall not assume and discharge the duties of the office, pending senate confirmation. If the incumbent is unable to continue to discharge the duties of office, the nominee shall assume and discharge the duties of the office pending senate confirmation. If the senate consents to the nomination, the governor shall then appoint the nominee to serve for the term or, in the case of a vacancy, for the unexpired term in which the vacancy occurred. If the senate rejects the nomination the nominee shall not be appointed and the governor shall promptly nominate another person who meets the requirements for such office. If the senate takes no formal action on the nomination during such legislative session, or if a nomination other than one that is required to be sent to the senate during the first week of the legislative session is not received during the session, the governor shall after the close of such legislative session appoint the nominee to serve, and the nominee shall discharge the duties of office, subject to confirmation during the next legislative session.

C. If the term of any state office that is appointive pursuant to this section expires, begins or becomes vacant during a time in which the legislature is not in regular session, the governor shall nominate a person who meets the requirements of law for such office and shall transmit the nomination to the president of the senate during the first week of the next regular session. The nominee shall assume and discharge the duties of the office until rejection of the nomination or inaction of the senate.

D. Every officer who is subject to confirmation as provided in this section and whose term is not fixed by law shall hold office at the pleasure of the appointing power.

E. In no event shall a nominee serve longer than one year after nomination without senate consent.

F. Nominations made by the governor shall be in writing, designating the residence of the nominee and the office for which nominated.

G. When the senate consents to a nomination, its secretary shall deliver a copy of the resolution of consent, certified by the president of the senate, to the secretary of state, who shall notify the governor. When the senate rejects a nomination, its secretary shall inform the governor promptly.

H. Before nomination or appointment by the governor pursuant to this section, the prospective nominee shall submit a full set of fingerprints to the governor for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.

§ 38-212 Limitation on appointments

Where the statutes limit the number of members of a board or commission who can be members of the same political party, the governor shall not appoint as a member of any such board or commission any person who does not have a continuous recorded registration pursuant to title 16, chapter 1, with the same political party or as an independent for at least two years immediately preceding appointment.

Article 3 Commission of Office

§ 38-221 Commission of office

A. The governor shall commission in the name and by the authority of the state:

Officers elected by the electors of the state whose commissions or certificates of election are not otherwise provided for.
Officers elected by the legislature.
Officers of the militia.
Officers appointed by the governor, or by the governor with the advice and consent of the senate.

B. The commission shall be signed by the governor and attested by the secretary of state under the great seal of the state.

C. The commissions of all officers other than those provided for in subsection A of this section, where no special provision is made by law, shall be signed by the presiding officer of the body or person making the appointment.

Article 4 Oath of Office

§ 38-231 Officers and employees required to take loyalty oath; form; classification; definition

A. In order to ensure the statewide application of this section on a uniform basis, each board, commission, agency and independent office of this state, and of any of its political subdivisions, and of any county, city, town, municipal corporation, school district and public educational institution, shall completely reproduce this section so that the form of written oath or affirmation required in this section contains all of the provisions of this section for use by all officers and employees of all boards, commissions, agencies and independent offices.

B. Any officer or employee who fails to take and subscribe to the oath or affirmation provided by this section within the time limits prescribed by this section is not entitled to any compensation until the officer or employee does so take and subscribe to the form of oath or affirmation prescribed by this section.

C. Any officer or employee having taken the form of oath or affirmation prescribed by this section, and knowingly at the time of subscribing to the oath or affirmation, or at any time thereafter during the officer’s or employee's term of office or employment, does commit or aid in the commission of any act to overthrow by force, violence or terrorism as defined in section 13-2301 the government of this state or of any of its political subdivisions, or advocates the overthrow by force, violence or terrorism as defined in section 13-2301 of the government of this state or of any of its political subdivisions, is guilty of a class 4 felony and, on conviction under this section, the officer or employee is deemed discharged from the office or employment and is not entitled to any additional compensation or any other emoluments or benefits which may have been incident or appurtenant to the office or employment.

D. Any of the persons referred to in article XVIII, section 10, Constitution of Arizona, as amended, relating to the employment of aliens, are exempted from any compliance with this section.

E. In addition to any other form of oath or affirmation specifically provided by law for an officer or employee, before any officer or employee enters upon the duties of the office or employment, the officer or employee shall take and subscribe the following oath or affirmation:

State of Arizona, County of ______________ I, _____________________

(type or print name)

do solemnly swear (or affirm) that I will support the Constitution of the United States and the Constitution and laws of the State of Arizona, that I will bear true faith and allegiance to the same and defend them against all enemies, foreign and domestic, and that I will faithfully and impartially discharge the duties of the office of ______________________ (name of office) ________________________ according to the best of my ability, so help me God (or so I do affirm).

(signature of officer or employee)

F. For the purposes of this section, "officer or employee" means any person elected, appointed or employed, either on a part-time or full-time basis, by this state or any of its political subdivisions or any county, city, town, municipal corporation, school district, public educational institution or any board, commission or agency of any county, city, town, municipal corporation, school district or public educational institution.

§ 38-232 Time of oath

When a different time is not prescribed, the oath of office shall be taken and subscribed as follows:

If appointed, at or before commencement of the term of office.
If elected, at any time after receiving the officer's certificate of election, and at or before commencement of the term of office.

§ 38-233 Filing oaths of record

A. The official oaths of state elective officers shall be filed of record in the office of the secretary of state. The official oaths of all other state officers and employees shall be filed of record in the office of the employing state board, commission or agency.

B. The official oaths of elective county and elective precinct officers shall be filed of record in the office of the county recorder, except the oath of the recorder, which shall be filed with the clerk of the board of supervisors. The official oaths of notaries public shall be endorsed upon their bond and filed with the secretary of state. The official oaths of all other county and precinct officers and employees shall be filed of record in the office of the employing county or precinct board, commission or agency.

C. The official oaths of all city, town or municipal corporation officers or employees shall be filed of record in the respective office of the employing board, commission or agency of the cities, towns and municipal corporations.

D. The official oaths of all officers and employees of all school districts shall be filed of record in the school district office.

E. The official oaths of all officers and employees of each public educational institution except school districts shall be filed of record in the respective offices of the public educational institutions.

F. The official oath or affirmation required to be filed of record shall be maintained as an official record throughout the person's term, appointment or employment plus a period of time to be determined pursuant to sections 41-151.15 and 41-151.19.

§ 38-234 Usurpation of office; classification

A person who knowingly intrudes himself into a public office to which he has not been elected or appointed, or a person who, having been a public officer, knowingly exercises the functions of his office after his term has expired and a successor has been elected or appointed and has qualified, is guilty of a class 2 misdemeanor.

Article 5 Official Bond

§ 38-251 State officers and employees blanket bond; amount; approval

A. The governor shall obtain and deliver to the secretary of state a blanket bond, payable to the state, in the principal amount of one hundred thousand dollars for each state officer and employee conditioned on the faithful performance of his duties.

B. All state officers and employees are bonded pursuant to this section unless otherwise provided by law.

C. The attorney general shall determine the form and sufficiency of the blanket bond.

§ 38-253 Approval of bond; filing

The approval of every official bond shall be endorsed thereon, signed by the officer approving the bond, and filed within the time prescribed for filing the oath in the office in which the official oath of the office is filed, except that the bonds of deputies or employees shall be filed with the officer appointing the deputy or employee. No fee shall be charged for the filing or recording thereof.

§ 38-254 Bond premiums as public charge

When a public officer, excepting a notary public, his deputy, assistant or employee is required by law or by a board or commission of the respective agencies of the state to give bond for the performance of the duties of his office and the surety of the bond is a corporation, the premiums for the writing of the bonds shall be a public charge of such officer and shall be paid from the expense fund of the agency, or if no expense fund exists, then by the state or county out of the general fund.

§ 38-255 Recording of bond; copies

Every officer with whom bonds are filed shall record them in a book kept by him for that purpose, preserve the bond and give certified copies thereof under seal to any person upon demand and payment of the fee for a copy and certificate.

§ 38-256 Form of official bonds

All official bonds shall be joint and several in form and made payable to the state of Arizona. The condition shall be that the principal will well, truly and faithfully perform all official duties required of him by law. The bond shall be signed by the principal and at least two sureties or a qualified surety company, and shall comply and be subject to the law governing the bond of such officer.

§ 38-257 Justification of sureties; officers ineligible as sureties

A. The officer whose duty it is to approve the bond shall not accept or approve it unless the sureties severally justify as required by law.

B. A member of the board of supervisors shall not be accepted as surety upon the official bond of any county or precinct officer of the county, nor shall the sheriff, treasurer, recorder, assessor or county attorney of the same county become sureties upon official bonds for each other.

C. Officers shall not approve any bond when the financial standing and ability of the sureties thereon are unknown to them, or when any of the sureties thereon are assessed for the current year for taxes upon property the aggregate value of which is less than the amount for which the surety becomes liable upon the bond, unless either:

The surety is first examined under oath before the officer authorized to approve the bond concerning the surety's ability to respond in damages.
The approving officer, upon examination and after diligent inquiry into the assets and liabilities of the proposed surety, is satisfied that the proposed surety is good and possesses ample means to respond in double the amount for which the surety proposes to become liable upon the bond.

§ 38-258 Limitation of liability by sureties

When the penal amount of any bond required to be given amounts to more than one thousand dollars, the sureties may become severally liable for portions of not less than five hundred dollars thereof, making in the aggregate at least two sureties for the whole penal sum. If any such bond becomes forfeited, action may be brought thereon against all or any number of the obligors and judgment entered against them, either jointly or severally as they are liable. The judgment shall not be entered against a surety severally bound for a greater amount than that for which he is specifically liable by the terms of the bond. Each surety is liable to contribution of his cosureties in proportion to the amount for which he is liable.

§ 38-259 Extent of liability

Every official bond executed by an officer pursuant to law is in force and obligatory upon the principal and sureties therein for any and all breaches of the conditions thereof committed during the time the officer continues to discharge any of the duties of or hold the office, whether the breaches are committed or suffered by the principal officer, his deputy or clerk. When, except in criminal prosecutions, a penalty, forfeiture or liability is imposed on any officer for nonperformance or malperformance of official duty, the liability therefor attaches to the official bond of the officer, and to the principal and sureties thereon. Every such bond is in force and obligatory upon the principal and sureties therein for the faithful discharge of all duties which may be required of the officer by any law enacted subsequently to the execution of the bond, and such condition shall be expressed therein.

§ 38-260 Beneficiaries of bond

Every official bond executed by any officer pursuant to law, is in force and obligatory upon the principal and sureties therein to and for the state and to and for the use and benefit of all persons who may be injured or aggrieved by the wrongful act or default of the officer in his official capacity. Any person so injured or aggrieved may bring an action on the bond in his own name without an assignment thereof.

§ 38-261 Successive recoveries

No bond is void on the first recovery of a judgment thereon, but action may afterwards be brought on the bond from time to time by the state, or by any person injured, and judgment recovered thereon until the whole penalty of the bond is exhausted.

§ 38-262 Defects in form, approval or filing of bond

When an official bond does not contain the substantial matter or conditions required by law, or when there are any defects in the approval or filing thereof, such defects shall not discharge the officer and his sureties, and they are bound to the state, or party injured, according to the conditions and obligations required by law to be inserted therein. The state or the injured party may in an action upon the bond, suggest the defect in the bond, approval or filing, and recover the proper and equitable demand or damages from the officer and the persons who intended to become and were included as sureties in the bond.

§ 38-263 Additional bond; failure to file

A. When a surety on any official bond moves from the state, becomes insolvent or insufficient, or the penalty on the bond becomes insufficient, the person approving the bond shall, of his own motion, or on the showing of any person, supported by an affidavit, at once notify any such officer to appear before him at a time stated, not less than three nor more than ten days after the service of the notice, and show cause why he should not execute a new or additional bond with good and sufficient sureties.

B. After hearing thereon, either party aggrieved by the decision may appeal to the judge of the superior court of the county in which the bond is filed, and in the absence of the judge, to the court commissioner of the county, who shall proceed to hear the matter summarily and decide the case, and such decision shall be final. If the officer fails to appear, the matter may be heard in his absence, and if any officer, when required to do so, fails to file a new or additional bond, his office shall be deemed vacant.

§ 38-264 Additional bond; terms

The new or additional bond shall be in the penalty directed by the person approving the original bond, in all respects similar to, and approved by and filed with the same officer as the original bond. When so filed it shall be of like force from the date of its execution and subject the officer and his sureties to the same liabilities as the original bond.

§ 38-265 Liability on original and additional bonds

The original bond is not discharged or affected by the giving of new or additional bond, but remains of like force and obligation as if the new or additional bond had not been given. The officer and his sureties are liable upon either or both bonds, and an action may be brought upon either bond, or separate actions on both bonds, and the same cause of action may be alleged and judgment recovered in each action.

§ 38-266 Judgment on original and additional bonds; contribution of sureties

A. If separate judgments are recovered on the bonds for the same cause of action, the plaintiff is entitled to have execution issued on both judgments, but he shall only collect by execution or otherwise the amount actually adjudged to him on the same causes of action, together with the costs of both actions.

B. When the sureties on either bond have been compelled to pay any amount of money on account of the principal obligor therein, they are entitled to recover of the sureties on the remaining bond, a distributive part of the amount thus paid, in the proportion which the penalties of the bonds bear one to the other, and to the amount thus paid, respectively.

§ 38-267 Discharge of sureties

A. When any sureties on the official bond of an officer wish to be discharged from their liability, they and such officer may procure such discharge if the officer will execute a new bond to be approved and filed as the original bond. Upon the filing and approval of the new bond, the first sureties are exonerated from all further liability, but their bond remains in full force as to all liabilities incurred previous to the approval of the new bond.

B. The liability of the sureties in each new bond is in all respects the same and may be enforced in like manner as the liability of the sureties in the original bond.

§ 38-268 Bonds of persons appointed to fill vacancies

Any person appointed to fill a vacancy, before entering upon the duties of the office, shall give a bond as required of the officer originally elected or appointed.

§ 38-269 Withdrawal of surety; effect on remaining sureties

A. Any surety on the official bond of any officer may be relieved from liabilities thereon afterwards accruing by complying with the following provisions:

The surety shall file with the person authorized by law to approve the official bond, a sworn statement in writing setting forth his desire to be relieved from liability thereon afterwards arising, and the reasons therefor.
Serve notice of the filing of the statement on the officer named in the official bond, and make return or affidavit of service thereon and file it with the approving officer.

B. Within ten days after the service of the notice, the person authorized to approve the bond shall make an order declaring such office vacant, and releasing the surety from all liability thereafter to arise on the official bond, and the office thereafter is in law vacant, and shall be immediately filled by election or appointment, as in other cases of vacancy, unless the officer has before that time given good and ample surety for the discharge of all his official duties as originally required.

C. The release, discharge, voluntary withdrawal or incompetency of the surety on any official bond, does not affect the bond as to the remaining sureties thereon, or alter or change their liability.

§ 38-270 Supplemental bond upon withdrawal of surety; exception

A. When a surety on any official bond gives notice of intention to withdraw therefrom, or is removed or becomes insolvent or becomes otherwise incompetent, the principal shall, within ten days after the notice or disqualification, execute and file, subject to the same conditions as the original, a supplemental bond, in which shall be recited the names of the remaining original sureties, and the name of the new surety, and the amount for which he becomes bound, who is substituted in lieu of the surety released or disqualified.

B. When the original bond is given for an amount in excess of the amount required by law, if the withdrawal or removal of any surety does not reduce the bond below the amount required by law to be secured by sureties, then no supplemental or additional bond is necessary. Until the filing and approval of the supplemental bond, the sureties withdrawing or removed on the formed bond are liable for all the acts of their principals.

§ 38-271 Effect of withdrawal on liability of surety

No surety shall be released from liability for acts, omissions or causes existing or which arose before the making of the order discharging him, but legal proceedings may be had therefor in all respects as though no such order had been made.

§ 38-272 Affidavit of plaintiff in action to recover on bond that defendant owns real property; notice to recorder

After an action has been commenced to recover upon any bond required to be given by a public officer, the plaintiff may file an affidavit stating either positively or on information and belief that the bond was executed by the defendant, and that the defendant has real property, designating the county or counties in which it is located. The clerk receiving the affidavit shall certify to the recorder of the county in which the real estate is located the names of the parties to the action, the name of the court in which the action is pending and the amount claimed in the complaint, with the date of the commencement of the action.

§ 38-273 Recording notice of ownership of real property; lien of judgment

Upon receiving the certificate the county recorder shall endorse, file and record it in the same manner as notices of the pendency of an action affecting real estate. Any judgment recovered in such action is a lien upon all real estate belonging to the defendant and located in any county in which the certificate is filed for the amount that the owner thereof is or may be liable upon the judgment, from the time of filing the certificate.

Article 6 Vacancy in Office

§ 38-291 Vacancy defined

An office shall be deemed vacant from and after the occurrence of any of the following events before the expiration of a term of office:

Death of the person holding the office.
Insanity of the person holding the office, when judicially determined.
Resignation of the person holding the office and the lawful acceptance of the resignation.
Removal from office of the person holding the office, including the removal of a board or commission member by the appointing power before the expiration of the person's term of office.
If the office is elective, the person holding the office ceasing to be a resident of the state, or, if the office is local, or from a legislative or congressional district, the person holding the office ceasing to be a resident of the district, county, city, town or precinct for which the person was elected, or within which the duties of the person's office are required to be discharged.
Absence from the state by the person holding the office, without permission of the legislature, beyond the period of three consecutive months.
The person holding the office ceasing to discharge the duties of office for the period of three consecutive months.
Conviction of the person holding the office of a felony or an offense involving a violation of the person's official duties.
Failure of the person elected or appointed to the office to file the person's official oath within the time prescribed by law.
A decision of a competent tribunal declaring void the election or appointment of the person elected or appointed to the office.
Failure of a person to be elected or appointed to the office.
A violation of section 38-296 by the person holding the office.

§ 38-292 Notice of vacancy in office

When an officer is removed, declared insane or convicted of a felony or an offense involving a violation of his official duties, or when his election or appointment is declared void, the body, judge or officer before whom the proceedings were had shall give notice thereof to the officer empowered to fill the vacancy.

§ 38-293 Effect of conviction of officer

In addition to the penalty fixed by express terms for every neglect or violation of official duty on the part of public officers of the state, a county, city, town, district or township where it is not so expressly provided, such officers may, in the discretion of the court, be removed from office.

§ 38-294 Resignations

Resignations shall be in writing and made as follows:

By members of the legislature, to the presiding officer of the body of which the legislator is a member, who shall immediately transmit the resignation to the governor.
By state officers and officers of the militia, to the governor.
By other officers commissioned by the governor, to the governor.
By county officers, to the chairman of the board of supervisors of their county.
By the chairman of the board of supervisors, to the county recorder of the county.
In cases not otherwise provided for, by filing the resignation in the office of the secretary of state.
By appointive officers, to the body or officer that appointed them, unless otherwise provided.

§ 38-295 Term of office; discharge of official duties after expiration of term; appointment to fill unexpired term

A. Unless otherwise specified by law, every officer holds office at the pleasure of the appointing power.

B. Every officer shall continue to discharge the duties of the office, although the term has expired, until a successor has qualified. The discharge of the duties of office for appointments requiring senate confirmation shall be governed by section 38-211.

C. Vacancies occurring in an office, or in the membership of a board or commission, shall be filled only for the unexpired term of the officer or member.

§ 38-296 Limitation on filing for election by incumbent of elective office

A. Except during the final year of the term being served, no incumbent of a salaried elective office, whether holding by election or appointment, may offer himself for nomination or election to any salaried local, state or federal office.

B. An incumbent of a salaried elected office shall be deemed to have offered himself for nomination or election to a salaried local, state or federal office on the filing of a nomination paper pursuant to section 16-311, subsection A. An incumbent of a salaried elected office is not deemed to have offered himself for nomination or election to an office by making a formal declaration of candidacy for the office.

C. The resignation of the incumbent elective officer duly filed in writing with the officer, board or commission having jurisdiction of the office, if not accepted within ten days, shall be deemed to have become effective as of the date of filing.

D. This section shall not be construed to prohibit a person whose resignation from office has become effective from qualifying as a candidate for another office during the unexpired portion of the term affected by the resignation, nor shall it apply to any incumbent elective officer who seeks reelection to the same office or to any other public office during the final year of the term to which the person has been so elected.

E. A person violating any provision of this section is guilty of misfeasance in office, and the office held by such person shall be declared vacant.

§ 38-296.01 Limitation on running for multiple offices

A. A person is not eligible to be a candidate for nomination or election to more than one public office if the elections for those offices are held on the same day and if the person would be prohibited from serving in the offices simultaneously.

B. A person is not eligible to be a candidate for nomination or election to more than one federal office simultaneously. This ineligibility does not apply to candidates for nomination or election to the offices of president and vice president. Candidates for nomination or election to the offices of president or vice president may be candidates for nomination or election to one additional federal office simultaneously.

C. A person is not eligible to be a candidate for nomination or election to and is not eligible to serve simultaneously in more than one statewide office.

D. A person is not eligible to be a candidate for nomination or election to and is not eligible to serve simultaneously in more than one legislative office.

E. A person is not eligible to be a candidate for nomination or election to and is not eligible to serve simultaneously in both a legislative office and a statewide office.

F. A person is not eligible to be a candidate for nomination or election to and is not eligible to serve simultaneously on more than one school district governing board, except that a member of a governing board may be a candidate for nomination or election for any other governing board if the member is serving in the last year of a term of office.

§ 38-297 Temporary vacancy resulting from military service; appointive officers and employees

Notwithstanding section 38-361, when a vacancy exists through the induction or order of an appointive officer or employee described in section 38-298 into the armed forces of the United States, the appointing or employing authority shall inform any person appointed to fill the vacancy that the tenure, apart from other considerations, is contingent upon restoration of the former officer or employee as provided in section 38-298.

§ 38-298 Restoration to position following military service

An appointive officer or employee of the state or of a political subdivision thereof, including an employee of the educational system, having been inducted or ordered into active service in the armed forces of the United States after August 1, 1939, shall, upon completion of his service, be restored to the position held by him at the time of induction or of reporting for service, or to a position having similar or other duties which he is qualified to discharge, and of like status and pay, if such officer or employee:

Possesses a certificate of satisfactory training and service or honorable discharge issued by the proper military or naval authority.
Is still qualified to perform the duties of the position.
Applies for restoration within sixty days after separation from the armed forces.
Has either served in the armed forces during time of war or was called to service because of his status as an active or inactive member of the reserve.

§ 38-299 Effect of expiration of term prior to separation from military service

An appointive officer included within the provisions of section 38-298 whose term of office is prescribed by law is not entitled to the protection of sections 38-297 and 38-298 if his term of office expires on or before the date he is relieved from military or naval service. If such officer is so relieved prior to expiration of his term, restoration to his office pursuant to section 38-298 shall be for the unexpired portion of the term.

§ 38-300 Temporary vacancy resulting from military service; elective office

Notwithstanding section 38-291, paragraph 7, if a person serving in an elective office of this state other than the governor, or a political subdivision of this state receives orders for active military duty and the period of active duty is projected to continue for at least three months but less than the remainder of the officer's term of office, the office may be temporarily vacated. A temporary replacement may be appointed in the same manner as prescribed by law for a permanent replacement. The temporary appointee shall serve until the officer returns from active military duty or until the expiration of the officer's term of office, whichever occurs first.

Article 7 Impeachment of State and Judicial Officers

§ 38-311 Officers subject to impeachment

The governor, every state and judicial officer, except justices of courts not of record, shall be liable to impeachment for high crimes, misdemeanors or malfeasance in office.

§ 38-312 Articles of impeachment

Impeachment shall be instituted in the house of representatives by resolution, and shall be conducted by managers elected by the house of representatives, who shall prepare articles of impeachment, present them at the bar of the senate and prosecute them. The hearing shall be heard before the senate sitting as a court of impeachment.

§ 38-313 Impeachment hearing; service on accused

A. The senate shall assign a day for hearing the impeachment, and inform the house of representatives thereof.

B. The president of the senate shall cause a copy of the articles of impeachment, with a notice to appear and answer them at the time and place appointed, to be served on the accused not less than ten days before the day fixed for the hearing. The service shall be made by the sergeant-at-arms of the senate upon the accused personally, or, if he cannot upon diligent inquiry be found within the state, the senate, upon proof of such fact, may order publication of the notice to be made in a manner it deems proper.

§ 38-314 Court of impeachment; organization

Not later than ten days after the articles of impeachment have been presented to the senate, the senate shall organize as a court of impeachment and may, for the purpose of conducting the proceedings of that court, appoint a clerk who may be the secretary of the senate. The clerk shall issue all process and keep a record of the proceedings of the court. The court shall also appoint a marshal, who shall be the sergeant at arms of the senate, and an assistant marshal. The senate sitting as a court of impeachment may also employ such legal, stenographic, clerical and other assistance as is required, and fix their compensation.

§ 38-315 Witness fees; execution of process

A. Witnesses shall receive the same compensation for travel and attendance, and the same exemptions in going, remaining and returning as witnesses in civil proceedings conducted in the superior court.

B. Officers executing the process and orders of the court of impeachment shall receive the fees allowed sheriffs for like service in the superior court.

§ 38-316 Absence of senator from hearing

The senate, while sitting as a court of impeachment, shall determine what accumulation of absences of a senator during the hearing shall exclude the senator from voting on the final decision.

§ 38-317 Compensation of impeachment personnel

A. The senators composing the court of impeachment and the managers representing the house of representatives shall be paid during the impeachment trial the compensation, mileage, and subsistence provided by law for members of the legislature when convened in regular session.

B. The managers shall be allowed the same compensation for the time required in preparing the proceedings for presentation to the court of impeachment together with their actual and necessary expenses; such expenses shall include the personal or subsistence expenses of the managers. In addition, the managers may during the preparation of the proceedings and the trial thereof also employ legal, stenographic, clerical and other assistance as is required and fix their compensation.

C. The members, officers, employees of the court, the board of managers and all employees of the board of managers shall be paid on verified claims approved by the presiding justice of the court and attested by its clerk.

D. Court reporters employed by the court may be paid the compensation provided by law for reporting proceedings before magistrates, and shall also receive from the party ordering a transcript of the proceedings the compensation provided by law for such services.

E. In lieu of the procedures prescribed by the terms of subsection D of this section, the court may provide by contract for the reporting of such proceedings and for the transcripts thereof.

§ 38-318 Expenses of impeachment proceedings

The expenses of impeachment proceedings, after the legislature has adjourned, shall be a charge upon the general fund of the state and shall be paid from any money in the general fund not otherwise appropriated upon verified claims, approved and attested as provided in section 38-317.

§ 38-319 Vacancy in board of managers

When a vacancy occurs in the board of managers selected by the house to try impeachment proceedings before the senate, and the house of representatives is not in session, the speaker or the presiding member, or if there is no presiding member, then the oldest member of the house in point of age, shall appoint a member of the house to fill the vacancy.

§ 38-320 Appearance of accused; plea

A. If the accused does not appear, the court of impeachment, upon proof of service or publication may, on motion or for cause shown, assign another day for hearing the impeachment proceedings, or may proceed in the absence of the accused to trial and judgment.

B. The accused may, in writing, object to the sufficiency of the articles of impeachment, or he may answer them by an oral plea of not guilty. The plea of not guilty shall be entered upon the journal and places in issue every material allegation of the articles of impeachment.

C. If the objection to the sufficiency of the articles of impeachment is not sustained by a majority of the members of the court who heard the argument, the accused shall be ordered forthwith to answer the articles of impeachment. If the accused then pleads guilty, or refuses to plead, the court shall render judgment of conviction against him. If the accused pleads not guilty, the court shall at such time as it appoints, try the impeachment.

§ 38-321 Judgment

If the accused is convicted, the court of impeachment shall, at such time as it appoints, pronounce judgment by resolution entered upon the journals of the court, which shall be the judgment of the senate. The judgment of conviction may provide that the accused be removed from office or that he be removed from office and disqualified to hold any office of honor, trust or profit under the constitution and laws of the state.

§ 38-322 Performance of official duties by accused

When articles of impeachment against any officer subject to impeachment are presented to the senate, such officer shall continue to perform the duties of his office unless and until removed.

Article 8 Removal of County and Precinct Officers

§ 38-341 Accusation by grand jury

A. An accusation, in writing, against a county, district or precinct officer for wilful or corrupt misconduct in office may be presented by a grand jury of the county for or in which the officer accused is elected or appointed.

B. The accusation shall state the offense charged in ordinary and concise language, and without repetition.

§ 38-342 Service on accused; appearance and plea

A. The accusation shall be delivered by the foreman of the grand jury to the county attorney, who shall cause a copy thereof to be served upon the accused, and require by written notice of not less than ten days that he appear before the superior court in and for the county and answer the accusation. The original accusation shall then be filed with the clerk of the court.

B. The accused shall appear at the time appointed in the notice and answer the accusation, unless the court assigns another day for that purpose. If the accused does not appear, the court may hear and determine the accusation in his absence.

C. The accused may answer the accusation either by objecting in writing to the sufficiency thereof or of any charge therein, and if overruled the accused shall immediately enter a denial which shall be entered upon the minutes of the court.

§ 38-343 Trial; judgment

A. If the accused pleads guilty or refuses to answer the accusation, the court shall render judgment of conviction against him. If the accused denies the matters charged, the court shall immediately, or at such time as it appoints, try the accusation.

B. The trial shall be by jury, unless expressly waived by the accused, and conducted in the same manner as the trial of an indictment or information.

C. Upon conviction, the court shall pronounce judgment that the accused be removed from office.

§ 38-344 Procedure upon accusation of county attorney

The same proceedings on the same grounds as provided in this article may be had for removal of the county attorney, except that the accusation shall be delivered to a judge of the superior court of the county, who shall thereupon file the accusation with the clerk of the court and appoint a person to act as prosecuting officer in the matter.

§ 38-345 Right of appeal; suspension from office pending appeal

An appeal may be taken from a judgment of removal to the supreme court in the same manner as from a judgment in a civil action, but until the judgment is reversed the accused shall be suspended from office. Pending the appeal the office may be filled as vacancies in other offices are filled.

Article 9 Successor to Office

§ 38-361 Powers and duties of successor in office

Any person elected or appointed to fill a vacancy, after filing his official oath and bond, if a bond is required, possesses all the rights and powers and is subject to all the liabilities, duties and obligations of the officer who previously occupied the office.

§ 38-362 Delivery of property and records to successor

Every public officer on vacating an office, or, in case of his death, his legal representative, shall deliver to his successor in office all property, books, papers and documents relating to or connected with the office and the official duties of the office.

§ 38-363 Withholding or destruction of records or property of office by former officer; classification

A public officer whose office is abolished by law, or who, after expiration of the time for which he has been appointed or elected, or after he has resigned or been legally removed from office, knowingly and unlawfully withholds or detains from his successor, or other person entitled thereto, the records, papers, documents or other writings pertaining or belonging to his office, or who knowingly mutilates, destroys or takes away any thereof, or who knowingly and unlawfully withholds or detains from his successor, or other person entitled thereto, any money or property in his custody as such officer, is guilty of a class 4 felony.

§ 38-364 Summary proceedings to obtain property and records of office

If any person refuses or neglects to deliver to the lawful incumbent any property or records pertaining to the office or the duties of the office, the incumbent may apply by petition to the superior court of the county in which the person resides, and the court shall proceed in a summary manner, after notice to the adverse party, to hear the petition and enter judgment thereon. The execution of the judgment and the delivery of the books and papers may be enforced by attachment, and also by a warrant directed to the sheriff or a constable of the county, commanding him to search for the books and papers, and to take and deliver them to the petitioner.

Chapter 2.1 Continuity of State and Local Government

Article 1 General Provisions

§ 38-381 Declaration of policy

The legislature declares:

That recent technological developments make possible an enemy attack of unprecedented destructiveness, which may result in the death or inability to act of a large proportion of the elected officials of the government of the state and the political subdivisions thereof.
That to conform, in time of attack, to existing legal requirements as to filling of vacancies would be impractical, would admit of undue delay, and would jeopardize continuity of civil government.
That it is, therefore, necessary to adopt special provisions as provided in this article for continuity of all echelons of civil government in the state of Arizona.

§ 38-382 Definitions

In this article, unless the context otherwise requires:

"Attack" means any action or series of actions taken by an enemy of the United States resulting in substantial damage or injury to persons or property in this state whether through sabotage, bombs, missiles, shellfire or atomic, radiological, chemical, bacteriological, biological or other means.
"Legislating body" means any branch of government of this state or of any political subdivision of this state which has the constitutional authority to enact laws, resolutions or ordinances.
"Political subdivision" means a county, city or town.

§ 38-383 Unavailability of governor; appointment of temporary successor

In the event of an attack after which the duly elected governor or his successors designated by the Constitution of Arizona are unavailable to serve due to death or for other reasons, the state legislature in emergency session shall designate a temporary governor who shall serve until such time as conditions permit compliance with constitutional mandates for filling the vacancy. Such designee shall be of the same political party as the duly elected governor and he is authorized to exercise full powers and duties of the office during his temporary appointment.

§ 38-384 Unavailability of other elected officers of the state or political subdivisions; appointment of temporary successor

In the event of an attack after which any duly elected officer of the state or of any political subdivision thereof, or his legal successor, if any, are unavailable to serve due to death or for other reasons, the legislating body of the state or the respective political subdivision in emergency session shall designate a temporary successor if required to maintain continuity of its civil government. Such temporary successor shall serve until such time as conditions permit compliance with constitutional mandates for filling vacancies. Such designee shall be of the same political party as the duly elected official and he is authorized to exercise full powers and duties of the office during his temporary appointment.

§ 38-385 Convening legislating bodies in event of an attack

A. In the event of an attack, the governor shall call the state legislature into emergency session as soon as practicable, and in any case within fifteen days following the inception of the attack. If the governor fails to issue such call, the legislature shall, on the fifteenth day from the inception of the attack, automatically convene at the state capitol or at an alternate site if conditions are such that the regularly designated state capitol is uninhabitable.

B. In the event of an attack, the mayor of each city and town and the chairman of the county board of supervisors of each county shall call their respective legislating bodies into emergency session as soon as practicable and in any case within fifteen days following the inception of the attack. If a mayor or chairman of any county board fails to issue such call, the legislating body shall, on the fifteenth day from the date of the inception of the attack, automatically convene at the seat of government or at an alternate site if conditions are such that the regularly designated seat is uninhabitable.

C. At any such session or at any session in operation at the state or local level at the inception of an attack, there shall be no limitations on the length of such session nor on the subjects which may be acted upon.

§ 38-386 Quorum and vote requirements of state and local legislating bodies

A. In the event of an attack, the quorum requirement for the legislating body of the state and any county, city or town shall be a majority of the members of each body who convene for the session. Where the affirmative vote of a specified proportion of the members of the legislating body would otherwise be required for approval of a bill, resolution, ordinance or for any other action, the same proportion of those members of the legislating body convening at the session shall be sufficient.

B. Any bill, resolution, ordinance or any other action taken by any such legislating body under suspension of the constitutional quorum and vote requirements shall be ratified by the body with a regularly constituted quorum present if it is to have the effect of law after the duration of the emergency for which it was enacted.

Chapter 3 Conduct of Office

Article 1 Hours for State Offices

§ 38-401 Office hours for state offices

State offices shall be kept open for transaction of business from eight o'clock a.m. until five o'clock p.m. each day from Monday through Friday except:

On holidays.
In implementing an agency furlough if the department of administration has authorized the state office to be closed in order to meet the furlough requirements. An agency that receives this authorization shall ensure that appropriate notice is given to notify the public of the office closure.
As otherwise provided by law.

Article 2 Fees

§ 38-411 Record of fees; inspection of fee book

Every officer entitled by law to charge fees for services shall keep a fee book and shall enter therein all fees charged for services rendered. The fee book shall at all times be subject to inspection by any person to ascertain the amount of fees therein charged.

§ 38-412 Posting schedule of fees

Recorders, clerks of the superior courts, sheriffs, justices of the peace, constables and notaries public shall keep posted at all times in a conspicuous place in their respective offices a complete list of the fees they are allowed to charge.

§ 38-413 Charging excessive fees; classification

A. If an officer demands and receives a higher fee than prescribed by law, or any fee not so allowed, such officer shall be liable to the party aggrieved in an amount four times the fee unlawfully demanded and received by him.

B. An officer who violates this section is guilty of a class 5 felony.

§ 38-414 Collection of fees; failure to report amount collected; classification

A public officer who by law is required to make an abstract or statement of the amount of fees, compensation or percentage as earned or collected by him or his deputies, or as having been returned to him by any other officer or person, or who is required by law to keep or preserve such abstract or statement or to file it in some designated place, who knowingly fails or refuses to make or file such abstract or statement as required by law, is guilty of a class 2 misdemeanor and shall be removed from office by judgment of the court.

Article 3 Records

§ 38-421 Stealing, destroying, altering or secreting public record; classification

A. An officer having custody of any record, map or book, or of any paper or proceeding of any court, filed or deposited in any public office, or placed in his hands for any purpose, who steals, or knowingly and without lawful authority destroys, mutilates, defaces, alters, falsifies, removes or secretes the whole or any part thereof, or who permits any other person so to do, is guilty of a class 4 felony.

B. A person not an officer who is guilty of the conduct specified in subsection A of this section is guilty of a class 6 felony.

§ 38-422 Failure of tax or revenue collector or disburser to permit inspection of books by attorney general or county attorney; classification

An officer charged with the collection, receipt or disbursement of any revenue or tax of the state, or any political subdivision thereof, who upon demand knowingly fails or refuses to permit the attorney general or a county attorney to inspect his books, papers, receipts and records pertaining to his office, is guilty of a class 2 misdemeanor.

§ 38-423 Making or giving false certificate; classification

A public officer authorized by law to make or give any certificate or other writing, who makes and delivers as true such a certificate or writing containing a statement which he knows is false, is guilty of a class 6 felony.

§ 38-424 Use of electronic recording devices; use of court reporter or stenographer; official record; presumed remedy for deficient electronic record

A. Except as provided in title 21, chapter 4, title 36, chapter 5, and subsections B and C of this section, this state or any agency of this state, including the judiciary, and each political subdivision of this state, including any courts of law, may for any purpose use electronic recording devices in lieu of court reporters or stenographers.

B. If requested by either party in writing at least five court days before a trial or hearing arising out of an indictment or information and a court reporter or stenographer is available on the day of the trial or hearing, a court reporter or stenographer shall be used, except that if the court finds a trial is required to start within the five days in order to comply with a victim's or defendant's right to a speedy trial, the court may commence the trial using an electronic recording device.

C. If requested by either party in writing at least five court days before a trial or hearing held pursuant to title 36, chapter 37 and a court reporter or stenographer is available on the day of the trial or hearing, a court reporter or stenographer shall be used.

D. Either party may provide a court reporter or stenographer in addition to the electronic recording device that is used by a court to record the proceedings. The official record of the proceedings is the record prepared by the court reporter. If no court reporter is available, the official record of the proceedings is the record prepared by the court pursuant to rules adopted by the supreme court.

E. If an electronic recording device is used in a trial or hearing arising out of an indictment or information, on the request of either party, the court shall hold a hearing to determine if there is a deficiency in the electronic record of the proceeding and whether the deficiency prejudiced a party. If the court finds that a deficiency in the electronic record prejudiced a party, the court shall presume that the prejudiced party is entitled to a new trial or phase of trial pursuant to rule 24 of the Arizona rules of criminal procedure.

Article 3.1 Public Meetings and Proceedings

§ 38-431 Definitions

In this article, unless the context otherwise requires:

"Advisory committee" or "subcommittee" means any entity, however designated, that is officially established, on motion and order of a public body or by the presiding officer of the public body, and whose members have been appointed for the specific purpose of making a recommendation concerning a decision to be made or considered or a course of conduct to be taken or considered by the public body.
"Executive session" means a gathering of a quorum of members of a public body from which the public is excluded for one or more of the reasons prescribed in section 38-431.03. In addition to the members of the public body, officers, appointees and employees as provided in section 38-431.03 and the auditor general as provided in section 41-1279.04, only individuals whose presence is reasonably necessary in order for the public body to carry out its executive session responsibilities may attend the executive session.
"Legal action" means a collective decision, commitment or promise made by a public body pursuant to the constitution, the public body's charter, bylaws or specified scope of appointment and the laws of this state.
"Meeting":

(a) Means the gathering, in person or through technological devices, of a quorum of the members of a public body at which they discuss, propose or take legal action, including any deliberations by a quorum with respect to that action.

(b) Includes:

(i) A one-way electronic communication by one member of a public body that is sent to a quorum of the members of a public body and that proposes legal action.

(ii) An exchange of electronic communications among a quorum of the members of a public body that involves a discussion, deliberation or the taking of legal action by the public body concerning a matter likely to come before the public body for action.

"Political subdivision" means all political subdivisions of this state, including without limitation all counties, cities and towns, school districts and special districts.
"Public body" means the legislature, all boards and commissions of this state or political subdivisions, all multimember governing bodies of departments, agencies, institutions and instrumentalities of this state or political subdivisions, including without limitation all corporations and other instrumentalities whose boards of directors are appointed or elected by this state or a political subdivision. Public body includes all quasi-judicial bodies and all standing, special or advisory committees or subcommittees of, or appointed by, the public body. Public body includes all commissions and other public entities established by the Arizona Constitution or by way of ballot initiative, including the independent redistricting commission, and this article applies except and only to the extent that specific constitutional provisions supersede this article.
"Quasi-judicial body" means a public body, other than a court of law, possessing the power to hold hearings on disputed matters between a private person and a public agency and to make decisions in the general manner of a court regarding such disputed claims.

§ 38-431.01 Meetings shall be open to the public; seating; minutes; recordings

A. All meetings of any public body shall be public meetings and all persons so desiring shall be allowed to attend and listen to the deliberations and proceedings. All legal action of public bodies shall occur during a public meeting.

B. Schools, school boards, executive boards and municipalities shall provide for an amount of seating sufficient to accommodate the reasonably anticipated attendance of all persons desiring to attend the deliberations and proceedings, when feasible. This section does not require a public body to relocate a meeting outside of the largest regular meeting room.

C. All public bodies shall provide for the taking of written minutes or a recording of all their meetings, including executive sessions. For meetings other than executive sessions, the minutes or recording shall include:

The date, time and place of the meeting.
The members of the public body recorded as either present or absent.
A general description of the matters considered.
An accurate description of all legal actions proposed, discussed or taken, including a record of how each member voted. The minutes shall also include the names of the members who propose each motion and the names of the persons, as given, who make statements or present material to the public body and a reference to the legal action about which they made statements or presented material.

D. Minutes of executive sessions shall include items set forth in subsection C, paragraphs 1, 2 and 3 of this section, an accurate description of all instructions given pursuant to section 38-431.03, subsection A, paragraphs 4, 5 and 7 and other matters as may be deemed appropriate by the public body.

E. The minutes or a recording of a meeting shall be available for public inspection three working days after the meeting except as otherwise specifically provided by this article.

F. A public body of a city or town with a population of more than two thousand five hundred persons shall:

Within three working days after a meeting, except for subcommittees and advisory committees, post on its website, if applicable, either:

(a) A statement describing the legal actions taken by the public body of the city or town during the meeting.

(b) Any recording of the meeting.

Within two working days following approval of the minutes, post approved minutes of city or town council meetings on its website, if applicable, except as otherwise specifically provided by this article.
Within ten working days after a subcommittee or advisory committee meeting, post on its website, if applicable, either:

(a) A statement describing legal action, if any.

(b) A recording of the meeting.

G. All or any part of a public meeting of a public body may be recorded by any person in attendance by means of a tape recorder or camera or any other means of sonic reproduction, provided that there is no active interference with the conduct of the meeting.

H. The secretary of state for state public bodies, the city or town clerk for municipal public bodies and the county clerk for all other local public bodies shall conspicuously post open meeting law materials prepared and approved by the attorney general on their website. A person elected or appointed to a public body shall review the open meeting law materials at least one day before the day that person takes office.

I. A public body may make an open call to the public during a public meeting, subject to reasonable time, place and manner restrictions, to allow individuals to address the public body on any issue within the jurisdiction of the public body. At the conclusion of an open call to the public, individual members of the public body may respond to criticism made by those who have addressed the public body, may ask staff to review a matter or may ask that a matter be put on a future agenda. However, members of the public body shall not discuss or take legal action on matters raised during an open call to the public unless the matters are properly noticed for discussion and legal action.

J. A member of a public body shall not knowingly direct any staff member to communicate in violation of this article.

K. Any posting required by subsection F of this section must remain on the applicable website for at least one year after the date of the posting.

§ 38-431.02 Notice of meetings

A. Public notice of all meetings of public bodies shall be given as follows:

The public bodies of this state, including governing bodies of charter schools, shall:

(a) Conspicuously post a statement on their website stating where all public notices of their meetings will be posted, including the physical and electronic locations, and shall give additional public notice as is reasonable and practicable as to all meetings.

(b) Post all public meeting notices on their website and give additional public notice as is reasonable and practicable as to all meetings. A technological problem or failure that either prevents posting public notices on a website or that temporarily or permanently prevents using all or part of the website does not preclude holding the meeting for which the notice was posted if the public body complies with all other public notice requirements required by this section.

The public bodies of the counties and school districts shall:

Special districts that are formed pursuant to title 48:

(a) May conspicuously post a statement on their website stating where all public notices of their meetings will be posted, including the physical and electronic locations, and shall give additional public notice as is reasonable and practicable as to all meetings.

(b) May post all public meeting notices on their website and shall give additional public notice as is reasonable and practicable as to all meetings. A technological problem or failure that either prevents posting public notices on a website or that temporarily or permanently prevents using all or part of the website does not preclude holding the meeting for which the notice was posted if the public body complies with all other public notice requirements required by this section.

(c) If a statement or notice is not posted pursuant to subdivision (a) or (b) of this paragraph, shall file a statement with the clerk of the board of supervisors stating where all public notices of their meetings will be posted and shall give additional public notice as is reasonable and practicable as to all meetings.

The public bodies of the cities and towns shall:

(a) Conspicuously post a statement on their website or on a website of an association of cities and towns stating where all public notices of their meetings will be posted, including the physical and electronic locations, and shall give additional public notice as is reasonable and practicable as to all meetings.

(b) Post all public meeting notices on their website or on a website of an association of cities and towns and give additional public notice as is reasonable and practicable as to all meetings. A technological problem or failure that either prevents posting public notices on a website or that temporarily or permanently prevents using all or part of the website does not preclude holding the meeting for which the notice was posted if the public body complies with all other public notice requirements required by this section.

B. If an executive session is scheduled, a notice of the executive session shall state the provision of law authorizing the executive session, and the notice shall be provided to the:

Members of the public body.
General public.

C. Except as provided in subsections D and E of this section, meetings shall not be held without at least twenty-four hours' notice to the members of the public body and to the general public. The twenty-four-hour period includes Saturdays if the public has access to the physical posted location in addition to any website posting, but excludes Sundays and other holidays prescribed in section 1-301.

D. In case of an actual emergency, a meeting, including an executive session, may be held on such notice as is appropriate to the circumstances. If this subsection is used for conduct of an emergency session or the consideration of an emergency measure at a previously scheduled meeting the public body must post a public notice within twenty-four hours declaring that an emergency session has been held and setting forth the information required in subsections H and I of this section.

E. A meeting may be recessed and resumed with less than twenty-four hours' notice if public notice of the initial session of the meeting is given as required in subsection A of this section, and if, before recessing, notice is publicly given as to the time and place of the resumption of the meeting or the method by which notice shall be publicly given.

F. A public body that intends to meet for a specified calendar period, on a regular day, date or event during the calendar period, and at a regular place and time, may post public notice of the meetings at the beginning of the period. The notice shall specify the period for which notice is applicable.

G. Notice required under this section shall include an agenda of the matters to be discussed or decided at the meeting or information on how the public may obtain a copy of such an agenda. The agenda must be available to the public at least twenty-four hours before the meeting, except in the case of an actual emergency under subsection D of this section. The twenty-four-hour period includes Saturdays if the public has access to the physical posted location in addition to any website posting, but excludes Sundays and other holidays prescribed in section 1-301.

H. Agendas required under this section shall list the specific matters to be discussed, considered or decided at the meeting. Except for a meeting through technological devices, the agenda shall also include notice of the time that the public will have physical access to the meeting place. The public body may discuss, consider or make decisions only on matters listed on the agenda and other matters related thereto.

I. Notwithstanding the other provisions of this section, notice of executive sessions shall be required to include only a general description of the matters to be considered. The agenda shall provide more than just a recital of the statutory provisions authorizing the executive session, but need not contain information that would defeat the purpose of the executive session, compromise the legitimate privacy interests of a public officer, appointee or employee or compromise the attorney-client privilege.

J. Notwithstanding subsections H and I of this section, in the case of an actual emergency a matter may be discussed and considered and, at public meetings, decided, if the matter was not listed on the agenda and a statement setting forth the reasons necessitating the discussion, consideration or decision is placed in the minutes of the meeting and is publicly announced at the public meeting. In the case of an executive session, the reason for consideration of the emergency measure shall be announced publicly immediately before the executive session.

K. Notwithstanding subsection H of this section, the chief administrator, presiding officer or a member of a public body may present a brief summary of current events without listing in the agenda the specific matters to be summarized, if:

The summary is listed on the agenda.
The public body does not propose, discuss, deliberate or take legal action at that meeting on any matter in the summary unless the specific matter is properly noticed for legal action.

§ 38-431.03 Executive sessions; definitions

A. On a public majority vote of the members constituting a quorum, a public body may hold an executive session but only for the following purposes:

Discussion or consideration of employment, assignment, appointment, promotion, demotion, dismissal, salaries, disciplining or resignation of a public officer, appointee or employee of any public body, except that, with the exception of salary discussions, an officer, appointee or employee may demand that the discussion or consideration occur at a public meeting. The public body shall provide the officer, appointee or employee with written notice of the executive session as is appropriate but not less than twenty-four hours for the officer, appointee or employee to determine whether the discussion or consideration should occur at a public meeting.
Discussion or consideration of records exempt by law from public inspection, including the receipt and discussion of information or testimony that is specifically required to be maintained as confidential by state or federal law.
Discussion or consultation for legal advice with the attorney or attorneys of the public body.
Discussion or consultation with the attorneys of the public body in order to consider its position and instruct its attorneys regarding the public body's position regarding contracts that are the subject of negotiations, in pending or contemplated litigation or in settlement discussions conducted in order to avoid or resolve litigation.
Discussions or consultations with designated representatives of the public body in order to consider its position and instruct its representatives regarding negotiations with employee organizations regarding the salaries, salary schedules or compensation paid in the form of fringe benefits of employees of the public body.
Discussion, consultation or consideration for international and interstate negotiations or for negotiations by a city or town, or its designated representatives, with members of a tribal council, or its designated representatives, of an Indian reservation located within or adjacent to the city or town.
Discussions or consultations with designated representatives of the public body in order to consider its position and instruct its representatives regarding negotiations for the purchase, sale or lease of real property.
Discussion or consideration of matters relating to school safety operations or school safety plans or programs.
Discussions or consultations with designated representatives of the public body in order to discuss security plans, procedures, assessments, measures or systems relating to, or having an impact on, the security or safety of buildings, facilities, operations, critical infrastructure information and information technology maintained by the public body. Records, documentation, notes, or other materials made by, or provided to, the representatives pursuant to this paragraph are confidential and exempt from public disclosure under this chapter and title 39, chapter 1.

B. Minutes of and discussions made at executive sessions shall be kept confidential except from:

Members of the public body that met in executive session.
Officers, appointees or employees who were the subject of discussion or consideration pursuant to subsection A, paragraph 1 of this section.
The auditor general on a request made in connection with an audit authorized as provided by law.
A county attorney or the attorney general when investigating alleged violations of this article.

C. The public body shall instruct persons who are present at the executive session regarding the confidentiality requirements of this article.

D. Legal action involving a final vote or decision shall not be taken at an executive session, except that the public body may instruct its attorneys or representatives as provided in subsection A, paragraphs 4, 5 and 7 of this section. A public vote shall be taken before any legal action binds the public body.

E. Except as provided in section 38-431.02, subsections I and J, a public body shall not discuss any matter in an executive session that is not described in the notice of the executive session.

F. Disclosure of executive session information pursuant to this section or section 38-431.06 does not constitute a waiver of any privilege, including the attorney-client privilege. Any person receiving executive session information pursuant to this section or section 38-431.06 shall not disclose that information except to the attorney general or county attorney, by agreement with the public body or to a court in camera for purposes of enforcing this article. Any court that reviews executive session information shall take appropriate action to protect privileged information.

G. For the purposes of this section:

"Critical infrastructure" has the same meaning prescribed in section 41-1801.
"Information technology" has the same meaning prescribed in section 18-101.

§ 38-431.04 Writ of mandamus

Where the provisions of this article are not complied with, a court of competent jurisdiction may issue a writ of mandamus requiring that a meeting be open to the public.

§ 38-431.05 Meeting held in violation of article; business transacted null and void; ratification

A. All legal action transacted by any public body during a meeting held in violation of any provision of this article is null and void except as provided in subsection B.

B. A public body may ratify legal action taken in violation of this article in accordance with the following requirements:

Ratification shall take place at a public meeting within thirty days after discovery of the violation or after such discovery should have been made by the exercise of reasonable diligence.
The notice for the meeting shall include a description of the action to be ratified, a clear statement that the public body proposes to ratify a prior action and information on how the public may obtain a detailed written description of the action to be ratified.
The public body shall make available to the public a detailed written description of the action to be ratified and all deliberations, consultations and decisions by members of the public body that preceded and related to such action. The written description shall also be included as part of the minutes of the meeting at which ratification is taken.
The public body shall make available to the public the notice and detailed written description required by this section at least seventy-two hours in advance of the public meeting at which the ratification is taken.

§ 38-431.06 Investigations; written investigative demands

A. On receipt of a written complaint signed by a complainant alleging a violation of this article or on their own initiative, the attorney general or the county attorney for the county in which the alleged violation occurred may begin an investigation.

B. In addition to other powers conferred by this article, in order to carry out the duties prescribed in this article, the attorney general or the county attorney for the county in which the alleged violation occurred, or their designees, may:

Issue written investigative demands to any person.
Administer an oath or affirmation to any person for testimony.
Examine under oath any person in connection with the investigation of the alleged violation of this article.
Examine by means of inspecting, studying or copying any account, book, computer, document, minutes, paper, recording or record.
Require any person to file on prescribed forms a statement or report in writing and under oath of all the facts and circumstances requested by the attorney general or county attorney.

C. The written investigative demand shall:

Be served on the person in the manner required for service of process in this state or by certified mail, return receipt requested.
Describe the class or classes of documents or objects with sufficient definiteness to permit them to be fairly identified.
Prescribe a reasonable time at which the person shall appear to testify and within which the document or object shall be produced and advise the person that objections to or reasons for not complying with the demand may be filed with the attorney general or county attorney on or before that time.
Specify a place for the taking of testimony or for production of a document or object and designate a person who shall be the custodian of the document or object.

D. If a person objects to or otherwise fails to comply with the written investigation demand served on the person pursuant to subsection C, the attorney general or county attorney may file an action in the superior court for an order to enforce the demand. Venue for the action to enforce the demand shall be in Maricopa county or in the county in which the alleged violation occurred. Notice of hearing the action to enforce the demand and a copy of the action shall be served on the person in the same manner as that prescribed in the Arizona rules of civil procedure. If a court finds that the demand is proper, including that the compliance will not violate a privilege and that there is not a conflict of interest on the part of the attorney general or county attorney, that there is reasonable cause to believe there may have been a violation of this article and that the information sought or document or object demanded is relevant to the violation, the court shall order the person to comply with the demand, subject to modifications the court may prescribe. If the person fails to comply with the court's order, the court may issue any of the following orders until the person complies with the order:

Adjudging the person in contempt of court.
Granting injunctive relief against the person to whom the demand is issued to restrain the conduct that is the subject of the investigation.
Granting other relief the court deems proper.

§ 38-431.07 Violations; enforcement; civil penalty; removal from office; in camera review

A. Any person affected by an alleged violation of this article, the attorney general or the county attorney for the county in which an alleged violation of this article occurred may commence a suit in the superior court in the county in which the public body ordinarily meets, for the purpose of requiring compliance with, or the prevention of violations of, this article, by the public body as a whole, or to determine the applicability of this article to matters or legal actions of the public body. The attorney general may also commence a suit in the superior court in the county in which the public body ordinarily meets against an individual member of a public body for a knowing violation of this article, and in such a suit the court may impose a civil penalty against each person who knowingly violates this article or who knowingly aids, agrees to aid or attempts to aid in violating this article and order equitable relief as the court deems appropriate in the circumstances. The court may impose a civil penalty not to exceed five hundred dollars for the second offense and not to exceed two thousand five hundred dollars for the third and subsequent offenses. If the court imposes a civil penalty against an individual member of the public body who knowingly violates this article, the public body may not pay the civil penalty on behalf of, or otherwise reimburse, the individual against whom the civil penalty has been imposed. If the court finds that a person who might otherwise be liable under this subsection objected to the action of the public body and the objection is noted on a public record, the court may choose not to impose a civil penalty on that person. The civil penalties awarded pursuant to this section shall be deposited into the general fund of the public body concerned. The court may also order payment to a successful plaintiff in a suit brought under this section of the plaintiff's reasonable attorney fees, by the defendant state, the political subdivision of the state or the incorporated city or town of which the public body is a part or to which it reports. If the court determines that a public officer with intent to deprive the public of information knowingly violated any provision of this article, the court may remove the public officer from office and shall assess the public officer or a person who knowingly aided, agreed to aid or attempted to aid the public officer in violating this article, or both, with all of the costs and attorney fees awarded to the plaintiff pursuant to this section.

B. A public body shall not expend public monies to employ or retain legal counsel to provide legal services or representation to the public body or any of its officers in any legal action commenced pursuant to any provisions of this article, unless the public body has authority to make the expenditure pursuant to other provisions of law and takes a legal action at a properly noticed open meeting approving the expenditure before incurring any obligation or indebtedness.

C. In any action brought pursuant to this section challenging the validity of an executive session, the court may review in camera the minutes of the executive session, and if the court in its discretion determines that the minutes are relevant and that justice so demands, the court may disclose to the parties or admit in evidence part or all of the minutes.

§ 38-431.08 Exceptions; limitation

A. This article does not apply to:

Any judicial proceeding of any court or any political caucus of the legislature.
Any conference committee of the legislature, except that all such meetings shall be open to the public.
The commissions on appellate and trial court appointments and the commission on judicial qualifications.
Good cause exception and central registry exception determinations and hearings conducted by the board of fingerprinting pursuant to sections 41-619.55 and 41-619.57.
The exchange of communications among a quorum of a three-member advisory committee or subcommittee that involves a discussion or deliberation concerning a matter before the advisory committee or subcommittee. The three-member advisory committee or subcommittee may not include more than one member who is a member of any public body.

B. A hearing held within a prison facility by the board of executive clemency is subject to this article, except that the director of the state department of corrections may:

Prohibit, on written findings that are made public within five days after so finding, any person from attending a hearing whose attendance would constitute a serious threat to the life or physical safety of any person or to the safe, secure and orderly operation of the prison.
Require a person who attends a hearing to sign an attendance log. If the person is over sixteen years of age, the person shall produce photographic identification that verifies the person's signature.
Prevent and prohibit any articles from being taken into a hearing except recording devices and, if the person who attends a hearing is a member of the media, cameras.
Require that a person who attends a hearing submit to a reasonable search on entering the facility.

C. The exclusive remedies available to any person who is denied attendance at or removed from a hearing by the director of the state department of corrections in violation of this section shall be those remedies available in section 38-431.07, as against the director only.

D. Either house of the legislature may adopt a rule or procedure pursuant to article IV, part 2, section 8, Constitution of Arizona, to provide an exemption to the notice and agenda requirements of this article or to allow standing or conference committees to meet through technological devices rather than only in person.

§ 38-431.09 Declaration of public policy

A. It is the public policy of this state that meetings of public bodies be conducted openly and that notices and agendas be provided for such meetings which contain such information as is reasonably necessary to inform the public of the matters to be discussed or decided. Toward this end, any person or entity charged with the interpretations of this article shall construe this article in favor of open and public meetings.

B. Notwithstanding subsection A, it is not a violation of this article if a member of a public body expresses an opinion or discusses an issue with the public either at a venue other than at a meeting that is subject to this article, personally, through the media or other form of public broadcast communication or through technological means if:

The opinion or discussion is not principally directed at or directly given to another member of the public body.
There is no concerted plan to engage in collective deliberation to take legal action.

Article 4 Official Acts

§ 38-441 Discharge of duties of another office; attestation

When an officer discharges ex officio the duties of another office, his official signature and the attestation shall be in the name of the office which he discharges.

§ 38-442 Persons acting as public officers without qualifying; classification; effect of acts

A. A person who exercises a function of a public office without taking the oath of office, or without giving the required bond, is guilty of a class 2 misdemeanor.

B. This section shall not affect the validity of acts done by a person exercising the functions of a public office in fact, where persons other than himself are interested in maintaining the validity of such acts.

§ 38-443 Nonfeasance in public office; classification

A public officer or person holding a position of public trust or employment who knowingly omits to perform any duty the performance of which is required of him by law is guilty of a class 2 misdemeanor unless special provision has been made for punishment of such omission.

§ 38-444 Asking or receiving illegal gratuity or reward; classification

A public officer who knowingly asks or receives any emolument, gratuity or reward, or any promise thereof, excepting those authorized by law, for doing any official act, is guilty of a class 6 felony.

§ 38-445 Using pass or obtaining special rates for transportation; classification; exception

A public officer, except a notary public or a member of the national guard of Arizona traveling under orders, who knowingly accepts or uses a pass or purchases transportation from a common carrier, other than as such transportation may be purchased by the general public, is guilty of a class 2 misdemeanor.

§ 38-446 Acts based on written opinions; immunity

Notwithstanding any provision of law to the contrary, no public officer or employee is personally liable for acts done in his official capacity in good faith reliance on written opinions of the attorney general issued pursuant to section 41-193, written opinions of a county attorney of the county, written opinions of the city or town attorney of the city or town or written opinions of any authorized private attorney for any independent public retirement trust fund or system for which the officer or employee serves or is employed.

§ 38-447 Violation of prohibition against acquisition of certain interests by public officers; classification

An officer or person prohibited by the laws of this state from making or being interested in contracts, or from becoming a vendor or purchaser at sales, or from purchasing evidences of indebtedness, who violates any provision of such laws, is guilty of a class 5 felony, and is forever disqualified from holding any office in this state.

§ 38-448 State employees; access to internet pornography prohibited; cause for dismissal; definitions

A. Except to the extent required in conjunction with a bona fide, agency approved research project or other agency approved undertaking, an employee of an agency shall not knowingly use agency owned or agency leased computer equipment to access, download, print or store any information infrastructure files or services that depict nudity, sexual activity, sexual excitement or ultimate sexual acts as defined in section 13-3501. Agency heads shall give, in writing, any agency approvals. Agency approvals are available for public inspection pursuant to section 39-121.

B. An employee who violates this section may be subject to discipline or dismissal.

C. All agencies shall immediately furnish their current employees with copies of this section. All agencies shall furnish all new employees with copies of this section at the time of authorizing an employee to use an agency computer.

D. For the purposes of this section:

"Agency" means:

(a) All offices, agencies, departments, boards, councils or commissions of this state.

(b) All state universities.

(d) All legislative agencies.

(e) All departments or agencies of the state supreme court or the court of appeals.

"Information infrastructure" means telecommunications, cable and computer networks and includes the internet, the world wide web, usenet, bulletin board systems, on-line systems and telephone networks.

§ 38-449 Display of POW/MIA flag

A. The POW/MIA flag shall be displayed on or in front of the locations prescribed in subsection B of this section on any day when the United States flag is displayed.

B. The locations for the display of the POW/MIA flag pursuant to subsection A of this section are the following:

The state capitol building.
The building that serves as the location of the superior court in a county.
The building that serves as the city or town hall of each incorporated city or town.
The building that serves as the main administrative building of each county.

C. The POW/MIA flag may be displayed on or in front of the following locations on any day when the United States flag is displayed:

The building that serves as the location of the municipal court in a city or town.
The building that serves as the location of the justice court.
The building that serves as the regional justice court center.

D. Notwithstanding any other law, when displayed with the United States flag on a single staff the POW/MIA flag shall be displayed below the Arizona state flag. When flags are displayed on multiple staffs the Arizona flag shall always be displayed to the honor of the United States flag.

§ 38-450 Display of honor and remember flag

A. The honor and remember flag shall be displayed on or in front of the locations prescribed in subsection B of this section on any day when the United States flag is flown at half-staff because of the death of a member of the United States armed forces.

B. The locations for the display of the honor and remember flag pursuant to subsection A of this section are the following:

The state capitol building.
The building that serves as the location of the superior court in a county.
The building that serves as the city or town hall of each incorporated city or town.

C. Notwithstanding any other law, when displayed with the United States flag on a single staff the honor and remember flag shall be displayed below the POW/MIA flag.

§ 38-451 Display of flags; notification; state agencies; state buildings; military service members

A. All state agencies, on notification from the governor of the death of a military service member of the United States armed forces who was killed in action and who claimed this state as the military service member's home of record or who was stationed in this state, shall fly all flags displayed on or in front of all state buildings at half-staff.

B. Notwithstanding any other law, when flags are displayed on multiple staffs the Arizona state flag shall always be displayed to the honor of the United States flag.

Article 5 Deputies and Assistants

§ 38-461 Appointment and recording of appointment

A. Every state officer, board or commission may appoint deputies and assistants when authorized by law, and may appoint clerks and employees for the prompt discharge of the duties of the office.

B. Deputies, assistants and subordinate officers whose appointments are not otherwise provided for by law shall be appointed by the officer or body to whom they are subordinate.

C. The appointment of deputies and assistants by state officers, boards or commissions shall be in writing and filed in the office of the secretary of state. The appointment of deputies, assistants or clerks by county officers or boards shall, except as otherwise provided, be in writing and recorded in the office of the county recorder.

§ 38-462 Powers and duties of deputies

A. Unless otherwise provided, each deputy of a state or county officer possesses the powers and may perform the duties prescribed by law for the office of the principal.

B. When the official name of any principal officer is used in law conferring power, or imposing duties, liabilities or prohibitions, it includes the officer's deputies.

§ 38-463 Liability of officer on bond for acts of deputies and assistants; bond of deputies and assistants; approval

A. Every officer is liable on his official bond for any official negligence or misconduct on the part of his deputies, clerks or assistants, and may require an official bond from a deputy appointed by him, in an amount not greater than that required of the officer and conditioned as required of the principal officer.

B. The bonds of deputies, clerks or employees, unless otherwise provided by law, shall be approved by the appointing power.

§ 38-464 Authorization for payment of salary; limitation

No salary or compensation shall be paid to deputies, assistants, clerks or employees of a state office, board or commission unless authorized in the appropriation made for that office, board or commission by the legislature, and under regulations the legislature prescribes.

§ 38-465 Purchase of appointment to office; classification

A person who knowingly gives or offers any gratuity or reward in consideration that he, or any other person, be appointed to a public office, or permitted to exercise or discharge the duties thereof, is guilty of a class 6 felony.

§ 38-466 Sale of appointment to office; classification

A public officer, who for a gratuity or reward, appoints another person to a public office, or permits another person to exercise or discharge any duties of his office, is guilty of a class 6 felony and shall forfeit his office and is forever disqualified from holding any office in this state.

Article 6 Employment of Relatives

§ 38-481 Employment of relatives; violation; classification; definition

A. It is unlawful, unless otherwise expressly provided by law, for an executive, legislative, ministerial or judicial officer to appoint or vote for appointment of any person related to him by affinity or consanguinity within the third degree to any clerkship, office, position, employment or duty in any department of the state, district, county, city or municipal government of which such executive, legislative, ministerial or judicial officer is a member, when the salary, wages or compensation of such appointee is to be paid from public funds or fees of such office, or to appoint, vote for or agree to appoint, or to work for, suggest, arrange or be a party to the appointment of any person in consideration of the appointment of a person related to him within the degree provided by this section.

B. Any executive, legislative, ministerial or judicial officer who violates any provision of this section is guilty of a class 2 misdemeanor.

C. The designation executive, legislative, ministerial or judicial officer includes all officials of the state, or of any county or incorporated city within the state, holding office either by election or appointment, and the heads of the departments of state, county or incorporated cities, officers and boards or managers of the universities.

Article 7 Civil Service Preference for Veterans

§ 38-491 Eligibility; age limit

A. This state, or any political subdivision of this state that employs personnel of any branch of its service under a merit system, civil service system or other system of employment on the basis of merit, by whatever name known, and whether pursuant to law, ordinance, rule, regulation or otherwise, shall provide that a veteran of the armed forces of the United States as defined by title 37, chapter 1, section 101, United States Code, separated from active duty under honorable conditions, is eligible to apply for and receive employment under such a merit system regardless of age, if otherwise qualified, subject only to the requirement that the veteran is below the regular retirement age at the time of entering the employment, if a retirement age is prescribed.

B. Any political subdivision of this state that employs personnel of any branch of its service under a merit system, civil service system or other system of employment on the basis of merit, by whatever name known, and whether pursuant to law, ordinance, rule, regulation or otherwise, shall provide that any veteran who is entitled under 10 United States Code chapter 1223 to retired pay for non-regular service or, but for age, would be entitled under that chapter to retired pay for non-regular service is eligible to apply for and receive employment under such a merit system regardless of age, if otherwise qualified, subject only to the requirement that the veteran is below the regular retirement age at the time of entering the employment, if a retirement age is prescribed.

§ 38-492 Preferences

A. A veteran of the armed forces of the United States who is separated from the armed forces under honorable conditions following more than six months of active duty and who takes an examination for employment by this state or any political subdivision of this state under a merit system of employment as provided by section 38-491, in the determination of the veteran's final rating on the examination, shall be given a preference of five points over persons other than veterans. The preference shall be added to the grade earned by the veteran, but only if the veteran earns a passing grade without preference. Any veteran who is entitled under 10 United States Code chapter 1223 to retired pay for non-regular service or, but for age, would be entitled under that chapter to retired pay for non-regular service and who takes an examination for employment by any political subdivision of this state under a merit system of employment as provided by section 38-491, in the determination of the veteran's final rating on the examination, shall be given a preference of five points over persons other than veterans. The preference shall be added to the grade earned by the veteran, but only if the veteran earns a passing grade without preference.

B. A person with a disability who takes an examination for employment by this state or any political subdivision of this state under a merit system of employment, in the determination of the person's with a disability final rating on such examination, shall be given a preference of five points. The preference shall be added to the grade earned by the person with a disability but only if such person earns a passing grade without preference. For the purposes of this subsection, "person with a disability" means an individual who has a physical or mental impairment that substantially limits one or more major life activities of the individual or who has a record of such an impairment or is regarded as having such an impairment.

C. A person qualified for a preference pursuant to subsections A and B of this section shall be given a ten point preference.

D. A spouse or surviving spouse of any of the following, otherwise qualified pursuant to subsection A of this section, shall be given a five point preference as if the spouse or surviving spouse were an eligible veteran pursuant to subsection A of this section:

Any veteran who died of a service-connected disability.
Any member of the armed forces who is serving on active duty and who, at the time of application, is listed by the secretary of defense of the United States in any of the following categories for not less than ninety days:

(a) Missing in action.

(b) Captured in the line of duty by a hostile force.

A person who has a total, permanent disability resulting from a service-connected disability or any person who died while the disability was in existence.

E. An honorably separated veteran who served on active duty in the armed forces at any time and who has a service-connected disability or is receiving compensation or disability retirement benefits under laws administered by the United States department of veterans affairs, army, navy, air force, coast guard or United States public health service shall be given a ten point preference pursuant to this section.

F. If a person is eligible for a preference pursuant to this section and the person applies for employment with this state or any political subdivision of this state under a merit system of employment as provided by section 38-491 in which applicants are assessed and evaluated but scores are not given, preference shall be given by granting applicable preference codes to qualified applicants.

G. No person eligible for a preference pursuant to this section shall be allowed more than a ten point preference.

H. If a department, division or agency of this state or any political subdivision of this state is operated under a merit system prescribed by the federal government or a department, division or agency of the federal government, the provisions of that system, including preferences, prevail.

§ 38-493 Effect of article

The provisions of this article shall be binding on the state and on a county, city, town or other political subdivision which employs personnel of any or all branches of its service under a merit system of employment as provided by section 38-491, regardless of any provision of the law, ordinance, rule, regulation or other enactment providing for such merit system.

§ 38-494 Violations; classification

A. A person violating any provision of this article is guilty of a class 2 misdemeanor.

B. An officer or person charged with the administration of a civil service or merit system of employment of the state or a county, city, town or other political subdivision who knowingly refuses or fails to observe any provision of this article in the selection of a public employee, or in grading the examination papers of an applicant for employment as provided in section 38-492, is guilty of a class 3 misdemeanor.

Article 8 Conflict of Interest of Officers and Employees

§ 38-501 Application of article

A. This article shall apply to all public officers and employees of incorporated cities or towns, of political subdivisions and of the state and any of its departments, commissions, agencies, bodies or boards.

B. Notwithstanding the provisions of any other law, or the provisions of any charter or ordinance of any incorporated city or town to the contrary, the provisions of this article shall be exclusively applicable to all officers and employees of every incorporated city or town or political subdivision or the state and any of its departments, commissions, agencies, bodies or boards and shall supersede the provisions of any other such law, charter provision or ordinance.

C. Other prohibitions in the state statutes against any specific conflict of interests shall be in addition to this article if consistent with the intent and provisions of this article.

§ 38-502 Definitions

In this article, unless the context otherwise requires:

"Compensation" means money, a tangible thing of value or a financial benefit.
"Employee" means all persons who are not public officers and who are employed on a full-time, part-time or contract basis by an incorporated city or town, a political subdivision or the state or any of its departments, commissions, agencies, bodies or boards for remuneration.
"Make known" means the filing of a paper which is signed by a public officer or employee and which fully discloses a substantial interest or the filing of a copy of the official minutes of a public agency which fully discloses a substantial interest. The filing shall be in the special file established pursuant to section 38-509.
"Official records" means the minutes or papers, records and documents maintained by a public agency for the specific purpose of receiving disclosures of substantial interests required to be made known by this article.
"Political subdivision" means all political subdivisions of the state and county, including all school districts.
"Public agency" means:

(a) All courts.

(b) Any department, agency, board, commission, institution, instrumentality or legislative or administrative body of the state, a county, an incorporated town or city and any other political subdivision.

"Public competitive bidding" means the method of purchasing prescribed by title 41, chapter 23, or procedures substantially equivalent to such method of purchasing, or as provided by local charter or ordinance.
"Public officer" means all elected and appointed officers of a public agency established by charter, ordinance, resolution, state constitution or statute.
"Relative" means the spouse, child, child's child, parent, grandparent, brother or sister of the whole or half blood and their spouses and the parent, brother, sister or child of a spouse.
"Remote interest" means:

(a) That of a nonsalaried officer of a nonprofit corporation.

(b) That of a landlord or tenant of the contracting party.

(d) That of a member of a nonprofit cooperative marketing association.

(e) The ownership of less than three percent of the shares of a corporation for profit, provided the total annual income from dividends, including the value of stock dividends, from the corporation does not exceed five percent of the total annual income of such officer or employee and any other payments made to him by the corporation do not exceed five percent of his total annual income.

(f) That of a public officer or employee in being reimbursed for his actual and necessary expenses incurred in the performance of official duty.

(g) That of a recipient of public services generally provided by the incorporated city or town, political subdivision or state department, commission, agency, body or board of which he is a public officer or employee, on the same terms and conditions as if he were not an officer or employee.

(h) That of a public school board member when the relative involved is not a dependent, as defined in section 43-1001, or a spouse.

(i) That of a public officer or employee, or that of a relative of a public officer or employee, unless the contract or decision involved would confer a direct economic benefit or detriment on the officer, the employee or his relative, of any of the following:

(i) Another political subdivision.

(ii) A public agency of another political subdivision.

(iii) A public agency except if it is the same governmental entity.

(j) That of a member of a trade, business, occupation, profession or class of persons consisting of at least ten members which is no greater than the interest of the other members of that trade, business, occupation, profession or class of persons.

(k) That of a relative who is an employee of any business entity or governmental entity that employs at least twenty-five employees within this state and who, in the capacity as an employee, does not assert control or decision-making authority over the entity's management or budget decisions.

(l) The ownership of any publicly traded investments that are held in an account or fund, including a mutual fund, that is managed by one or more qualified investment professionals who are not employed or controlled by the officer or employee and that the officer or employee owns shares or interest together with other investors.

"Substantial interest" means any nonspeculative pecuniary or proprietary interest, either direct or indirect, other than a remote interest.

§ 38-503 Conflict of interest; exemptions; employment prohibition

A. Any public officer or employee of a public agency who has, or whose relative has, a substantial interest in any contract, sale, purchase or service to such public agency shall make known that interest in the official records of such public agency and shall refrain from voting upon or otherwise participating in any manner as an officer or employee in such contract, sale or purchase.

B. Any public officer or employee who has, or whose relative has, a substantial interest in any decision of a public agency shall make known such interest in the official records of such public agency and shall refrain from participating in any manner as an officer or employee in such decision.

C. Notwithstanding the provisions of subsections A and B of this section, no public officer or employee of a public agency shall supply to such public agency any equipment, material, supplies or services, unless pursuant to an award or contract let after public competitive bidding, except that:

A school district governing board may purchase, as provided in sections 15-213 and 15-323, supplies, materials and equipment from a school board member.
Political subdivisions other than school districts may purchase through their governing bodies, without using public competitive bidding procedures, supplies, materials and equipment not exceeding three hundred dollars in cost in any single transaction, not to exceed a total of one thousand dollars annually, from a member of the governing body if the policy for such purchases is approved annually.

D. Notwithstanding subsections A and B of this section and as provided in sections 15-421 and 15-1441, the governing board of a school district or a community college district may not employ a person who is a member of the governing board or who is the spouse of a member of the governing board.

§ 38-504 Prohibited acts

A. A public officer or employee shall not represent another person for compensation before a public agency by which the officer or employee is or was employed within the preceding twelve months or on which the officer or employee serves or served within the preceding twelve months concerning any matter with which the officer or employee was directly concerned and in which the officer or employee personally participated during the officer's or employee's employment or service by a substantial and material exercise of administrative discretion.

B. During the period of a public officer's or employee's employment or service and for two years thereafter, a public officer or employee shall not disclose or use for the officer's or employee's personal profit, without appropriate authorization, any information acquired by the officer or employee in the course of the officer's or employee's official duties which has been clearly designated to the officer or employee as confidential when such confidential designation is warranted because of the status of the proceedings or the circumstances under which the information was received and preserving its confidentiality is necessary for the proper conduct of government business. A public officer or employee shall not disclose or use, without appropriate authorization, any information that is acquired by the officer or employee in the course of the officer's or employee's official duties and that is declared confidential by law.

C. A public officer or employee shall not use or attempt to use the officer's or employee's official position to secure any valuable thing or valuable benefit for the officer or employee that would not ordinarily accrue to the officer or employee in the performance of the officer's or employee's official duties if the thing or benefit is of such character as to manifest a substantial and improper influence on the officer or employee with respect to the officer's or employee's duties.

§ 38-505 Additional income prohibited for services

A. No public officer or employee may receive or agree to receive directly or indirectly compensation other than as provided by law for any service rendered or to be rendered by him personally in any case, proceeding, application, or other matter which is pending before the public agency of which he is a public officer or employee.

B. This section shall not be construed to prohibit the performance of ministerial functions including, but not limited to, the filing, or amendment of tax returns, applications for permits and licenses, incorporation papers, and other documents.

§ 38-506 Remedies

A. In addition to any other remedies provided by law, any contract entered into by a public agency in violation of this article is voidable at the instance of the public agency.

B. Any person affected by a decision of a public agency may commence a civil suit in the superior court for the purpose of enforcing the civil provisions of this article. The court may order such equitable relief as it deems appropriate in the circumstances including the remedies provided in this section.

C. The court may in its discretion order payment of costs, including reasonable attorney's fees, to the prevailing party in an action brought under subsection B.

§ 38-507 Opinions of the attorney general, county attorneys, city or town attorneys and house and senate ethics committee

Requests for opinions from either the attorney general, a county attorney, a city or town attorney, the senate ethics committee or the house of representatives ethics committee concerning violations of this article shall be confidential, but the final opinions shall be a matter of public record. The county attorneys shall file opinions with the county recorder, the city or town attorneys shall file opinions with the city or town clerk, the senate ethics committee shall file opinions with the senate secretary and the house of representatives ethics committee shall file opinions with the chief clerk of the house of representatives.

§ 38-508 Authority of public officers and employees to act

A. If the provisions of section 38-503 prevent an appointed public officer or a public employee from acting as required by law in his official capacity, such public officer or employee shall notify his superior authority of the conflicting interest. The superior authority may empower another to act or such authority may act in the capacity of the public officer or employee on the conflicting matter.

B. If the provisions of section 38-503 prevent a public agency from acting as required by law in its official capacity, such action shall not be prevented if members of the agency who have apparent conflicts make known their substantial interests in the official records of their public agency.

§ 38-509 Filing of disclosures

Every political subdivision and public agency subject to this article shall maintain for public inspection in a special file all documents necessary to memorialize all disclosures of substantial interest made known pursuant to this article.

§ 38-510 Penalties

A. A person who:

Intentionally or knowingly violates any provision of sections 38-503 through 38-505 is guilty of a class 6 felony.
Recklessly or negligently violates any provision of sections 38-503 through 38-505 is guilty of a class 1 misdemeanor.

B. A person found guilty of an offense described in subsection A of this section shall forfeit his public office or employment if any.

C. It is no defense to a prosecution for a violation of sections 38-503 through 38-505 that the public officer or employee to whom a benefit is offered, conferred or agreed to be conferred was not qualified or authorized to act in the desired way.

D. It is a defense to a prosecution for a violation of sections 38-503 through 38-505 that the interest charged to be substantial was a remote interest.

§ 38-511 Cancellation of political subdivision and state contracts; definition

A. The state, its political subdivisions or any department or agency of either may, within three years after its execution, cancel any contract, without penalty or further obligation, made by the state, its political subdivisions, or any of the departments or agencies of either if any person significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the state, its political subdivisions or any of the departments or agencies of either is, at any time while the contract or any extension of the contract is in effect, an employee or agent of any other party to the contract in any capacity or a consultant to any other party of the contract with respect to the subject matter of the contract.

B. Leases of state trust land for terms longer than ten years cancelled under this section shall respect those rights given to mortgagees of the lessee by section 37-289 and other lawful provisions of the lease.

C. The cancellation under this section by the state or its political subdivisions shall be effective when written notice from the governor or the chief executive officer or governing body of the political subdivision is received by all other parties to the contract unless the notice specifies a later time.

D. The cancellation under this section by any department or agency of the state or its political subdivisions shall be effective when written notice from such party is received by all other parties to the contract unless the notice specifies a later time.

E. In addition to the right to cancel a contract as provided in subsection A of this section, the state, its political subdivisions or any department or agency of either may recoup any fee or commission paid or due to any person significantly involved in initiating, negotiating, securing, drafting or creating the contract on behalf of the state, its political subdivisions or any department or agency of either from any other party to the contract arising as the result of the contract.

F. Notice of this section shall be included in every contract to which the state, its political subdivisions, or any of the departments or agencies of either is a party.

G. For purposes of this section, "political subdivisions" do not include entities formed or operating under title 48, chapter 11, 12, 13, 17, 18, 19 or 22.

Article 8.1 Standards of Conduct for Members of the State Legislature

§ 38-519 Legislative ethics committees; membership; powers and duties; code of ethics

A. An ethics committee is established in the senate and an ethics committee is established in the house of representatives, each consisting of five members. The president of the senate and the speaker of the house of representatives shall appoint to the ethics committee of their respective house five members, not more than three of whom may be from the same political party.

B. Each ethics committee shall propose, and each house of the legislature shall adopt, not later than thirty days after the beginning of the first regular legislative session, a code of ethics and conflict of interest requirements as part of the rules of the respective house in the same manner as other rules are adopted.

C. On the request of a member of the legislature or on its own initiative, each ethics committee may issue advisory opinions interpreting the code of ethics, conflict of interest and financial disclosure requirements.

D. Each ethics committee shall investigate complaints and charges against members of its house and, if necessary, report the results of the investigation to its house with recommendations for further action.

E. A member is subject to punishment or expulsion as provided by article IV, part 2, section 11, Constitution of Arizona, for any violation of the code of ethics, conflict of interest or financial disclosure requirements.

Article 9 Disclosure of Information by Public Employees

§ 38-531 Definitions

In this article, unless the context otherwise requires:

"Employee" means an officer or employee of this state or any of its departments, commissions, agencies or boards. Employee includes employees and officers of community college districts, school districts and counties of this state and law enforcement officers of a city or town but does not include officers or employees of a municipal corporation established for the purpose of reclamation and distribution of water and the generation of electricity.
"Former employee" means an employee who was dismissed.
"Law enforcement officer" has the same meaning prescribed in section 38-1101.
"Personnel action" means:

(a) Appointment.

(b) Promotion.

(d) Detail, transfer or reassignment.

(e) Suspension, demotion or dismissal.

(f) Reinstatement.

(g) Restoration.

(h) Reemployment.

(i) Performance evaluation.

(j) Decision concerning pay, benefits or awards.

(k) Elimination of the employee's position without a reduction in force by reason of lack of monies or work.

(l) Other significant change in duties or responsibilities that is inconsistent with the employee's salary or grade level.

"Public body" means the attorney general, the legislature, the governor, a federal, state or local law enforcement agency, the county attorney, the governing board of a community college district or school district, the board of supervisors of a county or an agency director.
"Reprisal" means to take a personnel action the result of which is adverse to an employee.

§ 38-532 Prohibited personnel practice; violation; reinstatement; exceptions; civil penalty

A. It is a prohibited personnel practice for an employee who has control over personnel actions to take reprisal against an employee for a disclosure of information of a matter of public concern by the employee to a public body that the employee reasonably believes evidences:

A violation of any law.
Mismanagement, a gross waste of monies or an abuse of authority.

B. The disclosure by an employee to a public body alleging a violation of law, mismanagement, gross waste of monies or abuse of authority shall be in writing and shall contain the following information:

The date of the disclosure.
The name of the employee making the disclosure.
The nature of the alleged violation of law, mismanagement, gross waste of monies or abuse of authority.
If possible, the date or range of dates on which the alleged violation of law, mismanagement, gross waste of monies or abuse of authority occurred.

C. An employee who knowingly commits a prohibited personnel practice shall be ordered by the state personnel board, a community college district governing board, a school district governing board, a city or town personnel board or any other appropriate independent personnel board established or authorized pursuant to section 38-534 to pay a civil penalty of up to $5,000 to the state general fund, a county general fund, a community college district unrestricted general fund, a school district maintenance and operation fund or a city or town general fund, whichever is appropriate. The employee who committed the prohibited personnel practice, not the governmental entity, shall pay the civil penalty. On a finding that an employee committed a prohibited personnel practice, the employer shall take appropriate disciplinary action including dismissal, except that on a finding that an employee committed a prohibited personnel practice against an employee who disclosed information that the employee reasonably believed evidenced a violation of any law, the employee who knowingly committed the prohibited personnel practice is subject to a civil penalty of up to $10,000, the employer shall dismiss the employee and the employee is barred from any future employment by the government entity.

D. An employee or former employee against whom a prohibited personnel practice is committed may recover attorney fees, costs, back pay, general and special damages and full reinstatement for any reprisal resulting from the prohibited personnel practice as determined by the court.

E. An employee does not commit a prohibited personnel practice if he takes reprisal against an employee if that employee discloses information in a manner prohibited by law or the materials or information are prescribed as confidential by law.

F. This section may not be used as a defense in a disciplinary action where the employee is being disciplined for cause pursuant to section 41-773, except in a hearing on a complaint brought pursuant to this section by an employee or former employee who believes he has been the subject of a prohibited personnel practice as prescribed in this section as the result of a disclosure of information.

G. On request or at any time an employee alleges reprisal, an employer shall provide an employee who is subject to disciplinary or corrective action, suspension, demotion or dismissal with a copy of this section.

H. If an employee or former employee believes that a personnel action taken against him is the result of his disclosure of information under this section, he may make a complaint to an appropriate independent personnel board, if one is established or authorized pursuant to section 38-534, or to a community college district governing board, school district governing board or city or town council. If an independent personnel board has not been established or authorized, or if a school district governing board, a community college district governing board or a city or town council does not hear and decide personnel matters brought pursuant to this section, the employee or former employee may make a complaint to the state personnel board. A complaint made pursuant to this subsection shall be made within ten working days after the effective date of the action taken against him. The state personnel board, a school district governing board, a community college district governing board, a city or town council or any other appropriate independent personnel board shall, pursuant to the rules governing appeals under section 41-783, make a determination concerning:

The validity of the complaint.
Whether a prohibited personnel practice was committed against the employee or former employee as a result of disclosure of information by the employee or former employee.

I. If the state personnel board, a community college district governing board, a school district governing board, a city or town council or any other appropriate independent personnel board established or authorized pursuant to section 38-534 determines that a prohibited personnel practice was committed as a result of disclosure of information by the employee or former employee, it shall rescind the personnel action and order that all lost pay and benefits be returned to the employee or former employee. The employee, former employee, employee alleged to have committed a prohibited personnel practice pursuant to subsection A of this section or employer may appeal the decision of the state personnel board, a community college district governing board, a school district governing board, a city or town council or any other appropriate independent personnel board established or authorized pursuant to section 38-534 to the superior court as provided in title 12, chapter 7, article 6.

J. For purposes of a hearing by the state personnel board, a school district governing board, a community college district governing board, a city or town council or any other appropriate independent personnel board conducted under this section, the employee, former employee, employee alleged to have committed the prohibited personnel practice pursuant to subsection A of this section and employer may be represented by counsel. In addition, representation by counsel in such hearings shall meet any other requirements stipulated by the state personnel board, a school district governing board, a community college district governing board, a city or town council or any other appropriate independent personnel board or as required by law.

K. An employee or former employee may also seek injunctive relief as is otherwise available in civil actions. A court may award reasonable attorney fees to an employee or former employee who prevails in an action pursuant to this section, but the award of attorney fees shall not exceed $10,000.

L. This section shall not be construed to limit or extend the civil or criminal liability of an employee or former employee for any disclosure of information or to limit an employee's right to a separate pretermination hearing with the employee's employer, as provided by law.

M. An employee who knowingly makes a false accusation that a public officer or employee who has control over personnel actions has engaged in a violation of any law, mismanagement, a gross waste of monies or an abuse of authority is personally subject to a civil penalty of up to $25,000 and dismissal from employment by the employer.

§ 38-533 Exemptions

This article does not apply to an employee or former employee of a state university or the board of regents which has in effect at the time a personnel action is taken against the employee a rule or provision for the protection of its employees from reprisal for the disclosure of information to a public body, except that the employee or former employee may appeal the final administrative decision to the superior court as provided in title 12, chapter 7, article 6. Notwithstanding section 12-910, an employee or former employee who has been dismissed is entitled to a trial de novo in superior court.

§ 38-534 Appropriate independent personnel boards

A. A community college district, school district, county and city or town may either:

Establish an appropriate independent personnel board to hear and decide personnel matters brought pursuant to section 38-532.
Authorize an existing independent board to hear and decide personnel matters brought pursuant to section 38-532.

B. Notwithstanding subsection A of this section, a school district governing board or a community college district governing board may hear and decide personnel matters brought pursuant to section 38-532.

C. If a community college district, school district, county or city or town does not establish an appropriate independent personnel board to hear and decide personnel matters brought pursuant to section 38-532, or does not authorize an existing independent board to hear and decide personnel matters brought pursuant to section 38-532, or if a school district governing board or a community college district governing board does not hear and decide personnel matters brought pursuant to section 38-532, complaints filed pursuant to this article shall be heard by the state personnel board.

Article 10 Designation of State and Political Subdivision Motor Vehicles

§ 38-538 Designation of state and political subdivision motor vehicles; definition

A. Except as provided in section 38-538.03, a motor vehicle owned or leased for six months or more by this state shall bear the designations "State of Arizona--(name of department or agency)" and "for official use only" in letters that are no more than two inches in height. The designation "for official use only" shall appear above the designation "State of Arizona--(name of department or agency)". The designations shall be on a decal that is placed on:

The rear window of the motor vehicle in an area that does not interfere with the driver's ability to safely operate the motor vehicle.
The rear bumper of the motor vehicle if the motor vehicle does not have a rear window.

B. A motor vehicle owned or leased for six months or more by a political subdivision of this state shall:

Bear the designation of the name of the political subdivision of this state and the department or agency of the political subdivision that owns or leases the motor vehicle in a visible manner as determined by the political subdivision.
Have placed on the motor vehicle in a visible manner as determined by the political subdivision the designation "for official use only".

C. For the purposes of this section, "political subdivision" includes an organization that is tax exempt as a political subdivision under the constitution or laws of this state.

§ 38-538.01 State and political subdivision vehicles; patterns and insignias; violation; classification

A. The state highway engineer shall approve a uniform pattern for use in the designation of state motor vehicles. A state agency or department may use a distinctive insignia, other than the uniform pattern, on approval of the insignia by the governor.

B. The governing body of each political subdivision shall approve a uniform pattern for use in designating the political subdivision motor vehicles.

C. A person who knowingly places a pattern or insignia approved for use as a designation for motor vehicles of this state or a political subdivision on a motor vehicle not owned or leased by this state or a political subdivision is guilty of a class 2 misdemeanor.

§ 38-538.02 Use of state motor vehicles; personal vehicle reimbursement

A. A motor vehicle owned or leased by this state shall not be provided to an employee, including an elected official, for the employee's personal use except as provided in subsection D of this section.

B. This state shall restrict the use of all motor vehicles owned or leased by it for motor pool use only. An employee may use a motor vehicle in the motor pool for business purposes only.

C. Reimbursement for travel for business purposes with an employee's own motor vehicle shall only be based on actual miles traveled.

D. This section does not apply to a person who is exempt under section 38-538.03 or a motor vehicle that is leased or rented pursuant to section 41-805 or section 41-1713, subsection B, paragraph 9.

E. For purposes of this section, use for business purposes does not include normal commuting to and from the employee's residence at any time unless the employee is on duty or on call for duty during the time that the employee is at the employee's residence.

§ 38-538.03 Exemptions

A. This article does not apply to a motor vehicle designated for the use of the governor.

B. The head of a state department or agency with the power and duty to conduct rehabilitation or social service programs, felony investigations or activities of a confidential nature may apply to the governor, or the head of a department or agency of a political subdivision may apply to the governing body of the political subdivision, for an exemption from this article for a motor vehicle used in this service. The application shall state the nature of the service and the year, make, model and identification number of the motor vehicle and shall provide other information the governor or political subdivision governing body requires. The governor or political subdivision governing body may grant the exemption for not more than one year.

§ 38-538.04 Violation; classification

Failure to comply with this article is a class 2 misdemeanor unless another classification is specifically prescribed in this article.

Chapter 3.1 Standards for Financial Disclosure

Article 1 General Provisions

§ 38-541 Definitions

In this chapter, unless the context otherwise requires:

"Business" includes any enterprise, organization, trade, occupation or profession, whether or not operated as a legal entity or for profit, including any business trust, corporation, partnership, joint venture or sole proprietorship.
"Compensation" means anything of value or advantage, present or prospective, including the forgiveness of debt.
"Controlled business" means any business in which the public officer or any member of his household has an ownership or beneficial interest, individually or combined, amounting to more than a fifty percent interest.
"Dependent business" means any business in which the public officer or any member of his household has an ownership or beneficial interest, individually or combined, amounting to more than a ten percent interest, and during the preceding calendar year the business received from a single source more than ten thousand dollars and more than fifty percent of its gross income.
"Gift" includes any gratuity, special discount, favor, hospitality, service, economic opportunity, loan or other benefit received without equivalent consideration and not provided to members of the public at large. Gift does not include:

(a) Travel-related expenses that are publicly reported pursuant to this article.

(b) Political campaign contributions that are publicly reported pursuant to title 16, chapter 6.

"Local public officer" means a person holding an elective office of an incorporated city or town, a county or a groundwater replenishment district established under title 48, chapter 27.
"Member of household" means a public officer's spouse and any minor child of whom the public officer has legal custody.
"Public officer" means a member of the legislature and any judge of the court of appeals or the superior court, or a person holding an elective office the constituency of which embraces the entire geographical limits of this state. Members of Congress are not public officers as defined in this paragraph.
"Travel-related expenses" means any costs associated with transportation, food, lodging and registration fees and other expenses directly related to travel to or from a meeting, conference or other event where the public officer is participating in the public officer's official capacity.

§ 38-543 Duty to file financial disclosure statement by candidate for public office

A candidate for public office as specified in section 38-541, paragraph 8 shall file a financial disclosure statement covering the preceding twelve month period and containing the information described in section 18-444 on a form prescribed by the secretary of state at the time of filing of nomination papers.

§ 38-544 Violation; classification

A. Any public officer, local public officer or candidate who knowingly fails to file a financial disclosure statement required pursuant to section 18-444, 38-543 or 38-545, who knowingly files an incomplete financial disclosure statement or who knowingly files a false financial disclosure statement is guilty of a class 1 misdemeanor.

B. Any public officer, local public officer or candidate who violates this chapter is subject to a civil penalty of fifty dollars for each day of noncompliance but not more than five hundred dollars that may be imposed as prescribed in sections 16-937 and 16-938.

§ 38-545 Local public officers financial disclosure

Notwithstanding the provisions of any law, charter or ordinance to the contrary, every incorporated city or town or county shall by ordinance, rule, resolution or regulation adopt standards of financial disclosure consistent with the provisions of this chapter applicable to local public officers.

Chapter 3.2 Public Service Orientation Programs

Article 1 General Provisions

§ 38-591 Definitions

In this chapter, unless the context otherwise requires:

"Public service orientation programs" means educational training about laws relating to the proper conduct of public business, including laws relating to bribery, conflicts of interest, contracting with the government, disclosure of confidential information, discrimination, nepotism, financial disclosure, gifts and extra compensation, incompatible employment, misuse of public resources for personal gain, political activity by public employees, public access to records, open meeting laws and conduct after leaving one's position with the government.
"State officer" means all individuals elected or appointed to the legislature, a statewide elective position, or a state agency, department, board, commission, committee or council.

§ 38-592 Public service orientation programs; implementation

A. The state shall conduct public service orientation programs so that all state officers and employees receive such training within six months after the date of hire, election or appointment. Each year after their training, all state officers and employees shall receive written information from the public entity responsible for providing the public service orientation program pursuant to subsection B, regarding changes in laws relating to the proper conduct of public business.

B. Public service orientation programs shall be administered as follows:

The attorney general shall implement the public service orientation program for all individuals elected or appointed to a statewide elective position and appointed to head a state agency or department.
Each house of the legislature shall implement the public service orientation program for members of its respective house and its employees.
The supreme court shall implement the public service orientation program for all elected and appointed members and employees of the judicial department.
The department of administration shall implement the public service orientation program for appointees and volunteers to all state agencies, departments, boards, commissions, committees and councils and for all other state employees.

Chapter 4 Compensation and Insurance

Article 1 Salaries

§ 38-601 Effect of payment of legal salary

State or county officers, employees, members of boards and commissions, and deputies, stenographers, clerks and employees of any such officer, board or commission, or of any institution, shall receive the salary provided by law, and shall not, under any pretext, receive any salary or emolument in excess of the salary so provided.

§ 38-602 Limitation on action for salary; waiver of right to additional salary

A. State and county officers, or former officers, their personal representatives or assigns, claiming the right to a salary as an officer or former officer due by virtue of any law of this state, shall bring an action for such salary within ninety days after the date the salary becomes due, and not thereafter.

B. In such action if it is alleged and proved that the party has received the compensation fixed by law, it shall be conclusively presumed that any right to additional salary has been waived and that the party has elected to receive such compensation in full payment.

§ 38-606 Suspension of salary pending determination of contested title to office; exception

A. When the title of the incumbent of any office is contested by proceedings instituted for that purpose, no warrant shall be drawn or paid for any part of such officer's salary, except when otherwise provided by the law relating to contests of elections, until the proceedings have been finally terminated.

B. As soon as such proceedings are instituted, the clerk of the court in which they are pending shall certify the facts to the officers whose duty it would otherwise be to draw the warrant or pay the salary.

§ 38-607 Recovery of payment to disqualified persons

Any board, officer or person who allows, audits or pays any warrant or other certificate of indebtedness for services performed to any person not qualified as provided in section 38-201, shall be liable for twice the amount so paid by an action in the name of any citizen of the county, if paid from county funds, or by an action in the name of any citizen of the state, if paid from state funds. The recovery, if any, shall be paid into the fund from which the amount was originally paid.

§ 38-608 Compensation or time off for legal holidays

A. All public employees who work forty hours or more per week who do not receive either compensation or commensurate time off for legal holidays worked, regardless of the day of the week on which such legal holidays fall, shall receive, for each such holiday worked, one day additional vacation leave or one day additional compensation for each such legal holiday worked.

B. For the purposes of this section, unless the context otherwise requires:

"Legal holiday" includes Christmas, Thanksgiving, Labor day, New Year's day and Independence day.
"Public employee" includes the employees of the state, a county, city, town or any other political subdivision of the state, but does not include irrigation, power, electrical, agricultural, improvement, drainage and flood control districts, and tax-levying public improvement districts organized pursuant to law.

§ 38-609 Retention of salary of subordinate; classification

A public officer or employee who accepts, retains or diverts for his own use or the use of any other person any part of the salary or fees allowed by law or usage to his deputy, clerk, other subordinate officer or employee, is guilty of a class 5 felony.

§ 38-610 Leaves of absence for certain military and disaster training; definitions

A. The officers and employees of this state, any county, city or town or any agency or political subdivision of this state or a county, city or town shall be granted leaves of absence from their duties without loss of time, pay or efficiency rating:

On all days during which they are employed on training duty or to attend camps, maneuvers, formations or drills under orders with any branch or reserve of the armed forces of the United States for the period prescribed in subsection C, paragraph 3 of this section.
On all days during which they are employed on training duty by the national disaster medical system under the United States department of health and human services.

B. The officers and employees of this state, any county, city or town or any agency or political subdivision of this state or a county, city or town shall be granted leaves of absence from their duties on all days during which they are employed on training duty or to attend camps, maneuvers, formations or drills under orders with any auxiliary of the armed forces of the United States. The state, any county, city or town or any agency or political subdivision of this state or a county, city or town may grant the leave of absence without loss of time, pay or efficiency rating as prescribed in subsection C, paragraph 3 of this section.

C. For the purposes of subsection A, paragraph 1 and subsection B of this section, the following apply:

An officer or employee may not be charged military leave for days on which the individual was not otherwise scheduled for work.
The period of time spent in training under orders may not be deducted from the vacation period with pay to which the officer or employee is otherwise entitled.
The military leave period is based on the average total of regularly scheduled hours in a weekly work period. An officer or employee of this state or a political subdivision of this state is entitled to up to three times the average of regularly scheduled work hours in a weekly work period each year and up to six times the average of regularly scheduled work hours in a weekly work period in any two consecutive years.

D. For the purposes of this section:

"Day" means a shift of work.
"Year" means the fiscal year of the United States government.

§ 38-610.01 Leave of absence and compensation for officers and employees during active military service

A. If the president of the United States or the governor of this state declares that a state of emergency exists, an officer or employee of this state who is ordered to active military service of the United States or this state as a member of the national guard, air national guard, army reserve, naval reserve, marine corps reserve, air force reserve or coast guard reserve and whose state employment is subject to title 41, chapter 4, article 4 or who is exempt pursuant to section 41-742, subsection D, paragraph 1, 2, 3 or 5 is eligible for an additional leave of absence until released from active duty by competent authority. During the additional leave of absence, the officer or employee shall continue to receive the officer's or employee's salary or compensation, less the amount of all pay and allowances for military activities while on active duty.

B. An officer or employee who receives salary or compensation pursuant to subsection A of this section is not entitled to accrue annual leave or sick leave during the period of active duty. Before qualifying for the compensation pursuant to subsection A of this section, the officer or employee must exhaust all military leave balances by the time of activation or at any time during the active duty period.

C. An officer or employee may receive compensation pursuant to subsection A of this section for the continuous duration of the officer's or employee's order.

D. Within sixty days after an officer or employee who receives pay differential pursuant to this section completes the period of active duty, the officer or employee shall provide proof that the officer or employee rendered honorable service while on active duty during any period for which the officer or employee received the pay differential pursuant to this section. The state may seek recovery of the pay differential from any person who fails to provide proof of honorable service.

E. The director of the department of administration shall establish procedures to be used by an eligible officer or employee to receive compensation pursuant to subsection A of this section.

§ 38-610.02 Leave of absence and compensation for national disaster medical system employment

A. An officer or employee of this state who is called into employment to the national disaster medical system under the United States department of health and human services and whose state employment is subject to title 41, chapter 4, article 4 or who is exempt pursuant to section 41-742, subsection D, paragraph 1, 2, 3 or 5 is eligible for an additional leave of absence until released from active duty by competent authority. During the additional leave of absence, the officer or employee shall continue to receive the officer's or employee's salary or compensation, less the amount of all pay and allowances for activities while on active duty with the national disaster medical system.

B. An officer or employee who receives salary or compensation pursuant to subsection A of this section is not entitled to accrue annual leave or sick leave during the period of active duty.

C. An officer or employee may receive compensation pursuant to subsection A of this section for the continuous duration of the officer's or employee's order.

D. Within sixty days after an officer or employee who receives pay differential pursuant to this section completes the period of active duty, the officer or employee shall provide proof that the officer or employee rendered honorable service while on active duty during any period for which the officer or employee received the pay differential pursuant to this section. This state may seek recovery of the pay differential from any person who fails to provide proof of honorable service.

E. The rights and duties of an officer or employee who is subject to this section is subject to the uniformed services employment and reemployment rights act (38 United States Code chapter 43).

F. The director of the department of administration shall establish procedures to be used by an eligible officer or employee to receive compensation pursuant to subsection A of this section.

§ 38-611 Compensation of certain state officers and employees

A. Except as otherwise provided in subsections B and C of this section, any officer or employee of the state, or any of its agencies, is entitled to receive a salary within the range as determined by the department of administration unless modified by the legislature.

B. Elected state officers, employees of the supreme court, employees of the court of appeals, employees of the legislature, employees of the governor's office, employees of the Arizona state schools for the deaf and the blind except the superintendent and the medical officer and all employees of the Arizona board of regents and the state universities are exempt from the provisions of this section.

C. Except as otherwise provided by statute or specific legislative appropriation, members of boards, commissions, councils or advisory committees who are authorized by law to receive compensation may receive compensation at the rate of not to exceed thirty dollars for each day engaged in the service of such board, commission, council or advisory committee.

§ 38-611.01 Arizona state retirement system; incentive compensation plan; special pay plan

The Arizona state retirement system established by chapter 5, article 2 of this title:

May administer an incentive compensation plan for investment related personnel established in consultation with the director of the department of administration. The Arizona state retirement system shall file a copy of any incentive compensation plan for investment related personnel with the governor, the president of the senate, the speaker of the house of representatives, the office of strategic planning and budgeting, the joint legislative budget committee and the department of administration within ten business days of its adoption or readoption.
Except for the incentive compensation plan for investment related personnel, shall not establish any other compensation plans without the approval of the director of the department of administration.
May request that the director of the department of administration establish a special pay plan for the Arizona state retirement system director, deputy director, chief investment officer, investment related personnel and fiduciary or investment counsel. The director of the department of administration, pursuant to section 41-742, subsection C, paragraph 4, shall establish the special pay plan after considering the recommendations of the Arizona state retirement system board and using relevant market data. The director of the department of administration may adopt other special pay plans determined necessary for certain classes or groups of Arizona state retirement system employees, taking into consideration such factors as occupational patterns, economic conditions and pay ranges common to government, business and industry, and shall work with the Arizona state retirement system in establishing the plans.

§ 38-611.02 Public safety personnel retirement system; special pay practices

The board of trustees of the public safety personnel retirement system established by chapter 5, article 4 of this title:

May administer an incentive compensation plan for investment related personnel established in consultation with the director of the department of administration. The public safety personnel retirement system shall file a copy of any incentive compensation plan for investment related personnel with the governor, the president of the senate, the speaker of the house of representatives, the office of strategic planning and budgeting, the joint legislative budget committee and the department of administration within ten business days of its adoption or readoption.
Except for the incentive compensation plan for investment related personnel, shall not establish any other compensation plans without the approval of the director of the department of administration.
May request that the director of the department of administration establish a special pay plan for the public safety personnel retirement system administrator, deputy or assistant administrator, chief investment officer, investment related personnel and fiduciary or investment counsel. The director of the department of administration, pursuant to section 41-742, subsection C, paragraph 4, shall establish the special pay plan after considering the recommendations of the public safety personnel retirement system board of trustees, including consideration of the salary ranges recommended by an independent compensation consultant and using relevant market data. The director of the department of administration may adopt other special pay plans determined necessary for certain classes or groups of public safety personnel retirement system employees, taking into consideration such factors as occupational patterns, economic conditions and pay ranges common to government, business and industry, and shall work with the public safety personnel retirement system in establishing the plans.

§ 38-612 Administration of payroll salary deductions

A. There shall be no payroll salary deductions from the compensation of state officers or employees except as specifically authorized by federal law or regulation or by a statute of this state. An administrative agency of this state may not authorize any other deduction.

B. Notwithstanding subsection A of this section, reductions to retroactive payroll compensation are authorized pursuant to section 38-1106, subsection K, paragraph 5.

C. In addition to those payroll salary deductions required by federal law or regulation or by statute, state officers or employees may authorize deductions to be made from their salaries or wages for the payment of:

Premiums on any health benefits, disability plans or group life plans provided for by statute and any existing insurance programs already provided by payroll deduction.
Shares or obligations to any state or federally chartered credit union established primarily for the purpose of serving state officers and employees and their families.
Dues in a recognized association composed principally of employees and former employees of agencies of this state, subject to the following criteria:

(a) When composed of at least one thousand state employees other than employees of the state universities, the department of public safety and academic personnel of the Arizona state schools for the deaf and the blind.

(b) When composed of at least twenty-five percent of the academic personnel or of the nonacademic employees of any state university.

(c) When composed of at least twenty-five percent of the academic personnel of the Arizona state schools for the deaf and the blind.

(d) When composed of at least four hundred state employees who are certified as peace officers by the Arizona peace officer standards and training board established by section 41-1821.

(e) When composed of a combined total of at least eight hundred state employees described in subdivision (d) of this paragraph, state employees of the state department of corrections and state employees who are law enforcement officers.

Deferred compensation or tax sheltered annuity salary reductions when made under approved plans.
Federal savings bond plans.
Recurrent fees, charges or other payments payable to a state agency under a collection plan approved by the director of the department of administration.
Except as provided in subsection G of this section, contributions made to a charitable organization:

(a) Organized and operated exclusively for charitable purposes and selected by the presidents of the state universities. Employees of the state universities shall be advised by form of the charitable organizations to which the employees may contribute through payroll salary deductions. The advisory provided under this subdivision shall be substantially similar to the following and prominently printed:

"You may contribute to any charitable organization registered under internal revenue code section 501(c)(3), tax exempt status.

Charitable organization name"

This subdivision applies only to academic personnel and nonacademic employees of the state universities.

(b) Organized and operated exclusively for charitable purposes, provided a fund drive by such an organization shall be applicable to all state agencies except the state universities covered under subdivision (a) of this paragraph and no state officer or employee of state agencies subject to this subdivision may authorize more than one deduction for charitable purposes to be in effect at the same time. This subdivision applies to all state agencies except the universities covered under subdivision (a) of this paragraph.

Contributions made for the purpose of contributing to a fundraising campaign for a university or a club for faculty or staff, or both, which is recognized by the university president and authorized by the Arizona board of regents. This paragraph applies only to academic personnel and nonacademic employees of the state universities.
Charges payable for transportation expenses pursuant to section 41-710.01.
Payments ordered by courts of competent jurisdiction within this state.
Automobile or homeowner's insurance premiums.
Premiums for the following state-sponsored group benefits that are established primarily for the purpose of serving state officers and employees and their families:

(a) Long-term care insurance.

(b) Critical care insurance.

(d) Identity theft protection services.

A computer system as defined in section 13-2301 for personal use.

D. In order for the department of administration to establish and maintain a dues deduction pursuant to subsection C, paragraph 3 of this section, the department of administration may establish and maintain the deduction without the appropriation of any additional monies or technological improvements. The department of administration shall track all personnel hours dedicated to dues deduction. The department of administration may charge a fee to a recognized association that qualifies under subsection C, paragraph 3 of this section for establishing the automatic dues deduction and anytime changes are needed in the automatic dues deduction system as a result of an increase or decrease in association dues. If the membership criteria of a recognized association fall below the criteria set forth in subsection C, paragraph 3 of this section, the recognized association shall be on probation for one year. If the membership of a recognized association falls below the criteria set forth in subsection C, paragraph 3 of this section for more than one year, or if the members of the association engage in a work slowdown or work stoppage, the dues deduction authorized by this section shall immediately be discontinued.

E. For those state officers and employees under payroll systems that are under the direction of the director of the department of administration, the director shall provide for the administration of payroll deductions for the purposes set forth in this section. For all other state officers and employees and for persons receiving allowances or benefits under other state payroll and retirement systems, the appropriate state officer shall provide for such administration of payroll deductions. Such administration shall operate without cost or contribution from the state other than the incidental expense of making the deductions and remittances to the payees. If any payee requests additional services, the director of the department of administration or any other appropriate state officer may require payment for the additional cost of providing such services.

F. As a means of readily identifying the employee from whom payroll deductions are to be made, the state officer administering payroll deductions may request an employee to enter such employee's social security identification number on the payroll deduction authorization. Such number shall not be used for any other purpose.

G. There shall be no payroll salary deductions from the compensation of state officers or employees for contributions made to a charitable organization that performs a nonfederally qualified abortion or maintains or operates a facility where a nonfederally qualified abortion is performed for the provision of family planning services. For the purposes of this subsection, "nonfederally qualified abortion" means an abortion that does not meet the requirements for federal reimbursement under title XIX of the social security act.

H. The state, the director of the department of administration or any other appropriate state officer shall be relieved of any liability to employees authorizing deductions or organizations receiving deductions that may result from authorizations pursuant to this section.

§ 38-613 State employee suggestion program awards; fund

A. The director of the department of administration may adopt rules to provide an award to any state employee for any of the following:

An adopted procedure or idea that resulted in eliminating or reducing state expenditures or improving operations in the public interest.
The performance of a special act or service in the public interest.

B. The governor shall appoint a five member board that serves at the governor's pleasure for four year staggered terms to establish policy for the operation of the state employee suggestion program, review all suggestions and approve all awards with the concurrence of the head of the agency in which the cost saving is realized. The board shall elect a chairman each year.

C. The award may equal no more than ten per cent of the amount saved as a result of the suggestion.

D. A state employee suggestion program award fund is established consisting of identified measurable dollar savings transferred from appropriated and nonappropriated monies in the budget unit where the cost saving is realized, except that monies may not be transferred from the state general fund. The board shall initiate fund transfers with the concurrence of the director of the department of administration. Except as provided in subsection G of this section, the director of the department of administration shall use monies in the state employee suggestion program award fund for the following purposes only:

To make awards pursuant to this section.
To purchase recognition materials with a cost of not to exceed fifty dollars for each award.

E. The board shall certify to the director of the department of administration the names of persons granted awards and the amounts of the awards. On certification of the names and the amounts of the awards the director of the department of administration shall draw a warrant on the state treasurer. The state treasurer shall pay the warrant from the state employee suggestion program award fund.

F. An award to a state employee shall not be considered as extra compensation.

G. The director of the department of administration may use up to six per cent of any monies transferred to the state employee suggestion program award fund for the purposes of administering, advertising and promoting the state employee suggestion program.

H. Elected officials, directors, deputy directors, managers and supervisors are not eligible for awards pursuant to this section.

§ 38-614 Merit awards; county employees; merit award system board; special merit award fund

A. A county board of supervisors may adopt rules and regulations to provide merit awards for county employees. The rules and regulations shall include granting a merit award for any of the following:

An adopted procedure or idea which resulted in eliminating or reducing county expenditures or improving operations in the public interest.
The performance of a special act or service in the public interest.

B. If the board of supervisors permits merit awards it shall appoint a merit award system board to establish policy for the operation of the merit award system, review all suggestions and recommend for approval all merit awards with the concurrence of the head of the department in which the cost savings is realized. The size of the merit award system board shall be equal to the number of supervisors for that county. Each supervisor shall appoint one member to serve on the merit award system board.

C. The board of supervisors shall approve all merit awards.

D. No merit award may exceed two thousand five hundred dollars.

E. The board of supervisors shall establish and may fund for the purpose of this section a special merit award fund consisting of identified measurable dollar savings transferred from appropriated and nonappropriated monies in the department where the cost saving is realized.

F. The board of supervisors may at the end of each fiscal year transfer all or part of the monies accumulated in the special merit award fund to the county general fund.

G. The merit award system board shall certify to the board of supervisors the names of persons recommended for merit awards and the amounts of the awards. On final approval by the board of supervisors of the names and the amounts of the merit awards, the county finance director shall draw a warrant on the county treasury. The county treasurer shall pay the warrant from the special merit award fund.

H. All county employees are eligible for merit awards, except that the qualifying criteria prescribed in subsection A are not met as a result of the employee's regular employment duties and an award is not considered extra compensation.

§ 38-615 Payment for accumulated sick leave; requirements; limit; definition

A. An officer or employee of this state, subject to legislative appropriation, or an officer or employee of a county, subject to authorization by the board of supervisors, is eligible, on retirement, to receive benefits as follows:

An officer or employee who has at least five hundred but less than seven hundred fifty hours of sick leave is entitled to receive payments equal to twenty-five per cent of the officer's or employee's salary at the officer's or employee's current hourly rate for each hour of accumulated sick leave.
An officer or employee who has at least seven hundred fifty but less than one thousand hours of sick leave is entitled to receive payments equal to thirty-three per cent of the officer's or employee's salary at the officer's or employee's current hourly rate for each hour of accumulated sick leave.
An officer or employee who has at least one thousand hours of sick leave is entitled to receive payments equal to fifty per cent of the officer's or employee's salary at the officer's or employee's current hourly rate for each hour of accumulated sick leave not to exceed one thousand five hundred hours of accumulated sick leave.

B. In order to be eligible to receive payments pursuant to subsection A of this section:

An officer or employee must establish a retirement date not later than thirty-one days after termination of employment by qualifying with an authorized retirement system or plan of this state.
The retirement date must be effective not later than thirty-one days after termination of employment.
An officer or employee shall elect retirement benefits that are defined not later than thirty-one days after termination of employment.

C. An officer or employee who receives payments as provided in subsection A of this section shall not receive more than thirty thousand dollars.

D. If an officer or employee receives payments pursuant to subsection A of this section, the officer or employee shall be paid the amount due the officer or employee either in a lump sum or in installments over a three year period.

E. If an officer or employee dies before the officer or employee receives the total payment due to the officer or employee or if an officer or employee is eligible for normal retirement but has not retired at the time of the officer's or employee's death, the officer's or employee's beneficiary is entitled to receive the balance due to the officer or employee in a lump sum.

F. Notwithstanding any other law:

The cash value of the sick leave credit pursuant to subsection A of this section shall not be used to compute the average salary.
The payment authorized by this section for accumulated sick leave is not salary or compensation for the purposes of making retirement contributions or computing any pension benefit.
The sick leave must be available for use by the officer or employee at the time of termination of employment. This section does not apply to previously forfeited sick leave.

G. This section applies to an officer or employee of this state or a county who is eligible to participate in the Arizona state retirement system as provided in chapter 5, article 2 of this title, in the public safety personnel retirement system as provided in chapter 5, article 4 of this title, in the corrections officer retirement plan as provided in chapter 5, article 6 of this title or in an optional retirement program established by the Arizona board of regents pursuant to section 15-1628.

H. This section applies retroactively to July 1, 1998 to an officer or employee of a university under the jurisdiction of the Arizona board of regents who participates in a federal retirement system, except that this section does not apply to a participant in a federal retirement system if the participant receives any sick leave payment from the federal government.

I. This section applies only to officers or employees of this state or a county whose compensation regulations provide for a forfeiture of sick leave on retirement.

J. For the purposes of this section, "hourly rate" means an officer's or employee's hourly salary on retirement, excluding overtime pay and pay for unused annual leave.

§ 38-616 Retiree accumulated sick leave fund; administration; contribution

A. A retiree accumulated sick leave fund is established consisting of deposits made pursuant to subsection C of this section. The department of administration shall administer the fund and shall maintain individual accounts for each state officer or employee receiving a benefit on retirement pursuant to section 38-615. Monies in the fund may be used for payment for accumulated sick leave made pursuant to section 38-615 and for any associated employee related expenditures. The department of administration may use up to two per cent of the total amount deposited in the fund in fiscal year 1999-2000 and up to one and one-half per cent of the total amount deposited in the fund in fiscal year 2000-2001 and each fiscal year thereafter to administer section 38-615.

B. The department of administration shall pay the accumulated sick leave payment for each eligible state officer or employee pursuant to section 38-615.

C. All state budget units and legislative and judicial branches of state government that employ officers or employees who may be eligible on retirement to receive payment for accumulated sick leave pursuant to section 38-615 shall contribute a pro rata share of the overall cost of the accumulated sick leave payments. The pro rata share shall be payable by payroll fund source, and the resultant amount shall be deposited in the retiree accumulated sick leave fund. The pro rata share shall be established by the director, is subject to review by the joint legislative budget committee and shall not exceed .40 per cent of the total benefit eligible payroll as prescribed in section 38-651 in fiscal year 1999-2000 and .55 per cent of the total benefit eligible payroll as prescribed in section 38-651 in fiscal year 2000-2001 and each fiscal year thereafter. Total payroll includes all fund sources including the state general fund, federal monies, special revenue funds, intergovernmental revenue monies, trust funds and other payroll sources. A claim for the pro rata share percentage payment shall be submitted according to the fund source, with the accompanying payroll, to the department of administration for deposit in the retiree accumulated sick leave fund.

D. Notwithstanding section 35-190, monies in the retiree accumulated sick leave fund do not revert to the state general fund at the end of each fiscal year.

§ 38-617 County safety incentive awards

A county board of supervisors may adopt rules to provide employee safety recognition awards with terms and conditions deemed appropriate by the board for the safe operation of county government. No award shall exceed two hundred fifty dollars.

§ 38-618 Performance based incentives program

A. The director of the department of administration and the president of the Arizona board of regents may establish a performance based incentives program to promote efficiency and effectiveness in state government. The director of the department of administration shall identify state agencies and the president of the Arizona board of regents shall identify state universities in which to implement the program.

B. The director of the department of administration and the president of the Arizona board of regents shall cooperate with the directors of agencies and the presidents of the identified universities, respectively, to:

Develop a performance based appraisal system of state employee performance that is based on agency or university goals and objectives, as identified and approved by the agency's or university's employees, supervisors, director or president.
Authorize all agency directors and university presidents participating in the program to recognize the performance of state employees, who are under their authority, based on the outcome of the appraisal conducted pursuant to paragraph 1 of this subsection.

C. The director of the department of administration shall cooperate with the director of the department of public safety, the superintendent of public instruction and the superintendent of the state schools for the deaf and the blind to implement the performance based incentives program. The president of the Arizona board of regents shall cooperate with the president of each university under the jurisdiction of the Arizona board of regents to implement the performance based incentives program.

D. Notwithstanding section 35-174, subsection B, the director of the department of administration, the director of the department of public safety, the president of the Arizona board of regents, the superintendent of public instruction and the superintendent of the state schools for the deaf and the blind may authorize the expenditure of up to eighty per cent of excess vacancy savings to recognize employees of state agencies and state universities who are under their respective authority and who are participating in the performance based incentives program. In addition to excess vacancy savings, the participating agency or university may use monies appropriated from the state general fund or other sources, including federal enhanced funding an agency or university receives for quality initiatives. Federal enhanced monies do not revert to the state general fund but remain in a separate agency or university account at the end of the fiscal year for use by the agency or university in accordance with the terms and conditions imposed by the federal funding source. For the purposes of this subsection, "excess vacancy savings" means the same as "vacancy saving" as defined in section 35-174, subsection A, except that "excess vacancy savings" are any vacancy savings that are over and above the amount eliminated from an agency's budget as the result of the applied vacancy factor reported in the annual appropriations report prepared by the joint legislative budget committee.

E. As provided for in subsection D of this section, any incentive or performance compensation using monies from excess vacancy savings or other fund sources including state general fund appropriations shall not be added to an agency's salary base.

F. Recognition of state employees may be in the form of increase in compensation for future services, but the increase may not exceed two hundred seventy-five dollars per month per employee.

G. An approved program shall notify the director of the department of administration or the president of the Arizona board of regents when it makes any substantive changes to the approved program.

Article 2 Reimbursement for Expenses

§ 38-621 Persons eligible to receive travel expenses

A. The provisions of this article shall apply to every public officer, deputy or employee of the state, or of any department, institution or agency thereof, and to a member of any board, commission or other agency of the state when traveling on necessary public business away from his designated post of duty and when issued a proper travel order.

B. The designated post of duty of members of boards, commissions, authorities, councils and committees who are not fulltime employees of the agency served by the board, commission, authority, council or committee shall be deemed to be their place of residence.

§ 38-622 Authorization for travel; claims

A. When the official duties of a public officer, deputy or employee require the public officer, deputy or employee to travel from the public officer's, deputy's or employee's designated post of duty, the public officer, deputy or employee shall be allowed reimbursement of the expenses incurred for that travel.

B. The reimbursement of expenses shall be authorized by travel orders signed by the head of the department or agency, or by a person to whom that authority has been properly delegated.

C. Claims by public officers, deputies, and employees for reimbursement of expenses for transportation, lodging, meals and incidentals and long-term subsistence allowances shall be submitted on forms prescribed by and in the manner required by the department of administration.

§ 38-623 Means of travel; rates

A. Travel by air, railroad or motor vehicle is permitted. Railroad sleeping accommodations shall be considered as transportation, and the cost of railroad sleeping accommodations may be allowed each person traveling. Private conveyance may be allowed for travel inside and outside this state by way of the most direct regularly traveled route computed by highway map or odometer reading when traveling by motor vehicle, or if by airplane, by the most direct air mileage route listed by the civil aeronautics board. Expenses for transportation by private conveyances used for travel outside this state shall be reimbursed at the lesser of either the rate set by the department of administration or air coach fare to the same destination. Travel by rented or chartered motor vehicle or airplane shall be paid at the cost of the travel.

B. When a private conveyance is used outside this state, a transportation expense shall not be allowed as provided for in subsection A, unless authority is delegated in writing by the director of the department of administration, or in the case of a university employee, by the president of the respective university, if the authority is delegated by the governor, or unless otherwise provided by law.

C. When one or more officers, employees or other public agents traveling on official business are transported in the same private conveyance, one mileage only may be allowed.

D. The department of administration shall set rates of reimbursement for state travel by motor vehicle and by airplane as provided in this section. In setting the rates the department of administration shall consider amounts established by the United States internal revenue service as acceptable for income tax purposes without further documentation. No increase or decrease from the current rate established by the department of administration shall be effective until approved by the joint legislative budget committee.

§ 38-624 Lodging expenses; meal and incidental expense reimbursement and long-term subsistence allowance; items covered by reimbursement; amount predetermined by department of administration

A. A state employee while traveling on authorized state business shall be reimbursed for actual lodging expenses incurred not to exceed a predetermined amount pursuant to subsection C of this section. All claims for reimbursement shall be accompanied by lodging expense receipts.

B. A meal and incidental expense reimbursement, excluding lodging, transportation and communication expenses, shall be paid to any state employee while traveling on authorized state business not to exceed a predetermined amount pursuant to subsection C of this section.

C. The director of the department of administration shall establish maximum amounts for reimbursement for lodging and meal and incidental expenses or long-term subsistence incurred pursuant to subsections A and B of this section, based on federal guidelines for these types of expenses or other reasonable rates as determined by the department. The director may change the maximum amounts from time to time and may establish a separate maximum amount for geographical areas of the United States if the director finds that the reasonable cost varies significantly in one or more areas. Maximum amounts established by the director shall be subject to approval by the joint legislative budget committee.

D. The director of the department of administration shall establish in the state accounting manual uniform procedures by which amounts less than the maximum lodging and meal and incidental expense reimbursement amounts may be claimed by a person who is in travel status for less than a full twenty-four-hour period or by a person who does not provide lodging receipts. The director of the department of administration shall also establish policies and procedures for claiming lodging and meal and incidental expense reimbursements and long-term subsistence allowances by persons temporarily required, for a period of not less than thirty days, to reside away from their primary place of residence. If housing or meals are provided, the reimbursements may be less than, and cannot exceed, the lodging and meal and incidental expense reimbursements pursuant to subsection C of this section. Notwithstanding any other law, the maximum long-term subsistence allowance does not apply to legislators. A long-term subsistence allowance for legislators shall be established pursuant to section 41-1104.

§ 38-625 Receipts for transportation

Claims which include transportation by common carrier, rented automobiles, trains or airplanes shall not be allowed unless accompanied by receipts, but receipts for transportation by means of local public transportation including taxicabs shall not be required, and such means of local transportation may be allowed and paid for and shall not be considered as regular common carrier transportation.

§ 38-626 Out-of-state travel; approval; exemptions

A. When the official duties or activities of a public officer, deputy or employee of the state or of any department, institution, commission, board or other agency of the state necessitate out-of-state travel, the travel order shall be countersigned by the agency head or by the president of the respective university for its university employees and is authority to pay the claims from any funds available for such travel. The agency head or the university president may delegate the authority to countersign out-of-state travel orders. Except as provided by subsection B, the department of administration shall:

Adopt policies and procedures for the approval of out-of-state travel orders.
Disseminate these policies and procedures to all agencies.
Perform compliance reviews on out-of-state travel orders for compliance with the policies and procedures.
Require that all outside travel orders shall be available for public inspection.

B. The Arizona board of regents is responsible for implementing the provisions of subsection A, paragraphs 1, 3 and 4, for the universities under its jurisdiction.

C. The requirements of subsection A shall not apply under the following:

When, by the shortest practical routing, travel through an adjoining state is necessary to reach remote areas of this state.
When any legislative member, officers and employees of the legislature, the legislative council, joint legislative budget committee members and employees, and other legislative interim committee members are traveling on official business.

§ 38-626.01 Authorization for certain out-of-state travel by state employees

Notwithstanding the provisions of sections 38-626 and 38-627, the agency head, or a person properly delegated by the agency head, may authorize travel of personnel and state equipment under the agency head's jurisdiction into states of the United States adjoining this state.

§ 38-627 Use of state equipment out of state

The agency head or the president of a university may authorize the use of state equipment outside of this state when the agency head or president ascertains in writing that no other means of transportation is available or no service of the type required is provided by existing common carriers or the use of state transportation equipment outside the state will best serve the interests of this state.

Article 3 Public Safety Cancer Insurance

§ 38-641 Definitions

In this article, unless the context otherwise requires:

"Board" means the board of trustees of the public safety personnel retirement system established by section 38-848, including its authorized employees, administrators, attorneys and agents.
"Employer" means this state or any political subdivision of this state, including cities, towns, fire districts and Indian tribes, that employs firefighters, peace officers, corrections officers, detention officers or other members as defined in section 38-881 and that participates in the public safety personnel retirement system established by chapter 5, article 4 of this title or the corrections officer retirement plan established by chapter 5, article 6 of this title.
"Peace officer" means a certified peace officer as defined in section 38-842.
"Program" means the public safety cancer insurance policy program established by this article.

§ 38-642 Public safety cancer insurance policy program

A. Except as provided in subsection D of this section, the board shall establish and administer a public safety cancer insurance policy program for participating employers that employ firefighters or peace officers. For the purposes of the internal revenue code, the program is an integral part of a political subdivision of this state.

B. Except as provided in subsection D of this section, participating employers that employ firefighters or peace officers shall participate in the program.

C. The board shall contract for a group cancer insurance policy to provide coverage as prescribed by section 38-645 or may self-insure the program by establishing an insurance policy that is of its own design and that is underwritten by the assets of the public safety cancer insurance policy program account established by section 38-643. When procuring, establishing or administering any cancer insurance policy provided pursuant to this article the board is exempt from the requirements of title 41, chapter 23.

D. The board shall administer a public safety cancer insurance policy program for employers and their employees who are corrections officers, detention officers or other members as defined in section 38-881 and who join the program. The state department of corrections, the department of juvenile corrections, the department of public safety or a county, city or town may establish a voluntary cancer insurance policy program for employees who are corrections officers, detention officers or other members as defined in section 38-881. The state department of corrections, the department of juvenile corrections, the department of public safety or a county, city or town that, in its discretion, establishes a program shall collect the payments for the program and submit the monies to the board on behalf of the employees who voluntarily enroll in the program and make payments for the cancer insurance. If a county, city or town establishes a voluntary cancer insurance policy program, the county, city or town is not required to make payments for the cancer insurance. If the state department of corrections, the department of juvenile corrections or the department of public safety establishes a voluntary cancer insurance policy program, the department shall not make payments for the cancer insurance. The board may adopt policies that establish criteria for participation in the program pursuant to this subsection.

E. On or before July 31 of each year, the board shall notify each employer required to participate in the program of the total amount payable to the board to pay for the costs of the program. The amount charged to each employer shall not exceed one hundred eighty dollars for each employee of the employer who is a firefighter, peace officer, corrections officer, detention officer or any other member as defined in section 38-881 on record with the board as of June 30 of that year. Each employer shall pay this amount to the board on or before August 31 of each year.

F. Employers that fail to pay the amount required by subsection E of this section by August 31 shall pay a fifteen percent late charge to the board on all delinquent amounts accrued monthly. If the amount due and the late charge are not paid within thirty days, the board may recover the amounts due from the employer by either:

Filing an action in a court of competent jurisdiction to recover the amount due.
Requesting a deduction of any monies, including excise revenue taxes, payable to the employer by any department or agency of this state.

G. If the board self-insures the program the board and the program are exempt from title 20 and any rules adopted pursuant to title 20.

§ 38-643 Public safety cancer insurance policy program account

A. The public safety cancer insurance policy program account is established and shall be under the exclusive control of the board. The board shall deposit monies collected pursuant to section 38-642 in the account to pay the cost of providing a group cancer insurance policy under the program and the cost of administering the program.

B. The board may use monies deposited in the account up to the amount equal to or less than ten percent of the total claims paid, averaged over the previous five years, each year ending June 30 to pay the costs of administering the program, excluding the costs of processing the claims, except that board attorney fees and court costs relating to the program shall be paid out of the account and are not subject to this limitation.

C. The board shall cause an independent audit of the account to be performed at the end of each fiscal year and shall report the results of the audit to each employer within six months following the end of the fiscal year.

D. The employer contributions and securities in the account and investment earnings on monies in the account are exempt from state, county and municipal taxes.

E. The program is a welfare benefit plan or trust intended to pay expenses incurred in the treatment of cancer as provided in the policy of insurance secured or established by the board pursuant to section 38-642. The legislature intends that the program's income be excluded as gross income for assessing federal income tax under section 115 of the internal revenue code and that coverage under the program be excluded as gross income to the employees or retirees under section 106 of the internal revenue code. The board may adopt additional program provisions as necessary to fulfill the legislature's intent that the program's income and coverage are not subject to federal income tax.

F. To the extent required to exclude coverage under the program as gross income of participants, employers that are required to participate in the program shall pay the premiums for the cost of the program and include the premium amount as wages of the firefighters and peace officers who are participating in the program, subject to federal and state income and employment taxes.

G. Employers, the board of trustees and any member of a local board do not guarantee the account in any manner against loss or depreciation and are not liable for any act or failure to act made in good faith pursuant to this article, including determinations on program claims.

§ 38-644 Eligibility

A. Except as provided in subsections B, C and D of this section, to qualify for covered benefits under the program, a person must satisfy all of the following criteria:

Be an active or retired member of the public safety personnel retirement system or the corrections officer retirement plan or a participant in the public safety personnel defined contribution retirement plan.
Be one of the following:

(a) A firefighter who is or was regularly assigned to hazardous duty of the type normally expected of a firefighter.

(b) A peace officer.

(c) A corrections officer employed by the state department of corrections or the department of juvenile corrections, a detention officer employed by a county, city or town or any other member as defined in section 38-881 if the department, county, city, town or participating employer as defined in section 38-881 has voluntarily established a program and the corrections officer, detention officer or other member as defined in section 38-881 voluntarily enrolled in the program and made the payments pursuant to section 38-642, subsection D.

Have cancer that was first diagnosed after the person's date of membership in the public safety personnel retirement system or corrections officer retirement plan or date of participation in the public safety personnel defined contribution retirement plan.

B. Persons who terminate employment with a participating employer are not eligible for benefits under the program unless the person has made a valid claim for payment of expenses under the program before termination of employment.

C. On retirement, persons who were either receiving benefits under the program before retirement or who are diagnosed with cancer subsequent to retirement and within the time frames specified in this subsection remain eligible for coverage under the program for the total of:

Either:

(a) Five months for each year of credited service accumulated toward retirement under the public safety personnel retirement system or corrections officer retirement plan.

(b) Five months for each year of service under the public safety personnel defined contribution retirement plan.

Plus actual time spent in the deferred retirement option plan pursuant to section 38-844.03 or the reverse deferred retirement option plan pursuant to section 38-885.01.

D. A person whose eligibility to receive benefits under subsection C of this section is expiring may continue to remain eligible for coverage under the program if the person makes an election with the board and pays to the board the cost of the premium equal to the amount paid by the employer for each employee as determined by the board at the time determined by the board.

E. A person who did not receive covered benefits under subsection C of this section may elect to continue coverage under the program by paying the cost of the premium as determined by the board. When determining the cost of the premium, the board:

Shall determine the cost to the program for persons who elect to continue coverage, except for persons who received covered benefits under subsection C of this section, and set an actuarially determined premium to cover the costs.
May not consider the balance of, contributions to or investment earnings associated with the public safety cancer insurance policy program account established by section 38-643 that are not associated with persons who are eligible for the program pursuant to this subsection.

F. For a person who elects to continue coverage under the program pursuant to subsection E of this section, the annual premium payment shall be deducted from the person's pension payment at the beginning of the plan year. The person may elect to discontinue coverage under the program within one hundred eighty days after the payment is made and may request a refund of the annual premium payment. A person who elects to discontinue coverage under the program is no longer eligible for coverage under the program.

G. A person is not eligible for benefits under the program if there is any evidence that the cancer that forms the basis for a benefit claim under the program existed before the person's membership in the public safety personnel retirement system or corrections officer retirement plan or the person's participation in the public safety personnel defined contribution retirement plan.

§ 38-645 Coverage

A. Coverage provided under the program shall provide benefits to eligible persons to pay for expenses that are designated by the board and that are incurred in the treatment of cancer, including treatments by clinics or providers outside of the United States.

B. The board may provide for additional coverage or exclusions under the program based on available monies in the public safety cancer insurance policy program account.

C. Coverage under the public safety cancer insurance policy program may be canceled, changed or terminated by the board at any time without notice. If the program is terminated, the board shall refund monies in the public safety cancer insurance policy program account on a pro rata basis to employers, excluding monies held in reserve for benefits as determined by the board.

D. If the program is self-insured, benefits are limited to the assets in the public safety cancer insurance policy program account and those benefits may be reduced or eliminated at any time.

Article 4 Health and Accident Insurance

§ 38-651 Expenditure of monies for health and accident insurance; definition

A. The department of administration may expend public monies appropriated for such purpose to procure health and accident coverage for full-time officers and employees of this state and its departments and agencies. The department of administration may adopt rules that provide that if an employee dies while the employee's surviving spouse's health insurance is in force, the surviving spouse is entitled to no more than thirty-six months of extended coverage at one hundred two per cent of the group rates by paying the premiums. Except as provided by sections 38-1114 and 38-1141, no public monies may be expended to pay all or any part of the premium of health insurance continued in force by the surviving spouse. The department of administration shall seek a variety of plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. On a recommendation of the department of administration and the review of the joint legislative budget committee, the department of administration may self-insure for the purposes of this subsection. If the department of administration self-insures, the department may contract directly with preferred provider organizations, physician and hospital networks, indemnity health insurers, hospital and medical service plans, dental plans and health maintenance organizations. If the department self-insures, the department shall provide that the self-insurance program include all health coverage benefits that are mandated pursuant to title 20. The self-insurance program shall include provisions to provide for the protection of the officers and employees, including grievance procedures for claim or treatment denials, creditable coverage determinations, dissatisfaction with care and access to care issues. The department of administration by rule shall designate and adopt performance standards, including cost competitiveness, utilization review issues, network development and access, conversion and implementation, report timeliness, quality outcomes and customer satisfaction for qualifying plans. The qualifying plans for which the standards are adopted include indemnity health insurance, hospital and medical service plans, closed panel medical and dental plans and health maintenance organizations, and for eligibility of officers and employees to participate in such plans. Any indemnity health insurance or hospital and medical service plan designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full-time state employees, except that any plan established prior to June 6, 1977 may be continued as a separate plan. Any closed panel medical or dental plan or health maintenance organization designated as the qualifying plan by the department of administration must be open for enrollment to all permanent full-time state employees residing within the geographic area or area to be served by the plan or organization. Officers and employees may select coverage under the available options.

B. The department of administration may expend public monies appropriated for such purpose to procure health and accident coverage for the dependents of full-time officers and employees of this state and its departments and agencies. The department of administration shall seek a variety of plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. On a recommendation of the department of administration and the review of the joint legislative budget committee, the department of administration may self-insure for the purposes of this subsection. If the department of administration self-insures, the department may contract directly with preferred provider organizations, physician and hospital networks, indemnity health insurers, hospital and medical service plans, dental plans and health maintenance organizations. If the department self-insures, the department shall provide that the self-insurance program include all health coverage benefits that are mandated pursuant to title 20. The self-insurance program shall include provisions to provide for the protection of the officers and employees, including grievance procedures for claim or treatment denials, creditable coverage determinations, dissatisfaction with care and access to care issues. The department of administration by rule shall designate and adopt performance standards, including cost competitiveness, utilization review issues, network development and access, conversion and implementation, report timeliness, quality outcomes and customer satisfaction for qualifying plans. The qualifying plans for which the standards are adopted include indemnity health insurance, hospital and medical service plans, closed panel medical and dental plans and health maintenance organizations, and for eligibility of the dependents of officers and employees to participate in such plans. Any indemnity health insurance or hospital and medical service plan designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full-time state employees, except that any plan established prior to June 6, 1977 may be continued as a separate plan. Any closed panel medical or dental plan or health maintenance organization designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full-time state employees residing within the geographic area or area to be served by the plan or organization. Officers and employees may select coverage under the available options.

C. The department of administration may designate the Arizona health care cost containment system established by title 36, chapter 29 as a qualifying plan for the provision of health and accident coverage to full-time state officers and employees and their dependents. The Arizona health care cost containment system shall not be the exclusive qualifying plan for health and accident coverage for state officers and employees either on a statewide or regional basis.

D. Except as provided in section 38-652, public monies expended pursuant to this section each month shall not exceed:

Five hundred dollars multiplied by the number of officers and employees who receive individual coverage.
One thousand two hundred dollars multiplied by the number of married couples if both members of the couple are either officers or employees and each receives individual coverage or family coverage.
One thousand two hundred dollars multiplied by the number of officers or employees who receive family coverage if the spouses of the officers or employees are not officers or employees.

E. Subsection D of this section:

Establishes a total maximum expenditure of public monies pursuant to this section.
Does not establish a minimum or maximum expenditure for each individual officer or employee.

F. In order to ensure that an officer or employee does not suffer a financial penalty or receive a financial benefit based on the officer's or employee's age, gender or health status, the department of administration shall consider implementing the following:

Requests for proposals for health insurance that specify that the carrier's proposed premiums for each plan be based on the expected age, gender and health status of the entire pool of employees and officers and their family members enrolled in all qualifying plans and not on the age, gender or health status of the individuals expected to enroll in the particular plan for which the premium is proposed.
Recommendations from a legislatively established study group on risk adjustments relating to a system for reallocating premium revenues among the contracting qualifying plans to the extent necessary to adjust the revenues received by any carrier to reflect differences between the average age, gender and health status of the enrollees in that carrier's plan or plans and the average age, gender and health status of all enrollees in all qualifying plans.

G. Each officer or employee shall certify on the initial application for family coverage that the officer or employee is not receiving more than the contribution for which eligible pursuant to subsection D of this section. Each officer or employee shall also provide the certification on any change of coverage or marital status.

H. If a qualifying health maintenance organization is not available to an officer or employee within fifty miles of the officer's or employee's residence and the officer or employee is enrolled in a qualifying plan, the officer or employee shall be offered the opportunity to enroll with a health maintenance organization when the option becomes available. If a health maintenance organization is available within fifty miles and it is determined by the department of administration that there is an insufficient number of medical providers in the organization, the department may provide for a change in enrollment from plans designated by the director when additional medical providers join the organization.

I. Notwithstanding subsection H of this section, officers and employees who enroll in a qualifying plan and reside outside the area of a qualifying health maintenance organization shall be offered the option to enroll with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization, if:

All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.
All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the officer or employee to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the officer or employee.
All emergency or urgent travel, ambulatory and other expenses from the residence area of the officer or employee to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are paid pursuant to any agreement between the health maintenance organization and the officer or employee living outside the area of the qualifying health maintenance organization.

J. The department of administration shall allow any school district in this state that meets the requirements of section 15-388, a charter school in this state that meets the requirements of section 15-187.01 or a city, town, county, community college district, special taxing district, authority or public entity organized pursuant to the laws of this state that meets the requirements of section 38-656 to participate in the health and accident coverage prescribed in this section, except that participation is only allowed in a health plan that is offered by the department and that is subject to title 20, chapter 1, article 1. A school district, a charter school, a city, a town, a county, a community college district, a special taxing district, an authority or any public entity organized pursuant to the laws of this state rather than this state shall pay directly to the benefits provider the premium for its employees.

K. The department of administration shall determine the actual administrative and operational costs associated with school districts, charter schools, cities, towns, counties, community college districts, special taxing districts, authorities and public entities organized pursuant to the laws of this state participating in the state health and accident insurance coverage. These costs shall be allocated to each school district, charter school, city, town, county, community college district, special taxing district, authority and public entity organized pursuant to the laws of this state based on the total number of employees participating in the coverage. This subsection only applies to a health plan that is offered by the department and that is subject to title 20, chapter 1, article 1.

L. Insurance providers contracting with this state shall separately maintain records that delineate claims and other expenses attributable to participation of a school district, charter school, city, town, county, community college district, special taxing district, authority and public entity organized pursuant to the laws of this state in the state health and accident insurance coverage and, by November 1 of each year, shall report to the department of administration the extent to which state costs are impacted by participation of school districts, charter schools, cities, towns, counties, community college districts, special taxing districts, authorities and public entities organized pursuant to the laws of this state in the state health and accident insurance coverage. By December 1 of each year, the director of the department of administration shall submit a report to the president of the senate and the speaker of the house of representatives detailing the information provided to the department by the insurance providers and including any recommendations for possible legislative action.

M. Notwithstanding subsection J of this section, any school district in this state that meets the requirements of section 15-388, a charter school in this state that meets the requirements of section 15-187.01 or a city, town, county, community college district, special taxing district, authority or public entity organized pursuant to the laws of this state that meets the requirements of section 38-656 may apply to the department of administration to participate in the self-insurance program that is provided by this section pursuant to rules adopted by the department. A participating entity shall reimburse the department for all premiums and administrative or other insurance costs. The department shall actuarially prescribe the annual premium for each participating entity to reflect the actual cost of each participating entity.

N. Any person that submits a bid to provide health and accident coverage pursuant to this section shall disclose any court or administrative judgments or orders issued against that person within the last ten years before the submittal.

O. For the purposes of this section, "dependent" means a spouse under the laws of this state, a child who is under twenty-six years of age or a child who was disabled before reaching nineteen years of age, who continues to be disabled under 42 United States Code section 1382c and for whom the employee had custody before reaching nineteen years of age.

§ 38-651.01 Group health and accident coverage for retired public employees and elected officials and their dependents

A. The department of administration, by rule, shall adopt standards to establish group health and accident coverage for former employees who worked for this state and who opt on retirement to enroll or continue enrollment in the group health and accident coverage for active employees working for this state, or with a disability, and receiving either income from a retirement program of this state or long-term disability income benefits pursuant to section 38-651.03 or chapter 5, article 2.1 of this title and their dependents and to establish eligibility for retired state employees or state employees with a disability to participate in the coverage. The department of administration may adopt rules that provide that if a retired insured or insured person with a disability dies before an insured surviving dependent, the insured surviving dependent is entitled to extended coverage at group rates if the insured surviving dependent elects to continue in the coverage within six months of the death of the retired insured or insured person with a disability and the insured surviving dependent agrees to pay the cost of the premium for group health and accident insurance. On notification of the death, the department of administration shall immediately notify an insured surviving dependent of the provisions of this section. The department of administration may enter into agreements with former state employees with a disability and their dependents who elect to obtain the coverage provided by this section. The agreements may include provisions for the payment of amounts sufficient to pay for the premium and administrative expense of providing the coverage. The department of administration may adopt rules that provide that on the death of a state employee who at the time of death was eligible for normal retirement pursuant to section 38-757 under the Arizona state retirement system, the insured surviving spouse and eligible dependent children are entitled to continue coverage under group rates provided that the deceased insured state employee, spouse and dependent children were insured at the time of the employee's death. The insured surviving spouse shall be charged an amount sufficient to pay the full premium for the coverage.

B. The department of administration, by rule, may adopt standards to establish group health and accident coverage for former elected officials of this state or its political subdivisions and their dependents and to establish eligibility for former elected officials to participate in the coverage. Qualifications for eligibility shall include that the former elected official has at least five years of credited service in the elected officials' retirement plan pursuant to chapter 5 of this title, had been covered under a group health or group health and accident plan while serving as an elected official and had been serving as an elected official on or after January 1, 1983. The department of administration may adopt rules that provide that on the death of an elected official or insured former elected official, the insured surviving spouse is entitled to coverage at group rates provided that the deceased insured former elected official met or would have met the qualifications for eligibility pursuant to this subsection or that the deceased elected official would have met the qualifications for eligibility had the deceased not been in office at the time of death. Except as provided in subsection J of this section, the insured former elected official or the insured surviving spouse shall be charged amounts that are sufficient to pay for the premium and state administrative expense of providing coverage. Notwithstanding subsection J of this section, the standards shall provide that all or any portion of the former state employees or former elected officials or their dependents shall be grouped with officers and employees of this state and its departments and agencies or their dependents as necessary to obtain health and accident coverage at favorable rates.

C. The Arizona state retirement system board may enter into agreements with state employee members of the system and plan who are retired or who have a disability, retired members of the elected officials' defined contribution retirement system established pursuant to chapter 5, article 3.1 of this title and retired participants of the public safety personnel defined contribution retirement plan established pursuant to chapter 5, article 4.1 of this title who elect to obtain the coverage provided pursuant to subsection A of this section. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain coverage of amounts sufficient to pay for the premium not covered under retirement benefits and state administrative expense of providing coverage.

D. Retired state employee members or state employee members with a disability of the public safety personnel retirement system, the public safety personnel defined contribution retirement plan established pursuant to chapter 5, article 4.1 of this title, the elected officials' retirement plan, the elected officials' defined contribution retirement system established pursuant to chapter 5, article 3.1 of this title, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section 15-1628 who opt on retirement to enroll or continue enrollment in the group health and accident coverage for active employees working for this state and their dependents and who are receiving benefits from the public safety personnel retirement system, the public safety personnel defined contribution retirement plan established pursuant to chapter 5, article 4.1 of this title, the elected officials' retirement plan, the elected officials' defined contribution retirement system established pursuant to chapter 5, article 3.1 of this title, the corrections officer retirement plan or the optional retirement programs authorized pursuant to section 15-1628 may participate in group health and accident coverage provided pursuant to this section. The department of administration shall adopt rules that are necessary for the implementation of this subsection.

E. The board of trustees of the public safety personnel retirement system may enter into agreements with retired state employee members and their dependents who elect to obtain the coverage provided pursuant to this section. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain coverage of amounts sufficient to pay for the premium not covered under retirement benefits and state administrative expense of providing coverage.

F. The board of trustees of the public safety personnel retirement system may enter into agreements with retired judges and retired elected officials and their dependents who elect to obtain the coverage provided pursuant to this section. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain coverage of amounts sufficient to pay for the premium not covered under retirement benefits and state administrative expense of providing coverage.

G. The board of trustees of the public safety personnel retirement system may contract with an insurance carrier and adopt standards to establish a group health and accident insurance coverage program for retired members of the public safety personnel retirement system, their dependents and their spouses. Any members or spouses who elect to obtain the group health and accident coverage provided under this subsection shall agree to a deduction from their monthly retirement benefits of an amount sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing coverage.

H. A county board of supervisors may enter into agreements to establish group health and accident coverage for retired county employees or county employees with a disability and their dependents who elect to obtain the coverage provided pursuant to section 11-263, subsection B. The agreements may include provision for the deduction from the retirement benefits of participants of a retirement program of this state who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing for the coverage.

I. Nonmedicare eligible retirees who live in this state, who enroll in a qualifying plan under this section and who reside outside the area of a qualifying health maintenance organization shall be offered the option to enroll with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization provided that:

All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.
All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the retiree to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the retiree.
All emergency or urgent travel, ambulatory and other expenses from the residence area of the retiree to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization shall be paid pursuant to any agreement between the health maintenance organization and the retiree living outside the area of the qualifying health maintenance organization.

J. Public funds shall not be expended to pay all or any part of the premium of insurance pursuant to this section except for monies authorized to be paid for any insured from the retirement plan from which the insured is receiving benefits.

K. A retired member of the elected officials' defined contribution retirement system established pursuant to chapter 5, article 3.1 of this title may elect to obtain the coverage provided pursuant to subsection A of this section, but shall pay the premium for the coverage selected and is not eligible for benefits pursuant to section 38-783 or 38-817.

L. A retired participant of the public safety personnel defined contribution retirement plan established pursuant to chapter 5, article 4.1 of this title may elect to obtain the coverage provided pursuant to subsection A of this section, but shall pay the premium for the coverage selected. A retired participant that makes an election pursuant to section 38-869 may be eligible for group health benefits as specified in section 38-869.

§ 38-651.02 Expenditure of funds for group life and group accidental death and dismemberment insurance; group life coverage for former elected officials

A. The department of administration may expend public funds appropriated for such purpose to procure group life insurance of at least five thousand dollars in coverage and group accidental death and dismemberment insurance of at least five thousand dollars in coverage for full-time officers and employees of the state and its departments and agencies. The department of administration by rule shall adopt standards for and designate qualifying plans and eligibility of officers and employees to participate in such plans. Any group life insurance and group accidental death and dismemberment insurance plan designated as a qualifying plan by the department of administration must be open for enrollment to all permanent full-time state employees.

B. The department of administration may by rule offer on a cost basis additional group life and group accidental death and dismemberment insurance to such officers and employees and the dependents of such officers and employees in amounts of not to exceed:

For the officer or employee, three times the annual salary of such officer or employee.
For the dependents of such officers or employees, an amount prescribed by the department of administration.

C. The department of administration, by rule, may adopt standards to establish group life insurance coverage for former elected officials of this state and their dependents and to establish eligibility for the former elected officials to participate in the coverage. The department of administration may promulgate rules which provide that if the former elected official dies before an insured surviving spouse the surviving spouse is eligible to participate in the coverage. The standards may provide that all or any group of the former elected officials, their dependents or a surviving spouse may be grouped with officers and employees of this state or their dependents as necessary to obtain life insurance coverage at favorable rates. No public monies may be expended to pay the premium for insurance coverage pursuant to this subsection.

§ 38-651.03 Expenditure of funds for disability income insurance

The department of administration may expend public funds appropriated for such purpose to procure disability income coverage for full-time officers and employees of the state, its departments and agencies. The department of administration by rule shall adopt standards for integrating such coverage with other forms of income protection and for eligibility of officers and employees. Such coverage shall provide two-thirds of the gross monthly salary of such officer or employee after a waiting period prescribed by the department of administration.

§ 38-651.04 Procurement of insurance; combining of coverages

The department of administration may procure insurance coverages provided in this article in any combination of coverages with a single insurance carrier through application of coverage reserves in any combination.

§ 38-651.05 Flexible or cafeteria employee benefit plan; fund

A. The department of administration is authorized to establish a flexible or cafeteria employee benefit plan that may provide for deductions or salary reductions for group life insurance, disability insurance, group accidental death and dismemberment insurance, long-term care coverage, health and accident insurance or other authorized employee benefits, which meet the requirements of the United States internal revenue code of 1986 and regulations thereunder and to adopt rules for its administration.

B. The department of administration shall determine the frequency of payroll deductions for purposes of this section for those state officers or employees under payroll systems under the direction of the department of administration. For all other state officers or employees under other state payroll systems, the appropriate state agency, board, commission or institution shall determine the frequency of payroll deductions for purposes of this section.

C. The flexible or cafeteria employee benefit plan fund is established. Monies received by the department of administration from employee contributions to the flexible or cafeteria employee benefit plan established pursuant to subsection A of this section shall be deposited in the fund or deposited directly with a third party under contract with the department of administration to administer the plan. Investment earnings shall be deposited to the credit of the fund.

D. The department of administration shall use any monies remaining in the fund or on deposit with a third party under contract to administer the plan at the end of each fiscal year in the following priority:

To cover the costs to this state of administering the flexible or cafeteria employee benefit plan under subsection A of this section.
After payment of the administrative costs, the remainder shall be used to reduce in a uniform manner the employee and employer contributions to benefits included under a flexible or cafeteria employee benefit plan.

§ 38-652 Experience rating dividends and unused claim reserves; deposit; trust account

A. Monies that are to be paid by any insurance carrier, other than a carrier that is being discontinued, as experience rating dividends or unused claim reserves resulting from health and accident coverage provided pursuant to this article shall be paid to the department of administration. All such monies received by the department from such carriers shall be deposited, pursuant to sections 35-146 and 35-147, by the department within five days after receipt in a trust account to be administered by the department of administration. All such monies that are to be paid by an insurance carrier that will no longer continue as a carrier providing coverage pursuant to this article shall be paid to the department of administration. The department shall deposit, pursuant to sections 35-146 and 35-147, all such monies received from such discontinued carriers in the state general fund.

C. Monies deposited in the trust account, together with all monies derived from investment of such monies, shall be used by the department of administration as provided in this subsection for the benefit of participating officers and employees who select a health and accident insurance benefit plan pursuant to this article that produces cash experience dividends and requires payroll deductions. Such monies shall be used as determined by the department of administration only for either or both of the following purposes:

To apply against premiums to be paid.
To purchase additional health and accident benefits for officers and employees and for the dependents of such officers and employees participating in the plan.

D. Subsection C of this section does not require that all monies in the trust fund be used within any one or more fiscal years. Any person who is no longer an employee of the state or an employee who is no longer a participant in a plan of the insurance carrier from which such monies were derived shall forfeit the person's right to any such premium reduction or plan improvement.

E. Monies deposited in or credited to the trust account shall be exempt from the provisions of section 35-190 relating to the reversion of monies to the state general fund.

F. No monies may be withdrawn from the trust account except on the warrant of the department of administration.

§ 38-653 Rules and regulations

The department of administration shall adopt and promulgate rules and regulations necessary to administer the provisions of this article.

§ 38-654 Special employee health insurance trust fund; purpose; investment of monies; use of monies; exemption from lapsing; annual report

A. The special employee health insurance trust fund is established to administer the state employee health insurance benefit plans. The fund shall consist of legislative appropriations, monies collected from the employer and employees for the health insurance benefit plans and investment earnings on monies collected from employees. The fund shall be administered by the director of the department of administration. Monies in the fund that are determined by the legislature to be for administrative expenses of the department of administration, including monies authorized by subsection C, paragraph 4 of this section, are subject to legislative appropriation.

B. On notice from the department of administration, the state treasurer shall invest and divest monies in the fund as provided by section 35-313, and monies earned from investment shall be credited to the fund. There shall be a separate accounting of monies contributed by the employer, monies collected from state employees and investment earnings on monies collected from employees. Monies collected from state employees for health insurance benefit plans shall be expended before expenditure of monies contributed by the employer.

C. Monies in the fund shall be used by the department of administration for the following purposes for the benefit of officers and employees who participate in a health insurance benefit plan pursuant to this article:

To administer a health insurance benefit program for state officers and employees.
To pay health insurance premiums, claims costs and related administrative expenses.
To apply against future premiums, claims costs and related administrative expenses.
To apply the equivalent of not more than $1.50 for each employee for each month to administer applicable federal and state laws relating to health insurance benefit programs and to design, implement and administer improvements to the employee health insurance or benefit program.

D. Subsection C of this section does not require that all monies in the special employee health insurance trust fund be used within any one or more fiscal years. Any person who is no longer a state employee or an employee who is no longer a participant in a health insurance plan under contract with the department of administration shall have no claim on monies in the fund.

E. Monies deposited in or credited to the fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations.

F. The department of administration shall submit an annual report on the financial status of the special employee insurance trust fund to the governor, the president of the senate, the speaker of the house of representatives, the chairpersons of the house and senate appropriations committees and the joint legislative budget committee staff by July 1. The department shall make the report available to officers and employees who have paid premiums under one of the insurance plans from which monies were received for deposit in the trust account since the inception of the health and accident coverage program or since the department submitted the last report, whichever is later. The report shall include:

The actuarial assumptions and a description of the methodology used to set premiums and reserve balance targets for the health insurance benefit program for the current plan year.
An analysis of the actuarial soundness of the health insurance benefit program for the previous plan year.
An analysis of the actuarial soundness of the health insurance benefit program for the current plan year, based on both year-to-date experience and total expected experience.
A preliminary estimate of the premiums and reserve balance targets for the next plan year, including the actuarial assumptions and a description of the methodology used.
The required and actual performance standards for the prior plan year for the contracted health plans, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations.

G. The department shall submit a report to the joint legislative budget committee detailing any changes to the type of benefits offered under the plan and associated costs at least forty-five days before making the change. The report shall include:

An estimate of the cost or saving associated with the change.
An explanation of why the change was implemented before the next plan year.

§ 38-656 Optional inclusion of city, town, county, special taxing district, authority, public entity and community college district employees in state health and accident coverage; payment of premiums; advance notice; minimum period of participation; definition

A. If a governing body of a city or town, a county board of supervisors, a community college district governing board, a special taxing district, an authority or any public entity organized pursuant to the laws of this state determines that state health and accident insurance coverage is necessary or desirable and in the best interest of its employees, it may provide for inclusion of its employees and spouses and the dependents of its employees in state health and accident insurance coverage pursuant to section 38-651.

B. If a governing body of a city or town, a county board of supervisors, a community college district governing board, a special taxing district, an authority or any public entity organized pursuant to the laws of this state elects to participate in the state health and accident insurance coverage, it shall be the only health and accident insurance coverage offered to the city's, town's, county's, district's, special taxing district's, authority's or public entity's employees.

C. A governing body of a city or town, a county board of supervisors, a community college district governing board, a special taxing district, an authority or any public entity organized pursuant to the laws of this state that elects to include its employees in the state health and accident insurance coverage shall notify the department of administration of its intention to do so by January 15 prior to the year in which the city's, town's, county's, district's, special taxing district's, authority's or public entity's employees would be eligible to receive state health and accident insurance coverage.

D. A governing body of a city or town, a county board of supervisors, a community college district governing board, a special taxing district, an authority or any public entity organized pursuant to the laws of this state that elects to include its employees in the state health and accident insurance coverage shall participate in state health and accident insurance coverage for at least two years.

E. A governing body of a city or town, a county board of supervisors, a community college district governing board, a special taxing district, an authority or any public entity organized pursuant to the laws of this state that opts to participate in the state health and accident insurance coverage shall agree to accept the benefit level, plan design, insurance providers, premium level and other terms and conditions determined by the department of administration and shall accept any other contractual arrangements made by the department of administration with health and accident insurance providers.

F. A governing body of a city or town, a county board of supervisors, a community college district governing board, a special taxing district, an authority or any public entity organized pursuant to the laws of this state shall reimburse the department of administration for administrative and operational costs associated with the city's, town's, county's, community college district's, special taxing district's, authority's or public entity's participation in the state health and accident insurance coverage determined pursuant to section 38-651, subsection K.

G. As used in this section, "state health and accident insurance coverage" means the health and accident coverage procured by the department of administration under section 38-651.

§ 38-657 Long-term care insurance

The department of administration shall spend public monies appropriated to procure long-term care coverage for full-time officers and employees of this state and its departments and agencies. The department of administration by rule shall adopt standards for and designate qualifying long-term plans and the eligibility of officers and employees to participate in those plans. Any long-term plan designated as a qualifying plan by the department of administration shall be open for enrollment to all permanent full-time state employees.

§ 38-658 Report to joint legislative budget committee

At least ten days before the department of administration enters into or renews contracts for medical and dental insurance coverage, the director of the department of administration shall meet with and review for the joint legislative budget committee in executive session the planned contribution strategy for each health plan, including indemnity health insurance, hospital and medical service plans, dental plans and health maintenance organizations. Information provided in executive session shall remain confidential until the contract award is made in compliance with title 41, chapter 23.

Article 5 Employee Benefits

§ 38-671 Employee benefits; exclusions; definitions

A. Notwithstanding any other law, any state employee initially hired on or after July 20, 2011 is not eligible to become a member of any state retirement system before the twenty-seventh week of employment. The state employee shall become a member of the state retirement system on the twenty-seventh week of employment if membership criteria are met under the state retirement system statutes.

B. Subsection A of this section does not apply to a person who is already a member of the state retirement system.

C. For the purposes of this section:

"State employee" means a person who is employed by an agency, department, board or commission of this state, a university under the jurisdiction of the Arizona board of regents, the judicial branch and whose salary is paid through the department of administration, the Arizona corporation commission or the legislature.
"State retirement system" means the Arizona state retirement system established by chapter 5, article 2 of this title and the long-term disability program established by chapter 5, article 2.1 of this title.

§ 38-672 Traumatic event counseling for public safety employees; report; exceptions; definitions

(Rpld. 1/1/27)

A. Notwithstanding any other law, this state or a political subdivision of this state shall establish a program to provide public safety employees who are exposed to any one of the following events while in the course of duty up to twelve visits of licensed counseling, which may be provided through telehealth, paid for by the employer:

Visually or audibly witnessing the death or maiming or visually or audibly witnessing the immediate aftermath of such a death or maiming of one or more human beings.
Responding to or being directly involved in a criminal investigation of an offense involving a dangerous crime against children as defined in section 13-705.
Requiring rescue in the line of duty where one's life was endangered.

B. Payment by the employer for licensed counseling pursuant to this section does not create a presumption that a claim is compensable under section 23-1043.01, subsection B.

C. For each program established pursuant to this section, this state and each political subdivision of this state shall compile the following data:

The total number of public safety employees who have participated in the program.
The average number of visits per public safety employee.
The average number of months that a public safety employee participated in the program.
The average number of days that a public safety employee who participated in the program missed work.
The total number of public safety employees who participated in the program and who subsequently filed a workers' compensation claim and the number of those claims that were approved and the number of those claims that were denied.
For each employer, the total amount of work missed by public safety employees who participated in the program and how missed work was provided for by the employer or through employee benefits.

D. On or before September 1 of each year, this state and each political subdivision of this state shall submit the data collected pursuant to subsection C of this section to the department of administration. On or before October 1 of each year, the department of administration shall compile the data into a report and submit the report to the governor, the president of the senate, the speaker of the house of representatives, the chairperson of the senate health and human services committee, or its successor committee, the chairperson of the house of representatives health and human services committee, or its successor committee, the chairperson of the senate military affairs, public safety and border security committee, or its successor committee, and the chairperson of the house of representatives military affairs and public safety committee, or its successor committee, and shall provide a copy of this report to the secretary of state. Subsection C of this section and this subsection do not authorize this state or a political subdivision of this state to compile and report data that is protected under the health insurance portability and accountability act of 1996 (P.L. 104-191; 110 Stat. 1936).

E. This section does not apply to a state employer that provides a program to its public safety employees that is characterized by all of the following:

The program is paid for by the employer.
The program provides licensed counseling for any issue. For licensed counseling related to trauma experienced while in the line of duty, the licensed counseling is provided on the request of the public safety employee and is in person.
Before July 1, 2017, the program offers at least six visits per year.
On or after July 1, 2017, the program offers at least twelve visits per year.

F. For the purposes of this section:

"Licensed counseling" means counseling provided by a licensed mental health professional.
"Licensed mental health professional" means a licensed individual who specializes in trauma and crisis, who uses evidence-based treatment options and who is one of the following:

(a) A psychiatrist who is licensed pursuant to title 32, chapter 13 or 17.

(b) A psychologist who is licensed pursuant to title 32, chapter 19.1.

(c) A mental health professional who is licensed pursuant to title 32, chapter 33 and who holds either a master's or doctoral degree related to the mental health profession.

(d) A mental health nurse practitioner or a psychiatric clinical nurse specialist who is licensed pursuant to title 32, chapter 15.

(e) A physician assistant who is licensed pursuant to title 32, chapter 25.

"Public safety employee":

(a) Means:

(i) Except as prescribed in subdivision (b) of this paragraph, an individual who is a member of the public safety personnel retirement system or the corrections officer retirement plan.

(ii) Except as prescribed in subdivision (b) of this paragraph, a probation officer, surveillance officer or juvenile detention officer who is employed by this state or a political subdivision of this state.

(iii) Except as prescribed in subdivision (b) of this paragraph, a 911 dispatcher in a primary or secondary public safety answering point.

(b) Does not include peace officers or firefighters.

§ 38-673 Traumatic event counseling for peace officers, firefighters and 911 dispatchers; report; exceptions; definitions

(Rpld. 1/1/27)

A. Notwithstanding any other law, this state or a political subdivision of this state shall establish a program to provide peace officers, firefighters and 911 dispatchers who are exposed to any one of the following events while in the course of duty up to twelve visits of licensed counseling, which may be provided through telehealth, paid for by the employer:

Visually or audibly witnessing the death or maiming or visually or audibly witnessing the immediate aftermath of such a death or maiming of one or more human beings.
Responding to or being directly involved in a criminal investigation of an offense involving a dangerous crime against children as defined in section 13-705.
Requiring rescue in the line of duty where one's life was endangered.
Using deadly force or being subjected to deadly force in the line of duty, regardless of whether the peace officer or firefighter was physically injured.
Witnessing the death of another peace officer or firefighter while engaged in the line of duty.
Responding to or being directly involved in an investigation regarding the drowning or near drowning of a child.

B. If the licensed mental health professional determines that the peace officer, firefighter or 911 dispatcher needs additional visits of licensed counseling beyond that which the peace officer, firefighter or 911 dispatcher is entitled to under subsection A of this section and that the additional visits are likely to improve the peace officer's, firefighter's or 911 dispatcher's condition, the employer shall pay for up to an additional twenty-four visits, if the visits occur within one year after the first visit pursuant to this section.

C. An employer may not require a peace officer, firefighter or 911 dispatcher who is receiving treatment pursuant to this section to use the peace officer's, firefighter's or 911 dispatcher's accrued paid vacation leave, personal leave or sick leave if the peace officer, firefighter or 911 dispatcher leaves work to attend a treatment visit pursuant to this section.

D. If the licensed mental health professional determines that the peace officer, firefighter or 911 dispatcher is not fit for duty while the peace officer, firefighter or 911 dispatcher is receiving treatment pursuant to this section, the employer shall ensure that the peace officer, firefighter or 911 dispatcher has no loss of pay and benefits for up to thirty calendar days per incident after the date the licensed mental health professional determines that the employee is not fit for duty if all of the following apply:

The peace officer, firefighter or 911 dispatcher is unable to work light duty or the employer does not offer a light duty option.
The peace officer, firefighter or 911 dispatcher has exhausted the peace officer's, firefighter's or 911 dispatcher's sick leave, vacation leave or other leave that is provided as part of the peace officer's, firefighter's or 911 dispatcher's benefits package.
If the employer offers short-term disability benefits, the employer offered and the peace officer, firefighter or 911 dispatcher elected short-term disability benefits, but the peace officer, firefighter or 911 dispatcher is not eligible to receive short-term disability benefits.
The employer does not have a supplemental program that provides pay and benefits after the occurrence of an injury. For the purposes of this paragraph, supplemental program that provides pay and benefits after the occurrence of an injury does not include a supplemental benefits plan established pursuant to section 38-961.

E. An employer shall allow a peace officer, firefighter or 911 dispatcher to select the peace officer's, firefighter's or 911 dispatcher's own licensed mental health professional, except that if a licensed mental health professional declines to provide counseling pursuant to this section, the employer is not required to secure the services of that licensed mental health professional. The employer shall pay the licensed mental health professional pursuant to the schedule of fees that is fixed by the industrial commission of Arizona pursuant to section 23-908.

F. Payment by the employer for licensed counseling pursuant to this section does not create a presumption that a claim is compensable under section 23-1043.01, subsection B.

G. For each program established pursuant to this section, this state and each political subdivision of this state shall compile the following data for peace officers, firefighters and 911 dispatchers:

For each category of persons, the total number of persons who have participated in the program.
For each category of persons, the average number of visits per person.
For each category of persons, the average number of months that a person participated in the program.
For each category of persons, the average number of days that a person who participated in the program missed work.
For each category of persons, the total number of persons who participated in the program and who subsequently filed a workers' compensation claim and the number of those claims that were approved and the number of those claims that were denied.
For each category of persons, of the total number of persons who have participated in the program, the percentage of persons who received additional visits under subsection B of this section.
For each category of persons, the total number of persons who were deemed not fit for duty by a licensed mental health professional pursuant to subsection D of this section.
For each employer, the total amount of work missed by each category of persons who participated in the program and how missed work was provided for by the employer or through employee benefits.

H. On or before September 1 of each year, this state and each political subdivision of this state shall submit the data collected pursuant to subsection G of this section to the department of administration. On or before October 1 of each year, the department of administration shall compile the data into a report and submit the report to the governor, the president of the senate, the speaker of the house of representatives, the chairperson of the senate health and human services committee, or its successor committee, the chairperson of the house of representatives health and human services committee, or its successor committee, the chairperson of the senate military affairs, public safety and border security committee, or its successor committee, and the chairperson of the house of representatives military affairs and public safety committee, or its successor committee, and shall provide a copy of this report to the secretary of state. Subsection G of this section and this subsection do not authorize this state or a political subdivision of this state to compile and report data that is protected under the health insurance portability and accountability act of 1996 (P.L. 104-191; 110 Stat. 1936).

I. This section does not apply to a state employer that provides a program to its peace officers, firefighters and 911 dispatchers that is characterized by all of the following:

The program is paid for by the employer.
The program provides licensed counseling for any issue. For licensed counseling related to trauma experienced while in the line of duty, the licensed counseling is provided on the request of the peace officer, firefighter or 911 dispatcher and is in person.
The program offers at least twelve visits per year and will offer additional visits if the licensed mental health professional determines that additional visits are necessary.

J. For the purposes of this section:

"Licensed counseling" means counseling provided by a licensed mental health professional.
"Licensed mental health professional" means a licensed individual who specializes in trauma and crisis, who uses evidence-based treatment options and who is one of the following:

(a) A psychiatrist who is licensed pursuant to title 32, chapter 13 or 17.

(b) A psychologist who is licensed pursuant to title 32, chapter 19.1.

(c) A mental health professional who is licensed pursuant to title 32, chapter 33 and who holds either a master's or doctoral degree related to the mental health profession.

(d) A mental health nurse practitioner or a psychiatric clinical nurse specialist who is licensed pursuant to title 32, chapter 15.

"911 dispatcher" means a 911 dispatcher in a primary or secondary public safety answering point.
"Peace officers" includes constables and deputy constables.

§ 38-701 Definitions

In this article, unless the context otherwise requires:

"Commissioner of social security" includes any individual to whom the commissioner of social security has delegated any of the commissioner's functions under the social security act with respect to coverage under the act of employees of states and their political subdivisions.
"Employee" means any person in the employ of this state or a political subdivision of this state and includes an elective or appointive officer of this state or an eligible political subdivision of this state.
"Employment" means any service performed by an employee in the employ of this state or a political subdivision of this state, for the employer, except service that in the absence of an agreement entered into under this article would constitute "employment" as defined in the social security act, or service that under the social security act may not be included in an agreement between this state and the commissioner of social security entered into under this article.
"Political subdivision" includes counties, incorporated cities or towns and school districts in this state, and any other political subdivision as defined in article XIII, section 7, Constitution of Arizona.
"Social security act" means the federal social security act (42 United States Code chapter 7), including regulations and requirements issued pursuant to that act.
"State agency" means the state agency that is designated by the governor to serve as the social security administrator for this state under the federal old age and survivors insurance system.

§ 38-702 Federal-state agreement

A. On behalf of this state the governor may enter into an agreement with the commissioner of social security, consistent with this article, for the purpose of extending the benefits of the federal old age and survivors insurance system to employees of this state or any political subdivision of this state with respect to services that are specified in the agreement and that constitute employment.

B. The agreement may contain provisions relating to coverage, benefits, contributions, effective date, modification of the agreement, notification of dissolution of entities, administration and other appropriate provisions to which the state agency and commissioner of social security agree, except that the agreement shall provide in effect the following, unless otherwise required under the social security act:

Benefits shall be provided for employees whose services are covered by the agreement, and their dependents and survivors, on the same basis as though the services constituted employment within the meaning of title II of the social security act.
The agreement is effective with respect to services in employment covered by the agreement performed after a date specified in the agreement, but in no event may it be effective with respect to services performed before the first day of the calendar year in which the agreement is entered into or in which the modification of the agreement making it applicable to the services is entered into, but an agreement or modification of an agreement entered into within the period permitted for retroactive coverage of employees under the agreement by title II of the social security act may provide in the agreement or modification of the agreement that the agreement or modification of the agreement is effective with respect to services performed after January 1, 1951, or any date after that date.
All services that constitute employment and that are performed in the employ of this state by employees of this state are covered by the agreement.
All services that constitute employment performed in the employ of an eligible political subdivision of this state and that are covered by a plan that is in conformity with the terms of the agreement and that has been approved by the state agency under section 38-703 are covered by the agreement.
All services described in either paragraph 3 or 4 and performed by individuals in positions covered by a retirement system with respect to which the governor has issued a certificate to the commissioner of social security pursuant to section 38-706.

§ 38-703 Plans for coverage of employees of eligible political subdivisions; payroll audits

A. Each eligible political subdivision of this state may submit for approval by the state agency a plan for extending the benefits of title II of the social security act, in conformity with applicable provisions of the social security act, to employees of the eligible political subdivisions. The state agency shall approve each plan and any amendment of the plan if it finds that the plan or amendment of the plan is in conformity with requirements of the state agency, except that a plan shall not be approved unless:

It is in conformity with the requirements of the social security act and with the agreement entered into under section 38-702.
It provides that all services that constitute employment and that are performed in the employ of the eligible political subdivision by employees of the political subdivision are covered by the plan.
It provides for such methods of administration of the plan by the eligible political subdivisions that the state agency finds to be necessary for the proper and efficient administration of the plan.
It provides that the eligible political subdivision make reports, in the form and containing the information, the state agency from time to time requires, and comply with provisions the state agency or the commissioner of social security from time to time finds necessary to assure the correctness and verification of the reports.

B. The state agency shall not finally refuse to approve a plan submitted by an eligible political subdivision under subsection A of this section without reasonable notice and the opportunity for a hearing to the political subdivision affected by the refusal.

§ 38-704 Rule making powers of state agency

The state agency shall adopt rules that are not inconsistent with this article and that it finds necessary or appropriate for the efficient administration of the functions with which it is charged under this article.

§ 38-705 Studies and reports by state agency

The state agency may:

Conduct studies concerning the problem of old age and survivors insurance protection for employees and concerning the operation of agreements made and plans approved under this article.
Submit a report to the legislature at the beginning of each regular session covering the administration and operation of this article during the preceding calendar year, including recommendations for amendments to this article it considers proper.

§ 38-706 Referenda and certification

A. On request of the board of trustees of a retirement system established by this state, the governor may authorize a referendum. On request of the governing body of any political subdivision that has established a retirement system, the governor shall authorize a referendum.

B. The referendum shall be conducted and the governor shall designate an agency or individual to supervise its conduct, in accordance with the requirements of section 218(d)(3) of the social security act, on the question of whether service in positions covered by the retirement system should be excluded from or included under an agreement under this article. The notice of referendum required by section 218(d)(3)(C) of the social security act to be given to employees shall contain or shall be accompanied by a statement, in the form and detail deemed necessary and sufficient by the agency or individual designated to supervise the referendum, to inform the employees of the rights that will accrue to them and their dependents and survivors, and the liabilities to which they will be subject, if their services are included under an agreement under this article.

C. On receipt of evidence satisfactory to the governor that with respect to any referendum the conditions specified in section 218(d)(3) of the social security act have been met, the governor shall so certify to the commissioner of social security.

Article 2 Arizona State Retirement System

§ 38-711 Definitions

In this article, unless the context otherwise requires:

"Active member" means a member as defined in paragraph 23, subdivision (b) of this section who satisfies the eligibility criteria prescribed in section 38-727 and who is currently making member contributions as prescribed in section 38-736.
"Actuarial equivalent" means equality in value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest rate assumptions approved from time to time by the board.
"ASRS" means the Arizona state retirement system established by this article.
"Assets" means the resources of ASRS including all cash, investments or securities.
"Average monthly compensation" means:

(a) For a member whose membership in ASRS commenced before January 1, 1984 and who left the member's contributions on deposit or reinstated forfeited credited service pursuant to section 38-742 for a period of employment that commenced before January 1, 1984, the higher of either:

(i) The monthly average of compensation that is calculated pursuant to subdivision (b) of this paragraph.

(ii) The monthly average of compensation on which contributions were remitted during a period of sixty consecutive months during which the member receives the highest compensation within the last one hundred twenty months of credited service. Any month for which no contributions are reported to ASRS or that falls within a period of nonpaid or partially paid leave of absence or sabbatical leave shall be excluded from the computation. The sixty consecutive months may entirely precede, may be both before and after or may be completely after any excluded months. If the member was employed for less than sixty consecutive months, the average monthly compensation is based on the total consecutive months worked. Payments for accumulated vacation or annual leave, sick leave, compensatory time or other forms of termination pay that, before August 12, 2005, constitute compensation for members whose membership in ASRS commenced before January 1, 1984, do not cease to be included as compensation if paid in the form of nonelective employer contributions under a 26 United States Code section 403(b) plan if all payments of employer and employee contributions are made at the time of termination. Contributions shall be made to ASRS on these amounts pursuant to sections 38-735, 38-736 and 38-737.

(b) For a member whose membership in ASRS commenced on or after January 1, 1984 but before July 1, 2011, the monthly average of compensation on which contributions were remitted during a period of thirty-six consecutive months during which a member receives the highest compensation within the last one hundred twenty months of credited service. Any month for which no contributions are reported to ASRS or that falls within a period of nonpaid or partially paid leave of absence or sabbatical leave shall be excluded from the computation. The thirty-six consecutive months may entirely precede, may be both before and after or may be completely after any excluded months. If the member was employed for less than thirty-six consecutive months, the average monthly compensation shall be based on the total consecutive months worked.

(c) For a member whose membership in ASRS commenced on or after July 1, 2011, the monthly average of compensation on which contributions were remitted during a period of sixty consecutive months during which a member receives the highest compensation within the last one hundred twenty months of credited service. Any month for which no contributions are reported to ASRS or that falls within a period of nonpaid or partially paid leave of absence or sabbatical leave shall be excluded from the computation. The sixty consecutive months may entirely precede, may be both before and after or may be completely after any excluded months. If the member was employed for less than sixty consecutive months, the average monthly compensation shall be based on the total consecutive months worked.

"Board" means the ASRS board established in section 38-713.
"Compensation" means:

(a) For members whose membership began on or before December 31, 2019, the gross amount paid to a member by an employer as salary or wages, including amounts that are subject to deferred compensation or tax shelter agreements, for services rendered to or for an employer, or that would have been paid to the member except for the member's election or a legal requirement that all or part of the gross amount be used for other purposes, but does not include amounts paid in excess of compensation limits established in section 38-746. Compensation includes amounts paid as salary or wages to a member by a second employer if the member meets the requirements prescribed in paragraph 23, subdivision (b) of this section with that second employer. Compensation, as provided in paragraph 5, subdivision (b) or (c) of this section, does not include:

(i) Lump sum payments, on termination of employment, for accumulated vacation or annual leave, sick leave, compensatory time or any other form of termination pay whether the payments are made in one payment or by installments over a period of time.

(ii) Damages, costs, attorney fees, interest or other penalties paid pursuant to a court order or a compromise settlement or agreement to satisfy a grievance or claim even though the amount of the payment is based in whole or in part on previous salary or wage levels, except that, if the court order or compromise settlement or agreement directs salary or wages to be paid for a specific period of time, the payment is compensation for that specific period of time. If the amount directed to be paid is less than the actual salary or wages that would have been paid for the period if service had been performed, the contributions for the period shall be based on the amount of compensation that would have been paid if the service had been performed.

(iii) Payment, at the member's option, in lieu of fringe benefits that are normally paid for or provided by the employer.

(iv) Merit awards pursuant to section 38-613 and performance bonuses paid to assistant attorneys general pursuant to section 41-192.

(v) Amounts that are paid as salary or wages to a member for which employer contributions have not been paid.

(b) For a member whose membership began on or after January 1, 2020, only gross wages paid to a member by the employer for services rendered to the employer during the period considered as credited service, including amounts reported as wages and tips and other compensation on the member's federal form W-2 wage and tax statement, including pretax deductions, except for the following:

(i) Payments made for accrued leave that is not being used to replace regular work hours, whether paid in a lump sum or in installments.

(ii) Payments made on termination from employment, whether paid in a lump sum or in installments or as a bonus or an incentive for termination or retirement.

(iii) Employer-paid contributions that are made to, and any distributions from, plans, programs or arrangements qualified under section 117, 125, 129, 401, 403, 408 or 457 of the internal revenue code.

(iv) Payments for allowances.

(v) Reimbursements for employee business expenses or employee personal expenses.

(vi) Employer-paid contributions for coverage under, or distributions from, an accident, health or life insurance plan, program or arrangement.

(vii) Payments made in lieu of any employer-paid insurance coverage.

(viii) Workers' compensation, unemployment compensation payments and disability payments.

(ix) Merit awards pursuant to section 38-613.

(x) Payments paid pursuant to a court order or settlement agreement to satisfy a claim even though the amount of the payment is based on previous salary or wage levels, except if the court order or settlement agreement directs salary or wages to be paid for a specific period of time, the payment is compensation for that specific period of time.

(xi) Payments made in the form of goods or services in lieu of gross wages.

(xii) Any other payment that is not reported as wages and tips and other compensation on the member's federal W-2 wage and tax statement for actual services rendered.

(xiii) Payments in excess of the section 401(a)(17) of the internal revenue code limits established in section 38-746.

(xiv) Payments for any other employment benefit.

(xv) Payments for which employer or employee contributions have not been paid.

"Contingent annuitant" means the person named by a member to receive retirement income payable following a member's death after retirement as provided in section 38-760.
"Credited service" means, subject to section 38-739, the number of years standing to the member's credit on the books of ASRS during which the member made the required contributions.
"Current annual compensation" means the greater of:

(a) Annualized compensation of the typical pay period amount immediately before the date of a request to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-745. The typical pay period amount shall be determined by taking the five pay periods immediately before the date of a request, disregarding the highest and lowest compensation amount pay periods and averaging the three remaining pay periods.

(b) Annualized compensation of the partial year, disregarding the first compensation amount pay period, if the member has less than twelve months total compensation on the date of a request to purchase credited service pursuant to section 38-743, 38-744 or 38-745.

(c) The sum of the twelve months of compensation immediately before the date of a request to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-745.

(d) The sum of the thirty-six months of compensation immediately before the date of a request to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-745 divided by three.

(e) If the member has retired one or more times from ASRS, the average monthly compensation that was used for calculating the member's last pension benefit times twelve.

"Early retirement" means retirement before a member's normal retirement date after five years of total credited service and attainment of age fifty.
"Effective date" means July 1, 1970, except with respect to employers and members whose contributions to ASRS commence thereafter, the effective date of their membership in ASRS is as specified in the applicable joinder agreement.
"Employer" means:

(a) This state.

(b) Participating political subdivisions.

"Employer contributions" means all amounts paid into ASRS by an employer on behalf of a member.
"Fiscal year" means the period from July 1 of any year to June 30 of the following year.
"Inactive member" means a member who previously made contributions to ASRS and who satisfies each of the following:

(a) Has not retired.

(b) Is not eligible for active membership in ASRS.

(d) Has not withdrawn contributions from ASRS.

"Interest" means the assumed actuarial investment earnings rate approved by the board.
"Internal revenue code" means the United States internal revenue code of 1986, as amended.
"Investment manager" means the persons, companies, banks, insurance company investment funds, mutual fund companies, management or any combinations of those entities that are appointed by ASRS and that have responsibility and authority for investment of the monies of ASRS.
"Late retirement" means retirement after normal retirement.
"Leave of absence" means any unpaid leave authorized by the employer, including leaves authorized for sickness or disability or to pursue education or training.
"Life annuity" means equal monthly installments payable during the member's lifetime after retirement.
"Member":

(a) Means any employee of an employer on the effective date.

(b) Means all employees of an employer who are eligible for membership pursuant to section 38-727 and who are engaged to work at least twenty weeks in each fiscal year and at least twenty hours each week.

(d) Means any person who is a former active member of ASRS and who has not withdrawn contributions from ASRS pursuant to section 38-740.

(e) Does not include any employee of an employer who is otherwise eligible pursuant to this article and who begins service in a limited appointment for not more than eighteen months on or after July 1, 1979. If the employment exceeds eighteen months, the employee shall be covered by ASRS as of the beginning of the nineteenth month of employment. In order to be excluded under this subdivision, classifications of employees designated by employers as limited appointments must be approved by the director.

(f) Does not include any leased employee. For the purposes of section 414(n) of the internal revenue code, "leased employee" means an individual who:

(i) Is not otherwise an employee of an employer.

(ii) Pursuant to a leasing agreement between the employer and another person, performs services for the employer on a substantially full-time basis for at least one year.

(iii) Performs services under the primary direction or control of the employer.

"Member contributions" means all amounts paid to ASRS by a member.
"Normal costs" means the sum of the individual normal costs for all active members for each fiscal year. The normal cost for an individual active member is the cost that is assigned to the fiscal year, through June 29, 2016, using the projected unit credit method and, beginning June 30, 2016, using the actuarial cost method determined by the board pursuant to section 38-714.
"Normal retirement age" means the age at which a member reaches the member's normal retirement date.
"Normal retirement date" means the earliest of the following:

(a) For a member whose membership commenced before July 1, 2011:

(i) A member's sixty-fifth birthday.

(ii) A member's sixty-second birthday and completion of at least ten years of credited service.

(iii) The first day that the sum of a member's age and years of total credited service equals eighty.

(b) For a member whose membership commenced on or after July 1, 2011:

(i) A member's sixty-fifth birthday.

(ii) A member's sixty-second birthday and completion of at least ten years of credited service.

(iii) A member's sixtieth birthday and completion of at least twenty-five years of credited service.

(iv) A member's fifty-fifth birthday and completion of at least thirty years of credited service.

"Political subdivision" means any political subdivision of this state and includes a political subdivision entity.
"Political subdivision entity" means an entity:

(a) That is located in this state.

(b) That is created in whole or in part by political subdivisions, including instrumentalities of political subdivisions.

(d) Whose primary purpose is the performance of a government-related service.

"Retired member" means a member who is receiving retirement benefits pursuant to this article.
"Service year" means fiscal year, except that:

(a) If the normal work year required of a member is less than the full fiscal year but is for a period of at least nine months, the service year is the normal work year.

(b) For a salaried member employed on a contract basis under one contract, or two or more consecutive contracts, for a total period of at least nine months, the service year is the total period of the contract or consecutive contracts.

(c) In determining average monthly compensation pursuant to paragraph 5 of this section, the service year is considered to be twelve months of compensation.

"State" means this state, including any department, office, board, commission, agency, institution or other instrumentality of this state.
"Vested" means that a member is eligible to receive a future retirement benefit.

§ 38-712 ASRS purpose; trust fund

A. The primary intent of ASRS is to:

Provide an incentive in the recruitment and retention of employees of the highest possible quality.
Contribute toward providing a total compensation package that is generally equivalent to comparable employment in other public and private organizations in this state.
Provide a retirement system that encourages employees to remain in service for periods of time that will provide public employers with the full benefit of the training and experience gained by the employees.
Provide an orderly method of promoting and maintaining a high level of service to the public through an equitable separation procedure that is available to employees at retirement or on becoming a person with a disability.
Provide a base retirement benefit that is less than one hundred per cent of a member's post-retirement income requirements, recognizing that personal savings and social security also contribute toward total post-retirement income requirements.

B. ASRS is a defined benefit plan as described in section 414(j) of the internal revenue code. As provided in section 38-771, some eligible members of ASRS are entitled to benefits under the defined contribution program administered by ASRS. With respect to the portion of ASRS that provides benefits to members entitled to benefits under the defined contribution program that are derived from employer contributions and that are based partly on the balance of the separate account of a member, ASRS is a plan described in section 414(k) of the internal revenue code and shall comply with all applicable provisions of section 414(k) of the internal revenue code.

C. A public employee's retirement trust fund is established to afford an optimum degree of security to the members of ASRS. All monies and other assets of ASRS are a part of the trust fund. All accounts, depositories and funds of ASRS are included within the trust fund.

D. Except as provided in section 38-738, an employer does not have a beneficial interest in any asset of the trust fund, and no part of the trust fund may ever revert to or be paid, directly or indirectly, to an employer. All liabilities with respect to members and their beneficiaries shall be satisfied before any part of the corpus or income of the trust fund is used for or diverted to purposes other than for the exclusive benefit of members or their beneficiaries.

§ 38-713 ASRS board; qualifications; term; compensation

A. The ASRS board is established consisting of the following nine members appointed by the governor pursuant to section 38-211:

Five members from among the members of ASRS to represent the members of ASRS as follows:

(a) An educator.

(b) An employee of a political subdivision.

(d) An employee of this state.

(e) An at large member who may represent any ASRS member group.

Four members who are not members of ASRS to represent the public.

B. Four of the members shall have at least ten years' substantial experience as any one or a combination of the following:

A portfolio manager acting in a fiduciary capacity.
A securities analyst.
An employee or principal of a trust institution, investment organization or endowment fund acting either in a management or an investment related capacity.
A chartered financial analyst in good standing as determined by the CFA institute.
A professor at the university level teaching economics or investment related subjects.
An economist.
Any other professional engaged in the field of public or private finances.

C. Each member who represents an ASRS member group shall have not less than five years of administrative management experience.

D. The following persons are not eligible for membership on the board:

A person who is a stockbroker or bond broker and who is actively engaged in the profession of a stockbroker or bond broker.
A person who holds a real estate license pursuant to title 32, chapter 20.

E. A member may be reappointed. Vacancies occurring other than by expiration of a term shall be filled for the balance of the term in the same manner as for initial appointment. On the expiration of any term, the governor shall appoint a successor for a full term of three years that expires on the third Monday in January of the appropriate year.

F. Board members are eligible to receive compensation for performing their duties in an amount of fifty dollars a day, but not more than one thousand dollars in any one fiscal year, and are eligible for reimbursement of expenses pursuant to chapter 4, article 2 of this title.

§ 38-714 Powers and duties of ASRS and board

A. ASRS shall have the powers and privileges of a corporation, shall have an official seal and shall transact all business in the name "Arizona state retirement system", and in that name may sue and be sued.

B. The board is responsible for supervising the administration of this article by the director of ASRS.

C. The board is responsible for the performance of fiduciary duties and other responsibilities required to preserve and protect the retirement trust fund established by section 38-712.

D. The board shall not advocate for or against legislation providing for benefit modifications, except that the board shall provide technical and administrative information regarding the impact of benefit modification legislation.

E. The board may:

Determine the rights, benefits or obligations of any person under this article and any member under articles 2.1 and 7 of this chapter and afford any person dissatisfied with a determination a hearing on the determination. The board may delegate the duty and authority to act on the board's behalf to a committee of the board for the purposes of this paragraph and title 41, chapter 6, article 10 relating to any decision made under this paragraph by that committee of the board.
Determine the amount, manner and time of payment of any benefits under this article.
Recommend amendments to this article and articles 2.1 and 7 of this chapter that are required for efficient and effective administration.
Adopt, amend or repeal rules for the administration of the plan, this article and articles 2.1 and 7 of this chapter.

F. Beginning June 30, 2016, the board shall determine which of the generally accepted actuarial cost methods shall be used in the annual actuarial valuation of the plan.

G. The board and ASRS are not subject to title 41, chapter 6, except title 41, chapter 6, article 10, for actuarial assumptions and calculations, investment strategy and decisions and accounting methodology.

H. The board shall submit to the governor and legislature for each fiscal year not later than eight months after the close of the fiscal year a report of its operations and the operations of ASRS. The report shall follow generally accepted accounting principles and generally accepted financial reporting standards and shall include:

A report on an actuarial valuation of ASRS assets and liabilities.
Any other statistical and financial data that may be necessary for the proper understanding of the financial condition of ASRS and the results of board operations.
On request of the governor or the legislature, a list of investments owned. This list shall be provided in an electronic format.
An estimate of the aggregate fees paid for private equity investments, including management fees and performance fees.

I. The board shall:

Prepare and publish a synopsis of the annual report for the information of ASRS members.
Contract for a study of the mortality, disability, service and other experiences of the members and employers participating in ASRS. The study shall be conducted for fiscal year 1990-1991 and for at least every fifth fiscal year thereafter. A report of the study shall be completed within eight months after the close of the applicable fiscal year and shall be submitted to the governor and the legislature.
Conduct an annual actuarial valuation of ASRS assets and liabilities.

J. The auditor general may make an annual audit of ASRS and transmit the results to the governor and the legislature.

K. In determining the past service funding period, the board shall seek to improve the funded status whenever the trust fund established by section 38-712 is less than one hundred percent funded.

§ 38-715 Director; powers and duties

A. The board shall appoint a director. The director shall serve at the pleasure of the board.

B. The director shall appoint a deputy director and assistant directors with the approval of the board.

C. The director, under the supervision of the board, shall:

Administer this article.
Be responsible for the recruitment, hiring and day-to-day management of employees.
Prescribe procedures to be followed by members and their beneficiaries in filing applications for benefits.
Prescribe procedures to be followed by employers for remitting data and monies to ASRS and for receiving data and monies from ASRS.
Be responsible for:

(a) Income and the collection of income and the accuracy of all expenditures.

(b) Maintaining books and maintaining and processing records of ASRS.

(c) Providing continuing education programs for the board to keep the board members informed of current issues and information needed to carry out their duties.

Perform additional powers and duties as may be prescribed by the board and delegated to the director.

D. The director, under the supervision and approval of the board, may:

Delegate duties and responsibilities to such state departments as the director deems feasible and desirable to administer this article.
Appoint a custodian for the safekeeping of all investments owned by ASRS and register stocks, bonds and other investments in the name of a nominee.
Establish one or more reserve holding accounts, into which the board shall close periodically the account balances of inactive accounts. If any person files a claim and furnishes proof of ownership of any amounts in any inactive account, the claim shall be paid from the reserve holding account on the same basis as if no action had been taken under this paragraph. Interest and supplemental credits shall be allocated to each reserve holding account on June 30 of each year, as determined by the board. For the purposes of this paragraph, "inactive account" means an account to which contributions have not been paid for six months or more.
Make retirement under this article effective retroactively to on or after the day following the date employment is terminated if the member was unable to apply before the retroactive effective date through no fault of the member.

E. For current or prospective employees of ASRS, the director, under the supervision of the board, may:

Conduct criminal records checks. The director may require a current or prospective employee to submit a full set of fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation.
Conduct credit checks for accounting, investment and other finance-related positions. The director shall establish a policy for conducting credit checks on a current employee that includes the method for determining when a credit check may be conducted, retaining records relating to the reason for the credit check and notifying an employee of the credit check and the result of the credit check.

F. The director and all persons employed by the director are subject to section 38-611 and title 41, chapter 4, article 4.

G. In consultation with the director of the department of administration, the board may enter into employment agreements and establish the terms of those agreements with persons holding any of the following ASRS positions:

Director.
Deputy director.
Chief investment officer.
Fiduciary or investment counsel.

§ 38-716 Employers' responsibilities under the system

In addition to any other requirements of this article or article 2.1, 7 or 8 of this chapter, an employer of a member shall:

Cooperate and collaborate with ASRS and follow all ASRS procedures to ensure the proper enrollment of members in the system.
Submit any reports, data, paperwork or materials that are requested by ASRS and that are necessary to make eligibility determinations and for the proper administration of the plan.
Attend the ASRS annual training conference.

§ 38-717 Liability insurance and immunity for the board

A. The department of administration shall provide coverage pursuant to title 41, chapter 3.1, article 1 against all liability for acts or omissions of any nature by members of the board while acting in an authorized governmental or proprietary capacity and within the course and scope of their employment or authority.

B. Notwithstanding any other law, a member of the board is immune from civil liability and is not subject to suit directly or by way of contribution for any act or omission resulting in any damage or injury if the member was acting in good faith and within the scope of the member's official capacity, unless the damage or injury was caused by wilful and wanton or grossly negligent conduct of the member. For the purposes of this subsection, "official capacity" means any decision or act taken by a member of the board to further the purpose for which the board is established.

§ 38-718 Investment managers; general powers and duties; investment of monies; limitations

A. A financial institution serving as an investment manager does not have a conflict of interest because it is also a depository in which ASRS monies are deposited.

B. The board shall appoint and may remove multiple investment managers to invest and reinvest the assets of ASRS. The board may authorize the director to retain and manage staff to make investments as an investment manager.

C. An investment manager shall be qualified to make the type of investments for which the investment manager is appointed.

D. The board shall:

Prescribe investment goals and policies that are consistent with the purposes of this article and the limitations and standard of care prescribed in this section.
Allocate assets and use investment strategies to meet the investment goals and policies ASRS prescribes.
Adopt specific directives for the guidance of investment managers.
Review the performance of each investment manager at least annually or at the request of a board member.
Prescribe investment diversification programs and assign investment manager responsibilities regarding those programs as it deems appropriate to achieve its investment goals, objectives and policies.

E. An investment manager shall discharge the duties of the position with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with the same matters would use in the conduct of an enterprise of a like character and with like aims as that of ASRS.

F. An investment manager may invest and reinvest in the name of ASRS all ASRS monies assigned to the investment manager and shall purchase and sell in the name of ASRS any of the securities and investments held by ASRS under this article. An investment manager may hold, purchase, sell, assign, loan, borrow, transfer and dispose of any of the securities and investments in which any of its account monies are invested, subject to the specific directives determined by ASRS. An investment manager shall redeposit the proceeds of sales, maturities and calls in the ASRS depository.

G. The director may enter into security loan agreements with one or more security lending entities.

H. No more than eighty per cent of ASRS assets may be invested at any given time in equities, measured at market value.

I. No more than forty per cent of ASRS assets may be invested in non-United States public investments, measured at market value.

J. No more than sixty per cent of ASRS assets may be invested internally, measured at market value.

K. No more than five per cent of ASRS assets may be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of or fully guaranteed by the United States government or mortgage backed securities and agency debentures issued by federal agencies, measured at market value.

L. No more than ten per cent of ASRS assets may be invested in bonds or other evidences of indebtedness of those multinational development banks in which the United States is a member nation, including the international bank for reconstruction and development, the African development bank, the Asian development bank and the inter-American development bank, measured at market value.

M. If a limitation in subsection H, I, J, K or L of this section is reached, ASRS is not required to sell assets, but shall not make any further investments of that type until the limit is no longer exceeded.

N. Notwithstanding any other law, an investment manager is not required to invest in any type of investment that is intended to fund economic development projects, public works or social programs but may consider such economically targeted investments pursuant to its fiduciary responsibility.

O. For the purpose of exercising the investment responsibilities prescribed in this section, the board may enter into contracts to receive market data and other market information from securities, commodities, options and monetary exchanges. These contracts may be interpreted and enforced under the laws of a jurisdiction other than this state and are not subject to section 35-214 or 38-511 or title 41, chapter 23.

P. Proprietary commercial information that is provided to the board, director, investment manager, employees of the director and attorneys of the board or the director relating to investments in which an investment manager has invested or has considered for investment is confidential and not a public record if the information is information that customarily would not be released to the public by the person or entity from whom the information was obtained.

§ 38-719 Interest paid to members and employers

ASRS may not pay interest on any amount paid to a member, an alternate payee or an employer pursuant to this article unless specifically authorized by this article.

§ 38-720 ASRS depository

A. Exclusively for the purposes of this article, the board shall establish an ASRS depository that is separate and apart from all other public monies or funds of this state. The ASRS depository shall be a bank in which ASRS monies are deposited and collateralized as provided by law. The ASRS depository consists of subsidiary accounts for administration, retirement and investment. ASRS shall place all monies that come into its custody from any source in the ASRS depository.

B. Any monies not currently needed in the administration account or the retirement account may be invested to provide the maximum income.

§ 38-721 Administration account

A. ASRS shall maintain an administration account consisting of all monies for administrative purposes. The following monies shall be deposited in the administration account:

All monies appropriated by the legislature to pay administrative expenses of ASRS.
All monies received for proportionate shares of administrative expenses from departments that pay the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund.
All monies received for proportionate shares of administrative expenses from political subdivisions paying employer contributions.
Monies that the director transfers from the investment account and that are necessary for the payment of expenditures made pursuant to subsections C and D of this section.

B. Except as provided in subsection C of this section, expenditures from the administration account shall be made in accordance with board directives, subject to legislative appropriation.

C. Expenditures for the following are continuously appropriated and shall be paid from the administration account in the amount deemed necessary by the board:

Investment management fees and related consulting fees necessary to meet the board's investment objectives.
Rent.
Actuarial consulting fees.
Retiree payroll.

D. With the approval of the board, the director:

May expend monies from the administration account for staff, expenses and related consulting fees necessary to implement section 38-714, subsection E, paragraph 1 and subsection I, paragraphs 2 and 3, section 38-718, subsection D, paragraph 5 and sections 38-755 and 38-756.
Shall pay from the administration account the costs for administering the health insurance program for retired members pursuant to section 38-782, the cost of continuing education programs for the board and the cost of legal counsel.

§ 38-722 Abandoned monies; disposition

A. Except as otherwise provided in this section, the trust fund established by section 38-712 is exempt from title 44, chapter 3.

B. Monies in the ASRS trust fund and the LTD trust fund established by section 38-797.02 are presumed abandoned if the apparent owner, as defined in section 44-301, has not communicated in writing with ASRS and has not otherwise indicated an interest in the monies for the three year period following the required beginning date of distributions pursuant to section 38-775.

C. At the time monies are presumed abandoned pursuant to subsection B of this section, any other property right accrued or accruing to the owner as a result of the interest in those monies, and not previously presumed abandoned, is also presumed abandoned.

D. Interest ceases to accrue on the monies on the date the monies are presumed abandoned.

E. Before monies are presumed abandoned, ASRS shall attempt to contact the apparent owner in writing. If the apparent owner is a member, beginning five years before the apparent owner's required beginning date of distributions pursuant to section 38-775 and for three years after that date, ASRS shall annually send a notice to the apparent owner notifying the apparent owner of the owner's eligibility for a retirement benefit. If the apparent owner is a beneficiary, beginning in the calendar year containing the fifth anniversary of the member’s death and for three years, ASRS shall annually send a notice to the apparent owner notifying the apparent owner of the owner’s eligibility for a survivor benefit. If this notice is returned by the postal authority as undeliverable, ASRS shall make a good faith attempt to locate the apparent owner, including contacting any known beneficiary on record with ASRS, searching public databases to identify the address of the apparent owner or using the services of a third-party address verification service. If the good faith attempt to locate the apparent owner fails and the base amount of the unclaimed monies is three hundred dollars or more, ASRS may use the services of a people search service. A fee imposed by the people search service shall not be deducted from the member's benefit and these expenditures are continuously appropriated and shall be paid from the administration account established pursuant to section 38-721 in the amount deemed necessary by the board.

F. If at any time an owner, as defined in section 44-301, establishes an entitlement in the monies, ASRS shall withdraw the monies from either the ASRS trust fund or the LTD trust fund, whichever is applicable, and pay the owner the monies or benefit to which the owner is entitled pursuant to this article or article 2.1 of this chapter, including interest at a rate determined by ASRS, if applicable.

§ 38-723 Recovery of collection costs; levy and distraint; definitions

A. A debtor who fails to pay any monies owed to ASRS is liable for all costs and expenses incurred by ASRS to collect the monies owed. ASRS may collect these expenses and costs at the time of collecting the monies owed to ASRS.

B. If a debtor neglects or refuses to pay a debt owed to ASRS after ASRS has made at least two separate attempts to collect the debt and not fewer than thirty days after ASRS determines a debt is owed, ASRS may collect the debt and such other sums as are sufficient to cover the expenses of the levy, by levy on:

Cash and cash equivalent property at financial institutions.
The accrued salary or wages of the debtor, by serving notice of levy on the chief disbursing officer of the debtor's employer.

C. The financial institution or the chief disbursing officer of the debtor's employer shall notify the debtor of the levy within five business days of the levy. The debtor may appeal the levy to ASRS.

D. The effect of a levy on salary or wages payable to or received by a debtor is continuous from the date the levy is first made until the liability out of which the levy arose is satisfied or becomes unenforceable. ASRS shall promptly release the levy when the liability out of which the levy arose is satisfied or becomes unenforceable and shall promptly notify the debtor on whom the levy was made that the levy has been released.

E. If a levy has been made or is about to be made, any person having custody or control of any books or records containing evidence or statements relating to the property subject to levy, on request from ASRS, shall exhibit the books or records to ASRS.

F. Except as otherwise provided in subsection D of this section, a levy extends only to property possessed and obligations existing at the time of the levy or within thirty days after the date of the levy. In any case in which ASRS may levy on property, ASRS may seize the cash property and may seize and convert cash equivalent property to cash.

G. For the purposes of this section:

"Financial institutions" means state and federally chartered banks, trust companies, federal and state savings and loan associations, federal and state credit unions, consumer lenders, international banking facilities and financial institution holding companies, insurance companies, benefit associations, safe deposit companies, money market mutual funds and similar institutions authorized to do business in this state and any party affiliated with these financial institutions.
"Levy" includes the power of distraint and seizure by any means.

§ 38-724 Surrender of property subject to levy; authority to release levy and return property; definitions

A. Any person in possession of, or obligated with respect to, property subject to levy on which a levy has been made, on request of ASRS, shall surrender the property or discharge the obligation to ASRS, except the part of the property that is, at the time of the request, subject to an attachment or execution under any judicial process.

B. A person who fails or refuses to surrender any property subject to levy, on request by ASRS, is liable in person and estate to this state in a sum equal to the value of the property not so surrendered, but not exceeding the amount of debt for the collection of which the levy has been made, with costs and interest on the sum at the interest rate determined by the board from the date of the levy or, in the case of a levy described in section 38-723, subsection E, from the date the person would otherwise have been obligated to pay the amounts to the debtor. Any amount, other than costs, recovered under this subsection shall be credited against the debt for the collection of which the levy was made.

C. A person in possession of or obligated with respect to property subject to levy on which a levy has been made who, on request by ASRS, surrenders the property or discharges the obligation to ASRS is discharged from any obligation or liability to the debtor with respect to the property arising from the surrender or payment.

D. ASRS may release a levy on all or part of property levied on. The release shall not operate to prevent any subsequent levy.

E. If ASRS determines that property has been wrongfully levied on, ASRS shall return the specific property levied on or an amount of money equal to the value of the property levied on.

F. For the purposes of this section:

"Levy" includes the power of distraint and seizure by any means.
"Person" includes an officer or employee of a corporation, an officer, employee or elected official of this state or its political subdivisions, or any agency or instrumentality of this state or its political subdivisions, or a member or employee of a partnership, who as such officer, employee, elected official or member is under a duty to surrender the property or rights to property or to discharge the obligation.

§ 38-725 Financial institutions data match; prohibited disclosure; fee; definition

A. ASRS may enter into agreements with financial institutions that conduct business in this state to develop and operate a data match system to assist ASRS in the collection of monies owed. The data match system shall use automated data exchange procedures to the maximum extent possible.

B. The data exchanges shall include the name, address of record, social security number and any other identifying information for each person who maintains an account at the institution and who owes money as identified by ASRS by name and social security number.

C. ASRS or its agent may disclose a debtor's financial record under this section only in order to enforce the collection of the money the debtor owes to ASRS.

D. ASRS may pay a reasonable fee to a financial institution for conducting a data match. The fee shall not exceed the actual costs incurred by the financial institution.

E. For the purposes of this section "financial institutions" means state and federally chartered banks, trust companies, federal and state savings and loan associations, federal and state credit unions, consumer lenders, international banking facilities and financial institution holding companies, insurance companies, benefit associations, safe deposit companies, money market mutual funds and similar institutions authorized to do business in this state and any party affiliated with these financial institutions.

§ 38-727 Eligibility; options

A. The following provisions apply to all employees hired on or after the effective date:

All employees and officers of this state and all officers and employees of political subdivisions establishing a retirement plan administered by the board pursuant to this article are subject to this article, except that membership is not mandatory:

(a) On the part of any employee who is eligible and who elects to participate in the optional retirement programs established by the Arizona board of regents pursuant to the authority conferred by section 15-1628 or by a community college district board pursuant to authority conferred by section 15-1451.

(b) For a state elected official who is subject to term limits, who is elected or appointed before January 1, 2014, who is eligible for participation in ASRS because the state elected official elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A and who elects not to participate in ASRS as provided in paragraph 7 of this subsection.

(c) On the part of any employee or officer who is eligible to participate and who participates in the elected officials' retirement plan pursuant to article 3 of this chapter, the elected officials' defined contribution retirement system pursuant to article 3.1 of this chapter, the public safety personnel retirement system pursuant to article 4 of this chapter or the corrections officer retirement plan pursuant to article 6 of this chapter.

All employees and officers of political subdivisions whose compensation is provided wholly or in part from state monies and who are declared to be state employees and officers by the legislature for retirement purposes are subject, on legislative enactment, to this article and are members of ASRS.
Any member whose service terminates other than by death or withdrawal from membership is deemed to be a member of ASRS until the member's death benefit is paid.
Employees and officers shall not become members of ASRS and, if they are members immediately before becoming employed as provided by this section, shall have their membership status suspended while they are employed by state departments paying the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund for the period or periods payment of the employer contributions is not made by or on behalf of the departments.
Notwithstanding other provisions of this section, a temporary employee of the legislature whose projected term of employment is for not more than six months is ineligible for membership in ASRS. If the employment continues beyond six successive months, the employee may elect to either:

(a) Receive credit for service for the first six months of employment and establish membership in ASRS as of the beginning of the current term of employment if, within forty-five days after the first six months of employment, both the employer and the employee contribute to ASRS the amount that would have been required to be contributed to ASRS during the first six months of employment as if the employee had been a member of ASRS during those six months.

(b) Establish membership in ASRS as of the day following the completion of six months of employment.

A person who is employed in postgraduate training in an approved medical residency training program of an employer or a postdoctoral scholar who is employed by a university under the jurisdiction of the Arizona board of regents is ineligible for membership in ASRS.
A state elected official who is subject to term limits, who is elected or appointed before January 1, 2014 and who is eligible for participation in ASRS because the state elected official elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A may elect not to participate in ASRS. The election not to participate is specific for that term of office. The state elected official who is subject to term limits shall make the election in writing and file the election with ASRS within thirty days after the elected official's retirement plan mails the notice to the state elected official of the state elected official's eligibility to participate in ASRS. The election is effective on the first day of the state elected official's eligibility. If a state elected official who is subject to term limits fails to make an election as provided in this paragraph, the state elected official is deemed to have elected to participate in ASRS. The election not to participate in ASRS is irrevocable and constitutes a waiver of all benefits provided by ASRS for the state elected official's entire term, except for any benefits accrued by the state elected official in ASRS for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law.
A person may elect not to participate in ASRS if the person becomes employed by an employer after the person has attained at least sixty-five years of age, is not an active member, inactive member, retired member or receiving benefits pursuant to article 2.1 of this chapter and does not have any credited service or prior service in ASRS. The employee shall make the election not to participate in writing and file the election with ASRS within thirty days after employment. The election not to participate is irrevocable for the remainder of the person's employment for which the person made the election and constitutes a waiver of all benefits provided by the Arizona state retirement system. The period the person works is not eligible for purchase under section 38-743 or 38-744.
The following are ineligible for membership in ASRS:

(a) A person who performs services in a hospital, home or other institution as an inmate or patient at the hospital, home or other institution.

(b) A person who performs agricultural labor services, as defined in section 210 of the social security act.

(c) A person who is a nonresident alien temporarily residing in the United States and who holds an F-1, J-1, M-1 or Q-1 visa when services are performed.

(d) A person who performs services for a school, college or university in this state at which the person is enrolled as a student, as defined by the employing institution. The employing institution shall maintain an appeal process for a person who disagrees with the employing institution's determination that the person is a student and not eligible for membership in ASRS.

(e) A person who performs services under a program designed to relieve the person from unemployment.

B. The following elected officials are subject to this article if the member's employer is an employer under article 3 of this chapter:

A state elected official who is subject to term limits, who is elected or appointed on or before December 31, 2013 and who is an active, an inactive or a retired member of ASRS or a member of ASRS with a disability because the state elected official had previously elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A.
An elected official, as defined in section 38-831, who is an active, an inactive or a retired member of ASRS or a member of ASRS with a disability, if the elected official's employer is a participating employer under this article and the elected official is eligible for ASRS service credit for the elected official's service.

§ 38-729 Political subdivision plans

A. The governing body of any political subdivision may adopt, by appropriate legislation, a supplemental retirement plan for employees and officers of the political subdivision. The supplemental retirement plan shall provide the same retirement benefits and require the same obligations for entitlement as are provided for other members under this article, except that:

The supplemental retirement plan shall specify the date of commencement of the supplemental retirement plan as the first day of the month following board approval of the supplemental plan of the political subdivision as provided in this section.
Employer and employee obligations shall be paid to ASRS in accordance with that date.

B. The governing body of the political subdivision shall submit the supplemental retirement plan to the board in the form of an agreement. The agreement shall state the terms of the supplemental retirement plan as provided in this section. The board shall either approve or disapprove the supplemental retirement plan submitted by the governing body of the political subdivision.

C. On approval, the board shall administer the supplemental plan of the political subdivision.

D. The employer's share of contributions and payments in excess of those required of the employer under section 38-737 shall be paid from monies of the political subdivision.

E. On establishment of the supplemental retirement plan the governing body of the political subdivision shall deduct member contributions in the same amounts and in the same manner as provided in this article for state employees and shall pay those contributions, together with the employer contributions for the political subdivision, to ASRS for deposit in the ASRS depository. The governing body of the political subdivision shall reimburse ASRS in a similar manner for its pro rata share of administrative costs attributable to coverage of employees of the political subdivision.

F. In addition to the employer contributions required under section 38-737, on establishment of the supplemental retirement plan the governing body of the political subdivision shall pay to ASRS the amount equal to the present value required to fund additional costs of benefits attributable to service for the political subdivision before the effective date of the supplemental retirement plan using the actuarial assumptions that are approved by the board. The board may authorize payments to be made at such times as the board requires and in amounts that are less than the amount required for fully funding the additional costs.

G. If the supplemental retirement plan is authorized by a political subdivision, then on or after the effective date of the supplemental retirement plan the governing body of the political subdivision and the board may sign an agreement to waive the provisions of subsection F of this section and to authorize benefits under the supplemental retirement plan only for service with the political subdivision after the effective date of the supplemental retirement plan. In lieu of waiving benefits for all service before the effective date of the supplemental retirement plan, the governing body of the political subdivision may elect to waive benefits for a portion of that service. Amendments to the agreement may increase but shall not reduce the service for which a member is entitled to benefits. The governing body of the political subdivision shall certify for each member the years of service before the effective date of the supplemental retirement plan for which the member is entitled to benefits. In addition to the employer contributions required in section 38-737, the governing body of the political subdivision shall pay to ASRS the amount, as determined by the board, required to fund the cost of the benefits attributable to service before the effective date of the supplemental retirement plan for which members are entitled to benefits.

H. The new political subdivision shall designate the classification of employees that is eligible for membership in ASRS and shall make contributions each year as provided in this section.

I. The liability of the political subdivision providing a supplemental retirement plan within ASRS arises in consideration of the officer's or employee's retention in or entrance into service for the political subdivision.

J. Notwithstanding any other law, an employee of a political subdivision who was previously a member of another public employee retirement system and who receives or is eligible to receive retirement benefits from that public employee retirement system for any period of employment is ineligible to receive service credit from ASRS for the same period of employment.

§ 38-730 Charter city or ASRS retirement service credits; transfers

A. On application the retirement service credits of an employee of a charter city that is not an employer under ASRS or an employee of an employer that is an employer under ASRS whose job functions are shifted by law from one employer jurisdiction to another shall be transferred to the retirement system of the new employer.

B. An employee of a charter city that is not an employer under ASRS or an employee of an employer that is an employer under ASRS who becomes employed by the other employer jurisdiction may apply to have the employee's retirement service credits transferred to the retirement system of the new employer. The retirement service credits of an employee of a charter city that is not an employer under ASRS shall not be transferred unless the governing body of that city approves the transfer. The retirement service credits of an employee of an employer that is an employer under ASRS shall not be transferred unless the board approves the transfer.

C. The transfer shall be made pursuant to section 38-922.

D. The accumulated retirement contributions of an employee whose retirement service credits are transferred that are paid to the retirement system of the new employer shall not be withdrawn by the employee unless the employee's employment terminates.

E. The retirement system to which the employee is transferring shall not apply service credits to the employee's account until such time as complete payment is made to the retirement system to which the employee is transferring. On completion of the transfer provided for in this section, the employee's rights in the retirement system from which the employee is transferring are extinguished.

§ 38-735 Payment of contributions; recovery of delinquent payments

A. All amounts deducted from a member's compensation as provided in section 38-736 and employer contributions required pursuant to section 38-737 shall be paid to ASRS for deposit in the ASRS depository.

B. Each employer shall certify on each payroll the amount to be contributed and shall remit that amount to ASRS.

C. Payments made by employers pursuant to this article or article 2.1, 7 or 8 of this chapter 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 at an annual rate equal to the interest rate assumption approved by the board from time to time for actuarial equivalency. Delinquent payments due under this article or article 2.1, 7 or 8 of this chapter, together with interest charges as provided in this subsection, may be recovered by action in a court of competent jurisdiction against an employer that is liable for payments or, at the request of the director, may be deducted from any other monies, including excise revenue taxes, payable to the employer by any department or agency of this state. The employer shall record delinquent payments that are recovered or deducted from other monies pursuant to this subsection pursuant to applicable accounting and financial reporting standards.

§ 38-736 Member contributions

A. Member contributions are required as a condition of employment and shall be made by payroll deductions. Member contributions shall begin simultaneously with membership in ASRS. Beginning July 1, 2011, member contributions are a percentage of a member's compensation equal to the employer contribution required pursuant to section 38-737. Amounts so deducted by employers shall be deposited in the ASRS depository.

B. The employer shall pay the member contributions required of members on account of compensation earned. The paid contributions shall be treated as employer contributions for the purpose of determining tax treatment under the internal revenue code. The effective date of the employer payment shall not be before the date ASRS has received notification from the United States internal revenue service that pursuant to section 414(h) of the internal revenue code the member contributions paid will not be included in gross income for income tax purposes until the paid contributions are distributed by refund or retirement benefit payments. The employer shall pay the member contributions from monies that are established and available in the retirement deduction account and that would otherwise have been designated as member contributions and paid to ASRS. Member contributions paid pursuant to this subsection shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before the approval of the United States internal revenue service pursuant to this section.

§ 38-737 Employer contributions; prepayment; definitions

A. Employer contributions shall be a percentage of compensation of all employees of the employers who meet the eligibility requirements contained in this article, excluding the compensation of those employees who are members of the defined contribution program administered by ASRS, as determined by the ASRS actuary pursuant to this section for June 30 of the fiscal year immediately preceding the preceding fiscal year, except that beginning with fiscal year 2001-2002 the contribution rate shall not be less than two percent of compensation of all employees of the employers. Beginning July 1, 2011 through June 29, 2016, the total employer contribution shall be determined on the projected unit credit method. Beginning June 30, 2016, the board shall determine the actuarial cost method pursuant to section 38-714. The total employer contributions shall be equal to the employer normal cost plus the amount required to amortize the past service funding requirement over a period that is determined by the board and consistent with generally accepted actuarial standards.

B. 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 expenses of ASRS.

C. The required employer contributions shall be determined on an annual basis by an actuary who is selected by the board and who is a fellow of the society of actuaries. ASRS shall provide by December 1 of each fiscal year to the governor, the speaker of the house of representatives and the president of the senate the contribution rate for the ensuing fiscal year and the unfunded actuarial accrued liability, the funded status based on the actuarial value of assets and market value of assets and the annualized rate of return and the ten-year rate of return as of June 30 of the prior fiscal year.

D. Notwithstanding any other provision of this article, an employer may prepay the employer's 401(a) pension contributions directly to ASRS according to a written agreement between the employer and ASRS as follows:

401(a) pension contributions that the employer prepays according to this subsection may be deposited, as determined by the employer and managed by ASRS, directly in either the ASRS trust fund established by section 38-712 or a section 115 trust.
ASRS shall determine the following options available to the employer:

(a) The amortization time periods.

(b) The frequency and dates that prepayments can be made.

(d) Any other options or obligations that the employer may have when entering into this written agreement.

The earnings accrual rate shall be the ASRS total 401(a) pension fund rate of return, or the actual rate of return of a short-term investment through ASRS, as requested by the employer and agreed to by ASRS.
The 401(a) pension contributions the employer prepays and the accrued earnings shall be managed at the discretion of ASRS subject to section 38-718.
401(a) pension contributions that the employer prepays and accrued earnings may be used solely to reduce the employer's future 401(a) pension contributions as required from the employer pursuant to this section and section 38-735.
The employer shall determine when to use the 401(a) pension contributions the employer prepays and the accrued earnings from those 401(a) pension contributions.
ASRS shall provide the employer an annual statement of 401(a) pension contributions the employer prepaid and the accrued earnings.
Notwithstanding any other provision of this subsection, an employer may not prepay 401(a) pension contributions according to this subsection either:

(a) In an amount greater than the employer's net pension liability as reflected by ASRS in its most recent applicable governmental accounting standards report.

(b) After the total of the unamortized prepaid 401(a) pension contributions and the accrued earnings is equal to or greater than the employer's net pension liability as reflected by ASRS in its most recent applicable governmental accounting standards report.

After an employer elects amortization terms, ASRS shall provide the employer an amortization schedule annually that is current and based on the employer's election.
If ASRS determines to no longer offer the option of prepaying the employer's 401(a) pension contributions directly to ASRS, any 401(a) pension contributions the employer prepays and the accrued earnings remaining on account shall be used for future obligations according to the written agreement between the employer and ASRS.
Assets transferred in or out of or held in the ASRS trust fund established by section 38-712, or a section 115 trust, and the accrued earnings are exempt from state, county and municipal taxes.
The legislature intends that the accrued earnings not be subject to federal income tax. ASRS may adopt additional rules, policies and procedures as ASRS deems necessary or appropriate to fulfill the legislature's intent that the accrued earnings not be subject to federal income tax.
If ASRS receives notification from the United States internal revenue service that this subsection or any portion of this subsection will jeopardize the tax-exempt status of the 401(a) pension contributions the employer prepays according to this subsection and the accrued earnings, the portion of this subsection that will cause the disqualification does not apply.

E. In addition to the requirements of subsection D of this section, any prepayment agreement made between ASRS and this state or any state agency is subject to the following requirements:

Any prepayment amounts deposited with ASRS must be from an appropriation specifically for that purpose that is passed by the legislature and signed by the governor.
Any prepayment amounts or accrued earnings used to reduce the employer's 401(a) pension contributions must be authorized for a specific fiscal year by legislation that is passed by the legislature and signed by the governor.

F. For the purposes of this section:

"401(a) pension contributions" means the portion of an employer's pension contribution that is specific to the retirement program established under this article and qualified under section 401(a) of the internal revenue code.
"Section 115 trust" means a trust whose income is exempt from gross income pursuant to section 115 of the internal revenue code for essential government functions integral to this state and its political subdivisions.

§ 38-738 Adjustment and refund

A. If more than the correct amount of employer or member contributions is paid into ASRS by an employer through a mistake of fact, ASRS shall provide the employer with an employer credit against future contributions if the employer requests an employer credit or, if the request is made within one year after the date of overpayment, shall return the contributions to the employer. ASRS may not pay an employer earnings attributable to the excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions. If more than the correct amount of employer or member contributions is paid into ASRS by an employer through a mistake of law, ASRS shall provide the employer with an employer credit against future contributions if the employer requests an employer credit. On receipt of an employer credit or return of contributions pursuant to this subsection, the employer shall return any member portion of the returned contributions to the member.

B. If less than the correct amount of employer or member contributions is paid into ASRS by an employer, the following apply:

The member shall pay an amount that is equal to the amount that would have been paid in member contributions for the period in question. For active members, payments shall be made as provided in section 38-747. For members who are inactive, retired or on long-term disability, payments shall be made using after-tax income and a personal check, cashier's check or money order. If the member does not make the payment within ninety days after being notified by ASRS that the employer has paid all amounts due from the employer, the unpaid amount accrues interest until the amount is paid in full. The member is responsible for payment of the unpaid amount and interest. The interest rate is the interest rate assumption that is approved by the board for actuarial equivalency for the period in question to the date payment is received.
If the member contributions to ASRS made pursuant to this subsection exceed the limits prescribed in section 38-747, subsection E when taking into account other annual additions of the member for the limitation year, the amount to be paid by the member shall be adjusted as provided in section 38-747. For the purposes of this paragraph, "limitation year" has the same meaning prescribed in section 38-769.
The employer shall pay to ASRS an amount equal to the amount that would have been paid in employer contributions for the period in question together with accumulated interest that would have accrued on both the employer and member contributions due. If the employer does not remit full payment of all employer contributions and all interest due within ninety days after being notified by ASRS of the amount due, the unpaid amount accrues interest until the amount is paid in full. The interest rate is the interest rate assumption that is approved by the board for actuarial equivalency for the period in question to the date payment is received.
On satisfaction of the requirements of this subsection, the member's salary history on the records of ASRS shall be adjusted and any additional service credits acquired by the member shall be reinstated.
If the member retires before all contributions are made pursuant to this subsection, the member's benefits shall be calculated only based on the contributions actually made.
Annual additions shall be determined as provided in section 38-747, subsection O.
The initiator of the request for correction of salary history and service credits on records of ASRS is responsible for providing credible evidence of past employment and compensation to ASRS in a form or forms that would lead a reasonable person to conclude that a period of employment occurred under circumstances that made the employee eligible for membership in ASRS during that period. A determination of eligibility by ASRS may be appealed to the ASRS board in a manner prescribed by the board.
A member who previously received a return of contributions pursuant to section 38-740 may receive an adjustment of employer contributions or service credits pursuant to this section only for qualifying employment and compensation that occurred after the member's most recent return of contributions pursuant to section 38-740.

C. Subsection B of this section applies to eligible verified service that occurred less than or equal to fifteen years before the date the initiator of the request for correction of salary history and service credits on the records of ASRS provides ASRS with credible evidence in writing that less than the correct amount of contributions was paid into ASRS or ASRS otherwise determines that less than the correct amount of contributions was made.

D. Eligible verified service that is more than fifteen years before the date the initiator of the request for correction of salary history and service credits on the records of ASRS provides ASRS with credible evidence in writing that less than the correct amount of contributions was paid into ASRS or ASRS otherwise determines that less than the correct amount of contributions was made is considered public service credit. The member may purchase this service pursuant to section 38-743.

E. Notwithstanding any other law, an employer may correct a contributions error pursuant to subsection B of this section by making payment adjustments through the employer's payroll reporting for the contributions that were not submitted if both of the following apply:

The adjustment is made within the same fiscal year that the contributions were due to ASRS.
The employer obtains written consent from the employee to make the adjustment to the employee's paycheck.

F. Notwithstanding any other law, if an employer pays less than the correct amount of employer or member contributions into ASRS, the correct amount of member contributions may not be paid to ASRS after the death of the member.

§ 38-739 Credited service

A. A member shall not earn more than one year of credited service in any fiscal year.

B. A member shall earn proportionate credited service for each month for which the member performs service and is compensated equal to the ratio that the month bears to the number of months in the member's service year.

C. If a member is compensated for less than a full service year, the member shall earn credited service equal to the ratio that the number of months actually compensated bears to the number of months in the full service year.

D. If a member holds two or more concurrent contracts in any fiscal year, credited service shall be determined on the basis of the terms of the contract with the longest term.

E. Members on sabbatical leave for which they are paid on a full or partial basis shall make appropriate contributions while on sabbatical leave and are considered to be employed full time.

F. The following years of service are excluded from credited service under this article:

Years of prior service. For the purposes of this paragraph, "prior service" has the same meaning prescribed in section 38-772.
Years in which the member made contributions to the defined contribution program administered by ASRS or the Arizona teachers' retirement system before membership in the defined contribution program administered by ASRS and for which those contributions were subsequently withdrawn and paid to the member.

§ 38-739.01 Credited service retention

Consistent with the compliance statement issued by the United States internal revenue service, an employee who is employed with an ASRS employer in a position that was exempt from ASRS membership because the position was not included in agreements providing for the employee's coverage under the federal old-age and survivors insurance system but on whose behalf the employer has remitted ASRS contributions shall retain credited service for the period of employment for which the employer remitted ASRS contributions on the employee's behalf.

§ 38-740 Return of contributions

A. A member whose membership commenced before July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of the contributions as follows:

If the member has less than five years of credited service, ASRS shall disburse all of the member's contributions.
If a member has five or more years of credited service, ASRS shall disburse the member's contributions and an amount equal to a percentage of the employer contributions paid on behalf of the member. This amount excludes payments made by an employer pursuant to section 38-738, subsection B, paragraph 3, unless the member has made the payment required by section 38-738, subsection B, paragraph 1. The percentage of employer contributions paid on behalf of the member shall be as follows:

(a) 5.0 to 5.9 years of credited service, twenty-five percent.

(b) 6.0 to 6.9 years of credited service, forty percent.

(d) 8.0 to 8.9 years of credited service, seventy percent.

(e) 9.0 to 9.9 years of credited service, eighty-five percent.

(f) 10.0 or more years of credited service, one hundred percent.

Interest on the returned contributions as determined by the board.

B. A member whose membership commenced on or after July 1, 2011 and who leaves employment other than by retirement or death may elect to receive a return of all of the member's contributions with interest as determined by the board.

C. Notwithstanding subsection B of this section, if a member has five or more years of credited service and the member is terminated solely because of an employer reduction in force by reason of a lack of monies or elimination of the member's position, the member is entitled to receive the amounts prescribed in subsection A of this section.

D. Withdrawal of contributions with interest constitutes a withdrawal from membership in ASRS and results in a forfeiture of all other benefits under ASRS.

E. If ASRS has disbursed an overpayment pursuant to section 38-765 or 38-797.08, ASRS shall withhold the overpayment amount plus any required income tax withholding from the return of contributions.

F. Notwithstanding any other provision of this article, a member who has not received a return of contributions pursuant to this section may combine any two or more periods of service for purposes of determining the member's benefits.

G. If ASRS disburses more than the amount due to a member or an alternate payee pursuant to this section, the person who received the overpayment shall repay the amount of the overpayment together with interest at the interest rate earned on ASRS investments as reported on a quarterly basis, but not less than the valuation rate established by the board, from the time of overpayment to the settlement of the debt.

§ 38-741 Reemployment of inactive member

A. ASRS shall return to active status an inactive member who terminates employment with an employer without terminating membership in ASRS and who later is reemployed by the same or another employer.

B. On retirement, ASRS shall disburse benefits derived from service for all employers that employed the member.

C. Retirement benefits attributable to service before membership in ASRS, if any, shall be paid only by the employer from which the retiring member obtained entitlement to the benefits as provided in section 38-729.

§ 38-742 Reinstatement

A. If an active member who received a return of contributions on termination of employment and by receipt of those contributions forfeited credited service earned on that employment, as provided in section 38-740, subsection A or B, is subsequently reemployed by an employer, the member's service shall be credited only from the date the member's most recent reemployment period commenced.

B. Notwithstanding subsection A of this section, the member may redeposit the amount of the contributions the ASRS paid at the time of the member's separation from service, with interest on that amount to the date of redeposit at the interest rate assumption approved by the board for actuarial equivalency. On satisfaction of this obligation, the member's service credits acquired by the previous employment shall be reinstated. The member is subject to the benefits and duties in effect at the time of the member's most recent reemployment except as provided in section 38-711, paragraph 5, subdivision (a). If a member redeposits less than the amount required under this subsection, ASRS shall proportionately reduce the member's reinstated service credits.

C. A member who is receiving benefits pursuant to section 38-797.07 and who received a return of contributions on termination of employment and by receipt of those contributions forfeited credited service earned on that employment, as provided in section 38-740, subsection A or B, may redeposit the amount of the contributions the ASRS paid at the time of the member's previous separation from service, with interest on that amount to the date of redeposit at the interest rate assumption approved by the board for actuarial equivalency. On redeposit of the contributions and interest, the member's service credits acquired by the previous employment shall be reinstated. The member is subject to the benefits and duties in effect at the time of the member's most recent reemployment except as provided in section 38-711, paragraph 5, subdivision (a). If a member redeposits less than the amount required under this subsection, ASRS shall proportionately reduce the member's reinstated service credits.

§ 38-743 Public service credit

A. If an active member of ASRS or a member who is receiving benefits pursuant to section 38-797.07 was previously employed by the United States government, a state, territory, commonwealth, overseas possession or insular area of the United States or a political subdivision of a state, territory, commonwealth, overseas possession or insular area of the United States, excluding any time worked for a prison while the member was incarcerated, the member may receive credited service for this prior employment if the member pays into ASRS the amount prescribed in subsection B of this section. For a member whose membership date is on or after July 20, 2011, the member may receive not more than sixty months of credited service.

B. A member who elects to receive credit for service with the United States government, a state, territory, commonwealth, overseas possession or insular area of the United States or a political subdivision of a state, territory, commonwealth, overseas possession or insular area of the United States shall pay to ASRS an amount equal to the present value of the additional benefit that is derived from the purchased credited service using the actuarial assumptions that are approved by the board.

C. A member who previously was a member of another public employee retirement system and who receives or is eligible to receive retirement benefits from that system for any period of employment is ineligible to receive retirement benefits from ASRS for the same period.

D. If a member's membership date is on or after July 1, 2010, the member shall have at least five years of credited service in ASRS before electing to receive credit for service pursuant to this section.

§ 38-744 Leave of absence; credit for leave without pay

A. A member may elect to be credited with service for retirement purposes for an officially granted leave of absence from employment without pay if all of the following apply:

At the time the absence was granted the member was an active member of ASRS or a member who was receiving benefits pursuant to section 38-797.07.
At the time the credit is requested the member is an active member of ASRS, receiving benefits pursuant to section 38-797.07 or a former active member of ASRS who has not withdrawn contributions from ASRS pursuant to section 38-740 and who was unable to resume employment because a position is not available.
The member returns to employment with the same employer, unless employment could not be resumed because of disability or a position was not available.
The member elects not more than one year of the leave and, for a member whose membership date is on or after July 20, 2011, not more than sixty months of credited service pursuant to this section.
The member pays the amount provided in subsection B of this section.
The member's employer has certified that the leave of absence benefits or is in the best interests of the employer.

B. A member who elects to be credited with a leave period as provided in subsection A of this section shall pay to ASRS an amount equal to the present value of the additional benefit that is derived from the purchased credited service using the actuarial assumptions that are approved by the board.

C. A member who previously was a member of another public employee retirement system and who receives or is eligible to receive a retirement benefit from that system for any period of employment is ineligible to receive retirement benefits from ASRS for the same period.

E. For the purposes of subsection A of this section, each employer shall adopt rules establishing guidelines for a leave of absence that benefits or is in the best interests of the employer.

§ 38-745 Credit for military service; temporary personnel service

A. An active member of ASRS or a member who is receiving benefits pursuant to section 38-797.07 may purchase credited service in ASRS for active military service if all of the following apply:

The member was honorably separated from the military service.
The member submits a copy of the member's military service record (DD-214) or its equivalent with the member's application for military service credit.
If a member's membership date is on or after July 1, 2010, the member must have at least five years of credited service in ASRS.
Except as provided by 10 United States Code section 12736, the member is not yet eligible for a military retirement benefit.

B. For a member whose membership date is on or after July 20, 2011, the member may purchase not more than sixty months of credited service pursuant to subsection A of this section.

C. The cost to purchase military service credit is an amount equal to the present value of the additional benefit that is derived from the purchased credited service using the actuarial assumptions that are approved by the board.

D. An active member of ASRS who is called to active military service or who is appointed as temporary personnel by a federal agency may receive credited service for not more than sixty months of active military service or temporary personnel service, except as provided by the uniformed services employment and reemployment rights act (38 United States Code section 4312(c)) and the civilian reservist emergency workforce act of 2021 (P.L. 117-178; 136 Stat. 2110; 42 United States Code section 5149(d)). The member's employer shall make employer contributions and member contributions for the member if the member meets the following requirements:

Was an active member of ASRS on the day before the member began active military service or temporary personnel service.
Is a member of the Arizona national guard, is a member of the reserves of any military establishment of the United States or is appointed as temporary personnel by a federal agency.
Volunteers or is ordered into active military service of the United States as part of a military call-up or is appointed as temporary personnel by a federal agency.
One of the following occurs:

(a) Is honorably separated from active military service or is released from temporary personnel service by a federal agency and returns to employment for the same employer from which the member left for active military service or temporary personnel service within ninety days after the date active military service or temporary personnel service is terminated.

(b) Is hospitalized as a result of military service or temporary personnel service and returns to employment for the same employer from which the member left for active military service or temporary personnel service within ninety days after release from service-related hospitalization.

(c) Develops a disability as a result of or during the military service or temporary personnel service and is unable to return to the same employer.

(d) Dies as a result of or during the military service or temporary personnel service.

E. Contributions made pursuant to subsection D of this section shall be for the period of time beginning on the date the member began active military service or temporary personnel service and ending on the later of one of the following dates:

The date the member returns to employment or the date the member should have returned to employment pursuant to 20 Code of Federal Regulations section 1002.115, whichever date is earlier.
The date the member is released from service-related hospitalization or two years after initiation of service-related hospitalization, whichever date is earlier.
One year after the date of disability.
The date the member dies as a result of or during active military service or temporary personnel service.

F. Notwithstanding any other law, on payment of the contributions made pursuant to subsection D of this section, the member shall be credited with service for retirement purposes for the period of time of active military service or temporary personnel service of not more than sixty months.

G. The employer shall make contributions pursuant to subsection D of this section as follows:

Contributions shall be based on the compensation that a member would have received but for the period that the member was ordered into active military service or temporary personnel service.
If the employer cannot reasonably determine a member's rate of compensation for the period that the member was ordered into active military service or temporary personnel service, the employer shall make contributions based on the member's average rate of compensation during the twelve-month period immediately preceding the period of active military service or temporary personnel service.
If a member has been employed less than twelve months before being ordered into active military service or temporary personnel service, the employer shall make contributions based on the employment period immediately preceding the period of active military service or temporary personnel service.
Employer contributions shall be made in a lump sum and without penalty when the member returns to employment, when it is determined that the member is unable to return to employment because of a disability as a result of or that occurred during military service or temporary personnel service or on receipt of the member's death certificate. If a member suffers a service-related death, the employer shall make the employer and member contributions up to and including the date of the member's death. Death benefits shall be calculated as prescribed by law.

H. In computing the length of total credited service of a member for the purpose of determining retirement benefits or eligibility, the period of military service or temporary personnel service, as prescribed by this section, shall be included.

I. Notwithstanding any other law, the member is not required to reimburse the member's employer or ASRS for any contribution made pursuant to subsection D of this section.

J. In addition to, but not in duplication of, the provisions of subsection D of this section, contributions, benefits and credited service provided pursuant to this section shall be provided in accordance with section 414(u) of the internal revenue code.

K. A member who does not currently perform services for an employer by reason of qualified military service, as that term is defined in section 414(u) of the internal revenue code, or temporary personnel service and who is receiving differential wage payments, as that term is defined in section 3401(h)(2) of the internal revenue code, shall not be considered as having a severance from employment for all purposes under ASRS during the period the differential wages are being paid by the employer to the employee.

§ 38-746 Compensation limitation; adjustments

A. Except as provided in subsection E, beginning on July 1, 2002, the annual compensation of each employee taken into account under ASRS for any fiscal year or for any other specified twelve consecutive month period shall not exceed two hundred thousand dollars. In determining benefit accruals under ASRS for fiscal years beginning after December 31, 2001 and except as provided for in subsection E, the annual compensation limit under this subsection for fiscal years beginning before January 1, 2002 is two hundred thousand dollars.

B. If compensation under ASRS is determined on a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.

C. For fiscal years beginning before July 1, 1997, the annual compensation limit prescribed in this section also applies to the combined compensation of a member who is a member of the group of ten highly compensated employees, as defined in section 414(q) of the internal revenue code, and who is paid the highest compensation during the fiscal year and any family member of the member who is either the member's spouse or the member's lineal descendant and who has not attained the age of nineteen before the close of the fiscal year. If the maximum compensation is adjusted pursuant to subsection D, the adjusted limitation shall be prorated among the affected members' compensation determined pursuant to this section before application of the adjusted limitation to the other provisions of this article.

D. The board shall adjust the maximum compensation under subsection A at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this subsection for a calendar year applies to annual compensation for the fiscal year of ASRS that begins with or within the calendar year.

E. The dollar limitation prescribed in subsection A does not apply to an eligible member to the extent that the annual compensation of an eligible member taken into account by ASRS for any fiscal year or for any other specified twelve consecutive month period would be reduced below two hundred thirty-five thousand eight hundred forty dollars. This was the amount of compensation taken into account by ASRS as of July 1, 1993. The board shall adjust this amount as of the effective date of the increase prescribed by the United States secretary of the treasury. For the purposes of this subsection, "eligible member" means a person who first became a member of ASRS before July 1, 1996.

§ 38-747 Purchase of credited service; payment; limitations; definitions

A. A member who purchases credited service pursuant to section 38-738, 38-742, 38-743, 38-744, 38-745 or 38-922 shall either:

Make payments directly to ASRS as provided in subsection H of this section.
Elect to have the member's employer make payments as provided in subsection B of this section.

B. A member may elect to have the member's employer make payments for all or any portion of the amounts payable for the member's purchase of credited service pursuant to the sections prescribed in subsection A of this section through a salary reduction program in accordance with the following:

The amounts paid pursuant to a salary reduction program are in lieu of contributions by the electing member. The electing member's salary or other compensation shall be reduced by the amount paid by the employer pursuant to this subsection. For the purposes of this paragraph, "other compensation" includes a member's termination pay.
The member shall make an election pursuant to this subsection at any time on or after the date the member elects to purchase credited service pursuant to the sections prescribed in subsection A of this section and before the member's termination of employment. The election shall specify the number of payroll periods that deductions will be made from the member's compensation and the dollar amount of deductions for each payroll period during the specified number of payroll periods. In the case of an election to utilize all or any part of the member's termination pay to purchase credited service, the member's election shall be made at least three full calendar months before the date of the member's termination of employment and entitlement to receive the termination pay. After an election is made pursuant to this subsection, the election is binding on and irrevocable for the member and the member's employer during the member's remaining period of current employment. After a member makes an irrevocable election pursuant to this subsection, the member does not have the option of choosing to receive the contributed amounts directly. For the purposes of this paragraph, "termination pay" means any lump sum that is paid at the member's termination of employment for accrued vacation, sick leave or overtime pay.
A member who makes an irrevocable election pursuant to this subsection to have the member's employer make payments for less than all of the amounts payable for the member's purchase of credited service may irrevocably elect to have the member's employer make payments for all or any portion of the remaining amounts payable for the member's purchase of credited service. A member who makes one or more irrevocable elections pursuant to this subsection may also make other contributions to ASRS pursuant to subsection H of this section to the extent of any remaining amounts payable for which the member has not made an election pursuant to this subsection. An additional election or contribution with respect to a portion of the amounts payable for the member's purchase of credited service does not alter, amend or revoke an irrevocable election already made pursuant to this subsection for any other portion of the amounts payable for the member's purchase of credited service.
If on termination of the member's employment with an ASRS employer all amounts have not been paid to ASRS pursuant to the member's irrevocable election pursuant to this subsection, the member may pay ASRS, within thirty days after the member's termination of employment and subject to other limitations prescribed in this section, all or any portion of the unpaid amounts as provided in subsection H of this section. These payments do not alter, amend or revoke any irrevocable election already made pursuant to this subsection with respect to any amount to be paid by the member's employer while the member is employed by the member's employer.
Amounts paid by an employer pursuant to this subsection shall be treated as employer contributions for the purpose of determining tax treatment under the internal revenue code. The effective date of employer payments pursuant to this subsection shall not be before the date ASRS receives notification from the United States internal revenue service that pursuant to section 414(h)(2) of the internal revenue code the amounts paid by an employer pursuant to this subsection will not be included in the member's gross income for income tax purposes until those amounts are distributed by refund or retirement benefit payments.
Unless otherwise provided, member contributions paid by an employer pursuant to this subsection are treated for all other purposes under ASRS in the same manner and to the same extent as member contributions that are not paid by an employer pursuant to this subsection. ASRS shall not grant credited service for contributions made pursuant to this subsection until those contributions are received by ASRS. ASRS may assess interest or administrative charges attributable to any salary reduction election made pursuant to this subsection. The interest or administrative charges shall be added to the amount of contributions that is made to ASRS by the member each payroll period and that is paid by the member's employer. The interest or administrative charges shall not be treated as member contributions for any purposes under this article and a member or a member's beneficiary does not have a right to the return of the interest or administrative charges pursuant to any other provision of this article. Interest assessed pursuant to this subsection shall be at the rate specified by the board pursuant to section 38-711, paragraph 2.
If a member transfers employment from one participating employer with which the member has made an irrevocable election pursuant to this subsection to another participating employer, the member and the successor participating employer shall complete the terms of the irrevocable election that the member made with the original participating employer.

C. A member who elects before July 1, 1999 to receive retirement benefits based on section 38-771, subsection C, paragraph 2 or a member who elects to make contributions to ASRS pursuant to section 38-771.01, subsection F, paragraph 4 shall either make the member's additional contributions required pursuant to section 38-771, subsection E or allowed pursuant to section 38-771.01, subsection F, paragraph 4 directly to ASRS as provided in subsection H of this section or shall elect to have the member's employer make payments for those additional contributions as provided in subsection D of this section. A member who elected to be covered or who was deemed to be covered by section 38-771 on or before December 31, 1995 or who elects to make member contributions pursuant to section 38-771.01, subsection F, paragraph 3 is deemed to have made an irrevocable election pursuant to subsection D of this section to make the member's contributions to ASRS that are required by section 38-771, subsection D or allowed by section 38-771.01, subsection F, paragraph 3.

D. Any member contributions that are required by section 38-771, subsection D or that are allowed pursuant to section 38-771.01, subsection F, paragraph 3 are deemed to be made by the member to ASRS through a salary reduction program in accordance with the following:

A member may make member contributions pursuant to section 38-771, subsection E or section 38-771.01, subsection F, paragraph 4 through a salary reduction program elected pursuant to this subsection. If a member makes an irrevocable election pursuant to this subsection before July 1, 1999 to have the member's employer make payments for additional contributions pursuant to section 38-771, subsection E, the election continues in effect from and after June 30, 1999 and shall not be revoked, amended or altered by any election made pursuant to section 38-771.01 or otherwise. The amounts paid pursuant to a salary reduction program are in lieu of contributions by the electing member. The member's salary or other compensation shall be reduced by the amount paid by the employer pursuant to this subsection.
Before a member's termination of employment, the member may make an election pursuant to this subsection at any time after the date the member elects to receive retirement benefits based on section 38-771, subsection C, paragraph 2 but before July 1, 1999 or at any time after the member elects to make member contributions pursuant to section 38-771.01, subsection F, paragraph 4. The election shall specify the number of payroll periods that deductions will be made from the member's compensation and the dollar amount of deductions for each payroll period during the specified number of payroll periods. After an election is made pursuant to this subsection, the election is binding on and irrevocable for the member and the member's employer during the member's remaining period of employment.
After a member makes or is deemed to have made an irrevocable election pursuant to this subsection, the member does not have the option of choosing to receive the contributed amounts directly. A member who makes an irrevocable election pursuant to this subsection to have the member's employer make payments for less than all of the amounts payable for the member's additional contributions allowed by section 38-771.01, subsection F, paragraph 4 may irrevocably elect to have the member's employer make payments for all or any portion of the remaining amounts payable for the member's additional contributions. A member who makes one or more irrevocable elections pursuant to this subsection may also make other contributions to ASRS pursuant to section 38-771.01, subsection F, paragraph 4 or pursuant to subsection H of this section to the extent of any remaining amounts payable for which the member has not made an election pursuant to this subsection. An additional election or contribution with respect to a portion of the amounts payable for the member's additional contributions pursuant to section 38-771.01, subsection F, paragraph 4 does not alter, amend or revoke an irrevocable election already made pursuant to this subsection for any other portion of the amounts payable for the member's additional contributions allowed by section 38-771.01, subsection F, paragraph 4.
If on termination of the member's employment all amounts have not been paid to ASRS pursuant to the member's irrevocable election pursuant to this subsection, the member may pay ASRS, within thirty days after the member's termination of employment and subject to other limitations prescribed in this section, all or any portion of the unpaid amounts as provided in subsection H of this section. These payments do not alter, amend or revoke any irrevocable election already made pursuant to this subsection with respect to any amount to be paid by the member's employer while the member is employed by the member's employer.
Amounts paid by an employer pursuant to this subsection shall be treated as employer contributions for the purpose of determining tax treatment under the internal revenue code. The effective date of employer payments pursuant to this subsection shall not be before the date ASRS receives notification from the United States internal revenue service that pursuant to section 414(h)(2) of the internal revenue code the amounts paid by an employer pursuant to this subsection will not be included in the member's gross income for income tax purposes until those amounts are distributed by refund or retirement benefit payments.
Unless otherwise provided, member contributions paid by an employer pursuant to this subsection are treated for all other purposes under ASRS in the same manner and to the same extent as member contributions that are not paid by an employer pursuant to this subsection.
If a member transfers employment from one participating employer with which the member has made an irrevocable election pursuant to this subsection to another participating employer, the member and the successor participating employer shall complete the terms of the irrevocable election that the member made with the original participating employer.

E. The following limits apply to contributions to ASRS:

Except to the extent paragraphs 2 and 3 of this subsection apply to certain contributions made by a member to ASRS and to the extent permitted under section 414(v) of the internal revenue code, if applicable, in any one limitation year, the annual additions contributed or allocated to ASRS for or on behalf of a member shall not exceed the lesser of either:

(a) $40,000 or a larger amount that is prescribed by the board and that is due to any cost of living adjustment announced by the United States secretary of the treasury pursuant to section 415(d) of the internal revenue code. The board shall increase the amount prescribed by this subdivision as of the effective date of the increase announced by the United States secretary of the treasury.

(b) One hundred percent of the member's compensation for the limitation year. The compensation limit prescribed in this subdivision does not apply to any contribution to ASRS for medical benefits after a member's separation from service, within the meaning prescribed in section 401(h) or 419A(f)(2) of the internal revenue code, that is otherwise treated as an annual addition.

Unless paragraph 4 of this subsection applies, for plan years beginning on or after July 1, 1998, in any one limitation year, the annual additions credited to ASRS for or on behalf of a member who makes contributions to ASRS to purchase credited service pursuant to section 38-743, 38-744, 38-745 or 38-922 and with respect to which an irrevocable election has not been made pursuant to subsection B of this section shall not exceed the greater of either:

(a) The requirements of section 38-769. For the purposes of applying the limits prescribed in section 38-769 under this subdivision, the accrued benefit derived from the contributions shall be treated as an annual benefit and the reduced limit for certain early retirement in section 38-769, subsection C, paragraph 2 does not apply.

(b) Except as provided in paragraph 3 of this subsection, the requirements of paragraph 1 of this subsection. The contributions shall be treated as annual additions and any of the member's other annual additions for the limitation year shall be taken into account. For the purposes of applying the requirements of paragraph 1 of this subsection under this subdivision, the percentage of compensation limit in paragraph 1, subdivision (b) of this paragraph does not apply.

For plan years beginning on or after July 1, 1998, the requirements of paragraph 1 of this subsection shall not be applied to reduce the amount of credited service that may be purchased by an eligible member pursuant to section 38-743, 38-744, 38-745 or 38-922 to an amount that is less than the amount of credited service allowed to be purchased pursuant to those sections on August 5, 1997 without the application of any of the limits prescribed in this section or section 415 of the internal revenue code. For the purposes of this paragraph, "eligible member" means a person who first becomes a member of ASRS before July 1, 1999.
Member contributions to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-922 shall not be made by a member if recognition of that service would cause a member to receive a retirement benefit for the same service from ASRS and one or more other retirement plans. This paragraph does not apply to either of the following:

(a) Contributions made by an eligible member as defined in paragraph 3 of this subsection, except that any service purchase by an eligible member is subject to any other limitations, including limitations on duplicative service purchase, otherwise provided in this article.

(b) Any member contributions with respect to which an irrevocable election has been made by a member pursuant to subsection B of this section, except that the service purchase is subject to any other limitations, including limitations on duplicative service purchase, otherwise provided in this article.

F. If a member's contributions are subject to the limitations of subsection E of this section, the contributions shall be treated as being made to a separate defined contribution plan. If the member's contributions exceed the limits prescribed in subsection E of this section when taking into account other member and employer contributions to ASRS on behalf of the member for the limitation year, the amount to be paid by the member shall be reduced to not exceed the limits prescribed in subsection E of this section and the remaining amount shall be carried forward to the next limitation year, unless the limits are exceeded in the next limitation year. If the limits are exceeded in the next limitation year, the procedure prescribed by this subsection shall be repeated until all payments have been made.

G. If, after the application of subsection F of this section, the annual additions on behalf of a member exceed the limitations prescribed in subsection E of this section, ASRS shall dispose of excess amounts by either of the following:

Returning to the member any contributions that are made by the member and that are nondeductible under the internal revenue code.
Holding the amounts in a suspense account established pursuant to subsection L of this section and allocating the amounts as either member or employer contributions for the benefit of the member in the next limitation year and before any further member or employer contributions are made that would constitute annual additions made to a defined contribution plan pursuant to section 415 of the internal revenue code. ASRS shall allocate contributions as prescribed in this section, and the amount allocated shall reduce the amount of the member or employer contributions for the limitation year in which the allocation is made.

H. To the extent that a payment under this subsection does not alter, amend or revoke any one or more currently effective irrevocable elections made by the member pursuant to subsection B or D of this section, the board may accept contributions made pursuant to section 38-771 or member contributions for the payment for credited service purchases pursuant to section 38-738, 38-742, 38-743, 38-744, 38-745 or 38-922 or contributions made pursuant to section 38-771.01, subsection F, paragraph 4, in whole or in part, by any one or a combination of the following methods:

In lump sum payments.
Subject to the limitations prescribed in sections 401(a)(31) and 402(c) of the internal revenue code and subsection J of this section, accepting a direct transfer of any eligible rollover distribution from one or more:

(a) Retirement programs that are qualified under section 401(a) or 403(a) of the internal revenue code.

(b) Annuity contracts described in section 403(b) of the internal revenue code.

(c) Eligible deferred compensation plans described in section 457(b) of the internal revenue code that are maintained by a state, a political subdivision of a state or any agency or instrumentality of a state or a political subdivision of a state.

Accepting from a member a direct transfer from an individual retirement account or individual retirement annuity described in section 408(a) or 408(b) of the internal revenue code of an amount that would otherwise be eligible to be rolled over to ASRS under the provisions of section 408(d)(3)(A)(ii) of the internal revenue code if the amount had been received by the member and would have otherwise been includible in the member's gross income but for the direct transfer.
Providing by rule that the contributions may be made in installment payments over a period of time.

I. To the extent that a payment under this subsection does not alter, amend or revoke any one or more currently effective irrevocable elections made by a member pursuant to subsection B or D of this section, the board may accept a direct trustee-to-trustee transfer from retirement programs that are qualified under section 401(a) or 403(a) of the internal revenue code, an annuity contract described in section 403(b) of the internal revenue code or an eligible deferred compensation plan described in section 457(b) of the internal revenue code for the payment for credited service purchases pursuant to section 38-742, 38-743, 38-744, 38-745 or 38-922. If a direct trustee-to-trustee transfer is from a retirement program that is qualified under section 401(a) of the internal revenue code and that includes a cash or deferred arrangement described in section 401(k) of the internal revenue code, the member on whose behalf the transfer was made is not eligible to retire under section 38-764, subsection I before the date the member attains fifty-nine and one-half years of age.

J. ASRS shall separately account for all amounts rolled over or directly transferred to ASRS. Subject to the limitations contained in the internal revenue code applicable to the type of plan from which an eligible rollover distribution is transferred, to the extent any eligible rollover distribution that is directly transferred to ASRS consists wholly or partially of amounts that would otherwise not be included in the member's gross income if not so transferred, ASRS shall separately account for the amounts so transferred, and earnings on those amounts, including separately accounting for the portion of the amount that is includable in gross income and the portion of the amount that is not includable in gross income.

K. ASRS shall not grant credited service under section 38-738, 38-742, 38-743, 38-744 or 38-922 for contributions made pursuant to subsection H of this section until the contributions are received by ASRS. ASRS may assess interest or administrative charges attributable to any installment payment made pursuant to subsection H, paragraph 4 of this section to purchase credited service pursuant to section 38-738, 38-742, 38-743, 38-744 or 38-922. The interest or administrative charges shall be added to the amount of contributions made to ASRS by the member. The interest or administrative charges shall not be treated as member contributions for any purposes under this article, and a member or a member's beneficiary does not have a right to the return of the interest or administrative charges pursuant to any other provision of this article. Interest assessed pursuant to this subsection shall be at the rate specified by the board pursuant to section 38-711, paragraph 2.

L. Notwithstanding any provision of this article to the contrary, if the annual additions credited on behalf of an ASRS member during any limitation year exceed the limits of section 415(c) of the internal revenue code and subsection E of this section, ASRS may only correct the excess pursuant to the employee plans compliance resolution system prescribed in internal revenue service revenue procedure 2008-50 or any future guidance issued by the internal revenue service, including the preamble of the final treasury regulations issued under section 415 of the internal revenue code.

M. If the member retires before all payments are made pursuant to this section, ASRS shall calculate the member's benefits based only on the payments actually made.

N. On satisfaction of the requirements of this section, ASRS shall adjust the member's credited service history and add any additional service credits acquired.

O. Annual additions on behalf of a member in any limitation year shall be the sum of:

The amount of the member contributions made to ASRS to purchase credited service pursuant to section 38-738, 38-743, 38-744, 38-745 or 38-922 and with respect to which an irrevocable election made pursuant to subsection B of this section is not in effect.
The amount of member and employer contributions made to ASRS on behalf of a member who elected or was deemed to have elected to receive retirement benefits pursuant to section 38-771 or who is entitled to benefits pursuant to section 38-771.01, except that, other than as provided in subsection P of this section, corrective contributions shall be considered annual additions for the limitation years to which the contributions relate and interest and gains shall not be considered as annual additions for the purpose of any limitation prescribed in this article or in section 415 of the internal revenue code. If the corrective contributions exceed the limit on annual additions for a limitation year prior to the limitation year in which the corrective contributions are contributed by the employer to ASRS, the retirement benefit attributable to the excess corrective contributions shall be treated as an excess benefit and shall be payable to the member as any other excess benefit is payable pursuant to section 38-774, and the employer shall pay the excess corrective contributions to the separate unfunded governmental excess benefit arrangement administered by the board pursuant to section 38-774.
Any member or employer contributions made to ASRS or any other plan that are treated as being made to a defined contribution plan maintained by an employer of the member.
Any forfeitures, including any income attributable to forfeitures, allocated for or on behalf of a member of ASRS or any other plan that are treated as being allocated under a defined contribution plan maintained by an employer of the member.

P. To the extent any portion of the subject benefits, if treated as subject to the benefit limitations of section 415(b) of the internal revenue code, exceed the applicable limitation on benefits pursuant to section 38-769 for the form of distribution, a percentage of corrective contributions and interest and gains shall be treated as annual additions for the limitation year in which contributed by the employer to ASRS. This percentage of corrective contributions and interest and gains shall be equal to the percentage determined by dividing the subject benefits that exceed the limitation on benefits pursuant to section 38-769 by the subject benefits. If the corrective contributions and interest and gains that are treated as annual additions for the limitation year in which the corrective contributions and interest and gains are contributed by the employer to ASRS exceed the limit on annual additions for the limitation year, the retirement benefit attributable to the excess shall be treated as an excess benefit and shall be payable to the member as any other excess benefit is payable pursuant to section 38-774, and the employer shall pay the excess to the separate unfunded governmental excess benefit arrangement administered by the board pursuant to section 38-774.

Q. Subsection O of this section shall be construed and interpreted in accordance with section 415 of the internal revenue code and the final treasury regulations issued under that section.

R. For the purposes of this section:

"Compensation" has the same meaning prescribed in section 38-769.
"Corrective contributions" means any contributions that are paid by an employer pursuant to section 38-771.01, subsection C, paragraph 3 and that are attributable to employer contributions that should have been made for prior limitation years.
"Defined contribution plan" has the same meaning prescribed in section 38-769.
"Eligible rollover distribution" has the same meaning prescribed in section 38-770.
"Interest and gains" means employer contributions to ASRS pursuant to section 38-771.01, subsection C, paragraphs 3, 5 and 6 that are attributable to earnings and supplemental credits that would have been earned or added to a member's annuity payment.
"Limitation year" has the same meaning prescribed in section 38-769.
"Participating employer" means an employer that participates in ASRS.
"Subject benefits" means the retirement benefit received by a member pursuant to section 38-771.01 minus the sum of the portion of such retirement benefit attributable to contributions that were made by or on behalf of the member to the defined contribution program administered by ASRS for periods before July 1, 1981 and contributions that were made by the member after June 30, 1981 and that were not picked up as provided in section 414(h)(2) of the internal revenue code.

§ 38-748 Employer payments for ineligible contributions; definitions

A. If an employer pays contributions on behalf of any person who is not eligible by statute or rule for ASRS membership or pays contributions on compensation that is not eligible by statute or rule for ASRS contributions and either ASRS or a court determines that ASRS shall provide a person with any benefit or credit under this article or article 2.1 of this chapter based on such contributions, the employer shall pay to ASRS any unfunded liability resulting from the provision of benefits or credit to the person.

B. If the employer does not remit full payment of the unfunded liability pursuant to subsection A of this section within ninety days after being notified by ASRS of the amount due, the unpaid amount accrues interest until the amount is paid in full.

C. Credited service ceases to accrue as of the date that ASRS or a court first determines that ASRS shall provide any benefit or credit to the person.

D. If the amount in the person's ASRS account is greater than the present value of the benefit or credit, ASRS shall retain the entire account and is not required to refund, credit or offset any excess against future contributions.

E. This section applies to an employer that employs, either directly or indirectly, a person who performs services for a third-party organization and that does not have a written representation by ASRS of the person's eligibility.

F. For the purposes of this section:

"Amount in the person's ASRS account" means two times the person's retirement contributions made pursuant to section 38-736:

(a) Plus:

(i) Interest on the person's retirement contributions made pursuant to section 38-736.

(ii) Any contributions made for the purchase of service credits pursuant to section 38-742, 38-743, 38-744 or 38-745.

(iii) Interest on the amount contributed for the purchase of service credits pursuant to section 38-742, 38-743, 38-744 or 38-745.

(b) Minus any amounts paid by ASRS pursuant to this article or article 2.1 of this chapter.

"Interest" means the interest rate assumption that is approved by ASRS for actuarial equivalency.
"Unfunded liability" means:

(a) For a person who is not eligible by statute or rule for ASRS membership, the amount, if any, that the present value of the person's benefit or credit, using the actuarial assumptions approved by ASRS, exceeds the amount in the person's ASRS account calculated as of the date that ASRS or a court first determines that ASRS shall provide any benefit or credit to the person.

(b) For contributions on compensation that is not eligible by statute or rule for ASRS contributions, the difference, if any, of the amount that the present value of a person's benefit or credit, using the actuarial assumptions approved by ASRS, exceeds the amount of the present value of the benefit or credit the person would receive if the ineligible contributions, and the compensation and credit associated with those ineligible contributions, had not been reported to ASRS and the amount in the person's ASRS account that is associated with the ineligible contributions on compensation.

§ 38-749 Employer termination incentive program; employer payment of actuarial cost; definitions

A. If a termination incentive program that is offered by an employer results in an actuarial unfunded liability to ASRS, the employer shall pay to ASRS the amount of the unfunded liability. ASRS shall determine the amount of the unfunded liability in consultation with its actuary.

B. An employer shall notify ASRS if the employer plans to implement a termination incentive program that may affect ASRS funding.

C. If ASRS determines that an employer has implemented a termination incentive program that results in an actuarial unfunded liability to ASRS, ASRS shall assess the cost of the unfunded liability to that employer. If the employer does not remit full payment of all monies due within ninety days after being notified by ASRS of the amount due, the unpaid amount accrues interest until the amount is paid in full. The interest rate is the interest rate assumption that is approved by the board for actuarial equivalency for the period in question to the date payment is received.

D. For the purposes of this section:

"Termination incentive program" means either:

(a) A total increase in compensation of thirty percent or more that is given to a member in any one or more years before termination that are used to calculate the member's average monthly compensation if that increase in compensation is used to calculate the member's retirement benefit and that increase in compensation is not attributed to a promotion.

(b) Anything of value, including any monies, credited service or points that the employer provides to or on behalf of a member that is conditioned on the member's termination except for payments to an employee for accrued vacation, sick leave or compensatory time, unless the payment is enhanced beyond the employer's customary payment.

"Unfunded liability" means either:

(a) For the purposes of assessing a cost for an unfunded liability from a termination incentive program as defined in paragraph 1, subdivision (a) of this subsection, the increase in accrued liability attributable to the portion of the benefit that is based on the member's average monthly compensation at the time of retirement in excess of the thirty percent threshold as calculated using the lump sum actuarial factors in effect at the time of the calculation, as provided by the ASRS actuary.

(b) For the purposes of assessing a cost for an unfunded liability resulting from a termination incentive program as defined in paragraph 1, subdivision (b) of this subsection, the difference between the accrued liability using the ASRS valuation assumptions calculated for the member assuming the member retires under the termination incentive program and the accrued liability using the ASRS valuation assumptions, which if necessary may be modified by the ASRS actuary, calculated for the member assuming the member is still an active member.

§ 38-750 Transfers out of the system

A. If an employee has made an irrevocable election pursuant to section 38-747, subsection B or D and transfers participation to another defined benefit retirement system or plan of this state without a termination of employment, within ninety days after the date of the transfer, ASRS shall transfer to the subsequent defined benefit retirement system or plan the amount the employee paid for the purchase of the credited service plus interest as determined by ASRS.

B. If the assets transferred from ASRS are less than the cost of the benefits accrued relative to the credited service as calculated pursuant to section 38-922, subsection B, paragraph 2, and unless a law otherwise provides, the employee shall elect either to pay the difference to the subsequent defined benefit retirement system or plan or accept a reduced amount of service credits. If the employee elects to pay the difference, the amount paid shall be added to the employee's accumulated contribution account balance. If the employee elects to accept a reduced amount of service credits, the amount of service credits granted shall be equal to the amount of service credits purchased multiplied by the ratio of the amount of assets transferred to the amount calculated pursuant to section 38-922, subsection B, paragraph 2.

C. The transferred employee and the employer shall complete the terms of the irrevocable election by making payments to ASRS.

D. If the employee is given an election to transfer to another defined benefit retirement system or plan of this state or to remain with the employee's current retirement system, on termination of employment the employee shall elect to have ASRS:

Promptly transfer to the subsequent defined benefit retirement system or plan the principal amount paid by the employee for the purchase of credited service plus interest as determined by ASRS. If an unfunded liability is created, subsection B of this section applies. If the employee fails to elect to have the assets transferred within thirty days after termination of employment, the employee is deemed to have made an election as prescribed in paragraph 2.
On written request by the employee, promptly return to the employee the principal amount paid by the employee for the purchase of credited service plus interest as determined by ASRS. If no application is received by ASRS within sixty days after termination of employment, ASRS shall issue the payment directly to the employee.

E. If the employee is not given an election to transfer to another defined benefit retirement system or plan of this state or to remain with the employee's current retirement system, after termination of employment the employee may elect within thirty days of termination of employment to have ASRS promptly transfer to the subsequent defined benefit retirement system or plan the principal amount paid by the employee for the purchase of credited service plus interest as determined by ASRS. If an unfunded liability is created, subsection B of this section applies. If the employee fails to make the election under this subsection, ASRS shall deem the employee as an inactive member of ASRS.

F. If an employee is given an election to transfer to another defined benefit retirement system or plan of this state or to remain with the employee's current retirement system and the employee is receiving a benefit pursuant to this article based on the employee's own service or article 2.1 of this chapter, the employee is eligible to transfer to the retirement system or plan, but the election to transfer terminates the benefit from ASRS on the effective date of the transfer.

G. If an employee is not given an election to transfer to another defined benefit retirement system or plan of this state or to remain with the employee's current retirement system and the employee is receiving a benefit pursuant to this article based on the employee's own service or article 2.1 of this chapter, the employee is not eligible to transfer to another retirement system or plan.

§ 38-751 Nonparticipatory employer liability allocation; exemption; definitions

A. ASRS shall establish a separate fund for an employer, other than a charter school, that is no longer participating in ASRS as a result of any of the following:

The character of the employer changes from a public entity to a private entity.
An employer, other than this state, dissolves.
Through legislative action, the employer is no longer enrolling new employees in ASRS or no longer contributing to ASRS on behalf of current employees or groups of employees who otherwise would be eligible for ASRS membership.

B. For a nonparticipating employer described in subsection A of this section, ASRS shall allocate an actuarial accrued liability and a designated asset amount to the nonparticipating employer's separate fund as of the nonparticipation date, which shall be calculated as follows:

The actuarial accrued liability shall equal the sum of the plan employer actuarial accrued liability and the LTD program employer actuarial accrued liability. Actuarial accrued liability shall be calculated based on the same actuarial assumptions and methods as the actuarial valuation performed immediately preceding the nonparticipating employer's nonparticipation date.
The designated asset amount shall equal the sum of the following:

(a) The plan employer actuarial accrued liability multiplied by the plan funded percentage.

(b) The LTD program employer actuarial accrued liability multiplied by the LTD program funded percentage.

C. All monies and securities transferred to the nonparticipating employer's separate fund shall be credited to that fund. A record of the market value and the cost value of such transferred contributions shall be maintained for actuarial and investment purposes. ASRS shall make all decisions regarding the nonparticipating employer's separate fund.

D. After establishing the nonparticipating employer's separate fund, the fund shall be adjusted for all of the following:

All contributions made by employees of the nonparticipating employer.
All contributions made by the nonparticipating employer.
All plan, all LTD program and any other benefits paid to the nonparticipating employer's members who are active, inactive, retired or on long-term disability.
All plan, all LTD program and any other benefits paid to the survivors of the nonparticipating employer's members.
The applicable share of the investment gains and losses.
Expenses associated with the administration of the nonparticipating employer's separate fund, including any administrative, development, actuarial, legal, custodial and investment management costs associated with the fund. These expenses shall be paid directly by the nonparticipating employer or included in the employer's liability for the purposes of determining the employer's contribution rate.

E. After establishing the nonparticipating employer's separate fund, the nonparticipating employer and any employees of that employer who are enrolled in ASRS shall continue to have contribution requirements to the nonparticipating employer's separate fund. The contribution requirements shall be calculated as follows:

All employees of the nonparticipating employer who are enrolled in ASRS shall continue to make contributions through payroll deductions based on the contribution rate determined for the employees of participating employers of ASRS pursuant to section 38-736.
The nonparticipating employer shall continue to make contributions through lump sum payments in accordance with section 38-735, equal to the sum of:

(a) Contributions owed through payroll deductions based on the contribution rate determined for participating employers pursuant to section 38-737.

(b) The amount required to amortize the past service funding requirement in the nonparticipating employer's separate fund over a period that is determined by the board and that is consistent with generally accepted actuarial standards. In determining the past service funding period, the board shall seek to improve the funded status whenever the nonparticipating employer's separate fund is less than one hundred percent funded.

F. The ASRS actuary shall determine the actuarial assumptions used to determine the contribution requirements for the nonparticipating employer under subsection E of this section. Notwithstanding section 38-737, the contribution for the nonparticipating employer may not be determined as a percentage of compensation due to the anticipated decline of compensation for employees of the nonparticipating employer participating in ASRS. The nonparticipating employer shall certify on each payroll the amount to be contributed and shall remit that amount to ASRS at a rate that is consistent with the rate paid by the participating employers. Each fiscal year, amounts that are not remitted through payroll contributions pursuant to this section shall be invoiced to the employer and shall be paid within the same fiscal year the nonparticipating employer is invoiced.

G. This section does not permit an employer to alter the irrevocable agreement approved by the board under section 38-729.

H. For the purposes of calculating an employer's liability under this section, members who are active, inactive, retired or on long-term disability are considered employees of the nonparticipating employer if the member's most recent employer was the nonparticipating employer as of the nonparticipation date.

I. This section does not apply to an employer whose existence was terminated by legislative action or otherwise became a nonparticipating employer as described in subsection A of this section on or before January 1, 2013.

J. For the purposes of this section:

"LTD program" means the program established by article 2.1 of this chapter.
"LTD program employer actuarial accrued liability" means the actuarial accrued liability for the employer's active and inactive members and the open LTD program claims for the employees of the employer as of the nonparticipation date.
"LTD program funded percentage" means the total market value of LTD program assets divided by the total LTD program actuarial accrued liabilities, as of the actuarial valuation performed immediately preceding the nonparticipation date. If the percentage is greater than one hundred percent, the LTD program funded percentage is one hundred percent.
"Nonparticipation date" means the date on which the employer is no longer participating in ASRS.
"Plan" means the retirement plan established by this article.
"Plan employer actuarial accrued liability" means the plan's actuarial accrued liability for all benefits provided under this article, including benefits established in section 38-783, for the employer's active, inactive or retired members as of the actuarial valuation performed immediately preceding the nonparticipation date.
"Plan funded percentage" means the plan's total market value of assets divided by the plan's actuarial accrued liability for all benefits provided under this article, including benefits established in section 38-783, for all active, inactive or retired members as of the actuarial valuation performed immediately preceding the nonparticipation date. If the percentage is greater than one hundred percent, the plan funded percentage is one hundred percent.

§ 38-755 Member's account information; beneficiary designation; spousal consent; confidentiality; exception

A. ASRS shall make information concerning a member's account accessible to the member in written or electronic form. This information shall include the member's current account balance, contact information, beneficiary election, estimated retirement date and estimated benefit amount.

B. The member may change the member's beneficiary at any time in a manner established by ASRS.

C. A member who is married shall name and maintain the member's current spouse as a beneficiary to receive at least fifty percent of the member's account, unless naming or maintaining the current spouse as a beneficiary violates another law, an existing contract or a court order. The member's current spouse may consent to a waiver of this requirement pursuant to section 38-776.

D. Except as provided in subsection F of this section, in order to protect a member's identity from fraud, abuse, theft or civil or criminal activity, information about a member is not subject to inspection pursuant to title 39, chapter 1, article 2, except that the following information about a member is subject to inspection:

The member's name.
Whether the member is an active member as defined in section 38-711, an inactive member as defined in section 38-711 or a retired member as defined in section 38-711.
The member's current or most recent employer.
For a retired member, the average monthly compensation, as defined in section 38-711, used to calculate the member's retirement benefit.
The credited service as defined in section 38-711 on account for an active or inactive member or the credited service used to calculate the retirement benefit for a retired member.
The gross pension amount actually paid to a retired member.
The most recent retirement date.
The current account balance for an active or inactive member.
The gross long-term disability program benefit actually paid to a member with a disability pursuant to article 2.1 of this chapter.
The amount paid to purchase credited service pursuant to section 38-743, 38-744 or 38-745.
The amount of credited service purchased pursuant to section 38-743, 38-744 or 38-745.

E. ASRS shall not permit any unredacted record to be inspected that contains a member's social security number, bank account information, address, telephone number, email address, medical records, health insurance information, beneficiary or survivor information or disability information or any information that is protected by any federal or state law.

F. ASRS may provide the value of the member's benefit to a member's current or former spouse on receipt of proof of service of a petition for annulment, dissolution of marriage or legal separation for the purposes of section 38-773.

§ 38-756 Outreach education program

A. The director shall develop, implement and maintain an outreach education program for members of ASRS that is designed to provide basic information on retirement planning.

B. The outreach education program prescribed in subsection A shall include at least the following:

Information on the benefits available to members before retirement.
Information on the financial benefits available at retirement including a detailed explanation of the benefits and benefit options under ASRS.
Information on how ASRS is organized.
Information on how the benefits of the members are funded.
Information on the social issues related to retirement.
The use of audiovisual, electronic and other educational aids that are designed to provide information on retirement education and planning.
The development of a creative promotional program using available media outlets.

C. ASRS shall present, either in person or through the use of electronic means, the outreach education program prescribed in subsection A at least once each year in each county of this state. Attendance of active members at outreach education program presentations is voluntary.

§ 38-757 Normal retirement

A. After application on a form prescribed by the director, a member may retire on reaching the member's normal retirement date. Except as provided in section 13-713, a member's right to the member's normal retirement benefit as described in subsection B of this section is nonforfeitable by an employer or ASRS on attainment of the member's normal retirement date.

B. Except as provided in section 38-768, a member who meets the requirements for retirement benefits at normal retirement shall receive a straight life annuity that equals the result of paragraph 1 of this subsection multiplied by paragraph 2 of this subsection when those paragraphs are defined as follows:

The number of whole and fractional years of credited service times the following:

(a) 2.10 percent if the member does not have more than 19.99 years of credited service.

(b) 2.15 percent if the member has at least 20.00 years of credited service but not more than 24.99 years of credited service.

(c) 2.20 percent if the member has at least 25.00 years of credited service but not more than 29.99 years of credited service.

(d) 2.30 percent if the member has at least 30.00 years of credited service.

The member's average monthly compensation.

C. Employers shall provide evidence of, and certify to, in a manner provided by the board, the member's average monthly compensation if that information is not already available from the records of ASRS.

§ 38-758 Early retirement

A. A member who has attained age fifty, who has terminated employment with all employers and who has five years of total credited service is eligible to elect, in a form and manner prescribed by the board, to receive a reduced retirement income.

B. For a member whose membership in ASRS commenced before July 1, 2011, the benefit payable to a member electing early retirement shall be determined by reducing the normal retirement benefit computed in accordance with section 38-757 either:

At the rate of three percent per year from age sixty to age sixty-five and five percent per year from age fifty to age sixty. The reduction in normal retirement benefits pursuant to this paragraph for an eligible member electing early retirement shall be based on the period from the date of commencement of early retirement benefits to the member's sixtieth birthday if the member has at least twenty years of total credited service, sixty-second birthday if the member has at least ten but less than twenty years of total credited service or sixty-fifth birthday if the member has at least five but less than ten years of total credited service.
If the sum of a member's age and years of total credited service equals seventy-seven or more, but is less than eighty, at the rate of three percent for each unit of one or fraction of one by which the sum is less than eighty.

C. For a member whose membership in ASRS commenced on or after July 1, 2011, the benefit payable to a member electing early retirement shall be determined by reducing the normal retirement benefit computed in accordance with section 38-757 at the rate of three percent per year from age sixty to age sixty-five and five percent per year from age fifty to age sixty. The reduction in normal retirement benefits pursuant to this subsection for an eligible member electing early retirement shall be based on the period from the date of commencement of early retirement benefits to the member's sixty-second birthday if the member has at least ten years of total credited service or sixty-fifth birthday if the member has at least five but less than ten years of total credited service.

§ 38-759 Late retirement; definition

A. A member who is eligible for normal retirement benefits on the member's normal retirement date may elect to defer receiving retirement benefits.

B. Notwithstanding this section, payment of a member's deferred benefits shall not commence later than the member's required beginning date.

C. For the purposes of this section, "required beginning date" has the same meaning prescribed in section 38-775.

§ 38-760 Optional forms of retirement benefits

A. On retirement, members may elect an optional form of retirement benefit as provided in this section.

B. The optional retirement benefits available under this section include the following:

Joint and survivor life annuity in a reduced amount payable to the retiring member during life, with the provisions that after the member's death all, two-thirds or one-half of the retirement income, as the member elects, shall be continued during the lifetime of the contingent annuitant designated by the retiring member subject to the restrictions prescribed in section 38-764. The amount of retirement income shall be the actuarial equivalent of the retirement income to which the member would be entitled under normal or early retirement. The election in a manner prescribed by the board shall name the contingent annuitant. The election may be revoked at any time before the member's effective date of retirement. At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board as follows:

(a) If a different contingent annuitant is named, the life annuity of the member under the same joint and survivor life annuity option previously elected shall be adjusted to the actuarial equivalent of the original annuity, based on the age of the new contingent annuitant. The adjustment shall include all postretirement increases in retirement income that are authorized by law after the member's date of retirement. Payment of this adjusted life annuity shall continue under the provisions of the option previously elected by the member.

(b) If the member rescinds the election, the member shall thereafter receive a straight life annuity equal to what the member would otherwise be entitled to receive if the member had not elected the joint and survivor life annuity option, including all postretirement increases in retirement income that are authorized by law after the date of retirement. The increased payment shall continue during the remainder of the member's lifetime.

(c) If a member whose original date of retirement is before July 1, 2008 rescinds the joint and survivor life annuity option previously elected and receives the straight life annuity pursuant to subdivision (b) of this paragraph, the member may again elect the same joint and survivor life annuity option previously elected subject to the same restrictions prescribed in subdivision (a) of this paragraph.

(d) A member whose original date of retirement is on or after July 1, 2008 may exercise a onetime election to rescind the joint and survivor life annuity option elected by the member if the contingent annuitant dies or ceases to be a contingent annuitant pursuant to the terms of a qualified domestic relations order.

(e) If the member's contingent annuitant is the member's current spouse, the member shall obtain the consent of the contingent annuitant pursuant to section 38-776 before the member names a new contingent annuitant or before the member rescinds the election, except that consent is not required if the rescission is pursuant to subdivision (d) of this paragraph.

A period certain and life annuity actuarially reduced with payments for five, ten or fifteen years that are not dependent on the continued lifetime of the member but whose payments continue for the member's lifetime beyond the five, ten or fifteen year period. At the time of electing this option, the member shall name one or more period certain contingent annuitants who are entitled to receive the payments for any portion of the period certain beyond the lifetime of the member. The member may name a different contingent annuitant at any time. If no contingent annuitant survives the member, any remaining payments are the property of the member's estate. A member who retires after August 9, 2001 and before July 1, 2008 may rescind the election of a period certain and life annuity. If the member rescinds the election of a period certain and life annuity, the member shall thereafter receive a straight life annuity equal to what the member would otherwise be entitled to receive if the member had not elected the period certain and life annuity option, including all postretirement increases in retirement income that are authorized by law after the date of retirement. The increased payment shall continue during the remainder of the member's lifetime. If the member reverts to a straight life annuity pursuant to this paragraph, the member may again elect a period certain and life annuity subject to the same provisions of the period certain and life annuity previously elected by the member. If the member's contingent annuitant is the member's current spouse, the member shall obtain the consent of the contingent annuitant pursuant to section 38-776 before the member rescinds the election of a period certain and life annuity or again elects a period certain and life annuity. A member whose original date of retirement is on or after July 1, 2008 may exercise a onetime election to rescind the period certain and life annuity option elected by the member if the contingent annuitant dies or ceases to be a contingent annuitant pursuant to the terms of a qualified domestic relations order or at the expiration of the member's period certain term.
Beginning on July 1, 2002, a lump sum payment equal to not more than thirty-six months of the member's retirement benefits based on the actuarial equivalent of the retirement income to which the member would be entitled under normal or early retirement. The member's benefit shall be actuarially reduced to provide for the lump sum payment. The lump sum payment shall be made at the time of retirement. If a member has received an overpayment pursuant to section 38-765 or 38-797.08, ASRS shall withhold the overpayment amount plus any required income tax withholding from the partial lump sum. Any benefit increase granted to a member who elects a lump sum payment pursuant to this paragraph is subject to the following conditions:

(a) If the benefit increase is a percentage increase of the member's retirement benefit, the increase shall be based on the actuarially reduced retirement benefit of the member.

(b) If the benefit increase is pursuant to section 38-767, the amount of the member's benefit increase shall be calculated without regard to the lump sum payment pursuant to this paragraph.

Other forms of actuarially reduced optional benefits prescribed by the board.

C. A member who is married at the time of retirement shall elect a joint and survivor life annuity pursuant to subsection B, paragraph 1 of this section, and the member's current spouse shall be the contingent annuitant unless the member's current spouse consents to a waiver of this requirement pursuant to section 38-776 or the election would violate another law, an existing contract or a court order. If the married member does not elect a type of joint and survivor life annuity for the member's current spouse and the member's current spouse has not waived the requirements of this subsection, ASRS shall cancel the member's retirement. The member may reapply for retirement at any time in a manner established by ASRS.

§ 38-762 Survivor benefits before retirement; definition

A. On the death of any active or inactive member before retirement, the designated beneficiary of the member shall be paid a survivor benefit equal to the sum of both of the following:

The member's contribution and interest and the employer's contribution and interest to the defined benefit plan established by this article for credited service that a member earned by working for an employer, plus all contributions and interest made for the purchase of military service, leave without pay or other public service credit. This amount excludes payments made by an employer pursuant to section 38-738, subsection B, paragraph 3, unless the member has made the payment required by section 38-738, subsection B, paragraph 1.
The amount of the member's employee account and the member's employer account together with supplemental credits, if any, transferred from the defined contribution program administered by ASRS to the defined benefit program established by this article.

B. Subsection A, paragraphs 1 and 2 of this section shall be accumulated at compound interest at a rate determined by the board through the day of the payment of the benefit.

C. In lieu of a single payment, a designated beneficiary who is eligible for a survivor benefit pursuant to subsection A of this section may elect to receive the actuarial equivalent of the survivor benefit as monthly income for life, if the resulting monthly amount is greater than or equal to the amount determined by the board under section 38-764, subsection E.

D. If a member dies before distribution of the member's benefits commences, the member's entire benefits 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.

E. If a deceased member did not designate a beneficiary or the beneficiary named by a member predeceases the member, ASRS shall pay the member's survivor benefit to the following persons in the following order of priority:

The member's surviving spouse.
The member's surviving natural or adopted children in equal shares.
The member's surviving parents in equal shares.
The member's estate.

F. Any payment pursuant to this section is payment for the account of the member or the member's beneficiary and all persons entitled to payment and, to the extent of the payment, is a full and complete discharge of all liability of the board or ASRS, or both, under or in connection with ASRS.

G. For the purposes of this section, "designated beneficiary" means any individual designated by the member as the member's beneficiary.

§ 38-763 Survivor benefits after retirement

A. Except as provided in subsection B of this section, if a member dies after distribution of retirement benefits commences, ASRS shall continue to distribute the remaining portion of retirement benefits 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.

B. On the death of a retired member who is receiving benefits, the estate or beneficiary of the member is entitled to receive at least the amount of the member's contribution to ASRS plus interest, as determined by the director, less the benefits distributed by ASRS. This amount is payable either as a lump sum or at the same periodic rate in effect at the time of the member's death, as determined by the estate or beneficiary.

§ 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 of this section.

B. All retirement benefits:

Are normally payable in monthly installments beginning on the commencement of retirement as prescribed in subsection A of this section.
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).

§ 38-765 Errors; benefit recomputation

If any change or error in the records results in any member or beneficiary receiving from ASRS more or less than the member or beneficiary would have been entitled to receive if the records had been correct, ASRS shall correct the error and as far as practicable shall adjust the payments in a manner so that the actuarial equivalent of the benefit to which the member or beneficiary was correctly entitled is paid. ASRS shall correct any change or error and shall pay the appropriate monies to a member or beneficiary or shall recover monies from the member or beneficiary if the member or beneficiary is overpaid. ASRS shall recover monies by reducing any benefit otherwise payable by ASRS or the LTD program established by article 2.1 of this chapter to an active, inactive, person with a disability or retired member, survivor, contingent annuitant, beneficiary or alternate payee.

§ 38-766 Retired members; return to work; suspension of benefits; exceptions; maximum benefit

A. A retired member who is engaged to work by an employer for at least twenty weeks in each fiscal year and at least twenty hours per week resumes active membership in ASRS. ASRS shall suspend payment of the member's retirement benefits until the member either:

Terminates employment and files an application for reretirement on a form that is approved by the director.
Attains a normal retirement date, no longer meets the requirements for active membership pursuant to this subsection and files an application for reretirement on a form that is approved by the director.

B. A retired member whose retirement benefits have been suspended pursuant to subsection A of this section shall repay ASRS any retirement benefits received by the member from the date ASRS notifies the member in writing that the member's employment resulted in active membership in ASRS pursuant to subsection A of this section, from the date ASRS determines that the member knew or should have known that the member's employment resulted in membership in ASRS pursuant to subsection A of this section or for any other period that approximates the duration of the violation, as determined by ASRS.

C. A member who satisfies subsection A, paragraph 1 or 2 of this section is entitled to receive an annuity recomputed to include the additional compensation and credited service. However, the recomputed annuity shall be in the original optional form chosen pursuant to section 38-760, with the same beneficiary, if applicable, as when the member first retired, unless the member has resumed active membership for at least sixty consecutive months. A member who retired under a provision of law allowing increased benefits if the retirement occurred during a specific period of time and who subsequently becomes an employee under ASRS shall not retain the increased benefits under the prior law when benefits are computed for the member's most recent retirement.

D. Notwithstanding subsection A of this section, ASRS shall not suspend the payment of retirement benefits if a retired member begins or returns to employment with an employer in a position that satisfies all of the following:

Results in a true change in position, job duties and job title from the position occupied by the member before ASRS retirement.
Either:

(a) Requires participation in another state retirement system, plan or program and the retired member makes contributions or waives participation pursuant to section 38-804, subsection A.

(b) Allows a member to elect to participate in another state retirement system, plan or program and the member makes such an election.

Does not require membership in the defined benefit plan established by this article.

E. A retired member who returns to work pursuant to subsection D of 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.

F. Section 38-769, subsection L applies when determining the maximum benefit that may be paid to a retired member who resumes active membership and subsequently retires.

G. An employer that engaged the retired member to work pursuant to this section shall pay to ASRS an amount equal to the rate established by the actuary pursuant to section 38-766.02, subsection B for the period starting with the first day the retired member began working after retirement through the earlier of:

The date the member terminates employment.
The date the member resumes active membership pursuant to subsection A of this section and the member and employer are required to make contributions pursuant to section 38-736, 38-737 or 38-738.

§ 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:

The retired member has attained the member's normal retirement age.
The retired member terminated direct employment with an employer at least three hundred sixty-five consecutive days before returning to work.
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 15-543.

B. Notwithstanding section 38-766 and subsection A of this section, at a retired member's election, a retired member may return to work as a state 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 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.

§ 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 with an ASRS employer 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:

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.
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:

"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.
"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.

§ 38-767 Benefit increases; applicability

A. For a member whose membership commenced before the effective date of this amendment to this section, effective July 1 of each year, each retired member or beneficiary of a retired member is entitled to receive a permanent benefit increase in the base benefit equal to the amount determined in subsection D of this section if the retired member or beneficiary of a retired member was receiving benefits on or before July 31 of the previous calendar year. The annual permanent benefit increases shall be paid on a monthly basis. The benefit increase shall commence on July 1.

B. The total amount of the percentage increase provided in subsection A of this section shall not exceed four per cent in aggregate for all persons eligible for an increase. The percentage payable from excess investment earnings shall be determined as follows:

Determine any excess investment earnings account balance available.
Determine the total excess investment earnings as provided in subsection C of this section.
Add the amount determined in paragraph 1 of this subsection to the amount determined in paragraph 2 of this subsection.
Determine one per cent of the actuarial present value of benefits for retired members and beneficiaries as of June 30 of the year prior to the year for which an increase is being granted.
Divide the amount determined in paragraph 3 of this subsection by the amount determined in paragraph 4 of this subsection. If the quotient is equal to or more than four, the percentage increase payable from excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section is four per cent. If the quotient is one or more but less than four, the percentage increase payable from excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section is that per cent rounded to the nearest tenth of a per cent. If the quotient is less than one, no benefit increases shall be granted.

C. The excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section are equal to the actuarial present value of benefits for all retired members and beneficiaries as of June 30 of the year prior to the year for which an increase is being granted multiplied by the positive difference, if any, between the yield rate on the actuarial value of ASRS assets for the fiscal year that ended June 30 of the year prior to the year for which an increase is being granted and eight per cent. The excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section are zero if the yield rate on ASRS assets is less than or equal to eight per cent.

D. The permanent benefit increase for each person entitled to receive an increase pursuant to subsection A of this section shall be determined based on years of credited service as follows:

Multiply the percentage determined in subsection B, paragraph 5 of this section by the actuarial present value of benefits for retired members and beneficiaries as of June 30 of the year prior to the year for which an increase is being granted.
Determine the actuarial present value of a one dollar per year of credited service annual increase in the base benefit amounts as of June 30 of the year prior to the year for which an increase is being granted, received by all persons entitled to receive an increase pursuant to subsection A of this section.
Divide the amount determined in paragraph 1 of this subsection by the amount determined in paragraph 2 of this subsection.
Multiply the amount determined in paragraph 3 of this subsection by the number of years of credited service for each retired member and the number of years of credited service earned by a retired member for each beneficiary entitled to receive an increase pursuant to subsection A of this section.

E. Any excess investment earnings on accounts associated with those persons eligible for an annual benefit increase pursuant to subsection A of this section from any year that are not used for benefit adjustments for that year are available for future benefit increases in the following years.

F. Monies available for future benefit increases shall earn interest at a rate of eight per cent per year. This interest shall be used to pay the additional benefit increases provided for in subsection G of this section.

G. In addition to a benefit increase pursuant to subsection A of this section, if a retired member who was eligible for an annual benefit increase pursuant to subsection A of this section had more than ten years of credited service, the retired member or beneficiary of the retired member is entitled to receive a benefit increase based on the number of years following retirement as follows:

At least five years but less than ten years, a monthly benefit increase equal to the amount determined in subsection H of this section.
At least ten years but less than fifteen years, a monthly benefit increase equal to two times the amount determined in subsection H of this section.
At least fifteen years but less than twenty years, a monthly benefit increase equal to three times the amount determined in subsection H of this section.
At least twenty years but less than twenty-five years, a monthly benefit increase equal to four times the amount determined in subsection H of this section.
At least twenty-five years but less than thirty years, a monthly benefit increase equal to five times the amount determined in subsection H of this section.
At least thirty years, a monthly benefit increase equal to six times the amount determined in subsection H of this section.

H. The amount of the monthly benefit increase under subsection G of this section for a retired member or beneficiary of a retired member who is entitled to the increase when at least five years but less than ten years have elapsed since the retired member's retirement date is equal to the amount obtained by dividing the amount of interest credited pursuant to subsection F of this section by the amount that equals the sum of:

The actuarial present value, as of June 30 of the year prior to the year for which the increase is granted, of a benefit increase of one dollar per month for the retired members and beneficiaries of retired members who are eligible for an increase under subsection G of this section and for whom at least five years but less than ten years have elapsed since the retired members' retirement dates.
The actuarial present value, as of June 30 of the year prior to the year for which the increase is granted, of a benefit increase of two dollars per month for the retired members and beneficiaries of retired members who are eligible for an increase under subsection G of this section and for whom at least ten years but less than fifteen years have elapsed since the retired members' retirement dates.
The actuarial present value, as of June 30 of the year prior to the year for which the increase is granted, of a benefit increase of three dollars per month for the retired members and beneficiaries of retired members who are eligible for an increase under subsection G of this section and for whom at least fifteen years but less than twenty years have elapsed since the retired members' retirement dates.
The actuarial present value, as of June 30 of the year prior to the year for which the increase is granted, of a benefit increase of four dollars per month for the retired members and beneficiaries of retired members who are eligible for an increase under subsection G of this section and for whom at least twenty years but less than twenty-five years have elapsed since the retired members' retirement dates.
The actuarial present value, as of June 30 of the year prior to the year for which the increase is granted, of a benefit increase of five dollars per month for the retired members and beneficiaries of retired members who are eligible for an increase under subsection G of this section and for whom at least twenty-five years but less than thirty years have elapsed since the retired members' retirement dates.
The actuarial present value, as of June 30 of the year prior to the year for which the increase is granted, of a benefit increase of six dollars per month for the retired members and beneficiaries of retired members who are eligible for an increase under subsection G of this section and for whom at least thirty years have elapsed since the retired members' retirement dates.

I. A member of the defined contribution program administered by ASRS is only eligible for the benefit increases pursuant to this section if the member elects to transfer irrevocably from the defined contribution program administered by ASRS to the defined benefit program established by this article.

J. The cost of the benefit increases granted pursuant to this section shall be added to the existing liabilities of ASRS.

K. As used in this section, the actuarial present value of benefits for retired members and beneficiaries does not include the value of benefits provided pursuant to section 38-783.

§ 38-768 Minimum retirement benefit

A. Notwithstanding any other provision of this article, a retired member or beneficiary who is entitled to a benefit under this article shall receive at least a minimum monthly benefit that is computed pursuant to subsection B of this section if the retired member or beneficiary is at least seventy-five years of age and if the retired member or beneficiary is any of the following:

Retired from ASRS with at least twenty years of credited service.
A beneficiary of ASRS who is receiving benefits derived from a retired member who had at least twenty years of credited service.
A member with at least twenty years of service who irrevocably revokes the receipt of benefits determined on the basis of membership in the defined contribution program administered by ASRS and who elects to receive benefits under this article.
A beneficiary who is receiving benefits derived from a retired member who had at least twenty years of service, who irrevocably revoked the receipt of benefits determined on the basis of membership in the defined contribution program administered by ASRS and who elected to receive benefits under this article.

B. The minimum monthly benefit provided by subsection A of this section:

For retired members, is $600.
For beneficiaries, is the amount determined by paragraph 1 of this subsection and reduced in accordance with the option chosen by multiplying the amount determined by paragraph 1 of this subsection by the actuarial figure for the option chosen and by the percentage of the option chosen.

C. If the minimum monthly benefit pursuant to subsections A and B of this section is more than the retired member's or beneficiary's current monthly benefit, the retired member or beneficiary is eligible to receive a monthly benefit equal to the minimum benefit. If the retired member's or beneficiary's current monthly benefit is more than the minimum benefit, the retired member's or beneficiary's benefit remains the same.

D. A member who receives a lump sum payment pursuant to section 38-764, subsection C is not eligible for a minimum benefit as provided by this section.

§ 38-769 Maximum retirement benefits; termination; definitions

A. Notwithstanding any other provision of this article, except as provided in subsection C of this section, the employer provided portion of a member's annual benefit payable in the form of a straight life annuity, at any time within a limitation year, shall not exceed one hundred sixty thousand dollars or a larger amount that is effective as of January 1 of each calendar year, is prescribed by the board and is due to any cost of living adjustment announced by the United States secretary of the treasury pursuant to section 415(d) of the internal revenue code. The board shall increase the amount pursuant to this subsection as of the effective date of the increase as prescribed by the United States secretary of the treasury. Benefit increases provided in this section resulting from the increase in the limitations of section 415(b) of the internal revenue code as amended by the economic growth and tax relief reconciliation act of 2001 shall be provided to all current and former members who have benefits that are limited by section 415(b) of the internal revenue code and who have an accrued benefit under ASRS immediately before July 1, 2001, other than an accrued benefit resulting from a benefit increase solely as a result of the increases provided by this section resulting from the increase in the limitations of section 415(b) of the internal revenue code as amended by the economic growth and tax relief reconciliation act of 2001.

B. Notwithstanding the limitations of subsection A of this section, the benefits payable to a member are deemed not to exceed the limitations determined under subsection A of this section if the retirement benefits payable to the member under this article do not exceed ten thousand dollars for the limitation year and if an employer has not at any time maintained a defined contribution plan in which the member has participated.

C. The limitations determined under subsection A of this section are subject to the following adjustments:

If a member has less than ten years of membership in ASRS, the maximum dollar limitation determined under subsection A of this section shall be multiplied by a fraction, the numerator of which is the number of years, or partial years, of membership in ASRS and the denominator of which is ten. The reduction provided in this paragraph also applies to the ten thousand dollar floor limitation provided in subsection B of this section, except that the reduction applies to years of service with an employer rather than to years of membership in ASRS. The reduction in this paragraph does not reduce the limitations determined under subsection A of this section to an amount less than one-tenth of the limitations as determined without regard to this paragraph.
If the member's benefit under ASRS commences before the member reaches sixty-two years of age, the benefit will be limited to:

(a) If the annuity starting date is in a limitation year beginning before July 1, 2007, the annual amount of a benefit payable in the form of a straight life annuity commencing at the member's annuity starting date that is the actuarial equivalent of the dollar limitation under section 415(b)(1)(A) of the internal revenue code as adjusted in subsection A of this section, with actuarial equivalence computed using whichever of the following produces the smaller annual amount:

(i) The interest rate and mortality table or other tabular factor specified by the board for determining actuarial equivalence for early retirement purposes.

(ii) A five per cent interest rate assumption and the applicable mortality table.

(b) If the annuity starting date is in a limitation year beginning on or after July 1, 2007 and ASRS does not have an immediately commencing straight life annuity payable at both age sixty-two and the age of benefit commencement, the annual amount of a benefit payable in the form of a straight life annuity commencing at the member's annuity starting date that is the actuarial equivalent of the dollar limitation under section 415(b)(1)(A) of the internal revenue code as adjusted in subsection A of this section, with actuarial equivalence computed using a five per cent interest rate assumption and the applicable mortality table and expressing the member's age based on completed calendar months as of the annuity start date.

(c) If the annuity starting date is in a limitation year beginning on or after July 1, 2007 and ASRS has an immediately commencing straight life annuity payable at both age sixty-two and the age of benefit commencement, the lesser of:

(i) The adjusted dollar limitation determined in accordance with subdivision (b) of this paragraph, determined without applying the limitations of section 415 of the internal revenue code.

(ii) The product of the dollar limitation under section 415(b)(1)(A) of the internal revenue code as adjusted in subsection A of this section, multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under ASRS at the member's annuity starting date to the annual amount of the immediately commencing straight life annuity under ASRS at age sixty-two, determined without applying the limitations of section 415 of the internal revenue code.

If the retirement benefit under ASRS commences after the member reaches sixty-five years of age, the dollar limitation under section 415(b)(1)(A) of the internal revenue code as adjusted in subsection A of this section on that benefit is increased to:

(a) If the annuity starting date is in a limitation year beginning before July 1, 2007, the annual amount of a benefit payable in the form of a straight life annuity commencing at the member's annuity starting date that is the actuarial equivalent of the dollar limitation under section 415(b)(1)(A) as adjusted under section 415(d) of the internal revenue code, with actuarial equivalence computed using whichever of the following produces the smaller annual amount:

(i) The interest rate and mortality table or other tabular factor specified by the board for determining actuarial equivalence for delayed retirement purposes.

(ii) A five per cent interest rate assumption and the applicable mortality table.

(b) If the annuity starting date is in a limitation year beginning on or after July 1, 2007 and ASRS does not have an immediately commencing straight life annuity payable at both age sixty-five and the age of benefit commencement, the annual amount of a benefit payable in the form of a straight life annuity commencing at the member's annuity starting date that is the actuarial equivalent of the dollar limitation under section 415(b)(1)(A) of the internal revenue code as adjusted in subsection A of this section, with actuarial equivalence computed using a five per cent interest rate assumption and the applicable mortality table and expressing the member's age based on completed calendar months as of the annuity starting date.

(c) If the annuity starting date is in a limitation year beginning on or after July 1, 2007 and ASRS has an immediately commencing straight life annuity payable at both age sixty-five and the age of benefit commencement, the lesser of:

(i) The adjusted dollar limitation determined in accordance with subdivision (b) of this paragraph, determined without applying the limitations of section 415 of the internal revenue code.

(ii) The product of the dollar limitation under section 415(b)(1)(A) of the internal revenue code as adjusted in subsection A of this section, multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under ASRS at the member's annuity starting date to the annual amount of the immediately commencing straight life annuity under ASRS at age sixty-five, determined without applying the limitations of section 415 of the internal revenue code.

For purposes of applying the limits of section 415 of the internal revenue code, a retirement benefit that is payable in any form other than a straight life annuity and that is not subject to section 417(e)(3) of the internal revenue code must be adjusted to an actuarially equivalent straight life annuity that equals either:

(a) For limitation years beginning on or after July 1, 2007, the greater of the annual amount of the straight life annuity, if any, payable under ASRS at the same annuity starting date, and the annual amount of a straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit computed using an interest rate of five per cent and the applicable mortality table under section 417(e)(3) of the internal revenue code.

(b) For limitation years beginning before July 1, 2007, the annual amount of a straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit computed using whichever of the following produces the greater annual amount:

(i) The interest rate and mortality table or other tabular factor specified by the board for adjusting benefits in the same form.

(ii) A five per cent interest rate assumption and the applicable mortality table.

For the purpose of applying the limits of section 415 of the internal revenue code, a retirement benefit that is payable in any form other than a straight life annuity to which section 417(e)(3) of the internal revenue code would apply if that section of the internal revenue code were applicable to ASRS must be adjusted to an actuarially equivalent straight life annuity that equals:

(a) If the annuity starting date is in a plan year beginning on or after July 1, 2006, the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit, using whichever of the following produces the greater annual amount:

(i) The interest rate and mortality table or other tabular factor specified by the board for adjusting benefits in the same form.

(ii) A five and one-half per cent interest rate assumption and the applicable mortality table.

(iii) The applicable interest rate under section 417(e)(3) of the internal revenue code and the applicable mortality table, divided by 1.05. The stability period during which the applicable interest rate remains constant is the plan year. The look-back month that is used to determine the applicable interest rate during the stability period is the third full calendar month preceding the first day of the stability period. For the purposes of this item, "applicable interest rate" means the annual interest rate on thirty-year treasury securities as specified by the commissioner of the United States internal revenue service for a month in revenue rulings or notices or another guidance published by the commissioner in the internal revenue bulletin.

(b) If the annuity starting date is in a plan year beginning in July 1, 2004 or July 1, 2005, the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit payable, using whichever of the following produces the greater annual amount:

(i) The interest rate and mortality table or other tabular factor specified by the board for adjusting benefits in the same form.

(ii) A five and one-half per cent interest assumption and the applicable mortality table.

(c) If the annuity starting date is on or after July 1, 2004 and before December 31, 2004, and ASRS applies the transition rule in section 101(d)(3) of the pension funding equity act of 2005 in lieu of the rule in subdivision (b) of this paragraph, the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the member's form of benefit, determined in accordance with internal revenue service notice 2004-78.

When calculating the limitations of paragraph 4 or 5 of this subsection, the portion of any joint or survivor annuity that constitutes a qualified joint and survivor annuity as defined in section 417 of the internal revenue code shall be disregarded.

D. Subsection C, paragraphs 1 and 2 of this section do not apply to income received from ASRS as a pension, annuity or similar allowance as a result of the recipient developing a disability by personal injury or sickness or to amounts received from ASRS by beneficiaries, survivors or the estate of a member as a result of the death of the member.

E. Notwithstanding any other provision of this section, the annual benefit payable under this article may be reduced to the extent necessary, as determined by the board, to prevent disqualification of ASRS under section 415 of the internal revenue code that imposes additional limitations on the annual benefits payable to members who also may be participating in another tax qualified pension or savings plan of this state. An employer shall not provide employee retirement or deferred benefits if the benefits authorized by this section and as required by federal law result in the failure of ASRS to meet federal qualification standards as applied to public pension plans. The board shall advise affected members of any additional information concerning their annual benefits required by this subsection. All benefits payable pursuant to this subsection shall comply with the limitations of benefits contained in section 415 of the internal revenue code and the final treasury regulations issued under that section. Notwithstanding any provision of this article to the contrary, if the annual benefits within the meaning of section 415 of the internal revenue code for any member exceed the limits of section 415(b) of the internal revenue code and this section, ASRS may only correct the excess pursuant to the employee plans compliance resolution system prescribed in internal revenue service revenue procedure 2008-50 or any future guidance by the internal revenue service, including the preamble of the final treasury regulations issued under section 415 of the internal revenue code.

F. If the maximum amount of benefit allowed under section 415 of the internal revenue code is increased after the commencement date of a member's benefit due to any cost of living adjustment announced by the United States secretary of the treasury pursuant to the provisions of section 415(d) of the internal revenue code, the amount of the monthly benefit payable under ASRS to a member whose benefit is restricted due to the provisions of section 415(d) of the internal revenue code shall be increased by the board as of the date prescribed by the United States secretary of the treasury on which the increase shall become effective. The increase shall reflect the increase in the amount of retirement income that may be payable under this article as a result of the cost of living adjustment.

G. In determining the adjustments to the defined benefit dollar limitation authorized by subsection A of this section, the board shall prescribe a larger defined benefit dollar limitation if prescribed by the United States secretary of the treasury pursuant to section 415(d) of the internal revenue code. An adjustment to the defined benefit dollar limitation prescribed in subsection A of this section is not effective before the first calendar year for which the United States secretary of the treasury publishes the adjustment. After it is prescribed by the board, the new defined benefit dollar limitation applies to the limitation year ending with or within the calendar year for which the secretary of the treasury makes the adjustment.

H. For the purposes of the limitations prescribed by this section, all member and employer contributions made to ASRS to provide a member benefits pursuant to section 38-771 or 38-771.01 and all member contributions that are not treated as picked up by the employer under section 414(h)(2) of the internal revenue code shall be treated as made to a separate defined contribution plan.

I. On termination or partial termination of ASRS, the accrued benefit of each member is, as of the date of termination or partial termination, fully vested and nonforfeitable to the extent then funded.

J. If ASRS terminates, the benefit of any highly compensated employee as defined in section 414(q) of the internal revenue code and any highly compensated former employee is limited to a benefit that is nondiscriminatory under section 401(a)(4) of the internal revenue code and as follows:

Benefits distributed to any of the twenty-five active and former highly compensated employees with the greatest compensation in the current or any prior fiscal year are restricted so that the annual payments are no greater than an amount equal to the payment that would be made on behalf of the member under a straight life annuity that is the actuarial equivalent of the sum of the member's accrued benefit, the member's other benefits under ASRS, excluding a social security supplement as defined in 26 Code of Federal Regulations section 1.411(a)-7(C)(4)(ii), and the amount the member is entitled to receive under a social security supplement.
Paragraph 1 of this subsection does not apply if either:

(a) After payment of the benefit to a member described in paragraph 1 of this subsection, the value of ASRS assets equals or exceeds one hundred ten per cent of the value of the current liabilities, as defined in section 412(l)(7) of the internal revenue code, of ASRS.

(b) The value of the benefits for a member described in paragraph 1 of this subsection is less than one per cent of the value of the current liabilities, as defined in section 412(l)(7) of the internal revenue code, of ASRS before distribution.

(c) The value of the benefits payable by ASRS to a member described in paragraph 1 of this subsection does not exceed three thousand five hundred dollars.

K. For the purposes of subsection J of this section, "benefit" includes loans in excess of the amount prescribed in section 72(p)(2)(A) of the internal revenue code, any periodic income, any withdrawal values payable to a living member and any death benefits not provided for by insurance on the member's life.

L. On retirement of a member who was a retired member, who resumed active membership and who subsequently retires, the limitations of this section in effect on the member's subsequent retirement apply to the member's retirement benefit payable as recomputed pursuant to section 38-766. In addition, the sum of the present value of the member's recomputed retirement benefits plus the present value of the benefits the member received during the member's prior retirement shall not exceed the present value of the limitations in effect on the member's subsequent retirement. The limitations prescribed in this subsection shall not reduce a member's retirement benefit below the retirement benefit the member was receiving before the member resumed active membership. For the purposes of determining present value under this subsection, the board shall use the actuarial equivalent assumptions provided in section 38-711, paragraph 2.

M. For the purposes of this section:

The following adjustments shall be made to the definition of compensation prescribed in subsection O of this section:

(a) Compensation shall be adjusted for the types of compensation that are prescribed in this paragraph and that are paid after a member's severance from employment with an employer. Amounts described in subdivisions (b), (c) and (d) of this paragraph may be included only as compensation to the extent the amounts are paid by the later of two and one-half months after severance from employment or by the end of the limitation year that includes the date of the severance from employment. Any other payment of compensation paid after severance of employment that is not described in the types of compensation prescribed in this paragraph is not considered compensation for purposes of this section, even if payment is made within the time period prescribed in this subdivision.

(b) Compensation shall include regular pay after severance of employment if the payment is regular compensation for services performed during the member's regular working hours or compensation for services performed outside the member's regular working hours, such as overtime or shift differential, commission, bonus or other similar payments, and the payment would have been paid to the member before a severance from employment if the member had continued in employment with the employer.

(c) Leave cash-outs shall be included in compensation if those amounts would have been included in compensation if they were paid before the member's severance from employment and the amounts are payment for unused accrued bona fide sick, vacation or other leave, but only if the member would have been able to use the leave if employment had continued.

(d) Deferred compensation shall be included in compensation if the compensation would have been included in compensation if it had been paid before the member's severance from employment and the compensation is received pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment would have been paid at the same time if the member had continued in employment with the employer and only to the extent that the payment is includable in the member's gross income.

(e) Compensation does include payments to an individual who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service.

(f) Compensation does not include compensation paid to a member who is a person with a permanent and total disability as defined in section 22(e)(3) of the internal revenue code.

(g) Compensation shall include amounts that are includable in the gross income of a member as required by section 409A or section 457(f)(1)(A) of the internal revenue code or because the amounts are constructively received by the member.

Compensation for a limitation year shall not include amounts earned but not paid during the limitation year solely because of the timing of pay periods and pay dates.
Payments awarded by an administrative agency or court or pursuant to a bona fide agreement by an employer to compensate a member for lost wages are compensation for the limitation year to which the back pay relates, but only to the extent the payments represent wages and compensation that would otherwise be included in compensation under this section.

N. The definition of limitation year prescribed in subsection O of this section may only be changed by an amendment to subsection O, except that if ASRS is terminated effective as of a date other than the last day of the limitation year, the termination shall be treated as if this section has been amended to change the definition of limitation year.

O. For the purposes of this section:

Annual additions shall be determined as provided in section 38-747, subsection O.
"Annual benefit" means a benefit, including any portion of a member's retirement benefit payable to an alternate payee under a qualified domestic relations order that satisfies the requirements prescribed in section 414(p)(1)(A)(i) of the internal revenue code and section 38-773, payable annually in the form of a straight life annuity, disregarding the portion of a joint and survivor annuity that constitutes a qualified joint and survivor annuity as defined in section 417 of the internal revenue code, with no ancillary or incidental benefits or rollover contributions and excluding any portion of the benefit derived from member contributions or other contributions that are treated as a separate defined contribution plan under section 415 of the internal revenue code but including any of those contributions that are picked up by the employer under section 414(h) of the internal revenue code, or that otherwise are not treated as a separate defined contribution plan. If the benefit is payable in another form, the determination as to whether the limitation described in subsection A of this section has been satisfied shall be made by the board by adjusting the benefit so that it is actuarially equivalent to the annual benefit described in this paragraph in accordance with the regulations promulgated by the United States secretary of the treasury. In addition, for determining the annual benefit attributable to member contributions, the factors described in section 411(c)(2)(B) of the internal revenue code and the regulations promulgated under the internal revenue code shall be used by the board regardless of whether section 411 of the internal revenue code applies to ASRS. The factors described in section 411(c)(2)(B) of the internal revenue code shall be those factors described under section 417(e)(3) of the internal revenue code and determined on the basis of the 417(e) mortality table and an interest rate as prescribed in subsection C, paragraph 5 of this section.
"Applicable mortality table" means the mortality table described in internal revenue service revenue ruling 2001-62.
"Compensation" means the member's earned income, wages, salaries, fees for professional service and other amounts received for personal services actually rendered in the course of employment with the employer and includes amounts described in sections 104(a)(3) and 105(a) of the internal revenue code, but only to the extent that these amounts are includable in the gross income of the member. Compensation also includes any elective deferral as defined in section 402(g)(3) of the internal revenue code and any amount that is contributed or deferred by an employer at the election of a member and that is not includable in the gross income of the member by reason of section 125, 132(f)(4) or 457 of the internal revenue code. Compensation does not mean:

(a) Employer contributions to a plan of deferred compensation to the extent the contributions are not included in the gross income of the employee for the taxable year in which contributed and any distributions from a plan of deferred compensation, regardless of whether the amounts are includable in gross income of the employee when distributed, except that any amount received by a member pursuant to an unfunded nonqualified plan may be considered as compensation for the purposes of this section in the year the amounts are includable in the gross income of the member under the internal revenue code.

(b) Other amounts that receive special tax benefits, such as premiums for group term life insurance, but only to the extent that the premiums are not includable in the gross income of the employee, qualified transportation fringe benefits as defined in section 132 of the internal revenue code and, effective for plan years beginning from and after December 31, 1987, any amounts under section 125 of the internal revenue code that are not available to a member in cash in lieu of group health coverage because the member is unable to certify that the member has other health coverage.

"Defined benefit dollar limitation" means the dollar limitation determined under subsection A of this section.
"Defined benefit plan" has the same meaning prescribed in section 414(j) of the internal revenue code.
"Defined contribution plan" has the same meaning prescribed in section 414(i) of the internal revenue code.
"Limitation year" and "years of service" mean the fiscal year.

§ 38-770 Eligible rollover distribution; definitions

A. Notwithstanding any other provision of this article that would limit a distributee's election under this section, a distributee may elect, at any time and in the manner prescribed by the board, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

B. An eligible rollover distribution may commence less than thirty days after the notice required under section 402(f) of the internal revenue code is given to the distributee, provided that both:

ASRS clearly informs the distributee that the distributee has a right to a period of at least thirty days after receiving the notice to consider the decision of whether or not to elect a direct rollover.
The distributee, after receiving the notice, affirmatively elects a distribution.

C. In addition to the other elections allowed in this section, effective for distributions made from and after December 31, 2006, a designated beneficiary of a member who is not the member's surviving spouse may elect, at any time and in the manner prescribed by ASRS, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan described in subsection D, paragraph 3, subdivisions (a) and (b) of this section. For the purposes of this subsection, "designated beneficiary" has the same meaning prescribed in section 38-775.

D. For the purposes of this section:

"Direct rollover" means a payment by ASRS to the eligible retirement plan specified by the distributee.
"Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under an acceptable domestic relations order as defined in section 38-773.
"Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

(f) An eligible deferred compensation plan described in section 457(b) of the internal revenue code that is maintained by a state, a political subdivision of a state or any agency or instrumentality of a state or a political subdivision of a state and that agrees to separately account for amounts transferred into the eligible deferred compensation plan from ASRS.

(g) Beginning January 1, 2008, a Roth individual retirement account described in section 408A of the internal revenue code.

(h) For distributions made after December 18, 2015, a simple retirement account that satisfies the requirements of section 408(p) of the internal revenue code.

"Eligible rollover distribution" means distribution of all or any portion of the balance to the credit of the distributee but does not include any of the following:

(a) Any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the member or the joint lives or joint life expectancies of the member and the member's designated beneficiary or for a specified period of ten years or more.

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

(c) Except as provided in this paragraph, the portion of any distribution that is not includable in gross income. A distribution does not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions that are not includable in gross income if the portion is paid only to an individual retirement account or annuity described in section 408(a) or 408(b) of the internal revenue code, to a qualified plan described in section 401(a) of the internal revenue code or an annuity contract described in section 403(b) of the internal revenue code that agrees to separately account for amounts so transferred, and earnings on those amounts, including separately accounting for the portion of the distribution that is includable in gross income and the portion of the distribution that is not includable in gross income.

(d) Any distribution that is made due to hardship of the member.

§ 38-771 Benefit options for transferred defined contribution program members; definitions

A. On or before December 31, 1995 a nonretired ASRS member who was a member of the defined contribution program administered by ASRS and who was transferred to the defined benefit program established by this article on July 1, 1981 shall elect to receive either retirement benefits provided under this section or retirement benefits as otherwise provided by this article. An election under this subsection is irrevocable. A member who fails to make an election under this subsection is deemed to have elected to receive retirement benefits provided under this section.

B. A member who elects to receive retirement benefits provided under this section is eligible only for those benefits.

C. If a member elects to receive retirement benefits provided under this section, the member shall elect to receive retirement benefits based on either of the following:

The contributions paid by the member and member's employer, plus all earnings attributed to the member's retirement account, through the member's retirement date.
Except as provided in subsections E and F of this section, contributions paid by the member and member's employer at the contribution rate in effect before July 1, 1975 and an employee and employer contribution rate of seven per cent calculated from July 1, 1975, plus all earnings attributed to the member's retirement account, through the member's retirement date.

D. Notwithstanding sections 38-736 and 38-737, members who elect to receive retirement benefits provided under this section and their employers shall each make contributions at a rate of seven per cent of the member's compensation and, beginning on July 1, 1998, employers shall make contributions to ASRS on behalf of their respective members who have elected to receive retirement benefits provided under this section to pay the actuarially determined amount necessary to provide the group health and accident insurance benefits for those retired members and their dependents as provided under section 38-783. Member contributions pursuant to this subsection shall be salary reduction contributions pursuant to section 38-747, subsections C and D.

E. Subject to subsection F of this section, if a member desires to receive retirement benefits based on subsection C, paragraph 2 of this section, the member shall make the election on or before June 30, 1999 and during the member's active employment. The election shall be made in accordance with section 38-747, subsections C, D and H. If a member elects to receive retirement benefits based on subsection C, paragraph 2 of this section, both the member and the member's employer shall pay to ASRS the difference between the contributions made and seven per cent of the member's gross compensation from July 1, 1984 through December 31, 1995. If a member elects to have the member's employer make payments for all or a portion of the contributions pursuant to section 38-747, subsection D, the member's employer shall make the contributions as required by section 38-747, subsection D. If a member elects to make contributions pursuant to section 38-747, subsection H, both the member and the member's employer shall pay to ASRS the portion of the difference between the total required contributions and that portion of the required contributions that the member has elected to have the member's employer pay pursuant to section 38-747, subsection D. The member's employer shall make the employer's contributions attributable to a member's period of employment before July 1, 1999 in a single lump sum payment at the time and computed in the manner prescribed in section 38-771.01, subsections G and H. If a member elects pursuant to subsection C, paragraph 2 of this section to have contributions made or to make contributions pursuant to section 38-747, subsection D or H for less than the full amount permitted by this subsection the member's benefits shall be computed only with reference to the contributions actually made. A member shall make an election pursuant to this section with respect to contributions to be made by the member before July 1, 1999. This election shall remain in full force and effect on and after July 1, 1999 and may be modified or revoked by the member only if the modification or revocation is specifically authorized in section 38-747. Section 38-771.01 governs any elections made by a member with respect to contributions to be made by the member to ASRS on or after July 1, 1999.

F. Contributions made to ASRS by a member and the member's employer pursuant to subsections D and E of this section shall not exceed, in any one limitation year, the limits of section 38-747, subsection E. If for any reason, the member and employer contributions to ASRS made pursuant to subsections D and E of this section would, at the time such contributions are due, taking into account other employer and member contributions due to ASRS for the limitation year, exceed the limits of section 38-747, the amount to be paid by the member and the member's employer under subsection E of this section shall be proportionately reduced and such reduction shall be carried into the succeeding limitation year and paid by the member and the member's employer within thirty days of the beginning of such limitation year, unless the limits of section 38-747 would again be exceeded, in which event this procedure will be repeated until all such contributions have been made. If more than one employer is contributing on behalf of a member, the reduction and contributions in succeeding years shall be proportionately allocated among the employers. If a member retires prior to making all contributions under subsections D and E of this section because of the limitations of section 38-747, the member's benefits under this section shall be calculated only with reference to the contributions actually made. For purposes of this subsection, "limitation year" has the same meaning prescribed in section 38-769.

G. A member who elects to receive retirement benefits provided under this section is subject to the provisions of section 38-771.01, subsection K that are equivalent to those imposed before the member's transfer from the defined contribution program administered by ASRS to the defined benefit program established by this article.

H. ASRS shall handle all retirement accounts of members who elect retirement benefits provided under this section and all member and employer contributions attributable to those members in the same manner as retirement accounts and contributions that are part of the defined contribution program administered by ASRS. Retirement accounts of members who elect to receive retirement benefits provided under this section are eligible for interest and supplemental credits on the same basis as members who retired under the defined contribution program administered by ASRS.

I. The election of retirement benefits by a member pursuant to this section is a waiver of all claims and demands by the member that the retirement benefits are less than the amount of retirement benefits payable to the member under the defined contribution program administered by ASRS if the member had remained a member of the defined contribution program administered by ASRS.

J. For purposes of this section:

"Member's employer" means an employer who compensated the member during a period when the member's contributions were less than seven per cent.
"Retirement account" means the combined member and employer contributions with interest or earnings on the contributions including any allocations credited as employer contributions.

§ 38-771.01 Alternative benefits for transferred defined contribution program members; definitions

A. A retired or nonretired ASRS member who was a member of the defined contribution program administered by ASRS, who was transferred to the defined benefit program established by this article on July 1, 1981, who is determined by ASRS to qualify under paragraph 1 of this subsection and who is not excluded under paragraph 2 of this subsection shall receive defined contribution benefits pursuant to this section, or, if greater, defined benefit retirement benefits pursuant to this article. A retired or nonretired ASRS member qualifies or is excluded under this section based on the following criteria:

A member is entitled to receive benefits under this section only if the member satisfies at least one of the following requirements:

(a) Is not retired as of July 1, 1999 even though the member may have previously elected to receive benefits under the defined benefit program established by this article, may have transferred employment between or among employers on or after July 1, 1981 or may have terminated employment on or after July 1, 1981 and after that termination date returned to employment with an employer.

(b) Retired on or after July 1, 1984 and elected to receive benefits under the defined benefit program established by this article.

(c) Retired on or after July 1, 1984 and is receiving benefits under the defined contribution program administered by ASRS.

Even if the member otherwise qualifies under paragraph 1 of this subsection, a member is not entitled to receive benefits under this section if any of the following applies to the member:

(a) The member retired before July 1, 1984.

(b) The member is entitled to receive benefits pursuant to section 38-771 and has paid to ASRS pursuant to section 38-771 before July 1, 1999 the entire amount that is attributable to service performed on or after July 1, 1984 and that is equal to the contribution rate of seven per cent of compensation, the contribution has been matched by an equal contribution to ASRS by the member's employers and all applicable earnings and supplemental credits have been credited for the member's account.

(c) The member withdrew the member's contributions from the defined contribution program administered by ASRS and, as of July 1, 1999, is not entitled to any benefit under the defined contribution program administered by ASRS.

(d) The member transferred the member's benefits under either the defined benefit program established by this article or the defined contribution program administered by ASRS to any other retirement system.

B. A beneficiary is entitled to receive benefits pursuant to this section only if the beneficiary satisfies the requirements of paragraph 1 of this subsection and is not excluded under paragraph 2 of this subsection based on the following criteria:

The beneficiary is a beneficiary of a retired or nonretired member who qualifies for benefits under subsection A, paragraph 1 of this section, is not excluded under subsection A, paragraph 2 of this section and as of July 1, 1999 either:

(a) Is receiving a monthly benefit from the defined benefit program established by this article or the defined contribution program administered by ASRS.

(b) Is living, is a survivor of a deceased retired or nonretired member and elected to receive a lump sum distribution of the survivor benefit that was payable on the death of the member.

Even if the beneficiary satisfies the requirements of paragraph 1 of this subsection, a beneficiary is not entitled to receive benefits under this section if the beneficiary is a beneficiary of a deceased retired member who elected a form of benefit under either the defined benefit program established by this article or the defined contribution program administered by ASRS that did not provide for survivor benefits after the death of the retired member.

C. A member or a deceased member's beneficiary who receives benefits pursuant to this section shall receive benefits based on the sum of the following:

Contributions paid by the member and the member's employer at the contribution rates in effect before July 1, 1984, together with all applicable earnings and supplemental credits on those contributions.
Contributions paid by the member's employer at the contribution rates in effect beginning on July 1, 1984 through the earlier of June 30, 1999 or the member's retirement or death, together with all applicable earnings and supplemental credits on those contributions computed through the earlier of June 30, 1999 or the member's retirement or death.
The excess of employer contributions computed at the rate of seven per cent of compensation beginning on July 1, 1984 through June 30, 1999 over the actual contributions paid by the member's employer as described in paragraph 2 of this subsection, together with all earnings and supplemental credits that would have been earned on those excess contributions computed from the date the contributions would have been paid to ASRS.
Contributions paid by the member at the contribution rate in effect on and after July 1, 1984, together with all earnings on those contributions.
With respect to member contributions that were not paid to ASRS before July 1, 1999 pursuant to section 38-771, subsection C, paragraph 2, forty per cent of the earnings that would have been credited on those contributions through the earlier of June 30, 1999 or the member's retirement or death as if those member contributions had been paid.
Contributions paid by the member to ASRS before July 1, 1999 pursuant to an election under section 38-771, subsection C, paragraph 2 and subsection E, together with all earnings on those contributions.
Contributions paid by the member to ASRS on or after July 1, 1999 pursuant to an election under section 38-771, subsection C, paragraph 2 and subsection E, together with earnings on those contributions.
Contributions paid by the member to ASRS on or after July 1, 1999 pursuant to this section, together with earnings on those contributions.
Contributions paid by the member's employer to ASRS on or after July 1, 1999 pursuant to this section, together with all applicable earnings and supplemental credits on those contributions.

D. Effective on July 1, 1999, ASRS shall adjust the retirement account reserves under the defined contribution program administered by ASRS for retired members and the beneficiaries of deceased retired members entitled to benefits pursuant to this section to give effect to additional contributions, earnings and supplemental credits for those retired members prescribed in subsection C, paragraphs 1 through 6 of this section for the periods of the members' employment before July 1, 1999 and to give effect to the recomputation, adjustment and payment of benefits pursuant to subsection G of this section. After this recomputation, adjustment and payment, ASRS shall credit and charge these retirement account reserves with the amounts prescribed under the defined contribution program administered by ASRS based on the adjustments prescribed in this section.

E. Effective on July 1, 1999, ASRS shall adjust each nonretired member's accounts under the defined contribution program administered by ASRS to equal the sum of the contribution amounts prescribed in subsection C, paragraphs 1 through 6 of this section with respect to periods of a member's employment before July 1, 1999. After the adjustment, these accounts shall accrue applicable interest and supplemental credits based on the entire amounts credited to the accounts.

F. For periods of a nonretired member's employment on or after July 1, 1999, a nonretired member who is entitled to receive benefits pursuant to this section and the nonretired member's employer shall each make contributions to ASRS at the rates established pursuant to sections 38-736 and 38-737, except as follows:

If a nonretired member made an election pursuant to section 38-771, subsection C, paragraph 2 and section 38-747, subsections C and D before July 1, 1999, the member's employer shall continue to make pickup contributions to ASRS on behalf of the member pursuant to the member's election, except that with respect to employer contributions that are required pursuant to section 38-771, subsection E for periods of a member's employment before July 1, 1999, the employer shall make a lump sum payment to ASRS as computed pursuant to subsection G of this section and required to be paid to ASRS pursuant to subsection H of this section.
If a nonretired member elected or was deemed to have elected benefits pursuant to section 38-771 before December 31, 1995, for periods of a member's employment from and after the election or deemed election the nonretired member's employer and the member shall each continue to pay to ASRS an amount equal to seven per cent of the member's compensation in lieu of the rates established pursuant to sections 38-736 and 38-737.
A nonretired member who is entitled to receive benefits pursuant to this section and who never elected to receive benefits pursuant to section 38-771 may elect pursuant to section 38-747, subsections C and D to make contributions at the rate of seven per cent of the member's compensation for periods of a member's employment on or after July 1, 1999. If a member makes an election pursuant to this paragraph, the election is irrevocable as provided in section 38-747, subsection D and the member and the member's employer shall each make contributions at a rate of seven per cent of the member's compensation beginning on the effective date of the election.
A nonretired member who is entitled to receive benefits pursuant to this section may elect pursuant to section 38-747, subsections C, D and H to make contributions with respect to member contributions that were not made to ASRS but that could have been made pursuant to section 38-771, subsection C, paragraph 2 for periods of employment before July 1, 1999 other than member contributions for which an irrevocable election pursuant to section 38-747, subsections C and D was in effect before July 1, 1999.
In addition to any other employer contributions required pursuant to this section, a nonretired member's employer shall make contributions to ASRS on behalf of the nonretired member who will receive retirement benefits pursuant to this section to pay the actuarially determined amount necessary to provide the group health and accident insurance benefits for the nonretired member and the nonretired member's dependents as provided under section 38-783.
Notwithstanding any other provision of this article, an election permitted pursuant to this section shall not revoke, amend or alter any irrevocable election made by a member before July 1, 1999 pursuant to sections 38-747 and 38-771.

G. Effective on July 1, 1999, ASRS shall recompute the monthly and annual benefits for retired members entitled to receive benefits pursuant to this section and the monthly or lump sum survivor's benefits payable to beneficiaries entitled to receive benefits pursuant to this section. The recomputation of benefits shall be as if the member's retirement account or retirement reserve account on the date of retirement or death had been computed based on the amounts that would have been credited to the account as of that date based on the contribution amounts prescribed in subsection C, paragraphs 1 through 6 of this section. In addition and after recomputing benefits described in this subsection, with respect to members who retired on or after July 1, 1984, ASRS shall recompute the annual payments that would have been made to the member or beneficiary of a deceased member entitled to receive benefits under this section in excess of the annual payments actually made. The recomputation shall be calculated and paid as follows:

The recomputation shall be calculated and paid based on the member's and, if applicable, the member's beneficiary's age, the benefit option selected at the date of the initial benefit payments and the actuarial assumptions used by ASRS at the time the initial benefit payments were computed.
Before July 1, 2000, ASRS shall pay to the retired member or beneficiary in a lump sum the difference between the recomputed amount and the actual distributions paid to the member or beneficiary through July 1, 1999, together with interest at the rate of eight per cent a year, compounded monthly, computed from the date each excess payment should have been paid through the date of payment to the retired member or beneficiary.
If the retired member is living, ASRS shall pay the lump sum payment to the member. If the member is deceased and is survived by a beneficiary who is then living and receiving a monthly benefit on account of the deceased member, ASRS shall pay the lump sum payment to the beneficiary. The payment to the beneficiary shall include the recomputed amount that is payable pursuant to this section and that would have been paid to the member through the date of the member's death plus the recomputed amount that is payable pursuant to this section and that would have been payable to the beneficiary from the member's date of death. Section 38-770 applies to a payment to a member or the member's beneficiary who is the surviving spouse of the member, if the payment is substantially larger or smaller than the monthly benefit payable by ASRS to the member.
With respect to a beneficiary who is a survivor of a deceased nonretired member who would have been entitled to benefits under this section and who elected a lump sum distribution of the survivor benefit that was payable on the death of the nonretired member, ASRS shall pay the recomputed amount in a lump sum to the beneficiary. If the beneficiary is the surviving spouse of the member, section 38-770 applies to the payment.
Effective on July 1, 1999, ASRS shall increase the member's or beneficiary's monthly and annual benefit to the recomputed amount. After that adjustment, ASRS shall adjust the member's or beneficiary's annual benefit as otherwise provided under the defined contribution program administered by ASRS.

H. Before July 1, 2002, the employer of each nonretired or retired member or deceased member who has a beneficiary entitled to adjustments and payments pursuant to subsections E and G of this section for periods of a member's employment before July 1, 1999 shall pay to ASRS in one or more installments those amounts required by ASRS to make the recomputations and adjustments pursuant to this section. ASRS shall determine the amount to be paid by the employer to ASRS as of July 1, 1999, plus interest at the rate of eight per cent a year, compounded monthly, from July 1, 1999 through the date the payment is made by the employer to ASRS. Any payments by the employer shall first be applied to accrued and unpaid interest and then to the amount to be paid by the employer to ASRS. ASRS shall allocate the payment to the assets maintained under the defined contribution program administered by ASRS. When determining the amounts required to be paid by employers for the recomputations and adjustments pursuant to this section, ASRS first shall transfer on July 1, 1999 from the assets maintained by ASRS under the defined benefit program established by this article to the assets maintained by ASRS under the defined contribution program administered by ASRS an amount equal to the sum of the defined benefit program equity balances of the retired and nonretired members or their beneficiaries whose benefits are transferred from the defined benefit program to the defined contribution program pursuant to this section, except that the amount transferred for any member or beneficiary shall not be more than the amount required to fund the recomputations and adjustments required by this section for the member or beneficiary. The defined benefit program equity balance for a member or beneficiary of a deceased member shall equal the sum of the member's employee and employer account balances on the earlier of June 30, 1999 or the member's retirement or death, less the monthly annuity payments to a retired member or beneficiary, plus the earnings on the average balance of that amount for a plan year.

I. If a member retired before July 1, 1999, elected to receive benefits pursuant to section 38-771, subsection C, paragraph 2 and did not make all contributions pursuant to section 38-771, subsection E because of the limitations prescribed in section 38-747, subsection E, the member has the option of receiving the employer contributions prescribed in subsection C, paragraphs 3 and 5 of this section in a lump sum payment. If the retired member elects to receive a lump sum payment, ASRS shall pay the amount on or before July 1, 2000 and the amount shall be deducted from the member's account when computing the annuity benefits to which the member is otherwise entitled pursuant to this section. In no case shall the payment under this subsection duplicate the payment under subsection G of this section. Section 38-770 applies to a payment to a member under this subsection if the payment is substantially larger or smaller than the monthly benefit payable by ASRS to the member.

J. Contributions made to ASRS by a member and the member's employer pursuant to subsection F of this section, other than employer contributions required pursuant to subsections G and H of this section, shall not exceed, in any one limitation year, the limits prescribed in section 38-747, subsection E. If for any reason the member and applicable employer contributions made pursuant to subsection F of this section would at the time the contributions are due, taking into account other annual additions due to ASRS for the limitation year, exceed the limits prescribed in section 38-747, subsection E, the amount to be paid by the member and the member's employer pursuant to subsection F of this section, other than employer contributions required pursuant to subsections G and H of this section, shall be proportionately reduced and the reduction shall be carried into the succeeding limitation year and paid by the member and the member's employer within thirty days after the beginning of that limitation year, unless the limits prescribed in section 38-747, subsection E would again be exceeded. If the limits are exceeded again, the procedure prescribed in this subsection shall be repeated until all of the contributions are made. If more than one employer is contributing on behalf of a member, the reduction and contributions in succeeding years shall be proportionately allocated among the employers. If a member retires before making all contributions pursuant to this section because of the limitations prescribed in section 38-747, subsection E, the member's benefits pursuant to this section shall be computed only with reference to the contributions actually made. For the purposes of this subsection, "limitation year" has the same meaning prescribed in section 38-769.

K. Unless otherwise provided in this section, a member who receives retirement benefits pursuant to this section and section 38-771 is subject to conditions that are equivalent to those imposed before the member's transfer from the defined contribution program administered by ASRS to the defined benefit program established by this article. Those conditions include the following:

A member who attains sixty-five years of age may retire and, on application, shall receive a life annuity derived from the member's prior service credit, if any, together with a life annuity derived from the member's retirement account. The annuity is payable in equal monthly installments. The amount of the installments is based on the age of the member at the date of commencement of retirement and is determined by the interest and life expectancy tables applicable at the date of the commencement of retirement.
If a retired member who is receiving retirement benefits pursuant to this section dies before receipt of annuity payments in an amount equal to the member's retirement account balance immediately before retirement, ASRS shall pay the member's designated beneficiary or estate in a lump sum the difference between the retirement account balance and the total amount of annuity payments received.
A member who attains sixty-five years of age with at least five years of creditable service may retire and, on application, may elect to receive in lieu of the annuity payments from the member's prior service, if any, together with a life annuity derived from the member's retirement account as provided in paragraph 1 of this subsection, the actuarial equivalent of those retirement benefits under one of the options established by the board.
A member who attains sixty years of age with at least five years of creditable service may retire and, on application, may receive a life annuity derived from the actuarial equivalent of the member's prior service credit, if any, together with a life annuity derived from the member's retirement account. The annuity shall be determined and paid in the manner set forth in paragraph 1 of this subsection.
In lieu of the retirement benefits pursuant to paragraph 4 of this subsection, on application, a member may elect to receive the actuarial equivalent of those retirement benefits under one of the options established by the board.
If a retired member who is receiving retirement benefits pursuant to this section is engaged to work by an employer for twenty or more weeks in a fiscal year and twenty hours or more a week, the member's retirement benefit payments pursuant to this section are suspended until the member terminates employment. On return to employment, the member shall accrue benefits pursuant to this section, unless the member elects to be covered by the defined benefit program established by this article. If a formerly retired member elects to be covered by the defined benefit program established by this article, the formerly retired member shall be an active member in the defined benefit program with respect to all service performed after the member's return to work and shall not accrue additional benefits pursuant to this section. Notwithstanding the other provisions of this paragraph, if a retired member begins or returns to employment as an elected official or to any other type of service or employment that does not require the retired member to begin active membership in the defined contribution program administered by ASRS or the defined benefit program established by this article, the payment of retirement benefits pursuant to this section shall not be terminated, withheld or interrupted because of beginning or returning to the service or employment or holding the elected office, unless the formerly retired member actually elects to recommence active participation in the defined benefit program established by this article or pursuant to this section.
On termination of employment of a retired member previously receiving retirement benefits pursuant to this section, ASRS shall reinstate the member's retirement benefits pursuant to this section and, on reinstatement of retirement benefits, the benefit shall be recomputed on the basis of the member's attained age and shall be adjusted for retirement benefits previously received and additional contributions, interest and supplemental credits accrued during the period of employment. On this reinstatement of retirement benefits, if the member elected to be covered by the defined benefit program established by this article on the member's return to employment, the member is also entitled to receive retirement benefits pursuant to the defined benefit program established by this article for the credited service earned by the member after the member's active membership in the defined benefit program established by this article began.

L. ASRS shall handle all retirement accounts of members who elect retirement benefits provided pursuant to this section and all member and employer contributions attributable to those members in the same manner as retirement accounts and contributions that are part of the defined contribution program administered by ASRS. Retirement accounts of members who elect to receive retirement benefits pursuant to this section are eligible for interest and supplemental credits on the same basis as members who retired under the defined contribution program administered by ASRS.

M. The receipt of retirement benefits by a member pursuant to this section is a waiver of all claims and demands by the member that the retirement benefits are less than the amount of retirement benefits payable to the member under the defined contribution program administered by ASRS if the member had remained a member of the defined contribution program administered by ASRS.

N. The board may administer and interpret this section in order to prevent any duplication of benefits provided by ASRS and the defined contribution program administered by ASRS and to provide all eligible members and beneficiaries with the benefits they are entitled to under the laws of this state.

O. For purposes of this section:

"Beneficiary" means the individual designated by the member in writing on forms approved by ASRS to receive benefits pursuant to this article after the death of the member.
"Creditable service" means service after April 8, 1953 in a position not subject to the defined contribution program administered by ASRS, prior service and membership service.
"Member's employer" means an employer who compensated the member during a period when the member's contributions were less than seven per cent.
"Pension" means equal monthly installments that are derived from a member's prior service credits and that are payable during the member's lifetime after retirement.
"Prior service" means service for this state or a political subdivision before membership in the defined contribution program administered by ASRS.
"Prior service credits" means the amount that is allowed for services before membership in the defined contribution program administered by ASRS and that is payable as a pension on retirement.
"Retirement account" means the combined member and employer contributions with applicable interest and supplemental credits on the contributions as computed pursuant to subsection C of this section.
"Service" means any compensated employment by the state or a political subdivision and includes periods of nonpaid leave, including military leave, provided employment has not been terminated at the commencement of the leave period and employment is state service for retirement purposes or service for any political subdivision establishing a defined contribution program administered by ASRS.

§ 38-772 Prior service under defined contribution program administered by ASRS; definitions

A. Amounts required of employers as provided in section 38-737, subsections A and B are in addition to any payments required of employers on behalf of prior service credits under the defined contribution program administered by ASRS arising from members of ASRS. Payments made to ASRS on behalf of members with those prior service credits shall reduce by that amount the payments required to be paid to the defined contribution program administered by ASRS for those prior service credits.

B. Notwithstanding section 38-757, subsection B, any prior service credits to which the member was entitled under the defined contribution program administered by ASRS shall be added to the product of section 38-757, subsection B, paragraphs 1 and 2.

C. For the purposes of this section:

"Prior service" means service for this state or a political subdivision of this state before membership in the defined contribution program administered by ASRS.
"Prior service credits" means the amount that is allowed for services before membership in the defined contribution program administered by ASRS and that is payable as a retirement benefit.

§ 38-773 Benefit payments to alternate payee under acceptable domestic relations order; termination of marriage; revocation of beneficiary designation; definitions

A. The board shall review any domestic relations order to which a member is a party and that is submitted to the board to determine if the domestic relations order is acceptable under this section. After a determination that a domestic relations order is acceptable under this section, the board shall notify the member and the named alternate payee of the board's acceptance of the domestic relations order, and ASRS shall pay benefits in accordance with the applicable requirements of the order.

B. An acceptable domestic relations order shall:

Not require the board to provide any type, form or time of payment of severance, survivor or retirement benefits or any severance, survivor or retirement benefit option that is not provided under this article.
Value the member's benefit on the earliest date of service of the petition for annulment, dissolution of marriage or legal separation.

C. An acceptable domestic relations order shall specify all of the following:

The name and last known mailing address of the member.
The name and last known mailing address of each alternate payee who is covered by the order.
The method of determining the amount of the member's severance, survivor or retirement benefits to be paid by ASRS to each alternate payee covered by the order.
The number of payments or period to which the order applies.

D. Except as provided by the express terms of a domestic relations order, the divorce or annulment of a member's marriage revokes any revocable:

Disposition or appointment of benefits made by a divorced member to that member's former spouse or to a relative of the divorced member's former spouse in an instrument executed by the member before the divorce or annulment of the member's marriage to the former spouse.
Provision in an instrument executed by the member before the divorce or annulment of the member's marriage to the former spouse conferring any power or right on the divorced member's former spouse or on a relative of the divorced member's former spouse.

E. ASRS shall give effect to provisions of an instrument executed by a member before the divorce or annulment of the member's marriage to a former spouse as follows:

In the case of disposition or appointment of benefits, as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section.
In the case of a revoked power or right, as if the former spouse and relatives of the former spouse died immediately before the divorce or annulment.

F. Provisions of an instrument revoked solely as provided by this section are revived by the divorced member's remarriage to the former spouse or by a nullification of the member's divorce or annulment.

G. If an alternate payee predeceases the member, amounts payable to the alternate payee cease on the death of the alternate payee. ASRS shall cause the amount formerly payable to the alternate payee to revert to the member.

H. For the purposes of this section:

"Domestic relations order" means any judgment, decree, order or approval of a property settlement agreement entered in a court of competent jurisdiction that:

(a) Relates to marital property rights of a spouse or former spouse.

(b) Creates or recognizes in the spouse or former spouse the existence of an alternate payee's right to severance, survivor or retirement benefits.

(c) Assigns the spouse or former spouse as alternate payee the right to receive all or part of the severance, survivor or retirement benefits payable to the member.

"Relative of the divorced member's former spouse" means a person who is related to the divorced member's former spouse by blood, adoption or affinity and who, after the divorce or annulment, is not related to the divorced member by blood, adoption or affinity.

§ 38-774 Excess benefit arrangement

A. A separate unfunded governmental excess benefit arrangement is established outside of and apart from the trust fund established by section 38-712 to pay members benefits that are otherwise payable by ASRS and that exceed the limitations on benefits imposed by section 415 of the internal revenue code. The board shall administer this excess benefit arrangement as a qualified governmental excess benefit arrangement pursuant to section 415(m) of the internal revenue code.

B. The board may adopt rules to implement this section subject to the following:

Benefits under this section are subject to section 38-773 and section 38-791, subsections D and F and are exempt from execution to the same extent as provided in section 38-792.
Contributions to this arrangement are not held in trust and shall not be commingled with other monies of ASRS.

C. A member is entitled to a monthly benefit under this section in an amount equal to the amount that the member's benefit that is payable by ASRS has been reduced by the limitation on benefits imposed by section 38-769 and section 415 of the internal revenue code. The benefit that is payable by this arrangement shall be paid at such time or times and in such form as the benefit under ASRS would be paid.

D. The benefit that is payable under this section shall be paid with employer contributions that would otherwise be made to ASRS under section 38-737. In lieu of the employer contributions being paid to the trust fund established by section 38-712, an amount determined by ASRS as necessary to pay benefits under this section shall be paid on a monthly basis to a separate account established by the board for this arrangement and may include amounts needed to pay reasonable and necessary expenses of this arrangement. The director may invest the monies in this account in suitable short-term investments between receipt of the monies and disbursement of the monies. The amount shall be paid to the account at least fifteen days before a disbursement is to be made under this section.

E. A member shall not directly or indirectly elect to defer compensation to purchase benefits provided under this section.

F. This section shall not be construed as requiring an employer or ASRS to purchase any investment or any contract to secure any obligations under this section. If an employer or ASRS purchases an investment or contract that the employer or ASRS earmarks to pay benefits under this section, title to and beneficial ownership of the investment or contract remain at all times in the employer or ASRS, and the member and the member's beneficiaries, if any, do not have any proprietary interest in any specific assets of the employer or ASRS. Any rights of the member and the member's beneficiaries, if any, to payment of any amounts under this section shall be those of general unsecured creditors of the employer or ASRS. This section and any action taken pursuant to this section by the employer or ASRS do not create and shall not be construed to create an irrevocable trust of any kind.

§ 38-775 Required distributions; definitions

A. This section applies for purposes of determining required minimum distributions for calendar years beginning on and after January 1, 2006. In applying the requirements of this section, the following operational provisions govern:

Except as provided in the following sentence, the requirements of this section take precedence over any inconsistent provisions of this article and article 2.1 of this chapter. The rules of this section shall not restrict any form, calculation, adjustment or payment of benefit provided under this article in effect on April 17, 2002, if the form, calculation, adjustment or payment of benefit satisfied section 401(a)(9) of the internal revenue code based on a reasonable and good faith interpretation of that section.
All distributions required under this section shall be determined and made pursuant to 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.
Notwithstanding this section, other than paragraph 2 of this subsection, distributions may be made under a designation made before January 1, 1984, pursuant to section 242(b)(2) of the tax equity and fiscal responsibility act of 1982 (P.L. 97-248) and the provisions of this article that relate to that section.

B. The member's entire interest shall be distributed, or begin to be distributed, to the member not later than the member's required beginning date.

C. If the member dies before distributions begin, the member's entire interest shall be distributed, or begin to be distributed, not later than as follows:

If the member's surviving spouse is the member's sole designated beneficiary, except as provided in paragraph 4 of this subsection, distributions to the surviving spouse shall begin by December 31 of the calendar year immediately following the calendar year in which the member died, or by December 31 of the calendar year in which the member would have attained seventy-two years of age, if later.
If the member's surviving spouse is not the member's sole designated beneficiary, except as provided in paragraph 4 of this subsection, distributions to the designated beneficiary shall begin by December 31 of the calendar year immediately following the calendar year in which the member died.
For purposes of this subsection and subsection G of this section, distributions are considered to begin on the member's required beginning date or the date distributions are required to begin to the surviving spouse under paragraph 1 of this subsection. If annuity payments irrevocably commence to the member before the member's required beginning date, or to the member's surviving spouse before the date distributions are required to begin to the surviving spouse under paragraph 1 of this subsection, the date distributions are considered to begin is the date distributions actually commence.
If the member dies before distributions begin and there is a designated beneficiary, distribution to the designated beneficiary is not required to begin by the date prescribed in paragraph 1 or 2 of this subsection as long as the member's entire interest will be distributed to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the member's death. If the member's surviving spouse is the member's sole designated beneficiary and the surviving spouse dies after the member but before distributions to either the member or the surviving spouse begin, this paragraph applies as if the surviving spouse were the member.

D. Unless the member's interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution, calendar year distributions shall be made pursuant to subsections E, F and G of this section. If the member's interest is distributed in the form of an annuity purchased from an insurance company, distributions shall be made pursuant to the requirements 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. Any part of the member's interest that is in the form of an individual account described in section 414(k) of the internal revenue code shall be distributed in a manner satisfying the requirements 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 that apply to individual accounts.

E. The following provisions govern the determination of the amount to be distributed each calendar year:

If the member's interest is paid in the form of annuity distributions, payments under the annuity shall satisfy the following requirements:

(a) The annuity distributions shall be paid in periodic payments made at intervals not longer than one year.

(b) The distribution period shall be over a life or lives or over a period certain not longer than the period described in subsection F or G of this section.

(c) Once payments have begun over a period certain, the period certain shall not be changed even if the period certain is shorter than the maximum allowed.

(d) Payments shall either be nonincreasing or increase only as follows:

(i) By an annual percentage increase that does not exceed the annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the bureau of labor statistics.

(ii) To the extent of the reduction in the amount of the member's payments to provide for a survivor benefit on death, but only if the beneficiary whose life was being used to determine the distribution period described in subsection F of this section dies or is no longer the member's beneficiary pursuant to a qualified domestic relations order within the meaning of section 414(p) of the internal revenue code.

(iii) To provide cash refunds of employee contributions on the member's death.

(iv) To pay increased benefits that result from a plan amendment.

The amount that must be distributed on or before the member's required beginning date or, if the member dies before distributions begin, the date distributions are required to begin under subsection C, paragraph 1 or 2 of this section, is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, such as bimonthly, monthly, semiannually or annually. All of the member's benefit accruals as of the last day of the first distribution calendar year shall be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the member's required beginning date.
Any additional benefits accruing to the member in a calendar year after the first distribution calendar year shall be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which the amount accrues.

F. The following provisions govern annuity distributions that commence during a member's lifetime:

If the member's interest is being distributed in the form of a joint and survivor annuity for the joint lives of the member and a nonspouse beneficiary, annuity payments to be made on or after the member's required beginning date to the designated beneficiary after the member's death must not at any time exceed the applicable percentage of the annuity payment for the period that would have been payable to the member using the table set forth in question and answer number 2 of section 1.401(a)(9)-6 of the regulations issued by the United States secretary of the treasury. If the form of distribution combines a joint and survivor annuity for the joint lives of the member and a nonspouse beneficiary and a period certain annuity, the requirement in the preceding sentence applies to annuity payments to be made to the designated beneficiary after the expiration of the period certain.
Unless the member's spouse is the sole designated beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the member's lifetime may not exceed the applicable distribution period for the member under the uniform lifetime table prescribed in section 1.401(a)(9)-9 of the regulations issued by the United States secretary of the treasury for the calendar year that contains the annuity starting date. If the annuity starting date precedes the year in which the member reaches seventy years of age, the applicable distribution period for the member is the distribution period for seventy years of age under the uniform lifetime table set forth in section 1.401(a)(9)-9 of the regulations issued by the United States secretary of the treasury plus the excess of seventy over the age of the member as of the member's birthday in the year that contains the annuity starting date. If the member's spouse is the member's sole designated beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the member's applicable distribution period, as determined under this paragraph, or the joint life and last survivor expectancy of the member and the member's spouse as determined under the joint and last survivor table prescribed in section 1.401(a)(9)-9 of the regulations issued by the United States secretary of the treasury, using the member's and spouse's attained ages as of the member's and spouse's birthdays in the calendar year that contains the annuity starting date.

G. The following provisions govern minimum distributions if a member dies before the date distributions begin:

Except as provided in subsection C, paragraph 4 of this section, if the member dies before the date distribution of the member's interest begins and there is a designated beneficiary, the member's entire interest shall be distributed, beginning not later than the time prescribed in subsection C, paragraph 1 or 2 of this section, over the life of the designated beneficiary or over a period certain not exceeding either of the following:

(a) Unless the annuity starting date is before the first distribution calendar year, the life expectancy of the designated beneficiary determined using the beneficiary's age as of the beneficiary's birthday in the calendar year immediately following the calendar year of the member's death.

(b) If the annuity starting date is before the first distribution calendar year, the life expectancy of the designated beneficiary determined using the beneficiary's age as of the beneficiary's birthday in the calendar year that contains the annuity starting date.

If the member dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the member's death, distribution of the member's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the member's death.
If the member dies before the date distribution of the member's interest begins, the member's surviving spouse is the member's sole designated beneficiary and the surviving spouse dies before distributions to the surviving spouse begin, this subsection applies as if the surviving spouse were the member, except that the time by which distributions must begin shall be determined without regard to subsection C, paragraph 1 of this section.

H. If a member dies after the member's required beginning date and the member had not commenced distribution of retirement benefits, ASRS shall treat the member as having commenced distribution of retirement benefits on the member's required beginning date. Notwithstanding section 38-776, ASRS shall determine the member's retirement benefit as a straight annuity as of the date of the member's required beginning date. The member's estate is entitled to the member's benefit payments and any remaining member contributions on account shall be disbursed pursuant to section 38-763.

I. For the purposes of this section:

"Designated beneficiary" means the individual who is designated as the member's beneficiary to receive benefits under this article and is the designated beneficiary under section 401(a)(9) of the internal revenue code and question and answer number 1 of section 1.401(a)(9)-4 of the regulations issued by the United States secretary of the treasury.
"Distribution calendar year" means a calendar year for which a minimum distribution is required. For distributions beginning before the member's death, the first distribution calendar year is the calendar year immediately preceding the calendar year that contains the member's required beginning date. For distributions beginning after the member's death, the first distribution calendar year is the calendar year in which distributions are required to begin pursuant to subsection C of this section.
"Life expectancy" means life expectancy as computed by use of the single life table in section 1.401(a)(9)-9 of the regulations issued by the United States secretary of the treasury.
"Required beginning date" means the date payment of a member's benefits shall commence in accordance with section 401(a)(9)(C) of the internal revenue code.

§ 38-776 Spousal waiver and consent

A. A member's current spouse may consent to one of the following requirements established in section 38-755 or 38-760 by signing and submitting an acknowledgement in a manner established by ASRS:

A change of beneficiary that provides the member's current spouse with less than fifty per cent of the member's account balance.
The member's retirement application that does not name the member's current spouse as a contingent annuitant of a joint and survivor annuity.
A change or rescission of the member's current spouse's contingent annuitant status.

B. If the member's current spouse is not capable of executing the acknowledgement because of an incapacitating mental or physical condition, a power of attorney or guardian may execute the acknowledgment on the current spouse's behalf.

C. The member may affirm in writing under penalty of perjury in a manner determined by ASRS that spousal consent is not required because of one of the following reasons:

The member is not married.
The member's current spouse has no identifiable community property interest in the member's benefits.
The member does not know, and has taken all reasonable steps to determine, the location of the member's current spouse.
The member has received notification from the board that a domestic relations order is acceptable pursuant to section 38-773 and that domestic relations order requires ASRS to pay benefits to an alternate payee that is contrary to the requirements of section 38-760.
Obtaining consent violates another law, an existing contract or a court order.

D. This section does not abrogate any community property laws of this state.

E. Payments or distributions made by ASRS in good faith reliance on the consent or waiver of a member's current spouse, the affirmations of a member contained in documents submitted to ASRS pursuant to this section or the member's indication to ASRS that the member is not married constitute a full and complete discharge and release of all liability of the board or ASRS, or both, respecting these payments or distributions.

F. If questions arise as to the distribution of a particular member's account, ASRS shall use reasonable judgment to distribute the account in a manner that is consistent with Arizona community property laws and interpretations of those laws.

§ 38-781 Supplemental employee deferral plan; public employees; administration; immunity; definitions

A. One or more supplemental employee deferral plans may be established pursuant to this section to provide public employees an opportunity to save additional tax-deferred monies for retirement.

B. ASRS may establish, administer, manage and operate supplemental employee deferral plans for employers.

C. ASRS may:

Employ services it deems necessary, including legal services, for the operation and administration of the plans.
Administer the plans through contracts with multiple vendors.
Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the operation and protection of the plans.
For the purposes of this section, enter into intergovernmental agreements pursuant to title 11, chapter 7, article 3.

D. A supplemental employee deferral plan does not replace an employee's existing state defined benefit retirement plan.

E. If an employer, including this state, elects to participate in a supplemental employee deferral plan, any employee of the employer who meets the eligibility requirements that are prescribed by ASRS for participation in the supplemental employee deferral plan may participate in the supplemental employee deferral plan.

F. Notwithstanding subsection E of this section, on or after July 1, 2022, an employee of an employer who is not participating in a public retirement system established by article 3, 3.1, 4, 4.1 or 6 of this chapter may elect to participate in a supplemental employee deferral plan if the employee meets the eligibility requirements that are prescribed by ASRS for participation in the supplemental employee deferral plan.

G. Employee participation in a supplemental employee deferral plan requires the participant's employer to make salary reductions from the participant's compensation at no cost to the employee, ASRS or any vendor retained by ASRS and contribute such salary reductions to the plan. An employer may make employer contributions to the supplemental employee deferral plan if the plan allows. The employer shall submit any reports required by the plan. If the participant is an active member, any compensation deferred by an employee under a plan shall be included as regular compensation or compensation for the purpose of computing the retirement and pension benefits provided in this article earned by any employee participating in the plan.

H. Employee contributions and earnings on employee contributions are immediately vested. Employer contributions, if any, and the earnings on employer contributions shall vest according to the schedule established by the employer, if the employer completes and submits a schedule to ASRS. If the employer does not complete and submit a schedule to ASRS, employer contributions, if any, and the earnings on employer contributions shall vest according to the default schedule established by ASRS.

I. Notwithstanding any other law, this state and its officers and employees, the board and ASRS are immune from civil liability and are not subject to suit directly or by way of contribution for any act or omission resulting in any damage or injury arising out of the supplemental employee deferral plan.

J. A political subdivision or a political subdivision entity that is not participating in ASRS may elect to allow its employees to participate in a supplemental employee deferral plan that is overseen by ASRS pursuant to this section by entering into an agreement with ASRS. An employee of a political subdivision or a political subdivision entity who is participating in a public retirement system established by article 3, 3.1, 4, 4.1 or 6 of this chapter is not eligible to participate in a supplemental employee deferral plan pursuant to this section. A political subdivision or political subdivision entity that elects to allow its employees to participate in a supplemental employee deferral plan pursuant to this subsection:

Is not an employer for the purposes of this article and its employees are not members for the purposes of this article.
May not provide any information indicating or implying that the political subdivision or political subdivision entity offers any ASRS benefits other than participation in a supplemental employee deferral plan pursuant to this subsection. A political subdivision or political subdivision entity that violates this paragraph may not elect to allow new employees to participate in a supplemental employee deferral plan pursuant to this subsection until the violation is corrected at the discretion of ASRS.
May elect to join ASRS pursuant to section 38-729.

K. For the purposes of this section:

"State" means this state, including any department, office, board, commission, agency or university, but does not mean any school district or community college district.
"Supplemental employee deferral plan" means a tax deferred annuity described in section 403(b) of the internal revenue code, including a custodial account described in 403(b)(7) of the internal revenue code, and an eligible deferred compensation plan described in section 457(b) of the internal revenue code. A supplemental employee deferral plan shall comply with all applicable provisions of the section of the internal revenue code under which such plan is adopted and maintained.

§ 38-782 Group health and accident coverage for retired public employees and elected officials and their dependents; definition

A. The board shall establish group health and accident coverage for eligible retired members, surviving dependents and members with a disability and their dependents. The board may establish a self-insurance program for the purposes of this subsection if the board determines that self-insuring would be less expensive than and at least as effective as a fully insured plan, while considering the risks and costs. If the board establishes a self-insurance program, the board shall provide that the self-insurance program include all health coverage benefits that are required pursuant to title 20. ASRS shall establish a separate account for any self-insurance program established pursuant to this section in an amount determined appropriate by ASRS. ASRS shall not use or divert any part of the corpus or income of the account for any purpose other than to provide benefits and to pay the administration costs for the self-insurance program pursuant to this section or the premium payments pursuant to section 38-783 unless the board determines that a self-insurance program should no longer be offered. If a self-insurance program is no longer offered, monies in the account shall be used to provide any remaining benefits and to pay administration costs for the self-insurance program pursuant to this section or the premium payments pursuant to section 38-783. If the liabilities of ASRS to provide the benefits under the self-insurance program and the premium payments pursuant to section 38-783 are satisfied, the board shall return any remaining monies in the account to the employer. If an insured retired member or member with a disability dies before the insured member's dependent beneficiary or an insured surviving dependent, the dependent beneficiary or insured surviving dependent is entitled to coverage at group rates if the dependent beneficiary or surviving dependent elects to continue in the coverage within six months of the insured member's death and the dependent beneficiary or surviving dependent agrees to pay the cost of the premium for group health and accident insurance. On notification of the insured member's death, the board shall immediately notify a dependent beneficiary or an insured surviving dependent of the provisions of this section.

B. Retired members of the public safety personnel retirement system, the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter, the elected officials' retirement plan, the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter, the corrections officer retirement plan or the optional retirement programs authorized pursuant to sections 15-1451 and 15-1628 and their dependents who are receiving benefits from the public safety personnel retirement system, the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter, the elected officials' retirement plan, the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter, the corrections officer retirement plan or the optional retirement programs authorized pursuant to sections 15-1451 and 15-1628 and who are not covered by section 38-651.01 may participate in group health and accident coverage provided pursuant to this section. On the death of an insured member of the public safety personnel retirement system, the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter, the elected officials' retirement plan, the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter, the corrections officer retirement plan or the optional retirement programs authorized pursuant to sections 15-1451 and 15-1628, the insured surviving dependent is entitled to coverage at group rates. Except as provided in subsection H of this section, the surviving dependent shall be charged amounts that are sufficient to pay for the premium and administrative expense of providing the coverage.

C. The board may enter into agreements with retired members, surviving dependents and members with a disability of ASRS and retired members of the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter who elect to obtain the coverage provided pursuant to subsection A of this section. Those agreements may include provisions for the deduction from the retirement benefits of the members who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under retirement benefits and the administrative expense of providing the coverage.

D. The board of trustees of the public safety personnel retirement system may enter into agreements with retired members of the public safety personnel retirement system, the elected officials' retirement plan, the corrections officer retirement plan and their dependents who elect to obtain the coverage provided pursuant to this section. Those agreements may include provisions for the deduction from the retirement benefits of the members who elect to obtain the coverage of amounts sufficient to pay for the premium not covered under their retirement benefits and the administrative expense of providing the coverage.

E. The board may enter into agreements with retired members of the optional retirement programs authorized pursuant to sections 15-1451 and 15-1628 and their dependents who elect to obtain the coverage provided pursuant to this section. Those agreements may include provisions for the payment of amounts sufficient to pay for the premium and administrative expense of providing the coverage.

F. If an insured member receiving long-term disability benefits pursuant to article 2.1 of this chapter becomes ineligible for the long-term disability benefits, the member and the covered dependents of the member may continue to participate in the group health and accident coverage provided pursuant to this section subject to the following conditions:

Participation in the coverage is limited to twelve months from the date the member ceases eligibility for benefits under article 2.1 of this chapter or the member commences employment, whichever occurs first.
The member shall pay the full premium cost of the coverage selected, and the member is not eligible for benefits pursuant to section 38-783.
If a member who participates in the coverage dies during the twelve-month period provided by this subsection, covered dependents of the member may continue coverage after the death of the member through the end of the twelve-month period. Covered dependents of the member who continue coverage pursuant to this paragraph shall pay the full premium cost of the coverage selected and are not eligible for benefits pursuant to section 38-783.

G. Retired members, surviving dependents or members with a disability who are not eligible for medicare, who live in this state, who enroll in a qualifying health maintenance organization under this section and who reside outside the area of a qualifying health maintenance organization shall be offered the option of enrolling with a qualified health maintenance organization offered through their provider under the same premiums as if they lived within the area boundaries of the qualified health maintenance organization provided that:

All medical services are rendered and received at an office designated by the qualifying health maintenance organization or at a facility referred by the health maintenance organization.
All nonemergency or nonurgent travel, ambulatory and other expenses from the residence area of the member to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization are the responsibility of and at the expense of the member.
All emergency or urgent travel, ambulatory and other expenses from the residence area of the member to the designated office of the qualifying health maintenance organization or the facility referred by the health maintenance organization shall be paid pursuant to any agreement between the health maintenance organization and the member living outside the area of the qualifying health maintenance organization.

H. Public monies shall not be spent to pay all or any part of the insurance premium pursuant to this section except for monies authorized to be paid for any insured from the retirement plan from which the insured is receiving benefits.

I. A retired member of the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter may elect to obtain the coverage provided pursuant to subsection A of this section, but shall pay the premium for the coverage selected and is not eligible for benefits pursuant to section 38-783 or 38-817.

J. For the purposes of this section, "eligible retired member, surviving dependent and member with a disability" means a retired member who is receiving retirement benefits from ASRS, a designated beneficiary of a deceased member who is receiving a survivor benefit pursuant to section 38-762, subsection C as monthly income or a member with a disability who is receiving long-term disability benefits pursuant to section 38-651.03 or article 2.1 of this chapter, and who does not otherwise elect to obtain coverage under a group health and accident insurance plan or program.

§ 38-783 Retired members; dependents; health insurance; premium payment; separate account; definitions

A. Subject to subsections G, H and I of this section, the board shall pay from ASRS assets part of the single coverage premium of any health and accident insurance for each retired member, contingent annuitant or member with a disability of ASRS if the member elects to participate in the coverage provided by ASRS or section 38-651.01 or elects to participate in a health and accident insurance program provided or administered by an employer or paid for, in whole or in part, by an employer to an insurer. A contingent annuitant must be receiving a monthly retirement benefit from ASRS in order to obtain any premium payment provided by this section. The board shall pay:

Up to $150 per month for a member of ASRS who is not eligible for medicare if the retired member or member with a disability has ten or more years of credited service.
Up to $100 per month for each member of ASRS who is eligible for medicare if the retired member or member with a disability has ten or more years of credited service.

B. Subject to subsections G, H and I of this section, the board shall pay from ASRS assets part of the family coverage premium of any health and accident insurance for a retired member, contingent annuitant or member with a disability of ASRS who elects family coverage and who otherwise qualifies for payment pursuant to subsection A of this section. If a member of ASRS and the member's spouse are both either retired or have disabilities under ASRS and apply for family coverage, the member who elects family coverage is entitled to receive the payments under this section as if they were both applying under a single coverage premium unless the payment under this section for family coverage is greater. Payment under this subsection is in the following amounts:

Up to $260 per month if the member of ASRS and one or more dependents are not eligible for medicare.
Up to $170 per month if the member of ASRS and one or more dependents are eligible for medicare.
Up to $215 per month if either:

(a) The member of ASRS is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The member of ASRS is eligible for medicare and one or more dependents are not eligible for medicare.

C. In addition each retired member, contingent annuitant or member with a disability of ASRS with less than ten years of credited service and a dependent of such a retired member, contingent annuitant or member with a disability who elects to participate in the coverage provided by ASRS or section 38-651.01 or who elects to participate in a health and accident insurance program provided or administered by an employer or paid for, in whole or in part, by an employer to an insurer is entitled to receive a proportion of the full benefit prescribed by subsection A or B of this section according to the following schedule:

9.0 to 9.9 years of credited service, ninety percent.
8.0 to 8.9 years of credited service, eighty percent.
7.0 to 7.9 years of credited service, seventy percent.
6.0 to 6.9 years of credited service, sixty percent.
5.0 to 5.9 years of credited service, fifty percent.
Those with less than five years of credited service do not qualify for the benefit.

D. The board shall not pay more than the amount prescribed in this section for a member of ASRS.

E. Notwithstanding subsections A, B and C of this section, for a member who retires on or after August 2, 2012, the board shall not make a payment under this section to a retired member, contingent annuitant or member with a disability who is enrolled in an employer's active employee group health and accident insurance program either as the insured or as a dependent, except that if the retired member, contingent annuitant or member with a disability is enrolled as a dependent and the premium paid to the employer's active employee group health and accident insurance program is not subsidized by the employer, the retired member, contingent annuitant or member with a disability is entitled to receive the amount provided in subsection A of this section.

F. The board shall establish a separate account that consists of the benefits provided by this section. The board shall not use or divert any part of the corpus or income of the account for any purpose other than the provision of and the cost of administering the benefits under this section or the self-insurance program pursuant to section 38-782 unless the liabilities of ASRS to provide the benefits are satisfied. If the liabilities of ASRS to provide the benefits described in this section and section 38-782 are satisfied, the board shall return any amount remaining in the account to the employer.

G. Payment of the benefits provided by this section is subject to the following conditions:

The payment of the benefits is subordinate to the payment of retirement benefits payable by ASRS.
The total of contributions for the benefits and actual contributions for life insurance protection, if any, shall not exceed twenty-five percent of the total actual employer and employee contributions to ASRS, less contributions to fund past service credits, after the day the account is established.
The board shall deposit the benefits provided by this section in the account.
The contributions by the employer to the account shall be reasonable and ascertainable.

H. A member who elects to receive a retirement benefit pursuant to section 38-760, subsection B, paragraph 1 may elect at the time of retirement an optional form of health and accident insurance premium benefit payment pursuant to this subsection as follows:

The optional premium benefit payment shall be an amount prescribed by subsection A, B or C of this section that is actuarially reduced to the retiring member for life. The amount of the optional premium benefit payment shall be the actuarial equivalent of the premium benefit payment to which the retired member would otherwise be entitled. The election in a manner prescribed by the board shall name the contingent annuitant and may be revoked at any time before the retiring member's effective date of retirement. At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board as follows:

(a) If the retired member names a different contingent annuitant, the optional premium benefit payment shall be adjusted to the actuarial equivalent of the original premium benefit payment based on the age of the new contingent annuitant. The adjustment shall include all postretirement increases or decreases in amounts prescribed by subsection A, B or C of this section that are authorized by law after the retired member's date of retirement. Payment of this adjusted premium benefit payment shall continue under the provisions of the optional premium benefit payment previously elected by the retired member. A retired member cannot name a different contingent annuitant if the retired member has at any time rescinded the optional form of health and accident insurance premium benefit payment.

(b) If the retired member rescinds the election, the retired member shall thereafter receive the premium benefit payment that the retired member would otherwise be entitled to receive if the retired member had not elected the optional premium benefit payment, including all postretirement increases or decreases in amounts prescribed by subsection A, B or C of this section that are authorized by law after the member's date of retirement. The increased benefit payment shall continue during the remainder of the retired member's lifetime. The decision to rescind shall be irrevocable.

If, at the time of the retired member's death:

(a) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection B or C of this section times the reduction factor applied to the retired member's premium benefit payment times the joint and survivor option reduction factor elected by the retired member at the time of retirement pursuant to section 38-760, subsection B, paragraph 1.

(b) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection A or C of this section and the contingent annuitant is eligible for single health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the reduction factor applied to the retired member's premium benefit payment times the joint and survivor option reduction factor elected by the retired member at the time of retirement pursuant to section 38-760, subsection B, paragraph 1.

(c) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is not eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the reduction factor applied to the retired member's premium benefit payment times the joint and survivor option reduction factor elected by the retired member at the time of retirement pursuant to section 38-760, subsection B, paragraph 1.

I. A member who elects to receive a retirement benefit pursuant to section 38-760, subsection B, paragraph 2 may elect at the time of retirement an optional form of health and accident insurance premium benefit payment pursuant to this subsection as follows:

The optional premium benefit payment shall be an amount prescribed by subsection A, B or C of this section that is actuarially reduced with payments for five, ten or fifteen years that are not dependent on the continued lifetime of the retired member but whose payments continue for the retired member's lifetime beyond the five, ten or fifteen year period. The election in a manner prescribed by the board shall name one contingent annuitant to receive the optional premium benefit payment and may be revoked at any time before the retiring member's effective date of retirement. At any time after benefits have commenced, the member may name a different contingent annuitant or rescind the election by written notice to the board. If the retired member rescinds the election, the retired member shall thereafter receive the premium benefit payment that the retired member would otherwise be entitled to receive if the retired member had not elected the optional premium benefit payment, including all postretirement increases or decreases in amounts prescribed by subsection A, B or C of this section that are authorized by law after the member's date of retirement. The increased benefit payment shall continue during the remainder of the retired member's lifetime. The decision to rescind shall be irrevocable.
If, at the time of the retired member's death:

(a) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection B or C of this section times the period certain and life option reduction factor elected by the retired member at the time of retirement pursuant to section 38-760, subsection B, paragraph 2.

(b) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection A or C of this section and the contingent annuitant is eligible for single health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the period certain and life option reduction factor elected by the retired member at the time of retirement pursuant to section 38-760, subsection B, paragraph 2.

(c) The retired member was receiving a reduced premium benefit payment based on an amount prescribed in subsection B or C of this section and the contingent annuitant is not eligible for family health and accident insurance coverage, the contingent annuitant is entitled to receive a premium benefit payment based on an amount prescribed in subsection A or C of this section times the period certain and life option reduction factor elected by the retired member at the time of retirement pursuant to section 38-760, subsection B, paragraph 2.

J. If, at the time of retirement, a retiring member does not elect to receive a reduced premium benefit payment pursuant to subsection H or I of this section, the retired member's contingent annuitant is not eligible at any time for the optional premium benefit payment.

K. If a member who is eligible for benefits pursuant to this section forfeits the member's interest in the account before the termination of ASRS, an amount equal to the amount of the forfeiture shall be applied as soon as possible to reduce employer contributions to fund the benefits provided by this section.

L. A contingent annuitant is not eligible for any premium benefit payment if the contingent annuitant was not enrolled in an eligible health and accident insurance plan at the time of the retired member's death or if the contingent annuitant is not the dependent beneficiary or insured surviving dependent as provided in section 38-782.

M. For the purposes of this section:

"Account" means the separate account established pursuant to subsection F of this section.
"Credited service" includes prior service.
"Prior service" means service for this state or a political subdivision of this state before membership in the defined contribution program administered by ASRS.
"Subsidized" means a portion of the total premium is paid by the employer, but does not necessarily mean a plan in which the employer uses blended rates to determine the total premium.

§ 38-791 Assurances and liabilities

A. Nothing contained in this article shall be construed as:

A contract of employment between an employer and any employee.
A right of any employee to continue in the employment of an employer.
A limitation of the rights of an employer to discharge any of its employees, with or without cause.

B. A member does not have any right to, or interest in, any ASRS assets on termination of the member's employment or otherwise, except as provided from time to time by ASRS, and then only to the extent of the benefits payable to the member out of ASRS assets. All payments of benefits shall be made solely out of ASRS assets and neither the employers, the board nor any member of the board is liable for payment of benefits in any manner.

C. Payment of compensation less contributions as provided in this article fully discharges any claim or demand for the service rendered by a member during the period covered by the payment, except with respect to benefits provided under this article.

D. Benefits, employee contributions or employer contributions, including interest, earnings and all other credits, payable under this article are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by a person entitled to the benefit, contribution, earning or credit, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, execute or levy or otherwise dispose of any benefit, contribution, earning or credit under this article is void. ASRS is not in any manner liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to any benefit, contribution, earning or credit under this article.

E. Neither the employers, the board nor any member of the board guarantees the fund established by section 38-712 in any manner against loss or depreciation, and they are not liable for any act or failure to act that is made in good faith pursuant to this article. The employers are not responsible for any act or failure to act of the board or any member of the board. Neither the board nor any member of the board is responsible for any act or failure to act of any employer.

F. This section does not exempt employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

§ 38-792 Exemptions from execution, attachment and taxation; exception

A. The benefits and annuities, the member and employer contributions and the securities in ASRS accounts provided for in this article are not subject to execution or attachment and are nonassignable except as specifically provided in this article. The member and employer contributions and the securities in ASRS accounts are exempt from state, county and municipal income taxes. Contributions that are withdrawn after December 31, 1974 by a public officer or employee from the accounts of ASRS and that are not received as benefits from ASRS and benefits and annuities received by a public officer or employee from ASRS after December 31, 1988 are subject to tax pursuant to title 43.

B. Interest, earnings and all other credits pertaining to benefits and annuities are not subject to execution or attachment and are nonassignable.

§ 38-793 Violation; classification

A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of ASRS with an intent to defraud ASRS is guilty of a class 6 felony.

§ 38-794 Reservation to legislature

The right to modify, amend or repeal this article, or any provisions of this article, is reserved to the legislature.

Article 2.1 Long-Term Disability Program

§ 38-797 Definitions

In this article, unless the context otherwise requires:

"ASRS" means the Arizona state retirement system established by article 2 of this chapter.
"Assets" means the accumulated resources of the LTD program.
"Board" means the ASRS board established pursuant to section 38-713.
"Compensation" has the same meaning prescribed in section 38-711.
"Depository" means a bank in which the monies of the LTD program are deposited and collateralized as provided by law.
"Employer" has the same meaning prescribed in section 38-711.
"Employer contributions" means all amounts paid into the LTD program by an employer.
"Fiscal year" has the same meaning prescribed in section 38-711.
"LTD program" means the long-term disability program established by this article.
"Member" has the same meaning prescribed in section 38-711.
"Monthly compensation" means the amount determined by taking the six pay periods immediately before the date of the member's disability in the fiscal year in which the member develops a disability, disregarding the highest two and lowest two compensation amount pay periods and deriving the mean of the two remaining pay periods. If the member was employed for fewer than six pay periods, monthly compensation is determined by deriving the mean of the number of pay periods the member worked in the fiscal year in which the member develops a disability.
"Normal retirement date" has the same meaning prescribed in section 38-711.
"Political subdivision" has the same meaning prescribed in section 38-711.
"State" has the same meaning prescribed in section 38-711.

§ 38-797.01 LTD program

A. A long-term disability program is established.

B. The program is known as the LTD program.

§ 38-797.02 LTD trust fund

A. The LTD trust fund is established for the purpose of paying benefits under and costs of administering the LTD program.

B. The LTD trust fund consists of all monies paid into it in accordance with this article, whether in the form of cash, securities or other assets, and all monies received from any other source. The LTD trust fund is exempt from title 44, chapter 3. Abandoned monies shall be disposed of pursuant to section 38-722.

C. Custody, management and investment of the LTD trust fund are as prescribed by this article and article 2 of this chapter.

§ 38-797.03 ASRS board; personnel; duties; hearing or review; executive session

A. The board shall administer the LTD program. ASRS officers, contractors and personnel shall perform the duties prescribed by this article.

B. The board may determine the rights, benefits or obligations of any person under this article and afford any person dissatisfied with a determination of their rights, benefits or obligations under this article with a hearing on the determination. Notwithstanding section 38-431.03, the board shall hold a hearing or review of an administrative law judge's written decision in an executive session if the aggrieved person makes such a request. If the board holds a hearing or review in executive session pursuant to this subsection, the board shall use the procedures for an executive session as provided in section 38-431.03. Minutes of and discussions held at an executive session are confidential except from the aggrieved person for the purposes of an appeal of the board's decision to the superior court on the matter that is determined by the board. The aggrieved person must request an executive session hearing at least forty-eight hours before the hearing.

C. The board may enter into a contract with an insurance company or another entity to administer all or part of the LTD program and to determine eligibility for benefits under the LTD program.

D. The board shall pay from the LTD trust fund the amounts necessary to pay benefits under and costs of administering the LTD program.

§ 38-797.04 Eligibility

All members are subject to this article and shall participate in the LTD program.

§ 38-797.05 Employer and member contributions

A. Beginning July 1, 2011, employers shall contribute the percentage of the compensation of all of the members under their employment so that the total employer contributions equals the amount that the board determines is necessary to pay one-half of all benefits under and costs of administering the LTD program.

B. Beginning July 1, 2011, a member shall contribute a percentage of the member's compensation equal to the employer contribution for the member required pursuant to subsection A of this section.

C. The employer shall pay the member contributions required of members on account of compensation earned. All employer and member contributions shall be paid to the board. The board shall allocate the contributions to the LTD trust fund and shall place the contributions in the LTD program's depository.

D. Each employer shall certify on each payroll the amount to be contributed to the LTD program and shall remit that amount to the board. The contributions are irrevocable.

E. Payments due pursuant to this article 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 the board. The board shall charge interest on the delinquent payments at an annual rate equal to the interest rate assumption approved by the board for actuarial equivalency pursuant to article 2 of this chapter. Delinquent payments due under this subsection, together with interest charges as provided in this subsection, may be recovered by an action in a court of competent jurisdiction against an employer liable for payments or, at the request of the director, may be deducted from any monies, including excise revenue taxes, payable to the employer by any department or agency of this state.

F. If more than the correct amount of contributions required is paid by an employer, proper adjustment shall be made in connection with subsequent payments. The board shall return excess contributions to the employer if the employer requests return of the contributions within one year after the date of overpayment.

G. Member contributions are not refundable and are not included in the calculation of survivor benefits pursuant to section 38-762.

§ 38-797.06 Contribution rate; annual report

A. The board shall select an actuary to determine required employer contributions on an annual basis. The actuary shall be a fellow of the society of actuaries.

B. Employer contributions shall be a percentage of compensation of all employees of the employers who meet the eligibility requirements of article 2 of this chapter, as the ASRS actuary determines pursuant to this section. The actuary shall make this determination in an annual valuation performed as of June 30. The valuation as of June 30 of a calendar year shall determine the percentage to be applied to compensation for the fiscal year beginning July 1 of the following calendar year. The actuary shall determine the total employer contribution using an actuarial cost method consistent with generally accepted actuarial standards. The total employer contributions shall be equal to the employer normal cost plus the amount required to amortize the past service funding requirement over a period consistent with generally accepted actuarial standards.

C. All contributions made by the employer and allocated to the LTD trust fund established by section 38-797.02 are irrevocable and shall be used as benefits under this article or to pay expenses of the LTD program.

D. ASRS shall provide a preliminary report on or before November 30 of the valuation year and a final report on or before January 15 of the following year to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

§ 38-797.07 LTD program benefits; limitations; definitions

A. The LTD program is subject to the following limitations:

Except as provided in paragraph 9 of this subsection, monthly LTD program benefits shall not exceed two-thirds of a member's monthly compensation, reduced by:

(a) For a member whose disability commences before July 1, 2008, sixty-four percent of social security disability benefits that the member and the member's dependents are eligible to receive.

(b) For a member whose disability commences on or after July 1, 2008, eighty-five percent of social security disability benefits that the member and the member's dependents are eligible to receive, but not including:

(i) The amount of attorney fees approved pursuant to social security administration rules and reasonable documented costs paid to an attorney to secure that disability benefit.

(ii) Any cost-of-living adjustments that are granted after the member commences benefits under this section.

(c) For a member whose disability commences before July 1, 2008, eighty-three percent of social security retirement benefits that the member is eligible to receive.

(d) For a member whose disability commences on or after July 1, 2008, eighty-five percent of social security retirement benefits that the member is eligible to receive, but not including any cost-of-living adjustments that are granted after the member commences benefits under this section.

(e) All of any workers' compensation benefits.

(f) All of any payments for a veteran's disability if both of the following apply:

(i) The veteran's disability payment is for the same condition or a condition related to the condition currently causing the member's disability.

(ii) The veteran's disability is due to, or a result of, service in the armed forces of the United States.

(g) All of any other benefits by reason of employment that are financed partly or wholly by an employer, including payments for sick leave. This subdivision does not include any retirement benefit that is received by the member pursuant to a state retirement system or plan other than ASRS.

(h) Fifty percent of any salary, wages, commissions or other employment-related pay that the member receives or is entitled to receive from any gainful employment in which the member actually engages.

For a member whose disability commences on or after August 2, 2012, a member's monthly income from the monthly LTD program benefits and sources listed in paragraph 1 of this subsection shall not exceed one hundred percent of the member's monthly compensation at the time disability commences. ASRS shall offset the member's monthly LTD program benefits by the amount necessary to reduce the member's total monthly income to meet the limit prescribed in this paragraph.
Monthly LTD program benefits are not payable until a member has had a disability for a period of six consecutive months.
Monthly LTD program benefits are not payable to a member who files an initial claim for disability more than twelve months after the date of the member's date of disability unless the member demonstrates to ASRS good cause for not filing the initial claim within twelve months after the date of disability.
Monthly LTD program benefits are not payable to a member who is receiving retirement benefits from ASRS, unless the retirement benefits are required pursuant to section 38-775.
Monthly LTD program benefits are not payable to a member whose disability is due to, or a result of, any of the following:

(a) An intentionally self-inflicted injury.

(b) War, whether declared or not.

(d) For a member whose most recent membership in the LTD program commences before July 1, 2008, an injury or sickness for which the member received medical treatment within three months before the date of the member's coverage under the LTD program. This subdivision does not apply to a member who either:

(i) Has been an active member of an employer for twelve continuous months.

(ii) Is employed by an employer before July 1, 1988.

(e) For a member whose most recent membership in the LTD program commences on or after July 1, 2008, an injury or sickness for which the member received medical treatment within six months before the date of the member's coverage under the LTD program. This subdivision does not apply to a member who has been an active member of an employer for twelve continuous months.

Monthly LTD program benefits cease to be payable to a member at the earliest of the following:

(a) The date the member ceases to have a disability.

(b) The date the member:

(i) Ceases to be under the direct care of a doctor.

(ii) Refuses to undergo any medical examination or refuses to participate in any work rehabilitation program for which the member is reasonably qualified by education, training or experience and that is requested by the insurance company or claims administrator that is selected by the board to administer the LTD program.

(d) The later of the following:

(i) The member's normal retirement date.

(ii) The month following sixty months of payments if disability occurs before sixty-five years of age.

(iii) The month following attainment of seventy years of age if disability occurs at sixty-five years of age or after but before sixty-nine years of age.

(iv) The month following twelve months of payments if disability occurs at or after sixty-nine years of age.

(e) If the member is convicted of a criminal offense and sentenced to more than six months in a jail, prison or other penal institution, the first day of the month following the first thirty continuous days of the member's confinement for the remainder of the confinement.

Monthly LTD program benefits are payable only for disabilities that commence on or after July 1, 1988.
Except as provided in paragraph 2 of this subsection, the minimum benefit for a member who is entitled to receive monthly LTD program benefits is $50 per month.
Members are eligible to receive the LTD program benefits and payments described in paragraph 1 of this subsection, and the reductions provided by paragraph 1 of this subsection apply even though the social security benefits are not actually paid as follows:

(a) For primary and dependent social security benefits, the members are eligible for the social security benefits until the social security benefits are actually awarded, or if the social security benefits are denied, until the member pursues the social security appeal process through a hearing before a social security administrative law judge or until the insurance company or claims administrator determines that the member is not eligible for social security benefits.

(b) For benefits and payments from any other source provided in paragraph 1 of this subsection, the members are eligible for the benefits if it is reasonable to believe that those benefits will be paid on proper completion of the claim or would have been paid except for the failure of the member to pursue the claim in time.

A member shall be considered to have a disability if based on objective medical evidence:

(a) During the first thirty months of a period of disability, the member is unable to perform one or more duties of the occupation held by the member with an employer when the member developed a disability.

(b) For a member who has received monthly LTD program benefits for twenty-four months within a five-year period, the member is unable to perform any work for compensation or gain for which the member is reasonably qualified by education, training or experience in an amount at least equal to the scheduled LTD program benefits prescribed in paragraph 1 of this subsection.

B. A member who is eligible pursuant to article 2 of this chapter and who receives monthly LTD program benefits is entitled to receive service credit pursuant to article 2 of this chapter from the time disability commences until LTD program benefits cease to be payable, except that for a member who receives monthly LTD program benefits on or after June 30, 1999, the number of years of service credited to the member's retirement account during the period ASRS disburses LTD program benefit payments shall not cause the member's total credited service for retirement benefits to exceed the greater of thirty years or the total years of service credited to the member's retirement account on the commencement of disability.

C. This section does not prohibit a member whose disability has been established to the satisfaction of the board from relying on treatment by prayer through spiritual means in accordance with the tenets and practice of a recognized church, religious denomination or Native American traditional medicine by a duly accredited practitioner of the church, denomination or Native American traditional medicine without suffering reduction or suspension of the member's monthly LTD program benefits.

D. ASRS may suspend or terminate benefits under this article if a member fails to provide information, data, paperwork or other materials that are requested by ASRS or the insurance company or claims administrator that is selected by the board to administer the LTD program. ASRS or its contracted administrator may investigate information that indicates a member may have falsified information or records related to LTD program eligibility or benefits or may not otherwise meet the requirements of LTD program eligibility. In connection with an investigation involving the LTD program, ASRS or its contracted administrator may collect and examine any statement or evidence, or may authorize a third party to collect and examine any statement or evidence, that relates to a member falsifying information or records related to LTD program eligibility or benefits. If the member provides the information requested, ASRS shall retroactively reinstate the benefits or claim for which the member qualifies under this article.

E. For the purposes of this section:

"Objective medical evidence" means evidence that established facts and conditions, as perceived without distortion by personal feelings, prejudices or interpretations, and includes x-rays, quantitative tests, laboratory findings, data, records, reports from the attending physician and reports from a consulting physician, as applicable.
"Received medical treatment" means that the member consulted with or received the advice of a licensed medical or dental practitioner, including advice given during a routine examination, and it includes situations in which the member received medical or dental care, treatment or services, including the taking of drugs, medication, insulin or similar substances.
"Social security" and "social security disability" includes the railroad retirement act of 1974 (P.L. 93-445; 88 Stat. 1305; 45 United States Code sections 231 through 231v).

§ 38-797.08 Errors; benefit recomputation

If any change or error in the records results in any member receiving from the LTD program more or less than the member would have been entitled to receive if the records had been correct, the board shall correct the error and shall adjust the payments in a manner so that the equivalent of the benefit to which the member was correctly entitled is paid. The board shall correct any change or error and shall pay the appropriate monies to a member or shall recover monies from the member if the member is overpaid. The board shall recover monies by reducing any benefit that is otherwise payable by ASRS or the LTD program to an active, inactive, member with a disability or retired member, survivor, contingent annuitant, beneficiary or alternate payee.

§ 38-797.10 Assurances and liabilities

A. Nothing contained in this article shall be construed as:

A contract of employment between an employer and any employee.
A right of any member to continue in the employment of an employer.
A limitation of the rights of an employer to discharge any of its employees, with or without cause.

B. A member does not have any right to, or interest in, any LTD program assets on termination of the member's employment or otherwise, except as provided from time to time in the LTD program, and then only to the extent of the benefits payable to the member out of LTD program assets. All payments of benefits shall be made solely out of LTD program assets and neither the employers, the board nor any member of the board is liable for payment of benefits in any manner.

C. Benefits, employer and member contributions, earnings and all other credits payable under this article are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by a person entitled to the benefit, earning or credit, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, execute or levy or otherwise dispose of any benefit, earning or credit under this article is void. The LTD program is not in any manner liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to any benefit, earning or credit under this article.

D. Neither the employers, the board nor any member of the board guarantees the LTD trust fund established by section 38-797.02 in any manner against loss or depreciation, and they are not liable for any act or failure to act that is made in good faith pursuant to this article. The employers are not responsible for any act or failure to act of the board or any member of the board. Neither the board nor any member of the board is responsible for any act or failure to act of any employer.

E. This section does not exempt benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

§ 38-797.11 Exemptions from execution, attachment and taxation; exception

A. The benefits, the employer and member contributions and the securities in the LTD trust fund established by section 38-797.02 are not subject to execution or attachment and are nonassignable except as specifically provided in this article or article 2 of this chapter. The employer and member contributions and the securities in the LTD trust fund established by section 38-797.02 are exempt from state, county and municipal income taxes. Benefits received by a member from the LTD program are subject to tax pursuant to title 43.

B. Interest, earnings and all other credits pertaining to benefits are not subject to execution or attachment and are nonassignable.

§ 38-797.12 Violation; classification

A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the LTD program with an intent to defraud the LTD program is guilty of a class 6 felony.

§ 38-797.13 Reservation to legislature

The right to modify, amend or repeal this article, or any provisions of this article, is reserved to the legislature.

§ 38-797.14 Liquidation of LTD program

If the legislature determines that the LTD program is no longer to be operated for the purposes set forth in this article, any monies remaining in the LTD trust after paying all liabilities of the trust or after making adequate provision for paying those liabilities revert to the general funds of the employers that were making contributions to the LTD program at the time the legislature terminates the LTD program. The reverted monies shall be prorated according to the gross amount of contributions made by the employers to the LTD program.

§ 38-797.15 Interest paid to members and employers

ASRS may not pay interest on any amount paid to a member, an alternate payee or an employer pursuant to this article unless specifically authorized by this article.

Article 3 Elected Officials' Retirement Plan

§ 38-801 Definitions

In this article, unless the context otherwise requires:

"Accumulated contributions" means the sum of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A plus the amount transferred to the fund on behalf of the member plus the amount deposited in the fund pursuant to section 38-816.
"Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the board.
"Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.
"Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.
"Average yearly salary" means the result obtained by dividing the total salary paid to an employee during a considered period by the number of years, including fractional years, in which the salary was received. The considered period shall be:

(a) For an elected official who becomes a member of the plan before January 1, 2012, the three consecutive years within the last ten completed years of credited service as an elected official that yield the highest average. If a member does not have three consecutive years of credited service as an elected official, the considered period is the member's last consecutive period of employment with a plan employer immediately before retirement.

(b) For an elected official who becomes a member of the plan on or after January 1, 2012, the five consecutive years within the last ten completed years of credited service as an elected official that yield the highest average. If a member does not have five consecutive years of credited service as an elected official, the considered period is the member's last consecutive period of employment with a plan employer immediately before retirement.

"Board" means the board of trustees of the system.
"Credited service" means the number of whole and fractional years of a member's service as an elected official after the elected official's effective date of participation for which member and employer contributions are on deposit with the fund, plus credited service transferred to the plan from another retirement system or plan for public employees of this state, plus service as an elected official before the elected official's effective date of participation that is being funded pursuant to a joinder agreement pursuant to section 38-815 or service that was redeemed pursuant to section 38-816. Credited service does not include periods of service for which an active member is uncompensated by the employer and for which no contributions to the plan are made.
"Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the plan issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.
"Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.
"Determination period" means the ninety-day period in which the plan must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the plan mails a notice of receipt to the participant and alternate payee.
"Direct rollover" means a payment by the plan to an eligible retirement plan that is specified by the distributee.
"Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.
"Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.
"Effective date of participation" means August 7, 1985, except with respect to employers and their elected officials whose contributions to the plan commence after that date, in which case the effective date of their participation in the plan is specified in the applicable joinder agreement.
"Elected official" means:

(a) Every elected official of this state who was a member of the plan on December 31, 2013.

(b) Every elected official of each county of this state who was a member of the plan on December 31, 2013.

(c) Every justice of the supreme court, every judge of the court of appeals, every judge of the superior court and every full-time superior court commissioner, except full-time superior court commissioners who failed to make a timely election of membership under the judges' retirement plan, repealed on August 7, 1985, who was a member of the plan on December 31, 2013.

(d) The administrator of the board if the administrator is a natural person but only if the administrator is employed by the board before January 1, 2012.

(e) Each elected official of an incorporated city or town whose employer has executed a proper joinder agreement for coverage of its elected officials and who was a member of the plan on December 31, 2013.

"Eligible child" means an unmarried child of a deceased active or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty-three years of age and remains a dependent of the surviving spouse or guardian.

"Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

(g) Effective January 1, 2008, a Roth individual retirement account that satisfies the requirements of section 408A of the internal revenue code.

(h) For distributions made after December 18, 2015, a simple retirement account as defined in section 408(p) of the internal revenue code.

"Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:

(a) Any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the member or the joint lives or joint life expectancies of the member and the member's beneficiary or for a specified period of ten years or more.

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

(d) Any distribution made to satisfy the requirements of section 415 of the internal revenue code.

(e) Hardship distributions.

(f) Similar items designated by the commissioner of the United States internal revenue service in revenue rulings, notices and other guidance published in the internal revenue bulletin.

"Employer" means a department, agency or political subdivision of this state that makes employer contributions to the plan pursuant to section 38-810 on behalf of an elected official who participates in the plan.
"Fund" means the elected officials' retirement plan fund.
"Notice of receipt" means a written document that is issued by the plan to a participant and alternate payee and that states that the plan has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.
"Participant" means a member who is subject to a domestic relations order.
"Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.
"Pension" means a series of monthly payments to a person who is entitled to receive benefits under the plan.
"Personal representative" means the personal representative of a deceased alternate payee.
"Physician" means a physician who is licensed pursuant to title 32, chapter 13 or 17.
"Plan" means the elected officials' retirement plan.
"Plan approved domestic relations order" means a domestic relations order that the plan approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.
"Plan year" or "fiscal year" means the period beginning on July 1 of any year and ending on June 30 of the next succeeding year.
"Retired member" means a person who is being paid a pension based on the person's credited service as a member of the plan.
"Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the plan, or a domestic relations order submitted to the plan that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.
"System" means the public safety personnel retirement system.

§ 38-802 Elected officials' retirement plan and fund; administration

A. The elected officials' retirement plan is established.

B. The elected officials' retirement plan fund is established. The fund shall be made up of the assets of the judges' retirement plan and the elected officials' retirement plan terminated on August 7, 1985 plus the assets generated by this plan and the assets of the administrator of the board in the state employees retirement plan on the date of transfer plus any assets transferred to the fund in accordance with a joinder agreement. The fund shall be used exclusively for payment of benefits to retired members or their beneficiaries as provided in this article and for payment of the administration, operation and investment expenses of the plan. In no case shall any portion of the fund revert or otherwise be paid to an employer.

C. The board shall administer, manage and operate the plan and fund.

D. The elected officials' retirement plan is a jural entity that may sue and be sued.

§ 38-802.01 Employer responsibilities under the system

An employer shall submit any reports, data, paperwork or other materials that are requested by the board of trustees for any reason, including eligibility determinations and proper administration of the plan.

§ 38-803 Powers and duties of the board; reporting requirements

A. The board, in the administration, management and operation of the plan and fund, shall:

Account for the operation, administration and investment expenses and allocate them against investment income.
Contract on a fee basis with an actuary to make an actuarial valuation of the plan based on the valuation method and valuation assumptions recommended by the actuary and approved by the board. The actuary shall be a member of the American academy of actuaries.
Contract on a fee basis with an independent auditing firm to make an annual audit of the accounting records of the fund and file a copy of the audit with the auditor general.
Invest the monies in the fund as provided in article 4 of this chapter.
Within a period of six months after the close of each fiscal year, submit a detailed report of the operation and the investment performance of the plan to the governor, the legislature and the members of the plan.
By November 1 of each year provide a preliminary report and by December 1 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

B. The board, in the administration, management and operation of the plan and fund, may:

Employ services as it deems necessary.
Either keep invested monies separate or commingle invested monies as it deems appropriate.
Delegate authority as it deems necessary and prudent to the administrator employed pursuant to section 38-848, subsection M, paragraph 6.
Do all acts, whether expressly authorized, that are deemed necessary or proper for the protection of the fund.

§ 38-803.01 Qualified governmental excess benefit arrangement; definitions

A. The board may establish a qualified governmental excess benefit arrangement for the sole purpose of enabling the board to continue to apply the same formula for determining benefits payable to all employees covered by the plan whose benefits under the plan are limited by section 415 of the internal revenue code.

B. The board shall administer the qualified governmental excess benefit arrangement. The board has full discretionary fiduciary authority to determine all questions arising in connection with the arrangement, including its interpretation and any factual questions arising under the arrangement.

C. All members and retired members of the plan are eligible to participate in the qualified governmental excess benefit arrangement if their benefits under the plan would exceed the limitations imposed by section 415 of the internal revenue code.

D. On or after the effective date of the qualified governmental excess benefit arrangement, the employer shall pay to each eligible member of the plan who retires on or after the effective date and to each retired member who retired before the effective date and that member's beneficiary, if required, a supplemental pension benefit equal to the amount by which the benefit that would have been payable under the plan, without regard to any provisions in the plan incorporating the limitation on benefits imposed by section 415 of the internal revenue code, exceeds the benefit actually payable taking into account the limitation imposed on the plan by section 415 of the internal revenue code. The board shall compute and pay the supplemental pension benefits under the same terms and conditions and to the same person as the benefits payable to or on account of a retired member under the plan.

E. The employer shall not fund benefits payable under the qualified governmental excess benefit arrangement. The employer shall pay benefits payable under the qualified governmental excess benefit arrangement out of the general assets of the employer. For administrative purposes, the employer may establish a grantor trust for the benefit of eligible members. The employer shall be treated as grantor of the trust for purposes of section 677 of the internal revenue code. The rights of any person to receive benefits under the qualified governmental excess benefit arrangement are limited to those of a general creditor of the employer.

F. The terms and conditions contained in the plan, other than those relating to the benefit limitation imposed by section 415 of the internal revenue code, apply, unless the terms and conditions are inconsistent with the purpose of the qualified governmental excess benefit arrangement.

G. For the purposes of this section:

"Internal revenue code" has the same meaning prescribed in section 42-1001.
"Qualified governmental excess benefit arrangement" means a portion of the plan if:

(a) The portion is maintained solely to provide to members of the plan that part of a member's annual benefit that is otherwise payable under the terms of the plan and that exceeds the limitations imposed by section 415 of the internal revenue code.

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the plan unless the trust is maintained solely for the purpose of providing excess benefits.

§ 38-804 Membership; termination; credited service; redemption; reemployment

A. Except as otherwise provided in this section, all elected officials are members of the plan, except that a state elected official who is subject to term limits may elect not to participate in the plan. The state elected official who is subject to term limits shall make the election in writing and file the election with the board within thirty days after the state elected official assumes office. The election is effective on the first day of the state elected official's eligibility for that term of office. The election not to participate is specific for that term of office. If a state elected official who is subject to term limits fails to make an election as provided in this subsection, the state elected official is deemed to have elected to participate in the plan. The election not to participate in the plan is irrevocable and constitutes a waiver of all benefits provided by the plan for the state elected official's entire term, except for any benefits accrued by the state elected official in the plan for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law. The state elected official who elects not to participate in the plan shall participate in the Arizona state retirement system unless the state elected official makes an irrevocable election not to participate in the Arizona state retirement system as provided in section 38-727.

B. All elected officials who are members of the plan on December 31, 2013 may remain members of the plan under the terms and limitations of this article.

C. If a member who becomes a member of the plan before January 1, 2012 ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:

If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.
If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty-five percent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.

(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.

(c) 7.0 to 7.9 years of credited service, fifty-five percent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.

(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.

(e) 9.0 to 9.9 years of credited service, eighty-five percent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.

(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38-810, subsection A.

D. If a member has more than ten years of credited service with the plan, leaves the monies prescribed in subsection C of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection C of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.

E. If an elected official who becomes a member of the plan on or after January 1, 2012 ceases to hold office for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member may withdraw the member's accumulated contributions from the plan and shall be paid the member's accumulated contributions plus interest at a rate determined by the board as of the date of termination, less any benefit payments the member has received and any amount the member may owe to the plan.

F. If the amount prescribed in subsection C, D or E of this section includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee-to-trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board. A member who receives the amount prescribed in subsection C, D or E of this section from the plan or who elects a transfer pursuant to this subsection forfeits the member's credited service, and all rights to benefits under the plan and membership in the plan terminate.

G. For distributions occurring from and after December 31, 2007, a member or a member's beneficiary, including a nonspouse designated beneficiary to the extent allowed under subsection H of this section, may roll over an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code to a Roth individual retirement account, if, for distributions occurring before January 1, 2010, the member or the member's beneficiary satisfies the requirements for making a Roth individual retirement account contribution under section 408A(c)(3)(B) of the internal revenue code, as in effect on the date of the rollover. Any amount rolled over to a Roth individual retirement account is included in the gross income of the member or the member's beneficiary to the extent the amounts would have been included in gross income if not rolled over as required under section 408A(d)(3)(A) of the internal revenue code. For the purposes of this subsection, the administrator is not responsible for ensuring the member or the member's beneficiary is eligible to make a rollover to a Roth individual retirement account.

H. For distributions made from and after December 31, 2009, a nonspouse designated beneficiary as defined in section 401(a)(9)(E) of the internal revenue code may elect to directly roll over an eligible rollover distribution to an individual retirement account under section 408(a) of the internal revenue code or an individual retirement annuity under section 408(b) of the internal revenue code that is established on behalf of the designated beneficiary and that will be treated as an inherited individual retirement plan pursuant to section 402(c)(11) of the internal revenue code. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution as defined in section 402(c)(4) of the internal revenue code. In applying this subsection, a nonspouse rollover is subject to the direct rollover requirements under section 401(a)(31) of the internal revenue code, the rollover notice requirements under section 402(f) of the internal revenue code and the mandatory withholding requirements under section 3405(c) of the internal revenue code.

I. For plan years occurring before January 1, 2007, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is not less than thirty days and not more than ninety days before the date of distribution and, for plan years beginning from and after December 31, 2006, the period for providing the rollover notice as required under section 402(f) of the internal revenue code is not less than thirty days and not more than one hundred eighty days before the date of distribution.

J. In no case shall more than twelve months of credited service be credited on account of all service rendered by a member in any one year.

K. If an elected official who has terminated the member's membership in the plan pursuant to subsection C of this section is subsequently elected, appointed or hired on or after January 1, 2014, the elected official is not eligible to become a member of the plan but is subject to article 3.1 of this chapter.

L. Notwithstanding subsection K of this section, if an elected official files a written election form with the board within ninety days after the day of the member's reemployment as an elected official and repays the amount previously withdrawn pursuant to subsection C or D of this section within one year after the date of the member's reemployment as an elected official, with interest on that amount at the rate of nine percent for each year, compounded each year from the date of withdrawal to the date of repayment, credited service shall be restored. Credited service shall not be restored until complete repayment is made to the fund.

M. An elected official who is elected, appointed or hired on or after January 1, 2014 and who was not a member of the plan on December 31, 2013 is not eligible to become a member of the plan but is subject to article 3.1 of this chapter.

N. If a retired member subsequently becomes an elected official, contributions shall not be made by the retired member and credited service shall not accrue while the retired member is holding office.

O. In addition to subsection N of this section, if a retired member subsequently becomes, by reason of election or reelection, an elected official of the same office from which the member retired within a time period following the member's retirement that is less than one full term for that office, the member shall not receive a pension. Any pension payments received by a member, who retired on or after July 1, 2009, while holding the same office from which the member retired within one full term after the date of retirement are considered overpayments pursuant to section 38-809, subsection A and are subject to repayment up to the maximum of only the amount received during that term. If the elected official ceases to hold the same office, the elected official is entitled to receive the same pension the elected official was receiving when the elected official's pension was discontinued pursuant to this subsection. This subsection does not prohibit a retired judge called by the supreme court to active duties of a judge pursuant to section 38-813 from receiving retirement benefits.

§ 38-804.01 Reinstatement of credited service; effect of prior law

An elected official who received a refund as provided in section 38-804, who is subsequently reemployed as an elected official and who may have redeposited the amount withdrawn with interest as provided in section 38-804 or an elected official who redeems prior service pursuant to statute is subject to the benefits and duties in effect at the time of the elected official's most recent reemployment. This section does not apply if a court of competent jurisdiction orders reinstatement of benefits and duties under a prior law.

§ 38-805 Normal retirement and early retirement pensions

A. A member who becomes a member of the plan before January 1, 2012 and who ceases to hold office is eligible for a normal retirement pension, if the member satisfies one of the following requirements:

Has attained age sixty-five with five or more years of credited service.
Has attained age sixty-two with ten or more years of credited service.
Has twenty or more years of credited service.

B. A member who becomes a member of the plan on or after January 1, 2012 and who ceases to hold office is eligible for a normal retirement pension, if the member satisfies one of the following requirements:

Has attained age sixty-five with five or more years of credited service.
Has attained age sixty-two with ten or more years of credited service.

C. A member who becomes a member of the plan before January 1, 2012, who has at least five years of credited service and who ceases to hold office as an elected official may take early retirement.

D. On normal or early retirement, a retired member shall receive a pension computed pursuant to section 38-808, subsection B or C until the member's death.

§ 38-805.01 Resignation; time frame; normal retirement pension; reemployment; employer contributions

A. Notwithstanding any age and service requirement specified in section 38-805, an elected official who is a member of the elected officials' retirement plan and who gives an irrevocable notice of resignation on or before July 29, 2022 with a date of resignation and retirement of not later than September 30, 2022 may receive pension payments for normal retirement as specified in section 38-808 if the member meets either of the following:

Has attained fifty-five years of age with ten years of credited service.
Has attained fifty-nine and one-half years of age with five years of credited service.

B. Notwithstanding the reemployment provisions of section 38-804, a member who retires pursuant to this section and who subsequently becomes an elected official may not:

Make contributions to the plan.
Accrue credited service under the plan while the retired member is holding office.
Participate in the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter.

C. If a member retires pursuant to this section and subsequently becomes an elected official, regardless of when the retired member returns to work, the employer shall pay contributions at an alternate contribution rate as required and calculated pursuant to section 38-810.04.

§ 38-806 Disability retirement pensions

A. A member who becomes permanently mentally or physically incapacitated for the purpose of performing the duties of the member's office may receive disability retirement benefits if the board of trustees finds that all of the following apply:

The member submits either personally or by a guardian an affidavit as to the nature of the member's incapacity.
The member is medically examined by a board of three physicians, one designated by the administrator of the fund, one designated by the member or the member's guardian and one designated by the governor.
A majority of the board of physicians certifies to the board of trustees that:

(a) The member is mentally or physically incapacitated for the purpose of performing the duties of the member's office.

(b) The member's incapacity occurred during the member's term of office and is expected to be of an indefinite duration.

B. On retirement by reason of disability under this section, a retired member shall receive a pension computed pursuant to section 38-808, subsection B, paragraph 2 or subsection C, paragraph 2 until the member's death or until the member's pension is suspended, revoked or discontinued pursuant to this section.

C. If the board of trustees has reason to believe that a member, retired pursuant to this section but not yet eligible for normal retirement, may no longer be mentally or physically incapacitated from performing the duties of the public office from which the member retired, the board of trustees may require such retired member to be medically examined. The examination shall be conducted by a board of three physicians, one designated by the administrator of the fund, one designated by the retired member or the member's guardian and one designated by the governor.

D. The board of trustees shall discontinue pension payments to a member retired pursuant to this section, if the board of physicians certifies that the member is mentally and physically capable of performing the duties of the public office from which the member retired.

E. If the retired member refuses to submit to the medical examination, the administrator of the fund may suspend payment of the member's pension until the member submits to the medical examination. If the retired member refuses for one year or more to submit to medical examination, the board of trustees shall revoke the pension of a member retired under this section.

§ 38-807 Survivor pensions

A. The surviving spouse of a deceased retired member shall be paid a surviving spouse's pension if the spouse was married to the member for a period of at least two consecutive years at the time of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the retired member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. For a member who becomes a member of the plan before January 1, 2012, the amount of pension paid a surviving spouse is equal to three-fourths of the amount of the deceased retired member's pension at the time of death. For a member who becomes a member of the plan on or after January 1, 2012, the amount of pension paid a surviving spouse is equal to one-half of the amount of the deceased retired member's pension at the time of death, except that at the time of retirement a member may elect an optional form of retirement benefit, as determined by the board, that provides for an actuarially reduced pension and an increased surviving spouse's benefit. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.

B. The surviving spouse of a deceased active or inactive member shall be paid a surviving spouse's pension if the spouse was married to the member on the date of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. For the purposes of this subsection, for a member who becomes a member of the plan before January 1, 2012, the surviving spouse's pension shall be three-fourths of the amount calculated in the same manner as a disability pension is calculated pursuant to section 38-806. For a member who becomes a member of the plan on or after January 1, 2012, the surviving spouse's pension shall be one-half of the amount calculated in the same manner as a disability pension is calculated pursuant to section 38-806. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.

C. If the deceased retired or active or inactive member does not have an eligible surviving spouse or the pension of the eligible surviving spouse is terminated, each eligible child is entitled to receive a child's pension. A child's pension terminates if the child is adopted. In the case of a child with a disability, the child's pension terminates if the child ceases to be under a disability or ceases to be a dependent of the surviving spouse or guardian. The amount of the pension of each eligible child is an equal share of the amount of the surviving spouse's pension. The surviving minor or child's with a disability pension shall be paid to the person who is the legally appointed guardian or custodian of the eligible child until the eligible child reaches eighteen years of age, at which time the eligible child's pension shall be paid directly to the eligible child so long as the person remains eligible to receive the pension and is not subject to a guardianship or conservatorship due to disability or incapacity. The pension of a child with a disability who is eighteen years of age or older and who is subject to a guardianship or conservatorship due to disability or incapacity shall continue to be paid to the guardian or conservator so long as the child remains eligible for the pension payment.

D. If a member dies and no pension is payable on account of the member's death, the deceased member's accumulated contributions shall be paid to the person or persons designated by the deceased member in writing and filed with the board. If the designated person or persons do not survive the deceased member, the accumulated contributions shall be paid to the estate of the deceased member.

§ 38-808 Pension payments; computation of amounts; termination

A. Plan retirement commences on the first day of the month following the date of the member's retirement or death. Pension payments shall be received on or about the first day of the month next following the member's plan retirement. The last pension payment shall be made as of the last day of the month in which the death of the retired member or the surviving spouse or minor children occurs. Pension payments shall not be made in advance.

B. For a member who becomes a member of the plan before January 1, 2012, the monthly pension shall be equal to one-twelfth of the following amount:

Four percent of the member's average yearly salary multiplied by the member's credited service, not to exceed eighty percent of the member's average yearly salary. This amount shall be reduced if the member takes early retirement pursuant to section 38-805, subsection C. The amount of reduction is three-twelfths of one percent for each month the retired member's early retirement age precedes the member's normal retirement age pursuant to section 38-805, subsection A, except that the reduction shall not be more than thirty percent.
A member who meets the requirements for a disability retirement pension shall receive a disability pension equal to four percent of the member's average yearly salary multiplied by twenty years of credited service if the member has ten or more years of credited service, four percent of the member's average yearly salary multiplied by ten years of credited service if the member has five or more years of credited service but fewer than ten years of credited service or four percent of the member's average yearly salary multiplied by five years of credited service if the member has fewer than five years of credited service.

C. The monthly pension of a member who becomes a member of the plan on or after January 1, 2012 shall be equal to one-twelfth of the following amount:

Three percent of the member's average yearly salary multiplied by the member's credited service, not to exceed seventy-five percent of the member's average yearly salary.
A member who meets the requirements for a disability retirement pension shall receive a disability pension equal to three percent of the member's average yearly salary multiplied by twenty-five years of credited service if the member has ten or more years of credited service, three percent of the member's average yearly salary multiplied by twelve and one-half years of credited service if the member has five or more years of credited service but fewer than ten years of credited service or three percent of the member's average yearly salary multiplied by 6.25 years of credited service if the member has fewer than five years of credited service.

D. The plan shall make payments pursuant to section 401(a)(9) of the internal revenue code and the regulations that are issued under that section. Notwithstanding any other provision of this plan, beginning January 1, 1987, payment of benefits to a member shall commence not later than April 1 of the calendar year following the later of:

The calendar year in which the member attains seventy-two years of age.
The date the member terminates employment.

E. If all pension payments terminate before an amount equal to the member's accumulated contributions has been paid, the difference between the member's accumulated contributions and the aggregate amount of pension payments shall be paid to the person or persons and in such shares as designated by the retired member in writing and filed with the board. If the designated person or persons do not survive the retired member, the difference shall be paid to the estate of the retired member.

§ 38-809 Correction of pension payment errors; assignments prohibited; civil liability; restitution or payment of fine; violation; classification; offset of benefits

A. If the plan has made pension payments based on incorrect information and a person or an estate has been paid more or less than the person or estate should have been paid, the board shall adjust future payments so that the proper amount is paid. The adjustment may be made in such a manner that the equivalent actuarial present value of the benefit to which the person or estate is correctly entitled is paid.

B. Notwithstanding any other statute, benefits, member contributions or court fees including interest earnings and all other credits payable under the plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by the person entitled to the benefit, contribution, earning or credit under the terms of the plan, and any attempt to dispose of any right under the terms of the plan as proscribed in this subsection is void. The fund is not liable for or subject to the debts, contracts, liabilities, enlargements or torts of any person entitled to a benefit, contribution, earning or credit under the terms of the plan.

C. Nothing in this section exempts employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

D. A person who defrauds the plan or who takes, converts, steals or embezzles monies owned by or from the plan and who fails or refuses to return the monies to the plan on the board's written request is subject to a civil suit by the plan in the superior court in Maricopa county. On entry of an order finding the person has defrauded the plan or taken, converted, stolen or embezzled monies owned by or from the plan, the court shall enter an order against that person and for the plan awarding the plan all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the plan a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the plan, plus interest at the rate prescribed by section 44-1201, until all amounts owed are paid to the plan.

E. If a member is convicted of, or discharged because of, theft, embezzlement, fraud or misappropriation of an employer's property or property under the control of the employer, the member is subject to restitution and fines imposed by a court of competent jurisdiction. The court may order the restitution or fines to be paid from any payments otherwise payable to the member from the plan.

F. A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the plan with an intent to defraud the plan is guilty of a class 1 misdemeanor. If any change or error in the records results in any member or beneficiary receiving from the plan more or less than the member or beneficiary would have been entitled to receive had the records been correct, the plan shall correct the error, and as far as practicable shall adjust the payments in such a manner that the actuarial equivalent of the benefit to which the member or beneficiary was correctly entitled to receive shall be paid. If a member is convicted of a crime pursuant to this subsection, the member is entitled to receive a lump sum payment of the member's accumulated contributions but forfeits any future compensation and benefits that would otherwise accrue to the member or the member's estate under this article.

G. Notwithstanding any other provision of this article, the board may offset against any benefits otherwise payable by the plan to an active or retired member or survivor any court ordered amounts awarded to the board and plan and assessed against the member or survivor.

§ 38-810 Contributions; appropriations

A. Each member shall contribute to the fund an amount equal to the amount prescribed in subsection G of this section. Contributions of members shall be made by payroll deductions. Every member is deemed to consent to these deductions. Payment of a member's compensation, less these payroll deductions, constitutes a full and complete discharge and satisfaction of all claims and demands by the member relating to remuneration for the member's services rendered during the period covered by the payment, except with respect to the benefits provided under the plan. A member may not, under any circumstance, borrow from, take a loan against or remove contributions from the member's account before the termination of membership in the plan or the receipt of a pension.

B. The board's office shall be credited monthly with monies collected pursuant to section 12-119.01, subsection B, paragraph 2, section 12-120.31, subsection D, paragraph 2, section 12-284.03, subsection A, paragraph 6, section 22-281, subsection C, paragraph 3 and section 41-178. The monies credited to the fund pursuant to this subsection shall be deposited in the fund on a monthly basis, and there shall be a complete accounting of the determination of these monies deposited in the fund.

C. Beginning on July 1, 2018, as determined by actuarial valuations performed by the plan's actuary each employer shall make contributions on a level percent of compensation basis for all employees of the employer who are either members under this article, article 3.1 of this chapter or article 2 of this chapter pursuant to section 38-727, subsection B sufficient under the actuarial valuation to meet both the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability over a closed period of at least twenty and not more than thirty years that is established by the board taking into account the recommendation of the plan's actuary and the employer's contribution under the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter and the employer's contribution under article 2 of this chapter for members who are eligible pursuant to section 38-727, subsection B. The employer also shall pay the amount required by section 38-797.05 for members under article 2 of this chapter who are eligible pursuant to section 38-727, subsection B and the amount required by article 3.2 of this chapter for members under article 3.1 of this chapter. The monies deposited in the fund pursuant to subsection B of this section shall be used to supplement the contributions required of all employers under the plan. The employer level percent compensation contribution that is paid pursuant to this subsection, less the amount contributed by the employer pursuant to section 38-833 and section 38-737 for members eligible pursuant to section 38-727, subsection B, shall not be used to pay for an increase in benefits that is otherwise payable to members but shall be used to meet the normal cost plus an amount to amortize the unfunded accrued liability.

D. In any fiscal year, an employer's contribution to the plan in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of the fund contains excess valuation assets and is more than one hundred percent funded, the board shall account for the excess valuation assets up to one hundred percent of present value of all future benefits of the employer in a stabilization reserve account. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of the fund has a valuation asset deficiency and an unfunded actuarial accrued liability, the board shall use any valuation assets in the stabilization reserve account, to the extent available, to limit the decline in the fund's funding ratio to not more than two percent.

E. The department of administration and the treasurer of each county and participating city and town shall transfer to the board the contributions provided for in subsections A and C of this section within ten working days after each payroll date. The state, county treasurers and clerks of the superior court shall transfer the monies credited under subsection B of this section to the board on or before the fifteenth day of each calendar month that follows the month in which the court fees were collected. Contributions and monies credited under subsection B of this section and transferred after these dates shall include a penalty equal to ten percent a year, compounded annually, for each day that the contributions or monies credited under subsection B of this section are late. Delinquent payments due under this subsection, together with interest charges as provided in this subsection and court costs, may be recovered by action in a court of competent jurisdiction against the person or persons responsible for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to a political subdivision by any department or agency of this state. If requested by the board, the state, county treasurers or clerks of the superior court shall transfer the monies credited under subsection B of this section, in an amount determined by the board, directly to the qualified governmental excess benefit arrangement established pursuant to section 38-803.01.

F. The employer shall pay the member contributions required of members on account of compensation earned after August 7, 1985. The paid contributions shall be treated as employer contributions for the purpose of determining tax treatment under the United States internal revenue code. The effective date of the employer payment shall not be before the date the retirement plan has received notification from the United States internal revenue service that pursuant to section 414(h) of the United States internal revenue code the member contributions paid will not be included in gross income for income tax purposes until the paid contributions are distributed by refund or pension payments. The employer shall pay the member contributions from monies established and available in the retirement deduction account, which monies would otherwise have been designated as member contributions and paid to the retirement plan. Member contributions paid pursuant to this subsection shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before August 7, 1985.

G. An elected official who became a member of the plan before July 20, 2011 shall contribute seven percent of the member's gross salary pursuant to subsection A of this section. The amount contributed pursuant to subsection A of this section by an elected official who became a member of the plan on or after July 20, 2011 is:

For fiscal year 2011-2012, ten percent of the member's gross salary.
For fiscal year 2012-2013, eleven and one-half percent of the member's gross salary.
For fiscal year 2013-2014 and each fiscal year thereafter, thirteen percent of the member's gross salary.

H. The amount of the member's contribution that exceeds seven percent of the member's compensation shall not be used to reduce the employer's contributions that are calculated pursuant to subsection C of this section until the employer's funded ratio as expressed as a percentage of the employer's actuarial value of assets to accrued actuarial liability as determined by the actuarial valuations reported pursuant to subsection D of this section is at or above one hundred percent. If the employer's funded ratio falls below one hundred percent, the amount of the member's contributions above seven percent as provided in subsection G, paragraph 3 of this section shall accumulate from that time and not be used to reduce the employer's contribution rate until the employer's funded ratio returns to one hundred percent funded.

I. In fiscal years 2013-2014 through 2042-2043, the sum of $5,000,000 is appropriated in each fiscal year from the state general fund to the elected officials' retirement plan fund to supplement the normal cost plus an amount to amortize the unfunded accrued liability pursuant to subsection C of this section. Monies appropriated pursuant to this subsection shall not be used to pay for an increase in benefits that is otherwise payable to members and shall only be used as specified in this subsection. Monies appropriated pursuant to this subsection are exempt from the provisions of section 35-190 relating to lapsing of appropriations.

J. In any fiscal year, an employer's contribution to the plan in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. The board may not suspend contributions to the plan unless both of the following apply:

The plan actuary, based on the annual valuation, determines the stabilization reserve of an employer's account is funded to one hundred percent of present value of all future benefits of the employer.
The board determines that suspending, in whole or in part, the normal cost contributions as calculated under subsection D of this section would not be in conflict with its fiduciary responsibility.

§ 38-810.01 Internal revenue code qualification

The legislature intends that the plan is a qualified pension plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that the trust is exempt from taxation under section 501 of the internal revenue code, as amended. The assets of the fund are held in trust for the exclusive benefit of the members and beneficiaries of the plan. The board may adopt such additional provisions to the plan as are necessary to fulfill this intent.

§ 38-810.02 Statutory construction

A. Because the plan as enacted at a particular time is a unique amalgam of rights and obligations having a critical impact on the actuarial integrity of the plan, the legislature intends that the plan as enacted at a particular time be construed and applied as a coherent whole and without reference to any other provision of the plan in effect at a different time.

B. The plan was established in order to provide a uniform, consistent and equitable statewide program for those eligible elected officials as defined by the plan. A member of the plan does not have a vested right to benefits under the plan until the member files an application for benefits and is found eligible for those benefits. An eligible claimant's right to benefits vests on the date of the member's application for those benefits or the member's last day of employment under the plan, whichever occurs first.

§ 38-810.03 Compensation limitation; adjustments

A. The annual compensation of each member taken into account for purposes of the plan shall not exceed the following:

Beginning January 1, 1996 through December 31, 2001, one hundred fifty thousand dollars.
Beginning January 1, 2002, two hundred thousand dollars.

B. If compensation under the plan is determined for a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.

C. The board shall adjust the annual compensation limits under this section at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this subsection for a calendar year applies to annual compensation for the plan year that begins with or within the calendar year.

§ 38-810.04 Retired member; return to work; employer contributions

A. An employer shall pay contributions at an alternate contribution rate on behalf of a retired member who returns to work in any capacity in a position ordinarily filled by an elected official of the employer. This section applies to a retired member who has been retired for more than one full term for that office.

B. The alternate contribution rate shall be equal to that portion of the total required contribution that is applied to the amortization of the unfunded actuarial accrued liability for the fiscal year beginning July 1, based on the plan's actuary's calculation of the total required contribution for the preceding fiscal year ended on June 30. The alternate contribution rate shall 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 ten per cent in any fiscal year.

D. All contributions made by the employer and allocated to the fund established by section 38-802 are irrevocable and shall be used as benefits under this article or to pay the expenses of the plan. Payments made pursuant to this section by employers become delinquent after the due date prescribed in section 38-810, subsection E, and thereafter shall be increased by interest from and after that date until payment is received by the plan.

E. An employer of a retired member shall submit any reports, data, paperwork or materials that are requested by the board 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, use, efficacy or operation of the return to work program.

§ 38-810.05 Required distributions

All distributions required under this article shall be determined and made pursuant to 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.

§ 38-811 Taxation of benefits; exemption of contributions and securities

The member and employer contributions and the securities in the fund are exempt from state, county and municipal taxes. Member and employer contributions that are made to and subsequently withdrawn from the fund after December 31, 1974 by a member from the accounts of the plan and are not received as benefits from the plan and benefits, annuities and pensions received by a member from the plan after December 31, 1988 are subject to state taxes pursuant to title 43.

§ 38-812 Maximum annual pension; limitations; definition

A. The maximum annual pension for a limitation year shall not exceed the following:

For limitation years beginning before 1995, the lesser of ninety thousand dollars, as indexed for inflation, or one hundred per cent of the member's average yearly salary.
For limitation years beginning in 1995 and ending before 2002, ninety thousand dollars, as indexed for inflation.
For limitation years ending in and after 2002, one hundred sixty thousand dollars, as indexed for inflation.

B. The limitations prescribed in subsection A shall be determined under section 415 of the internal revenue code and the regulations that are then in effect under that section.

C. Notwithstanding this section, the pension payable under this plan may be reduced to the extent necessary, as determined by the plan, to prevent disqualification of the plan under section 415 of the internal revenue code, which imposes additional limitations on the pension payable to members who also may be participating in another tax qualified pension plan or other plan of this state. The plan shall advise affected members of any additional limitation of their pension required by this section.

D. For the purposes of this section, "limitation year" means the plan's fiscal year.

§ 38-813 Availability of retired judges for certain legal services; compensation

A. Every judge retired under this plan may, if physically and mentally able, be subject to call by the supreme court or the chief justice of the supreme court to assist the supreme court, court of appeals or superior court under such directions as the supreme court may give, including the examination of the facts in cases before the court, the examination of authorities cited and the preparation of opinions for and on behalf of the court. The court may order these opinions, to the extent approved by the court, to constitute the opinion of the court. The retired judge may, subject to any rule which the supreme court adopts, perform any duties preliminary to the final disposition of cases insofar as they are not inconsistent with the constitution of this state.

B. Notwithstanding any provision of law to the contrary, a retired judge who is temporarily called back to the active duties of a judge is entitled to receive the same compensation and expenses as other like active judges less any amount received for that period in retirement benefits.

§ 38-814 Termination of plan; adjustment and refund

A. If the plan terminates, each member's accrued benefits to the date of termination become one hundred percent nonforfeitable to the extent funded. After provision is made for all expenses of the plan, including expenses of liquidation, the assets of the plan shall be allocated by the payment or provision for the payment of benefits in the following order of preference:

To pay each elected official and nonretired former elected official an amount equal to his accumulated contributions.
To continue to pay pensions to retired members or their beneficiaries.
To provide for potential rights of elected officials and former elected officials on an equitable and nondiscriminatory basis according to generally accepted actuarial principles.
To pay any excess to this state.

B. The allocations in subsection A of this section may be implemented through the existing trust, a new trust instrument for that purpose or the purchase by the board of insurance company contracts, or by a combination of these methods. An elected official has no rights or claims on the plan or this state beyond the capacity of the assets held by the board to provide benefits in accordance with subsection A of this section.

C. If the allocations produce a pension of less than twenty-five dollars per month for any person, the board may pay a lump sum of actuarial equivalent value in lieu of the pension.

D. If more than the correct amount of employer or member contributions is paid into the plan by an employer through a mistake of fact, the board shall return those contributions to the employer if the employer requests return of the contributions within one year after the date of the overpayment. The board may not pay an employer earnings attributable to excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions.

§ 38-815 Joinder agreement

A. Elected officials of an incorporated city or town may participate in the plan if the governing body of the city or town enters into a joinder agreement with the board on behalf of its elected officials and the employer unconditionally accepts the provisions of the plan and binds its elected officials thereto. All elected officials shall be designated for membership unless written consent to the contrary is obtained from the board. A member shall be qualified for participation in order to obtain written consent to the contrary from the board.

B. The effective date of participation shall be specifically stipulated in the joinder agreement.

C. Any city or town that is considering participation in the plan shall request a preliminary actuarial survey to determine the estimated cost of participation, the benefits to be derived and such other information as may be deemed appropriate. The cost of such survey shall be paid by the city or town requesting it.

D. All assets under any existing public employee defined benefit retirement program, to the extent attributable to the city's or town's elected officials, shall be transferred from the program to this fund no later than sixty days after the city's or town's effective date of participation. That portion of the transferred assets that is attributable to the elected official's contributions, including interest credits thereon, shall be properly allocated to each affected elected official of the city or town and credited to the elected official's accumulated contributions, in accordance with a schedule furnished by the city or town to the board.

§ 38-816 Redemption of prior service

A. Except as provided in subsection B of this section, an active elected official who has at least five years of credited service with the plan may elect to redeem up to sixty months of any part of the following prior service or employment by paying into the fund the amounts required under subsection C of this section if the prior service or employment is not on account with any other retirement system or plan:

Prior service in this state as an elected official with an employer now covered by the plan before the effective date of participation if the elected official has received a refund from a prior retirement system or plan on termination of employment before the elected official's application for redemption of prior service.
Prior service in this state as an elected official with an employer now covered by the plan before the effective date of participation if the elected official was not covered by a retirement system or plan during the elected official's prior elected official service.
Prior service as an elected official of this state or a city, town or county of this state if the elected official was not covered by a retirement system or plan during that service whether or not the city, town or county is an employer now covered by the plan.
Prior employment with the United States government, a state of the United States or a political subdivision of a state of the United States.

B. An active elected official who became a member of the plan before January 1, 2012 may redeem any amount of eligible prior service as specified in subsection A of this section without having to have accrued any minimum amount of credited service in the plan.

C. An active elected official who elects to redeem any part of the prior service or employment for which the elected official is deemed eligible by the board under this section shall pay into the plan the amounts previously withdrawn by the elected official as a refund of the elected official's accumulated contributions, if any, plus the additional amount, if any, that is computed by the plan's actuary and that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions that are prescribed by the plan's actuary.

D. On approval by the governing body of an incorporated city or town that executes a joinder agreement under section 38-815, the city or town may pay into the fund all or any part of the amount sufficient to provide retirement benefits for elected officials or former elected officials for the time of service as an elected official of the city or town before the joinder agreement if no retirement benefits were in effect for elected officials during the time of service being redeemed under this section.

E. A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the plan, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.

§ 38-816.01 Purchase of service; payment

A member who purchases service pursuant to this article or section 38-922 or 38-924 shall make payments directly to the plan in whole or in part by any one or a combination of the following methods:

In lump sum payments.
Through an arrangement with the plan that the payments be made in installment payments over a period of time.
Subject to the limitations prescribed in sections 401(a)(31) and 402(c) of the internal revenue code, accepting a direct transfer of any eligible rollover distribution or a contribution by a member of an eligible rollover distribution from one or more:

(a) Retirement programs that are qualified under section 401(a) or 403(a) of the internal revenue code.

(b) Annuity contracts described in section 403(b) of the internal revenue code.

Subject to the limitations prescribed in section 408(d)(3)(A)(ii) of the internal revenue code, accepting from a member a rollover contribution of that portion of a distribution from an individual retirement account or individual retirement annuity described in section 408(a) or 408(b) of the internal revenue code that is eligible to be rolled over and would otherwise be includable as gross income.

§ 38-817 Group health and accident coverage for retired members; payment; applicability; forfeiture of interest

A. On notification, the board shall pay from the assets of the separate account established pursuant to subsection G of this section part of the single coverage premium of any group health and accident insurance for each retired member or survivor of the plan who receives a pension if the retired member had eight or more years of credited service under the plan. In order to qualify for payment pursuant to this subsection, the retired member or survivor shall elect single coverage and must have elected to participate in the coverage provided in section 38-651.01 or 38-782 or any other retiree health and accident insurance coverage provided or administered by an employer. The board shall pay up to:

One hundred fifty dollars per month for each retired member or survivor of the plan who is not eligible for medicare.
One hundred dollars per month for each retired member or survivor of the plan who is eligible for medicare.

B. On notification, the board shall pay from the assets of the separate account established pursuant to subsection G of this section part of the family coverage premium of any group health and accident insurance each month for a retired member or survivor who elects family coverage and who otherwise qualifies for payment pursuant to subsection A of this section. The board shall pay up to:

Two hundred sixty dollars per month if the retired member or survivor of the plan and one or more dependents are not eligible for medicare.
One hundred seventy dollars per month if the retired member or survivor of the plan and one or more dependents are eligible for medicare.
Two hundred fifteen dollars per month if either:

(a) The retired member or survivor of the plan is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the plan is eligible for medicare and one or more dependents are not eligible for medicare.

C. Each retired member or survivor of the plan with less than eight years of credited service and a dependent of such a retired member or survivor who participates in the coverage provided by section 38-651.01 or 38-782 or who participates in any other retiree health and accident insurance coverage provided or administered by an employer is entitled to receive a proportion of the full benefit prescribed by subsection A or B of this section according to the following schedule:

7.0 to 7.9 years of credited service, ninety percent.
6.0 to 6.9 years of credited service, seventy-five percent.
5.0 to 5.9 years of credited service, sixty percent.
Those with less than five years of credited service do not qualify for the benefit.

D. The board shall not pay more than the amount prescribed in this section for a benefit recipient as a member or survivor of the plan.

E. A retired member or survivor of the plan may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's former employer if that former employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired member or survivor of the plan.

F. This section does not apply to a retired member or survivor of the plan who becomes a retired member or survivor on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the member's or survivor's new employer.

G. The board shall establish a separate account that consists of the benefits provided in this section. The board shall deposit the benefits provided by this section in the account. The board shall not use or divert any part of the corpus or income of the account for any purpose other than the provision of benefits pursuant to this section unless the liabilities to provide the benefits pursuant to this section are satisfied. If the liabilities to provide the benefits described in this section are satisfied, the board shall return any amount remaining in the account to the employer.

H. Payment of the benefits provided by this section is subject to the following conditions:

The payment of the benefits is subordinate to the payment of retirement benefits payable by the plan.
The total of contributions for the benefits and actual contributions for life insurance protection, if any, shall not exceed twenty-five percent of the total actual employer and employee contributions to the plan, minus the contributions to fund past service credits, after the day the account is established.
The contributions by the employer to the account shall be reasonable and ascertainable.

I. If a member who is eligible for benefits under this section forfeits the member's interest in the account before the termination of the plan, an amount equal to the amount of the forfeiture shall be applied as soon as possible to reduce employer contributions to fund the benefits provided by this section.

§ 38-818.04 Cost-of-living adjustment

A. Each retired member or survivor of a retired member is eligible to receive a compounding cost-of-living adjustment in the base benefit as provided in this section. The first payment under this section shall be made immediately following the first year the cost-of-living adjustment specified in subsection C of this section is paid. The cost-of-living adjustment shall be made on July 1 each year thereafter.

B. A retired member or a survivor of a retired member shall receive annually a cost-of-living adjustment in the base benefit based on the average annual percentage change in the metropolitan Phoenix-Mesa consumer price index published by the United States department of labor, bureau of labor statistics, with the immediately preceding year as the base year for making the determination, not to exceed annually two percent of the retired member's or survivor's base benefit.

C. In the first year of a member's retirement, the cost-of-living adjustment specified in subsection B of this section shall be prorated based on the date of retirement.

D. The plan actuary shall include the projected cost of providing the cost-of-living adjustment specified in subsection B of this section in the calculation of normal cost and accrued liability.

§ 38-820 Credit for military service

A. Except as provided in subsection B of this section, a member of the plan who has at least five years of credited service with the plan may receive credited service for periods of active military service performed before employment with the member's current employer if:

The member was honorably separated from the military service.
The period of military service for which the member receives credited service does not exceed sixty months.
The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736 or except if the member is not yet eligible for a military retirement benefit.
The member pays the cost to purchase the prior active military service. The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the additional credited service.
The amount of benefits purchased pursuant to this subsection is subject to limits established by section 415 of the internal revenue code.

B. An elected official who became a member of the plan before January 1, 2012 may receive credited service for eligible prior active military service as specified in subsection A of this section without having to have accrued any minimum amount of credited service with the plan.

C. An active member of the plan who volunteers or is ordered to perform military service may receive credited service for not more than sixty months of military service as provided by the uniformed services employment and reemployment rights act of 1994 (38 United States Code part III, chapter 43). The member's employer shall make employer contributions and the member shall make the member contributions pursuant to subsection D of this section if the member meets the following requirements:

Was an active member of the plan on the day before the member began military service.
Entered into and served in the armed forces of the United States or any military reserve unit of any branch of the armed forces of the United States or is a member of the national guard.
Complies with the notice and return to work provisions of 38 United States Code section 4312.

D. Contributions made pursuant to subsection C of this section shall be for the period of time beginning on the date the member began military service and ending on the later of one of the following dates:

The date the member is separated from military service.
The date the member is released from service-related hospitalization or two years after initiation of service-related hospitalization, whichever date is earlier.
The date the member dies as a result of or during military service.

E. Notwithstanding any other law, on payment of the contributions made pursuant to subsection C of this section, the member shall be credited with service for retirement purposes for the period of military service of not more than sixty months. The member shall submit a copy of the military discharge certificate (DD-256A) and a copy of the military service record (DD-214) or its equivalent with the member's application when applying for credited service corresponding to the period of military service.

F. The employer and the member shall make contributions pursuant to subsection C of this section as follows:

Contributions shall be based on the compensation that the member would have received but for the period that the member was ordered into active military service.
If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into military service, contributions shall be based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.
If a member has been employed less than twelve months before being ordered into military service, contributions shall be based on the member's compensation being earned immediately preceding the period of military service.
The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions. Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum. Death benefits shall be calculated as prescribed by law.
If the member's employer pays military differential wage pay to members serving in the military, contributions shall be paid to the plan pursuant to section 38-810 for any military differential wage pay paid to the member while performing military service.

G. In computing the length of total credited service of a member for the purpose of determining retirement benefits or eligibility, the period of military service, as prescribed by this section, shall be included.

H. If a member performs military service due to a presidential call-up, not to exceed forty-eight months, the employer shall make the employer and member contributions computed pursuant to subsection F of this section on the member's return and in compliance with subsection C of this section.

I. In addition to, but not in duplication of, subsection C of this section, beginning December 12, 1994 contributions, benefits and credited service provided pursuant to this section shall be provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

J. For plan years beginning after December 31, 2008, a member who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code is not considered having a severance from employment during that qualified military service. Any payments by the employer to the member during the qualified military service shall be considered compensation to the extent those payments do not exceed the amounts the member would have received if the member had continued to perform services for the employer rather than entering qualified military service.

K. For deaths occurring from and after December 31, 2006, in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the plan as though the member resumed and then terminated employment on account of death.

§ 38-821 Charter city retirement system service credits; transfers

A. A member of a charter city retirement system who is an elected official may apply for a transfer of service credits from the charter city retirement system to the elected officials' retirement plan pursuant to this section if all of the following conditions are met:

The member initiates the transfer by making written application to the elected officials' retirement plan.
The charter city retirement system and the elected officials' retirement plan agree regarding the terms of the transfer.
The transfer does not cause either the charter city retirement system or the elected officials' retirement plan to incur any unfunded accrued liabilities as a result of the transfer.

B. Service credits qualified in accordance with subsection A may be transferred or redeemed in accordance with the following:

If a member's contributions remain on deposit with the charter city retirement system, the following shall be calculated:

(a) The charter city retirement system shall calculate the amount equal to the actuarial present value of a member's projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation under the charter city retirement system as calculated by the system's actuary using the actuarial method and assumptions recommended by the system's actuary and based on the transferring member's service credits at the time of transfer.

(b) The elected officials' retirement plan shall calculate the increase in the actuarial present value of the projected benefits provided as a result of the transfer of the member's service credits. This calculation shall be performed by the plan's actuary using the actuarial method and assumptions recommended by the plan's actuary and based on the transferring member's service credits at the time of transfer.

If a member decides to transfer:

(a) If the amount calculated in paragraph 1, subdivision (b) of this subsection is greater than the amount calculated in paragraph 1, subdivision (a) of this subsection:

(i) The charter city retirement system shall transfer to the elected officials' retirement plan the greater of the amount calculated in paragraph 1, subdivision (a) of this subsection or the member's accumulated contribution account balance.

(ii) If the amount transferred is less than the amount calculated under paragraph 1, subdivision (b) of this subsection, the transferring member shall elect either to pay the difference or to accept a reduced transfer of service credits. If the member elects to pay the difference, the amount paid shall be added to the member's accumulated contribution account balance. If the member elects to accept a reduced transfer of service credits, the amount of service credits transferred shall be equal to the amount of service credits used in making the calculation under paragraph 1, subdivision (a) of this subsection multiplied by the ratio of the amount calculated under paragraph 1, subdivision (a) of this subsection to the amount calculated under paragraph 1, subdivision (b) of this subsection.

(b) If the amount calculated in paragraph 1, subdivision (b) of this subsection is less than or equal to the amount calculated in paragraph 1, subdivision (a) of this subsection, the charter city retirement system shall transfer to the elected officials' retirement plan the greater of the amount calculated in paragraph 1, subdivision (b) of this subsection or the member's accumulated contribution account balance.

If an applicant has withdrawn member contributions from the charter city retirement system, the applicant shall pay into the elected officials' retirement plan an amount equal to the increase in the actuarial present value of the projected benefits provided by the service credits being redeemed and this amount shall be included in the member's current accumulated contribution account balance. The actuary of the elected officials' retirement plan shall perform this calculation using the actuarial method and assumptions the actuary recommends.

C. Service credits shall not be applied to the applicant's account until complete payment is made to the elected officials' retirement plan. On completion of the transfer provided for in this section, the member's rights in the charter city retirement system are extinguished.

§ 38-822 Domestic relations orders; procedures; payments

A. Notwithstanding any other law, in a judicial proceeding for annulment, dissolution of marriage or legal separation that provides for the distribution of community property, or in any judicial proceeding to amend or enforce such a property distribution, a court in this state may issue a domestic relations order that provides that all or any part of a participant's benefit or refund in the plan that would otherwise be payable to that participant shall instead be paid by the plan to an alternate payee. The value of a participant's benefit shall be the value on the earliest date of service of the petition for annulment, dissolution of marriage or legal separation.

B. A domestic relations order is not effective against the plan unless the domestic relations order is approved by the plan and qualifies as a plan approved domestic relations order. To qualify as a plan approved domestic relations order, a domestic relations order shall comply with any policies or procedures adopted pursuant to subsection K of this section and shall also meet all of the following requirements:

The domestic relations order shall state the name and the last known mailing address of the participant and the name and last known mailing address of the alternate payee that is covered by the domestic relations order.
The domestic relations order shall clearly state the amount or percentage of the participant's benefits that is payable by the plan to the alternate payee or the precise manner in which the amount or percentage is to be determined.
The domestic relations order shall state the number of payments or periods to which the domestic relations order applies, if applicable.
The domestic relations order shall state that the domestic relations order applies to the plan.
The domestic relations order shall not require the plan to provide any type or form of benefit or any option not otherwise provided by this article.
The domestic relations order shall not require the plan to provide increased benefits determined on the basis of actuarial value.
The domestic relations order shall not require the payment of benefits to an alternate payee if the benefits are required to be paid to another alternate payee under a separate plan approved domestic relations order.
The domestic relations order shall have been issued by a court of competent jurisdiction of a state, territory or possession of the United States.

C. On receipt by the plan of a certified copy of a domestic relations order and a written request for a determination that the domestic relations order is a plan approved domestic relations order, the plan shall promptly issue a written notice of receipt stating that the domestic relations order and request were received to the participant and alternate payee at the addresses on file, if any.

D. The plan has a determination period to issue a written determination indicating whether a domestic relations order qualifies as a plan approved domestic relations order. If the participant is receiving benefits during the determination period and if the plan can determine the amount of the benefits that currently would be payable to the alternate payee if the domestic relations order were a plan approved domestic relations order, the plan shall hold the segregated funds and shall pay the remaining portion of the benefits to the participant. If the plan determines the domestic relations order is a plan approved domestic relations order, the plan shall pay the participant and alternate payee pursuant to the plan approved domestic relations order in the month following the month in which the determination was issued or in the month following the month in which a benefit is payable under the plan approved domestic relations order, whichever is later. If the plan determines the domestic relations order fails to qualify as a plan approved domestic relations order, the plan shall specify in its determination how the domestic relations order is deficient and how it may be amended to qualify as a plan approved domestic relations order. If the participant is currently receiving benefits, and if the plan can determine the amount of segregated funds that would be payable to the alternate payee if the domestic relations order were a plan approved domestic relations order, the plan shall hold the segregated funds during the cure period to allow the parties to submit a certified copy of an amended domestic relations order and a written request for a determination that the amended domestic relations order is a plan approved domestic relations order. During the cure period, the plan shall pay the participant's portion to the participant. At the end of the cure period, if the issue of whether an amended domestic relations order qualifies as a plan approved domestic relations order remains undetermined or if an amended domestic relations order is determined not to be a plan approved domestic relations order, the plan shall pay the segregated funds and the participant's portion to the participant. The participant shall hold the segregated funds in trust for the alternate payee as provided in subsection J of this section. If an amended domestic relations order that is submitted after the expiration of the cure period is determined to be a plan approved domestic relations order, the plan shall make payments to an alternate payee under the plan approved domestic relations order only prospectively. A determination by the plan that a domestic relations order is not a plan approved domestic relations order does not prohibit a participant or alternate payee from submitting an amended domestic relations order to the plan.

E. Each participant and alternate payee is responsible for maintaining a current mailing address on file with the plan. The plan has no duty to attempt to locate any participant or alternate payee. The plan has no duty to provide a notice of receipt or determination or pay benefits by means other than mailing the notice or payments to the participant or alternate payee at the last known address that is on file with the plan. If the address of an alternate payee is unknown to the plan, but benefits are payable to the alternate payee pursuant to a plan approved domestic relations order, the plan shall either:

Hold the alternate payee's portion until the alternate payee provides the plan with a current address. Once the plan is notified of the alternate payee's current address, the plan shall prospectively pay the alternate payee's portion to the alternate payee.
Pay the alternate payee's portion to the participant, who shall hold the alternate payee's portion in trust as provided in subsection J of this section, until the alternate payee is located. At that time, the participant shall pay the alternate payee's portion directly to the alternate payee.

F. If the address of a participant is unknown to the plan, but benefits are payable to the participant pursuant to a plan approved domestic relations order, the plan shall hold the participant's portion until the participant provides the plan with a current address.

G. If the alternate payee identified in a plan approved domestic relations order predeceases the participant and the plan approved domestic relations order does not otherwise provide for the disposition of the alternate payee's interest, the plan shall pay the alternate payee's portion to the personal representative of the deceased alternate payee pursuant to this subsection. The personal representative is responsible for maintaining a current mailing address on file with the plan. The plan has no duty to attempt to locate any personal representative. The plan is not responsible for making benefit payments to a personal representative until the personal representative has both:

Persuaded the plan that the personal representative is authorized to receive payments designated for the deceased alternate payee.
Provided the plan with an address to which the payments should be sent.

H. If, within thirty days after the date the plan verifies an alternate payee's death, a personal representative does not make demand on the plan for the alternate payee's portion, the plan shall either:

Hold the alternate payee's portion until the time a personal representative makes a proper demand for payment of the alternate payee's portion.
Remit the alternate payee's portion to the participant, who shall hold the amounts in trust for the estate of the alternate payee until the personal representative is identified. At that time, the participant shall pay the alternate payee's portion paid by the plan to the participant to the personal representative.

Thereafter, the plan shall prospectively pay the alternate payee's portion to the personal representative.

I. Amounts held or paid pursuant to this section shall not accrue interest unless otherwise prescribed by this article.

J. The plan is not liable to the participant, the alternate payee, any personal representative of the estate of an alternate payee or any other person for any amount paid, withheld or disbursed by the plan pursuant to this section. If one or more payments are made by the plan to a person not otherwise entitled to receive the payments, the recipient of the payment is designated a constructive trustee for the payment received and, together with the marital community, if any, is the sole party against whom an action may be brought to recover the payment.

K. The plan may adopt policies and procedures that govern the implementation of this section.

§ 38-823 Discount rate; service purchase; transfer of service credits

A. Beginning July 1, 2017, the discount rate specified in subsection B of this section applies to service purchases or transfers of service credits to the plan pursuant to the following sections:

Section 38-816, subsection C.
Section 38-820, subsection A or B.
Section 38-821.
Sections 38-921, 38-922, 38-923 and 38-924.

B. The discount rate is an amount equal to the assumed rate of return that is prescribed by the board.

Article 3.1 Elected Officials' Defined Contribution Retirement System

§ 38-831 Definitions

In this article, unless the context otherwise requires:

"Annuity account" means an account that is established for each member to record the deposit of member contributions, employer contributions and interest, dividends or other accumulations credited on behalf of the member.
"Board" means the board of trustees of the public safety personnel retirement system established by section 38-848.
"Defined contribution system" means the elected officials' defined contribution retirement system established pursuant to this article.
"Elected official" means:

(a) Every elected official of this state who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

(b) Every elected official of each county of this state who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

(c) Every justice of the supreme court who was appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

(d) Every judge of the court of appeals who was appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

(e) Every judge of the superior court who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

(f) Every full-time superior court commissioner, except full-time superior court commissioners who failed to make a timely election of membership under the judges' retirement plan, repealed on August 7, 1985, who was hired on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

(g) Each elected official of an incorporated city or town whose employer has executed a proper joinder agreement with the plan for coverage of its elected officials, who was elected or appointed on or after January 1, 2014 and who was not an active, an inactive, a disabled or a retired member of the plan on December 31, 2013.

"Employer" means a department or political subdivision of this state that makes employer contributions to the defined contribution system on behalf of a member.
"Employer contribution" means an amount deposited by an employer, from the employer's own monies, in the member's annuity account on a periodic basis coinciding with the member's regular pay period.
"Member" means an elected official under the defined contribution system.
"Plan" means the elected officials' retirement plan established by article 3 of this chapter.

§ 38-832 Defined contribution system; annual report; quarterly statements

A. The board shall establish, design and administer a defined contribution system to provide for the retirement of elected officials.

B. The purpose of this article is to provide a defined contribution system that is fully funded on a current basis from employer and member contributions.

C. The legislature intends that the defined contribution system for members under this article be designed to be a qualified government plan under section 401(a) of the internal revenue code, as amended, or successor provisions of law, and be exempt from taxation under section 501 of the internal revenue code. The board may adopt any additional provisions to the defined contribution system that are necessary to fulfill this intent. On or before December 31, 2013, the board shall submit to the internal revenue service a request for a determination letter that the defined contribution system is a plan qualified under section 401(a) of the internal revenue code and a private letter ruling that all member contributions that are picked up by the employer as provided in section 38-833 shall be treated as employer contributions pursuant to section 414(h) of the internal revenue code.

D. The board may:

Employ the services of the third-party administrator that is contracted on September 13, 2013 to administer the supplemental defined contribution plan pursuant to article 8 of this chapter to also administer the defined contribution system.
Employ other services it deems necessary, including legal services, for the operation and administration of the defined contribution system.
Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the operation and protection of the system.

E. The board shall adopt policies regarding the defined contribution system, including the administration of the member and employer contributions, investment options, termination in the defined contribution system, the administration of the payout options under the defined contribution system and the administration of the member distributions.

F. On receipt of the determination letter and private letter ruling from the internal revenue service, the board shall participate in a competitive bid process at least once every five years to contract with a private person or any qualified company or companies to administer the defined contribution system established under this section.

G. Any contract for a third-party administrator of the defined contribution system shall include competitive fees, quarterly meetings with the public safety personnel retirement system, annual updates to the board on the status of the defined contribution system and quarterly statements to each member. On or before December 1 of each year, the board shall report the status of the defined contribution system to the governor, the president of the senate, the speaker of the house of representatives and the joint legislative budget committee.

§ 38-833 Member and employer contributions; disability

A. Beginning January 1, 2014, the defined contribution system is the retirement program for elected officials, unless the elected official is described in section 38-727, subsection B. Elected officials shall be enrolled in the defined contribution system established by the board pursuant to this article.

B. Each elected official who is a member of the defined contribution system shall contribute eight percent of the member's gross compensation by salary reduction that shall be deposited in the member's annuity account. Each member shall also contribute to the elected officials' defined contribution retirement system disability program pursuant to article 3.2 of this chapter.

C. Although designated as employee contributions, all member contributions made to the defined contribution system shall be picked up and paid by the employer in lieu of contributions by the employee. The contributions picked up by an employer may be made through a reduction in the member's compensation. A member participating in the defined contribution system does not have the option of choosing to receive the contributed amounts directly instead of the employer paying the amounts to the defined contribution system. All member contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code, shall be excluded from members' gross income for federal and state income tax purposes and are includable in the gross income of the members or the members' beneficiaries only in the taxable year in which they are distributed.

D. Each employer shall annually make a contribution equal to six percent of each member's gross compensation. The pro rata share of this amount shall be paid on each date that a member contribution is made and shall be credited to the member's annuity account. Each employer shall also contribute to the elected officials' defined contribution retirement system disability program pursuant to article 3.2 of this chapter.

E. Member and employer contributions and earnings on those contributions are immediately vested. A member who was not an active, inactive or retired member of the elected officials' retirement plan or a member of the elected officials' retirement plan with a disability may receive benefits pursuant to article 3.2 of this chapter if the member develops a total disability.

§ 38-834 Credit for military service

A. An active member of the defined contribution system who volunteers or is ordered to perform military service may receive years of service for not more than sixty months of military service as provided by the uniformed services employment and reemployment rights act of 1994 (38 United States Code part III, chapter 43). The member's employer shall make employer contributions and the member shall make the member contributions pursuant to subsection B of this section if the member meets the following requirements:

Was an active member of the defined contribution system on the day before the member began military service.
Entered into and served in the armed forces of the United States or any military reserve unit of any branch of the armed forces of the United States or is a member of the national guard.
Complies with the notice and return to work provisions of 38 United States Code section 4312.

B. Contributions made pursuant to subsection A of this section are for the period of time beginning on the date the member began military service and ending on the later of one of the following dates:

The date the member is separated from military service.
The date the member is released from service-related hospitalization or two years after initiation of service-related hospitalization, whichever date is earlier.
The date the member dies as a result of or during military service.

C. Notwithstanding any other law, on payment of the contributions made pursuant to subsection B of this section, the member shall be credited with service for vesting purposes for the period of military service of not more than sixty months. The member shall submit a copy of the military discharge certificate (DD-256A) and a copy of the military service record (DD-214) or its equivalent with the member's application when applying for service corresponding to the period of military service.

D. The employer and the member shall make contributions pursuant to subsection A of this section as follows:

Contributions are based on the compensation that the member would have received but for the period that the member was ordered into or volunteered for military service.
If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into or volunteered for military service, contributions are based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.
If a member has been employed less than twelve months before being ordered into or volunteering for military service, contributions are based on the member's compensation being earned immediately preceding the period of military service.
The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions. Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum. Death benefits shall be calculated as prescribed by law.
If the member's employer pays military differential wage pay to members serving in the military, contributions are paid to the defined contribution system pursuant to section 38-833 for any military differential wage pay paid to the member while performing military service.

E. In computing the length of total credited service of a member for the purpose of disability in accordance with article 3.2 of this chapter, the period of military service, as prescribed by this section, is included.

F. If a member performs military service due to a presidential call-up, not to exceed forty-eight months, the employer shall make the employer and member contributions computed pursuant to subsection D of this section on the member's return and in compliance with subsection A of this section.

G. In addition to, but not in duplication of, the provisions of subsection A of this section, beginning January 1, 2014, contributions, benefits and credited service provided pursuant to this section are provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

H. For plan years beginning after January 1, 2014, a member who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code is not considered having a severance from employment during that qualified military service. Any payments by the employer to the member during the qualified military service shall be considered compensation to the extent those payments do not exceed the amounts the member would have received if the member had continued to perform services for the employer rather than entering qualified military service.

I. For deaths occurring from and after January 1, 2014, in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the defined contribution system as though the member resumed and then terminated employment on account of death.

Article 3.2 Elected Officials' Defined Contribution Retirement System Disability Program

§ 38-840 Definitions

In this article, unless the context otherwise requires:

"Assets" means the accumulated resources of the EODC disability program.
"Board" means the board of trustees established pursuant to section 38-848.
"Depository" means a bank in which the monies of the EODC disability program are deposited and collateralized as provided by law.
"Employer" has the same meaning prescribed in section 38-831.
"Employer contributions" means all amounts paid into the EODC disability program by an employer.
"EODC disability program" or "program" means the elected officials' defined contribution retirement system disability program established by this article.
"Member" has the same meaning prescribed in section 38-831.
"State" has the same meaning prescribed in section 38-842.
"System" means the public safety personnel retirement system established by article 4 of this chapter.

§ 38-840.01 EODC disability program; administration; power and duties of the board; hearing; annual report

A. The elected officials' defined contribution retirement system disability program is established for members of the elected officials' defined contribution retirement system. The board shall administer the EODC disability program.

B. The board may delegate authority to administer the program as it deems necessary and prudent to the administrator employed pursuant to section 38-848.

C. The board, in the administration, management and operation of the program, shall:

Account for the operation, administration and investment expenses and allocate them against investment income.
Contract on a fee basis with an actuary to make an actuarial valuation of the program based on the valuation method and valuation assumptions recommended by the actuary and approved by the board. The actuary shall be a member of the American academy of actuaries.
Contract on a fee basis with an independent auditing firm to make an annual audit of the accounting records of the EODC disability program trust fund and file a copy of the audit with the auditor general.
Invest the monies in the EODC disability program trust fund as provided in article 4 of this chapter.
On or before December 1 of each year, submit to the governor, the speaker of the house of representatives and the president of the senate a detailed report of the operation and the investment performance of the program that includes the contribution rate for the ensuing fiscal year.

D. The board, in the administration, management and operation of the program, may:

Employ services as it deems necessary.
Either keep invested monies separate or commingle invested monies as it deems appropriate.
Do all acts, whether expressly authorized, that may be deemed necessary or proper for the protection of the EODC disability program trust fund.
Determine the rights, benefits or obligations of any person under this article and afford any person dissatisfied with a determination of the person's rights, benefits or obligations under this article with a hearing on the determination.

§ 38-840.02 EODC disability program trust fund

A. The EODC disability program trust fund is established for the purpose of paying benefits under and costs of administering the EODC disability program. The trust fund shall be administered by the board.

B. The EODC disability program trust fund consists of all monies paid into the trust fund pursuant to this article, whether in the form of cash, securities or other assets, and all monies received from any other source. Except as provided in subsection C, paragraph 1 of this section, the EODC disability program trust fund is exempt from title 44, chapter 3.

C. Abandoned monies shall revert to the EODC disability program trust fund under the following conditions:

Monies in the trust fund are presumed abandoned if the system has taken the required action described in this subsection to identify and locate the apparent owner and the apparent owner as defined in section 44-301 has not communicated in writing with the system and has not otherwise indicated an interest in the monies for the three-year period following the required beginning date of distributions.
Before monies are presumed abandoned, the system shall attempt to contact the apparent owner in writing. If this notice is returned by the postal authority as undeliverable, then each year for three years from the date that distributions should have begun, the system shall make a good faith attempt to locate the apparent owner, including contacting any known beneficiary on record with the system, searching public databases to identify the address of the apparent owner or using the services of a third-party address verification service. If the good faith attempt to locate the apparent owner fails, monies are presumed abandoned pursuant to this subsection.
At the time monies are presumed abandoned pursuant to this subsection, any other property right accrued or accruing to the owner as a result of the interest in those monies, and not previously presumed abandoned, is also presumed abandoned.
Interest ceases to accrue on the monies on the date the monies are presumed abandoned.

D. The custody, management and investment of the EODC disability program trust fund are as prescribed by this article and article 4 of this chapter.

§ 38-840.03 Eligibility

All members are subject to this article and shall participate in the EODC disability program.

§ 38-840.04 Employer and member contributions

A. Beginning January 1, 2014, employers shall contribute the percentage of the gross compensation of all of the members under their employment so that the total employer contributions equals the amount that the board determines is necessary to pay one-half of all benefits under and costs of administering the EODC disability program.

B. Beginning January 1, 2014, a member shall contribute a percentage of the member's gross compensation equal to the employer contribution for the member required pursuant to subsection A of this section.

C. The employer shall pay the member contributions required of members on account of gross compensation earned. All employer and member contributions shall be paid to the board. The board shall allocate the contributions to the EODC disability program trust fund and shall place the contributions in the EODC disability program's depository.

D. Each employer shall certify on each payroll the amount to be contributed to the EODC disability program and shall remit that amount to the board.

E. The department of administration and the treasurer of each county and participating city and town shall transfer to the board the contributions provided for in subsections A and B of this section within ten working days after each payroll date. Contributions transferred after these dates shall include a penalty equal to ten percent per annum, compounded annually, for each day that the contributions are late. Delinquent payments due under this subsection, together with interest charges as provided in this subsection and court costs, may be recovered by action in a court of competent jurisdiction against the person or persons responsible for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to a political subdivision by any department or agency of this state.

G. Member contributions are not refundable.

§ 38-840.05 Contribution rate

A. Employer contributions shall be a percentage of gross compensation for each member, as the system actuary determines pursuant to this section. The actuary shall make this determination in an annual valuation performed as of June 30. The valuation as of June 30 of a calendar year shall determine the percentage to be applied to compensation for the fiscal year beginning July 1 of the following calendar year. The actuary shall determine the total employer contribution using an actuarial cost method consistent with generally accepted actuarial standards. The total employer contributions shall be equal to the employer normal cost plus the amount required to amortize the past service funding requirement over a period consistent with generally accepted actuarial standards.

B. All contributions made by the employer and allocated to the EODC disability program trust fund established by section 38-840.02 are irrevocable and shall be used as benefits under this article or to pay expenses of the EODC disability program.

§ 38-840.06 EODC disability program benefits

A. In determining eligibility for and continuation of a disability benefit and computing the amount available to a member, the board shall follow the same procedures and methods as prescribed in section 38-806, except that an elected official who no longer holds office must apply within one year after terminating office and the credited service used to compute the benefit shall be only the time earned while a member of the elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter. Payment of the disability benefit will be made retroactive only to the date the board receives an application for the disability.

B. A member who meets the requirements for a disability pension as prescribed in section 38-806 shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a member who was elected, appointed or hired on or after January 1, 2012 and before January 1, 2014, reduced by an amount equal to the monthly annuitized value of the member's annuity account under article 3.1 of this chapter that does not include a cost-of-living adjustment, as determined by the board. In determining the monthly annuitized offset value of the member's annuity account under article 3.1 of this chapter to be used in reducing the disability benefit paid pursuant to this subsection, the board shall instruct the actuary for the elected officials' retirement plan to calculate the monthly payment that would be paid to the member assuming the member had elected a straight life annuity commencing on the member's date of disability, using the mortality and interest factors then used by the actuary in determining the valuation of the elected officials' retirement plan.

§ 38-840.07 Errors; benefit recomputation

If any change or error in the records results in any member receiving from the EODC disability program more or less than the member would have been entitled to receive if the records had been correct, the board shall correct the error and shall adjust the payments in a manner so that the equivalent of the benefit to which the member was correctly entitled is paid. The board shall correct any change or error and shall pay the appropriate monies to a member or shall recover monies from the member if the member was overpaid. The board shall recover monies by reducing any benefit that is otherwise payable by the EODC disability program to a member with a disability.

§ 38-840.08 Facility of payment

In the case of incapacity of a member receiving EODC disability program benefits, or in the case of any other emergency as determined by the board, the board may make EODC disability program benefit payments on behalf of the member to another person or persons the board determines to be lawfully entitled to receive payment. The payment is payment for the account of the member and all persons entitled to payment and, to the extent of the payment, is a full and complete discharge of all liability of the board or the EODC disability program, or both, under or in connection with the EODC disability program.

§ 38-840.09 Assurances and liabilities

A. This article does not establish:

A contract of employment between an employer and any employee.
A right of any member to continue in the employment of an employer.
A limitation of the rights of an employer to discharge any of its employees, with or without cause.

B. A member does not have any right to, or interest in, any EODC disability program assets on termination of the member's employment or otherwise, except as provided in this article, and then only to the extent of the benefits payable to the member out of EODC disability program assets. All payments of benefits shall be made solely out of EODC disability program assets, and the employers, the board and members of the board are not liable for payment of benefits in any manner.

C. Benefits, employer and member contributions, earnings and all other credits payable under this article are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, before actually being received by a person entitled to the benefit, earning or credit, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, execute or levy or otherwise dispose of any benefit, earning or credit under this article is void. The EODC disability program trust fund is not in any manner liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to any benefit, earning or credit under this article.

D. The employers, the board and members of the board do not guarantee the EODC disability program trust fund established by section 38-840.02 in any manner against loss or depreciation and are not liable for any act or failure to act that is made in good faith pursuant to this article. The employers are not responsible for any act or failure to act of the board or any member of the board. The board and members of the board are not responsible for any act or failure to act of any employer.

E. This section does not exempt benefits under the program from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

§ 38-840.10 Exemption from execution and attachment; taxation

A. The employer and member contributions and the securities in the EODC disability program trust fund established by section 38-840.02 are not subject to execution or attachment and are nonassignable. The employer and member contributions and the securities in the EODC disability program trust fund established by section 38-840.02 are exempt from state, county and municipal income taxes. Benefits received by a member from the EODC disability program are subject to tax pursuant to title 43.

B. Interest, earnings and all other credits on monies in the EODC disability program trust fund are not subject to execution or attachment and are nonassignable.

§ 38-840.11 Violation; classification

A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the EODC disability program with an intent to defraud the EODC disability program is guilty of a class 6 felony.

§ 38-840.12 Reservation to legislature

The right to modify, amend or repeal this article, or any provisions of this article, is reserved to the legislature.

§ 38-840.13 Liquidation of the EODC disability program

If the legislature determines that the EODC disability program is no longer to be operated for the purposes set forth in this article, any monies remaining in the EODC disability program trust fund after paying all liabilities of the program or after making adequate provision for paying those liabilities revert to the general funds of the employers that were making contributions to the EODC disability program at the time the legislature terminates the EODC disability program. The reverted monies shall be prorated according to the gross amount of contributions made by the employers to the EODC disability program.

Article 4 Public Safety Personnel Retirement System

§ 38-841 Purpose; vested benefits

A. Before the establishment of the public safety personnel retirement system, municipal firemen and policemen, employees of the Arizona highway patrol and other public safety personnel in the state of Arizona were covered under various local, municipal and state retirement programs. These heterogeneous programs provided for wide and significant differentials in employee contribution rates, benefit eligibility provisions, types of benefit protection and benefit formulas.

B. In order to provide a uniform, consistent and equitable statewide program for public safety personnel who are regularly assigned hazardous duty in the employ of the state of Arizona or a political subdivision thereof, this retirement system was created effective as of July 1, 1968, as an amendment to and continuation of three prior systems. Groups of employees covered under the three prior systems as of June 30, 1968, and the assets and liabilities accumulated thereunder for such employees, are transferred with prior service credits to this retirement system as of the effective date, and both they and their employers shall be required to make stipulated contributions to support the system's benefit structure on a sound actuarial basis. Future employees in such groups shall commence participation in, and contributions to, the system immediately on commencement of covered employment.

C. The provisions of this system shall not be construed to authorize the granting of any retirement benefits to persons who are retired as of the effective date of this article, except as described in sections 38-849 and 38-853.

D. Additional eligible groups of public safety personnel will participate in the system pursuant to election by their employer for such coverage under an appropriate joinder agreement.

E. The public safety personnel retirement system is a jural entity that may sue and be sued.

§ 38-842 Definitions

In this article, unless the context otherwise requires:

"Accidental disability" means a physical or mental condition that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's job classification and that was incurred in the performance of the employee's duty.
"Accumulated contributions" means, for each member, the sum of the amount of the member's aggregate contributions made to the fund and the amount, if any, attributable to the employee's contributions before the member's effective date under another public retirement system, other than the federal social security act, and transferred to the fund minus the benefits paid to or on behalf of the member.
"Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the board.
"Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.
"Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.
"Annuitant" means a person who is receiving a benefit pursuant to section 38-846.01.
"Average monthly benefit compensation" means the result obtained by dividing the total compensation paid to an employee during a considered period by the number of months, including fractional months, in which such compensation was received. For an employee who becomes a member of the system:

(a) Before January 1, 2012, the considered period shall be the three consecutive years within the last twenty completed years of credited service that yield the highest average. In the computation under this subdivision, a period of nonpaid or partially paid industrial leave shall be considered based on the compensation the employee would have received in the employee's job classification if the employee was not on industrial leave.

(b) On or after January 1, 2012 and before July 1, 2017, the considered period is the five consecutive years within the last twenty completed years of credited service that yield the highest average. In the computation under this subdivision, a period of nonpaid or partially paid industrial leave shall be considered based on the compensation the employee would have received in the employee's job classification if the employee was not on industrial leave.

(c) On or after July 1, 2017, the considered period is the five consecutive years within the last fifteen completed years of credited service that yield the highest average. In the computation under this subdivision, a period of nonpaid or partially paid industrial leave shall be considered based on the compensation the employee would have received in the employee's job classification if the employee was not on industrial leave.

"Board" means the board of trustees of the system, who are the persons appointed to invest and operate the fund.
"Catastrophic disability" means a physical and not a psychological condition that the local board determines prevents the employee from totally and permanently engaging in any gainful employment and that results from a physical injury incurred in the performance of the employee's duty.
"Certified peace officer" means a peace officer certified by the Arizona peace officer standards and training board.
"Claimant" means any member or beneficiary who files an application for benefits pursuant to this article.
"Compensation" means, for the purpose of computing retirement benefits, base salary, overtime pay, shift differential pay, military differential wage pay, compensatory time used by an employee in lieu of overtime not otherwise paid by an employer and holiday pay paid to an employee by the employer for the employee's performance of services in an eligible group on a regular monthly, semimonthly or biweekly payroll basis and longevity pay paid to an employee at least every six months for which contributions are made to the system pursuant to section 38-843, subsection D. Compensation does not include, for the purpose of computing retirement benefits, payment for unused sick leave, payment in lieu of vacation, payment for unused compensatory time or payment for any fringe benefits. In addition, compensation does not include, for the purpose of computing retirement benefits, payments made directly or indirectly by the employer to the employee for work performed for a third party on a contracted basis or any other type of agreement under which the third party pays or reimburses the employer for the work performed by the employee for that third party, except for third-party contracts between public agencies for law enforcement, criminal, traffic and crime suppression activities training or fire, wildfire, emergency medical or emergency management activities or where the employer supervises the employee's performance of law enforcement, criminal, traffic and crime suppression activities training or fire, wildfire, emergency medical or emergency management activities. For the purposes of this paragraph, "base salary" means the amount of compensation each employee is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, longevity pay, fringe benefit pay and similar extra payments.
"Credited service":

(a) Means the member's total period of service before the member's effective date of participation, plus those compensated periods of the member's service thereafter for which the member made contributions to the fund.

(b) Includes those compensated periods of the member's part-time service, calculated on a pro rata basis, during which the member made contributions to the fund.

"Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the system issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.
"Depository" means a bank in which all monies of the system are deposited and held and from which all expenditures for benefits, expenses and investments are disbursed.
"Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.
"Determination period" means the ninety-day period in which the system must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the system mails a notice of receipt to the participant and alternate payee.
"Direct rollover" means a payment by the system to an eligible retirement plan that is specified by the distributee.
"Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.
"Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.
"Effective date of participation" means July 1, 1968, except with respect to employers and their covered employees whose contributions to the fund commence thereafter, the effective date of their participation in the system is as specified in the applicable joinder agreement.
"Effective date of vesting" means the date a member's rights to benefits vest pursuant to section 38-844.01.
"Eligible child" means an unmarried child of a deceased member or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty-three years of age and remains a dependent of the surviving spouse or guardian.

"Eligible groups" means only the following who are regularly assigned to hazardous duty:

(a) Municipal police officers who are certified peace officers.

(b) Municipal firefighters.

(c) Paid full-time firefighters employed directly by a fire district organized pursuant to section 48-803 or 48-804 or a joint powers authority pursuant to section 48-805.01 with three or more full-time firefighters, but not including firefighters employed by a fire district pursuant to a contract with a corporation.

(d) State highway patrol officers who are certified peace officers.

(e) State firefighters.

(f) County sheriffs and deputies who are certified peace officers.

(g) Game and fish wardens who are certified peace officers.

(h) Police officers who are certified peace officers and firefighters of a nonprofit corporation operating a public airport pursuant to sections 28-8423 and 28-8424. A police officer shall be designated pursuant to section 28-8426 to aid and supplement state and local law enforcement agencies and a firefighter's sole duty shall be to perform firefighting services, including services required by federal regulations.

(i) Police officers who are certified peace officers and who are appointed by the Arizona board of regents.

(j) Police officers who are certified peace officers and who are appointed by a community college district governing board.

(k) State attorney general investigators who are certified peace officers.

(l) County attorney investigators who are certified peace officers.

(m) Police officers who are certified peace officers and who are employed by an Indian reservation police agency.

(n) Firefighters who are employed by an Indian reservation firefighting agency.

(o) Department of liquor licenses and control investigators who are certified peace officers.

(p) Arizona department of agriculture officers who are certified peace officers.

(q) Arizona state parks board rangers and managers who are certified peace officers.

(r) County park rangers who are certified peace officers.

(s) Game rangers who are certified peace officers and who are employed by an Indian reservation.

"Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

(g) A Roth individual retirement account that satisfies the requirements of section 408A of the internal revenue code.

(h) For distributions made after December 18, 2015, a simple retirement account as defined in section 408(p) of the internal revenue code.

"Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:

(a) Any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the member or the joint lives or joint life expectancies of the member and the member's beneficiary or for a specified period of ten years or more.

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

(d) Any distribution made to satisfy the requirements of section 415 of the internal revenue code.

(e) Hardship distributions.

(f) Similar items designated by the commissioner of the United States internal revenue service in revenue rulings, notices and other guidance published in the internal revenue bulletin.

"Employee" means any person who is employed by a participating employer and who is a member of an eligible group but does not include any persons compensated on a contractual or fee basis. If an eligible group requires certified peace officer status or firefighter certification and at the option of the local board, employee may include a person who is training to become a certified peace officer or firefighter.
"Employers" means:

(a) Cities contributing to the fire fighters' relief and pension fund as provided in sections 9-951 through 9-973 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their full-time paid firefighters.

(b) Cities contributing under the state police pension laws as provided in sections 9-911 through 9-934 or statutes amended thereby and antecedent thereto, as of June 30, 1968 on behalf of their municipal policemen.

(d) The state, or any political subdivision of this state, including towns, cities, fire districts, joint powers authorities, counties and nonprofit corporations operating public airports pursuant to sections 28-8423 and 28-8424, that has elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.

(e) Indian tribes that have elected to participate in the system on behalf of an eligible group of public safety personnel pursuant to a joinder agreement entered into after July 1, 1968.

"Fund" means the public safety personnel retirement fund, which is the fund established to receive and invest contributions accumulated under the system and from which benefits are paid.
"Local board" means the retirement board of the employer, who are the persons appointed to administer the system as it applies to their members in the system.
"Member":

(a) Means any full-time employee who meets all of the following qualifications:

(i) Who is either a paid municipal police officer, a paid firefighter, a law enforcement officer who is employed by this state including the director thereof, a state firefighter who is primarily assigned to firefighting duties, a firefighter or police officer of a nonprofit corporation operating a public airport pursuant to sections 28-8423 and 28-8424, all ranks designated by the Arizona law enforcement merit system council, a state attorney general investigator who is a certified peace officer, a county attorney investigator who is a certified peace officer, a department of liquor licenses and control investigator who is a certified peace officer, an Arizona department of agriculture officer who is a certified peace officer, an Arizona state parks board ranger or manager who is a certified peace officer, a county park ranger who is a certified peace officer, a person who is a certified peace officer and who is employed by an Indian reservation police agency, a game ranger who is a certified peace officer and who is employed by an Indian reservation, a firefighter who is employed by an Indian reservation firefighting agency or an employee included in a group designated as eligible employees under a joinder agreement entered into by their employer after July 1, 1968 and who is or was regularly assigned to hazardous duty or, beginning retroactively to January 1, 2009, who is a police chief or a fire chief.

(ii) Who, on or after the employee's effective date of participation, is receiving compensation for personal services rendered to an employer or would be receiving compensation except for an authorized leave of absence.

(iii) Whose customary employment is at least forty hours per week or, for those employees who customarily work fluctuating workweeks, whose customary employment averages at least forty hours per week.

(iv) Who is engaged to work for more than six months in a calendar year.

(v) Who, if economic conditions exist, is required to take furlough days or reduce the hours of the employee's normal workweek below forty hours but not less than thirty hours per pay cycle, and maintain the employee's active member status within the system as long as the hour change does not extend beyond twelve consecutive months.

(vi) Who has not attained age sixty-five before the employee's effective date of participation or who was over age sixty-five with twenty-five years or more of service prior to the employee's effective date of participation.

(b) Beginning from and after June 30, 2026, includes any part-time employee whose employer has chosen to allow part-time employees to participate in the system and to whom all of the following apply:

(i) Is hired in an eligible group as defined in paragraph 24, subdivision (a), (d) or (f) of this section.

(ii) Has at least three years of credited service in either the system or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter before the employee is hired as a part-time employee for the purposes of this subdivision.

(iii) Is engaged to work as a patrol officer and is scheduled to work for at least twenty hours per week but not more than thirty hours per week following a consistent schedule, as determined by the employer.

(iv) Meets the requirements of section 38-842.03.

(c) Does not include an employee who is hired on or after July 1, 2017, who makes the irrevocable election to participate solely in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter and who was not an active, an inactive or a retired member of the system or a member of the system with a disability on June 30, 2017.

"Normal retirement date" means:

(a) For an employee who becomes a member of the system before January 1, 2012, the first day of the calendar month immediately following the employee's completion of twenty years of service or the employee's sixty-second birthday and the employee's completion of fifteen years of service.

(b) For an employee who becomes a member of the system on or after January 1, 2012 and before July 1, 2017, the first day of the calendar month immediately following the employee's completion of either twenty-five years of service or fifteen years of credited service if the employee is at least fifty-two and one-half years of age.

(c) For an employee who becomes a member of the system on or after July 1, 2017, the first day of the calendar month immediately following the employee's completion of fifteen years of credited service if the employee is at least fifty-five years of age.

"Notice of receipt" means a written document that is issued by the system to a participant and alternate payee and that states that the system has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.
"Ordinary disability" means a physical condition that the local board determines will prevent an employee totally and permanently from performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will prevent an employee totally and permanently from engaging in any substantial gainful activity.
"Participant" means a member who is subject to a domestic relations order.
"Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.
"Pension" means a series of monthly amounts that are payable to a person who is entitled to receive benefits under the plan but does not include an annuity that is payable pursuant to section 38-846.01.
"Personal representative" means the personal representative of a deceased alternate payee.
"Physician" means a physician who is licensed pursuant to title 32, chapter 13 or 17.
"Plan approved domestic relations order" means a domestic relations order that the system approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.
"Plan year" or "fiscal year" means the period beginning on July 1 of any year and ending on June 30 of the next succeeding year.
"Regularly assigned to hazardous duty" means regularly assigned to duties of the type normally expected of municipal police officers, municipal or state firefighters, eligible fire district firefighters, state highway patrol officers, county sheriffs and deputies, fish and game wardens, firefighters and police officers of a nonprofit corporation operating a public airport pursuant to sections 28-8423 and 28-8424, police officers who are appointed by the Arizona board of regents or a community college district governing board, state attorney general investigators who are certified peace officers, county attorney investigators who are certified peace officers, department of liquor licenses and control investigators who are certified peace officers, Arizona department of agriculture officers who are certified peace officers, Arizona state parks board rangers and managers who are certified peace officers, county park rangers who are certified peace officers, police officers who are certified peace officers and who are employed by an Indian reservation police agency, firefighters who are employed by an Indian reservation firefighting agency or game rangers who are certified peace officers and who are employed by an Indian reservation. Those individuals who are assigned solely to support duties such as secretaries, stenographers, clerical personnel, clerks, cooks, maintenance personnel, mechanics and dispatchers are not assigned to hazardous duty regardless of their position classification title. Since the normal duties of those jobs described in this paragraph are constantly changing, questions as to whether a person is or was previously regularly assigned to hazardous duty shall be resolved by the local board on a case-by-case basis. Resolutions by local boards are subject to rehearing and appeal.
"Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension, for an employee who becomes a member of the system on or after January 1, 2012 and before July 1, 2017, attains the age and service requirements for a normal retirement date or for an employee who becomes a member of the system on or after July 1, 2017 attains the age and credited service requirements for a normal retirement date. Retirement shall be considered as commencing on the first day of the month immediately following a member's last day of employment or authorized leave of absence, if later.
"Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the system, or a domestic relations order submitted to the system that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.
"Service" means the last period of continuous employment of an employee by the employers before the employee's retirement, except that if such period includes employment during which the employee would not have qualified as a member had the system then been effective, such as employment as a volunteer firefighter, then only twenty-five percent of such noncovered employment shall be considered as service. Any absence that is authorized by an employer shall not be considered as interrupting continuity of employment if the employee returns within the period of authorized absence. Transfers between employers also shall not be considered as interrupting continuity of employment. Any period during which a member is receiving sick leave payments or a temporary disability pension shall be considered as service. Notwithstanding any other provision of this paragraph, any period during which a person was employed as a full-time paid firefighter for a corporation that contracted with an employer to provide firefighting services on behalf of the employer shall be considered as service if the employer has elected at its option to treat part or all of the period the firefighter worked for the company as service in its applicable joinder agreement. Any reference in this system to the number of years of service of an employee shall be deemed to include fractional portions of a year.
"State" means the state of Arizona, including any department, office, board, commission, agency or other instrumentality of this state.
"System" means the public safety personnel retirement system established by this article.
"Temporary disability" means a physical or mental condition that the local board finds totally and temporarily prevents an employee from performing a reasonable range of duties within the employee's department and that was incurred in the performance of the employee's duty.

§ 38-842.01 Benefit election; eligibility; disability; death; employees hired on or after July 1, 2017

A. An employee who is hired on or after July 1, 2017 and who was not an active, an inactive or a retired member of the system or a member of the system with a disability on June 30, 2017 is eligible to participate in the system or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter, depending on the employee's election under this section. The employee's participation in either the system or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter begins ninety days after the date the employee is hired. Unless the elections made under this section are made before the ninetieth day after the date of employment, the employee is automatically enrolled in the system for the remainder of the employee's employment. Any election made under this section is irrevocable and is the employee's election for the remainder of the employee's employment. If an employee is subsequently rehired after a bona fide termination of employment from the employee's employer of not less than six months with no prearranged reemployment agreement with the employer or hired by a new employer, the employee may make a new election under this section before the ninetieth day after the date of hire. If the employee does not make a new election within that time frame, the employee's previous election will continue. The employee may make one of the following irrevocable elections:

To participate solely in the system.
To participate solely in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter.

B. An employee who makes an election to participate solely in the system or is automatically enrolled in the system pursuant to subsection A of this section and who is not covered by the federal old age and survivors insurance system is also enrolled in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter during any period that the employee is not covered by the federal old age and survivors insurance system through an employer under the system. If such employee is subsequently covered by the federal old age and survivors insurance system, the employee and the employer may not make any contributions on the employee's behalf to the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter that are described in section 38-867, subsection A, paragraph 1 or subsection B during the period the employee is covered by the federal old age and survivors insurance system. If at any later time the employee is not covered by the federal old age and survivors insurance system through an employer under the system, the employee and the employer shall again be required to contribute on behalf of the employee to the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter as required by section 38-867, subsection A, paragraph 1 and, if the employee made an irrevocable election to contribute more of the employee's gross pensionable compensation to the public safety personnel defined contribution retirement plan as provided in section 38-867, subsection B, such contributions shall be reestablished for the period the employee is not covered by the federal old age and survivors insurance system.

C. If an employee in the employee's first ninety days of employment is determined to be eligible for an accidental or catastrophic disability pension pursuant to section 38-844, the employee shall be automatically enrolled in the system for the remainder of the employee's employment with any employer under the system commencing on the employee's date of disability and shall receive an accidental or catastrophic disability pension as prescribed in this article.

D. If an employee in the employee's first ninety days of employment is killed in the line of duty or dies from injuries suffered in the line of duty, the employee shall be considered as having been enrolled in the system and the surviving spouse of the deceased employee is eligible for survivor benefits as prescribed in this article.

E. If an employee who is hired on or after July 1, 2017 and who is an active or inactive member of the system or a participant in the public safety personnel defined contribution plan established pursuant to article 4.1 of this chapter is subsequently rehired by the employee's previous employer or another employer under the system, the employee's participation in either the system or the public safety personnel defined contribution plan, for which the employee had elected to participate, begins on the date the employee is rehired or hired by another employer.

§ 38-842.02 Public safety employer risk pool

A. The public safety employer risk pool is established for members hired on or after July 1, 2017 and consists of, for actuarial purposes in the system and to determine contribution rates pursuant to section 38-843, any employer of an eligible group that has on May 1, 2017 two hundred fifty or fewer active members who were hired before July 1, 2017.

B. If an employer has more than two hundred fifty active members who were hired before July 1, 2017 in any eligible group on May 1, 2017, the employer may not participate in the risk pool for any of the employer's eligible groups, except that:

Each state agency's eligibility for the risk pool is not affected by another state agency's ineligibility for the risk pool.
For a county with multiple eligible groups in the system, the eligibility of each eligible group of a county for the risk pool is not affected by the ineligibility for the risk pool of another eligible group of that county.

C. Any Indian tribe that has elected to participate in the system and that qualifies for the public safety employer risk pool pursuant to subsection A of this section may elect to opt out of the risk pool before January 1, 2019. The Indian tribe shall notify the administrator of the system in writing before January 1, 2019 of the Indian tribe's decision not to participate in the public safety employer risk pool. If an Indian tribe is a new employer in the system pursuant to subsection D of this section, the Indian tribe shall have ninety days after the date of participation to elect to opt out of the risk pool and to notify the administrator of the system in writing of the Indian tribe's decision not to participate in the public safety employer risk pool.

D. This state or any political subdivision of this state, Indian tribe or public organization that becomes a new employer in the system and that has two hundred fifty or fewer employees, on the effective date of participation in the system pursuant to section 38-851, who are in an eligible group shall participate in the public safety employer risk pool unless subsection B or C of this section applies.

E. If any individual employer in the public safety employer risk pool experiences a deviation in reported active member payroll of greater than twenty percent of the average of all participating employers in the risk pool in a twenty-four-month period, the system actuary shall prepare a financial impact report to determine whether the deviation creates an increased or decreased unfunded liability within the risk pool. If the deviation in reported active member payroll creates an increase to the unfunded liability within the risk pool, the responsible individual employer shall pay into the system, within sixty days after being notified of the amount due, one hundred percent of the cost of the increase in the unfunded liability. If the deviation in reported active member payroll creates a decrease to the unfunded liability within the risk pool, the system shall immediately credit the responsible individual employer one hundred percent of the cost of the decrease in the unfunded liability.

§ 38-842.03 Part-time employees; requirements; prohibition; definitions

A. To qualify as a member as defined in section 38-842, paragraph 31, subdivision (b), a part-time employee shall meet both of the following:

Has entered into a written agreement with the employee's employer before July 1, 2031 to work part-time for a period of not more than three years due to a specified qualifying event.
Has not worked as a part-time employee for the purposes of this section for more than six years.

B. A part-time employee may not perform off-duty work.

C. For the purposes of this section:

"Immediate family member" means a child, spouse, parent, grandchild or grandparent.
"Off-duty work" means being employed as a police officer, state highway patrol officer or county sheriff or deputy by an employer other than the part-time employee's employer pursuant to this article.
"Qualifying event" means the birth or adoption of a child or providing care for a serious health condition of an immediate family member.
"Serious health condition" has the same meaning prescribed in 29 Code of Federal Regulations section 825.113.

§ 38-843 Contributions; employer account asset transfers

A. Each employer that participates in the system on behalf of a group of employees who were covered under a prior public retirement system, other than the federal social security act, shall transfer all securities and monies attributable to the taxes and contributions of this state other than this state's contribution to social security, the employer and the employees for the covered group of employees under the other system, such transfer to be made to the fund subject to all existing liabilities and on or within sixty days following the employer's effective date. All monies and securities transferred to the fund shall be credited to the employer's account in the fund. A record of the market value and the cost value of such transferred contributions shall be maintained for actuarial and investment purposes.

B. As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to meet both the normal cost for members hired before July 1, 2017 plus the actuarially determined amount required to amortize the unfunded accrued liability on a level percent of compensation basis for all employees of the employer who are members of the system or participants as defined in section 38-865, paragraph 7, subdivision (a), item (i) over, beginning July 1, 2017, a closed period of not more than twenty years, except as provided in subsection M of this section, that is established by the board of trustees taking into account the recommendation of the system's actuary. An employer shall have the option of paying a higher level percent of compensation thereby reducing its unfunded past service liability. An employer shall also have the option of increasing its contributions in order to reduce the contributions required from its members under subsection C of this section, except that if an employer elects this option the employer shall pay the same higher level percentage contribution for all members of the eligible group. A county employer that elected to pay a higher level percentage contribution rate may eliminate that higher level percentage contribution rate amount for members who are hired on or after January 1, 2015. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employer shall make the contributions based on the compensation the employee would have received in the employee's job classification if the employee was in normal employment status. All contributions made by the employers and all state taxes allocated to the fund shall be irrevocable and shall be used to pay benefits under the system or to pay expenses of the system and fund. The minimum employer contribution that is paid and that is in excess of the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability as calculated pursuant to this subsection shall be used to reduce future employer contribution increases and shall not be used to pay for an increase in benefits that are otherwise payable to members. The board shall separately account for these monies in the fund. Forfeitures arising because of severance of employment before a member becomes eligible for a pension or any other reason shall be applied to reduce the cost of the employer, not to increase the benefits otherwise payable to members. After the close of any fiscal year, if the system's actuary determines that the actuarial valuation of an employer's account contains excess valuation assets other than excess valuation assets that were in the employer's account as of fiscal year 2004-2005 and is more than one hundred percent funded, the board shall account for the excess valuation assets up to one hundred percent of the present value of all future benefits of the employer in a stabilization reserve account. After the close of any fiscal year, if the system's actuary determines that the actuarial valuation of an employer's account has a valuation asset deficiency and an unfunded actuarial accrued liability, the board shall use any valuation assets in the stabilization reserve account for that employer, to the extent available, to limit the decline in that employer's funding ratio to not more than two percent.

C. Each member who was hired before July 1, 2017, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to the amount prescribed in subsection E of this section, except as provided in subsection B of this section. Each member who was hired on or after July 1, 2017, throughout the member's period of service from the member's effective date of participation, shall contribute to the fund an amount equal to the amount prescribed in subsection H of this section. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employee shall make the employee's contribution based on the compensation the employee would have received in the employee's job classification if the employee was in normal employment status. Contributions of members shall be required as a condition of employment and membership in the system and shall be made by payroll deductions. Every employee shall be deemed to consent to such deductions. Payment of an employee's compensation, less such payroll deductions, shall constitute a full and complete discharge and satisfaction of all claims and demands by the employee relating to remuneration for the employee's services rendered during the period covered by the payment, except with respect to the benefits provided under the system. A member may not, under any circumstance, borrow from, take a loan against or remove contributions from the member's account before the termination of membership in the plan or the receipt of a pension.

D. Each employer shall transfer to the board the employer and employee contributions provided for in subsections B, C and H of this section within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten percent per annum, compounded annually, for each day the contributions are late, such penalty to be paid by the employer. Delinquent payments due under this subsection, together with interest charges as provided in this subsection, may be recovered by action in a court of competent jurisdiction against an employer liable for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to such employer by any department or agency of this state.

E. The amount contributed by a member who was hired before July 1, 2017 pursuant to subsection C of this section is:

Through June 30, 2011, 7.65 percent of the member's compensation.
For fiscal year 2011-2012, 8.65 percent of the member's compensation.
For fiscal year 2012-2013, 9.55 percent of the member's compensation.
For fiscal year 2013-2014, 10.35 percent of the member's compensation.
For fiscal year 2014-2015, 11.05 percent of the member's compensation.
For fiscal year 2015-2016 through fiscal year 2022-2023, 11.65 percent of the member's compensation or 33.3 percent of the sum of the member's contribution rate from the preceding fiscal year and the aggregate computed employer contribution rate that is calculated pursuant to subsection B of this section, whichever is lower, except that the member contribution rate shall not be less than 7.65 percent of the member's compensation and the employer contribution rate shall not be less than the rate prescribed in subsection B of this section.
For fiscal year 2023-2024 and each fiscal year thereafter, 7.65 percent of the member's compensation.

F. From and after June 30, 2011 through June 30, 2023, the amount of the member's contribution that exceeds 7.65 percent of the member's compensation shall not be used to reduce the employer's contributions that are calculated pursuant to subsection B of this section until the employer's funded ratio, as expressed as a percentage of the employer's actuarial value of assets to accrued actuarial liability as determined by actuarial valuations reported pursuant to subsection B of this section, is at or above one hundred percent.

G. From and after June 30, 2023, the amount of the member's contribution that exceeds 7.65 percent of the member's compensation collected pursuant to subsection E of this section and that was accumulated from and after June 30, 2011 through June 30, 2023 may be used in calculating the employer's contributions that are calculated pursuant to subsection B of this section.

H. For members hired on or after July 1, 2017, the employer and member contributions are determined as follows:

For employers and members in the public safety employer risk pool:

(a) As determined by the system consolidated actuarial valuation reported to the board of trustees, each employer shall make contributions sufficient under such actuarial valuation to pay fifty percent of both the normal cost plus the actuarially determined amount required to amortize the total unfunded accrued liability within the risk pool for all employers attributable to all members in the risk pool. For each year that new unfunded liabilities are attributable to the public safety employer risk pool, a new amortization base representing the most recent annual gain or loss, smoothed over a period of not more than five years as determined by the board, shall be created on a level-dollar basis over a closed period equal to the average expected remaining service lives of all members of the risk pool but not more than ten years, as determined by the board.

(b) The remaining fifty percent of both the normal cost and actuarially determined amount required to amortize the total unfunded accrued liability within the public safety employer risk pool as determined in subdivision (a) of this paragraph shall be divided by the total number of members in the risk pool such that each member contributes an equal percentage of the member's compensation. Member contributions shall begin simultaneously with membership in the system and shall be made by payroll deduction.

For employers and members that are not in the public safety employer risk pool:

(a) As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to pay fifty percent of both the normal cost plus the actuarially determined amount required to amortize the total unfunded accrued liability for each employer attributable only to those members hired on or after July 1, 2017. For each year that new unfunded liabilities are attributable to the employer's own members hired on or after July 1, 2017, a new amortization base representing the most recent annual gain or loss, smoothed over a period of not more than five years as determined by the board, shall be created on a level-dollar basis over a closed period equal to the average expected remaining service lives of all members but not more than ten years, as determined by the board.

(b) The remaining fifty percent of both the normal cost and actuarially determined amount required to amortize the total unfunded accrued liability as determined pursuant to subdivision (a) of this paragraph shall be divided by the total number of the employer's members who were hired on or after July 1, 2017 such that each member contributes an equal percentage of the member's compensation. Member contributions shall begin simultaneously with membership in the system and shall be made by payroll deduction.

I. In any fiscal year, an employer's contribution to the system in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. The board may not suspend contributions to the system unless both of the following apply:

The retirement system actuary, based on the annual valuation, determines the stabilization reserve of an employer's account is funded to one hundred percent of present value of all future benefits of the employer.
The board determines that suspending, in whole or in part, the normal cost contributions as calculated under subsection B of this section would not be in conflict with its fiduciary responsibility.

J. An employer may request that the board transfer excess assets of an employer's account that has no liabilities or beneficiaries to another account of the employer that is managed by the board. The board may authorize the transfer of assets if all of the following apply:

The board verifies that the employer's liabilities have been reconciled with the administrator and there are no remaining or potential liabilities or beneficiaries of the employer's account.
The board and the system bear no liability that the proposed transfer conforms with any other restrictions on the use or transfer of the assets of the proposed transfer.
The transfer does not violate the internal revenue code or threaten to impair the system's status as a qualified plan under the internal revenue code.

K. For the purposes of requesting a transfer of assets pursuant to this section, an employer must meet both of the following requirements:

The governing body of the employer adopts a resolution requesting the transfer of assets in an open session where public comment is allowed.
The employer submits a written request to the administrator of the board for the transfer of assets along with the adopted resolution.

L. For a state employer that meets the requirements of subsection J of this section, the joint legislative budget committee may request from the administrator of the board confirmation that an employer's account meets the requirements to transfer the account assets. The legislature shall pass a bill directing the board to transfer the assets from the eligible employer account to another account of the employer. Before the legislature passes the bill, the joint legislative budget committee shall confirm with the administrator of the board that the assets are eligible for transfer to another employer account and discuss the matter in a scheduled public meeting.

M. For the purposes of calculating unfunded liability amortization payments pursuant to subsection B of this section, an employer may make a onetime election to request that the board use a closed period of not more than thirty years if the employer meets both of the following requirements:

The governing body of the employer adopts a resolution requesting the longer amortization period and specifying the actuarial valuation date for which the new amortization period is to begin. The actuarial valuation date chosen must be the system's fiscal year end either immediately before or immediately after the date of the resolution.
The employer submits a written request for the longer amortization period along with the adopted resolution to the administrator of the board.

N. For the purposes of subsection M of this section, employer does not include this state or any state agency.

O. Except as provided in subsection P of this section, if a member's employment is terminated with an employer by either party, the total liability under the system associated with the member's service with the employer remains with the employer.

P. If an active or inactive member is reemployed in the same retirement plan under the system with a subsequent employer, assets equal to the actuarially accrued liability earned with the previous employer through the date of reemployment shall transfer to the subsequent employer and all benefit liabilities for the member are attributed to that employer. Actuarially accrued liability shall be computed using the actuarial methods and assumptions prescribed by the system's actuary and adopted by the board.

§ 38-843.01 Internal revenue code section 414(h) pickup of member contributions

Each employer shall pick up the contributions required of members on account of compensation paid after the effective date specified in the resolution of the board activating the provisions of this section. The picked up contributions shall be treated as employer contributions for the purpose of tax treatment under the United States internal revenue code. The specified effective date shall not be before the date the system receives notification from the internal revenue service that pursuant to section 414(h) of the internal revenue code the member contributions picked up shall not be included in gross income for income tax purposes until the time that the picked up contributions are distributed by refund or pension payments. The employers shall pick up the member contributions from monies established and available in a retirement deduction account, which monies would otherwise have been designated as member contributions and paid to the system. Member contributions picked up pursuant to this section shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before the effective date.

§ 38-843.02 Internal revenue code qualification

The legislature intends that the system is a qualified pension plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that the trust is exempt from taxation under section 501 of the internal revenue code, as amended. The assets of the fund are held in trust for the exclusive benefit of the members and beneficiaries of the system. The board may adopt such additional provisions to the system as are necessary to fulfill this intent.

§ 38-843.03 Statutory construction

Because the system as enacted at a particular time is a unique amalgam of rights and obligations having a critical impact on the actuarial integrity of the system, the legislature intends that the system as enacted at a particular time be construed and applied as a coherent whole and without reference to any other provision of the system in effect at a different time.

§ 38-843.04 Compensation limitation; adjustments; definition

A. The annual compensation of each member taken into account for purposes of the system shall not exceed the following:

Beginning January 1, 1996 through December 31, 2001, $150,000.
Except for members who are hired on or after July 1, 2017, beginning January 1, 2002, $200,000. The board shall adjust the $200,000 annual compensation limit under this paragraph at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this paragraph for a calendar year applies to annual compensation for that calendar year.
For members who are hired on or after July 1, 2017, $110,000. The board shall adjust the $110,000 annual compensation limit under this paragraph as prescribed in subsection C of this section. Notwithstanding the adjustments made under subsection C of this section, the limit under this paragraph, as adjusted by the board, may not exceed the maximum compensation limit of section 401(a)(17) of the internal revenue code, as adjusted by the United States secretary of the treasury.

B. If compensation under the system is determined on a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.

C. Beginning in fiscal year 2020-2021, and every third fiscal year thereafter, the board shall adjust the annual compensation limit specified in subsection A, paragraph 3 of this section by the average change in the public safety wage index as determined in this subsection. The board shall annually publish the public safety wage index in January. The annual compensation limit adjustment under this subsection for a calendar year applies to the annual compensation for that calendar year. To determine the public safety wage index:

Employers represented in the public safety wage index shall provide the board pay scales for the month of July for the enforcement classifications of public safety officers annually in July.
The board shall determine the weighted average of the change in the top of the pay scale for public safety officers of the employers represented in the public safety wage index. The average change shall be weighted by measuring each employer's total number of members divided by the total number of members of all employers represented in the public safety wage index.

D. The board shall establish a public safety wage index that is composed of a group of employers that represents geographic diversity across this state and that represents:

Seven large employers, each of which has one thousand or more total system members, composed of one state law enforcement agency, one county law enforcement agency, three municipal law enforcement agencies and two municipal fire agencies.
Nine midsized employers, each of which has more than two hundred but fewer than one thousand total system members, composed of one state law enforcement agency, two county law enforcement agencies, four municipal law enforcement agencies, one municipal fire agency and one fire district.
Ten small employers, each of which has two hundred or fewer total system members, composed of three municipal law enforcement agencies, four municipal fire agencies and three fire districts.

E. The board may not change the employers represented in the public safety wage index more frequently than every ten years, unless required to maintain the composition of employers as prescribed in subsection D of this section.

F. For the purposes of this section, "public safety officers" means the classification of police officers, sheriff's deputies, firefighters or wildlife managers or their equivalent enforcement classifications.

§ 38-843.05 Retired members; return to work; employer contributions

A. An employer shall pay contributions at an alternate contribution rate on behalf of a retired member who returns to work in any capacity in a position ordinarily filled by an employee of the employer of an eligible group, unless the retired member is required to participate in another state retirement system and the retired member returned to work before July 20, 2011. For the purposes of this subsection, "returns to work in any capacity" includes a retired member who returns to work and is ineligible for benefits pursuant to section 38-849, subsection E.

B. The alternate contribution rate shall be equal to that portion of the individual employer's total required contribution that is applied to the amortization of the unfunded actuarial accrued liability for the fiscal year beginning July 1, based on the system's actuary's calculation of the total required contribution for the preceding fiscal year ended on June 30. The alternate contribution rate shall 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 eight percent in any fiscal year.

D. All contributions made by the employer and allocated to the fund are irrevocable and shall be used as benefits under this article or to pay the expenses of the system. Payments made pursuant to this section by employers become delinquent after the due date prescribed in section 38-843, subsection D, and thereafter shall be increased by interest from and after that date until payment is received by the system.

E. An employer of a retired member shall immediately notify the local board after the employment of a retired member and shall submit any reports, data, paperwork or materials that are requested by the board or the local board 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, use, efficacy or operation of the return to work program.

§ 38-843.06 Required distributions

§ 38-843.07 Adjustment and refund; termination of the system

A. If more than the correct amount of employer or member contributions is paid into the system by an employer through a mistake of fact, the board shall return those contributions to the employer if the employer requests return of the contributions within one year after the date of the overpayment. The board may not pay an employer earnings attributable to excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions.

B. On termination or partial termination of the system, the accrued benefit of each member is, as of the date of termination or partial termination, fully vested and nonforfeitable to the extent then funded.

§ 38-844 Requirements for retirement benefits and disability pensions

A. A member shall be eligible for a normal pension on retirement on or after the member's normal retirement date. Payment of a normal pension shall commence as of the first day of the month following the date of retirement, and the last payment shall be made as of the last day of the month in which the death of the retired member occurs.

B. A member is eligible for an accidental disability pension if the member's employment is terminated by reason of accidental disability. A member is eligible for an ordinary disability pension if the member's employment is terminated before the member's normal retirement date by reason of ordinary disability. A member shall file an application for a disability pension after the disabling incident or within one year after the date the member ceases to be an employee. Timely application for an accidental, catastrophic or ordinary disability pension is a prerequisite to receipt of the pension. Payment of an accidental, catastrophic or ordinary disability pension shall commence as of the first day of the month following the date of retirement or the expiration of a period during which the member is receiving sick leave payments or a temporary disability pension, whichever is later, but not earlier than section 38-845.02 allows for retroactive payments. The last payment shall be made as of the last day of the month in which the death of the retired member occurs, or if disability ceases before the member's normal retirement date, the first day of the month in which disability ceases.

C. A member is eligible for a catastrophic disability pension if the member's employment is terminated by reason of catastrophic disability. If more than the allowable catastrophic disability pensions are approved by the local boards in a calendar year, from and after December 31 of the following calendar year a member of the system is not eligible to apply for a catastrophic disability pension. On or before January 31, the board of trustees shall report to the president of the senate and the speaker of the house of representatives the number of catastrophic disability pensions that were approved by the local boards in the preceding calendar year. For the purposes of this subsection, "allowable catastrophic disability pensions" means for calendar year 2004, ten, and for subsequent calendar years the number of allowable catastrophic disability pensions allowed in the prior calendar year minus the number of catastrophic disability pensions approved by the local boards in the prior calendar year plus four.

D. Notwithstanding any other provision of this section, no member shall qualify for an accidental, catastrophic or ordinary disability pension if the local board determines that the member's disability results from the following:

An injury suffered while engaged in a felonious criminal act or enterprise.
Service in the armed forces of the United States that entitles the member to a veteran's disability pension.
A physical or mental condition or injury that existed or occurred before the member's date of membership in the system.

E. Accidental or ordinary disability shall be considered to have ceased and an accidental or ordinary disability pension terminates if the member:

Has sufficiently recovered, in the opinion of the local board, based on a medical examination by a designated physician or a physician working in a clinic that is appointed by the local board, to be able to engage in a reasonable range of duties within the member's department and the member refuses an offer of employment by an employer in the system.
Refuses to undergo any medical examination requested by the local board, provided that a medical examination shall not be required more frequently than once in any calendar year.

F. Sixty months after the award of a catastrophic disability pension, the local board shall reevaluate the member. If the member still qualifies for the catastrophic disability pension, the member is entitled to continue to receive the pension at the reduced amount prescribed in section 38-845, subsection E. A catastrophic disability shall be considered to have ceased and a catastrophic disability pension terminates if the local board determines that the member has sufficiently recovered and is able to engage in gainful employment based on a medical examination by a designated physician or a physician working in a clinic that is appointed by the local board. After the sixty-month review, the catastrophic disability shall be considered to have ceased and a catastrophic disability pension terminates if the local board determines that the member has sufficiently recovered and is able to engage in gainful employment based on a medical examination by a designated physician or a physician working in a clinic that is appointed by the local board, except that the medical examination shall not be required more frequently than once in a calendar year. The medical review after the sixty-month period does not apply after the date the catastrophic disability pensioner would have attained twenty-five years of service assuming the pensioner remained a member of the system. The local board shall also terminate a catastrophic disability pension if the member refuses to undergo any medical examination requested by the local board. A member whose catastrophic disability pension is terminated may apply for and if eligible is entitled to receive an accidental disability pension as provided in this section.

G. Subsection E of this section does not apply after a disability pensioner's normal retirement date. The amount of a disability pension shall not be recomputed at a disability pensioner's normal retirement date.

H. If accidental or ordinary disability ceases before a retired member attains the member's normal retirement date and the member is reemployed by an employer, the member shall be treated as if the member has been on an uncompensated leave of absence during the period of the member's disability retirement and shall be a contributing member of the system. The pension payable on the member's subsequent retirement shall be determined as provided in section 38-845.

I. A member shall be eligible for a temporary disability pension if the member's employment is terminated before the member's normal retirement date by reason of temporary disability. Payment of a temporary disability pension shall commence as of the first day of the month following the date of disability or the expiration of a period during which the member is receiving compensation and sick leave payments, whichever is later. The last payment shall be made as of the first day of the month in which either the death of the member occurs or the local board deems the member is no longer under temporary disability, whichever first occurs, provided that not more than twelve monthly temporary disability payments shall be made in total to the member.

J. If on the expiration of a temporary disability pension the local board finds on application that the member has an accidental or ordinary disability, the member shall be eligible for an accidental or ordinary disability pension, as provided in this section.

K. The system shall make payments pursuant to section 401(a)(9) of the internal revenue code and the regulations that are issued under that section. Notwithstanding any other provision of the system, beginning January 1, 1987 payment of benefits to a member shall commence not later than April 1 of the calendar year following the later of:

The calendar year in which the member attains seventy-two years of age.
The date the member terminates employment.

§ 38-844.01 Vested rights to benefits

A member of the system does not have vested rights to benefits under the system, except as provided in section 38-854, until he files an application for benefits and is found eligible for those benefits as provided in this article. An eligible claimant's rights to benefits vest on the date of his application for those benefits or his last day of employment under the system, whichever occurs first.

§ 38-844.02 Deferred retirement option plan for employees hired before January 1, 2012; purpose

A. A deferred retirement option plan is established for those employees who become members of the system before January 1, 2012. The purpose of the deferred retirement option plan is to add flexibility to the system and to provide members who elect to participate in the deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.

B. The board shall offer the deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the system.

§ 38-844.03 Eligibility; participation

A. Any member who is eligible for a normal pension pursuant to section 38-844, subsection A, who becomes a member of the system before January 1, 2012 and who has at least twenty years of credited service is eligible to participate for not more than sixty consecutive months in the deferred retirement option plan. In addition, any member who is subject to section 38-858, subsection C is eligible to participate for not more than sixty consecutive months in the deferred retirement option plan retroactive to the member's twentieth year of credited service or on the day before the member began military service, whichever is later, if the member makes the election pursuant to this section on or before resuming employment with the member's employer. Any member who is eligible for a normal pension pursuant to section 38-844, subsection A, who becomes a member of the system before January 1, 2012, who is at least fifty-one years of age and who has at least twenty-four and one-half years of credited service is eligible to participate for not more than eighty-four consecutive months in the deferred retirement option plan.

B. A member who elects to participate in the deferred retirement option plan shall voluntarily and irrevocably:

Designate a period of participation that is not more than sixty consecutive months or eighty-four consecutive months, as applicable pursuant to subsection A of this section.
Beginning on the date the member elects to participate in the deferred retirement option plan, cease to accrue benefits under any other provision of this article. The member's effective date of participation is the first day of the month following the date the member elects to participate.
Have deferred retirement option plan benefits credited to a deferred retirement option plan participation account pursuant to section 38-844.05.
Receive benefits from the system on termination of employment at the same time and in the same manner as otherwise prescribed in this article.
Agree to terminate employment on completion of the deferred retirement option plan participation period designated by the member on the appropriate deferred retirement option plan participation form.

C. If a member fails to terminate employment on completion of the designated deferred retirement option plan participation period:

The member is not entitled to the interest accumulation on the deferred retirement option plan participation account.
The deferred retirement option plan participation account shall not be credited with the monthly amount prescribed in section 38-844.05, subsection C, paragraph 1 and that amount shall not be paid directly to the member.
The payment prescribed in section 38-844.08, subsection A, paragraph 1 shall not be paid until the member terminates employment and is payable at the same time as the pension amount is paid on retirement.
The member does not acquire any further credited service in the system.

§ 38-844.04 Termination of deferred retirement option plan participation

A. A member may terminate participation in the deferred retirement option plan by voluntarily terminating employment at any time before the completion of the deferred retirement option plan participation period designated by the member on the appropriate deferred retirement option plan participation form.

B. Participation in the deferred retirement option plan terminates on the first occurrence of any of the following:

Completion of the deferred retirement option plan participation period designated by the member on the appropriate deferred retirement option plan participation form.
Termination of employment. If termination of employment for cause is reversed, a member's participation in the deferred retirement option plan, minus any benefits previously distributed pursuant to this article, shall be reinstated for the duration of the original deferred retirement option plan participation period designated by the member on the appropriate deferred retirement option plan participation form.
Death of the member.
Approval of disability retirement benefits pursuant to section 38-844, subsection B.

§ 38-844.05 Deferred retirement option benefits and participation accounts

A. A deferred retirement option plan participation account is an account established within the system on behalf of each deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the deferred retirement option plan participation account. A deferred retirement option plan participant does not have a claim on the assets of the system with respect to the member's deferred retirement option plan participation account and assets shall not be set aside for any deferred retirement option plan participant that are separate from all other system assets.

B. All amounts credited to a member's deferred retirement option plan participation account are fully vested.

C. A member's deferred retirement option plan participation account shall be credited with the following:

An amount, credited monthly, that is computed in the same manner as a normal retirement benefit using the factors of credited service and average monthly benefit compensation in effect on the date of deferred retirement option plan participation.
For the first sixty months, an amount, credited monthly, that represents interest on the amount credited pursuant to paragraph 1 of this subsection at a rate equal to the assumed rate of return determined by the board.

D. Beginning on or before January 1, 2023, at the end of the first sixty-month period, for a member who extended the member's period of participation in the deferred retirement option plan past sixty months, the system shall transfer the accumulated balance of a member's deferred retirement option plan participation account to an account created for the member in a defined contribution plan. For the subsequent period of time in the deferred retirement option plan, up to twenty-four months, all deferred retirement option plan benefits that are accrued and credited monthly pursuant to subsection C, paragraph 1 of this section shall be deposited in the member's defined contribution plan account. A member may not withdraw the assets of the member's defined contribution plan account until the member terminates employment.

E. The participant is not entitled to receive any amount prescribed by section 38-856.05 or 38-857 during the deferred retirement option plan participation period.

§ 38-844.06 Additional deferred retirement option plan provisions

A. Beginning on the day after the date the member elects to participate in the deferred retirement option plan, employee and employer contributions pursuant to section 38-843 cease with respect to that member.

B. A member who elects to participate in the deferred retirement option plan and who develops a disability during the period of deferred retirement option plan participation is eligible to apply for disability retirement benefits. If the application for disability retirement benefits is approved by the local board:

The disability retirement benefits shall be computed using the factors of credited service and average monthly benefit compensation in effect the day before the effective date of the member's deferred retirement option plan participation.
All amounts in the member's deferred retirement option plan participation account shall be distributed pursuant to section 38-844.08.

C. If a member dies during the period of the member's deferred retirement option plan participation, the entire amount in the member's deferred retirement option plan participation account shall be transferred by the system's trustee directly to the trustee of the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter and deposited in an account established on behalf of the deceased member. On deposit of the monies in the account, the monies shall be made immediately available to the member's beneficiary to either withdraw all or any portion of the monies or directly transfer all or any portion of the monies to an eligible retirement plan in accordance with section 401(a)(31) of the internal revenue code.

§ 38-844.07 Designation of deferred retirement option plan beneficiaries

A. A member who elects to participate in the deferred retirement option plan shall designate a beneficiary. A member's beneficiary designation applies to all amounts in the member's deferred retirement option plan participation account.

B. If a designated beneficiary predeceases a deferred retirement option plan participant who dies before designating a new beneficiary, the beneficiary of the participant's deferred retirement option plan participation account shall be the following persons in the following order of priority:

The participant's surviving spouse.
The participant's natural or adopted children in equal shares.
The participant's estate.

C. A member shall not make a beneficiary designation pursuant to this section that results in an abrogation of a member's community property obligations under the applicable laws of this state.

§ 38-844.08 Payment of deferred retirement option plan benefits

A. On the simultaneous termination of deferred retirement option plan participation and employment, a member is entitled to receive all of the following:

The monthly retirement allowance in the amount determined pursuant to section 38-845 that was credited monthly to the member's deferred retirement option plan participation account at the date of termination of deferred retirement option plan participation.
All amounts credited to the member's deferred retirement option plan participation account on the effective date of termination of deferred retirement option plan participation.

B. The form of payment shall be a lump sum distribution that is directly deposited in an account created for the member in the public safety personnel defined contribution retirement plan established by article 4.1 of this chapter. On deposit of the lump sum payment, the member shall immediately be able to either withdraw all or any portion of the lump sum deposit or directly transfer all or any portion of the lump sum deposit to an eligible retirement plan as required by section 401(a)(31) of the internal revenue code.

§ 38-844.09 Internal revenue code compliance

The deferred retirement plan option shall not jeopardize in any way the tax qualified status of the system under the rules of the internal revenue service. The board may adopt additional provisions to the extent necessary or appropriate for the deferred retirement option plan to comply with applicable federal laws or rules.

§ 38-844.10 Deferred retirement option plan; employer; extension approval

(Rpld. 1/1/28)

Notwithstanding the age and service requirements prescribed in section 38-844.03, an employer may approve, for a member of the public safety personnel retirement system who is participating in the deferred retirement option plan on the effective date of this section, an extension of the member's period of participation for up to an additional twenty-four months.

§ 38-845 Amount of retirement benefit

A. A member who meets the requirements for a normal pension, who becomes a member of the system before January 1, 2012 and who has twenty years of credited service shall receive a monthly amount that equals fifty percent of the member's average monthly benefit compensation. If the member retires with other than twenty years of credited service, the foregoing amount shall be:

Reduced by four percent for each year of credited service under twenty years, with pro rata reduction for any fractional year.
Increased by a monthly amount equal to two percent of the member's average monthly benefit compensation multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional year, except that if a member retires with twenty-five or more years of credited service the amount shall be increased by a monthly amount equal to two and one-half percent of the member's average monthly benefit compensation multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional year.

B. A member who meets the requirements for an accidental disability pension shall receive a monthly amount, which shall be computed in the same manner as a normal pension, using the member's average monthly benefit compensation before termination of employment and the member's actual credited service or twenty years of credited service, whichever is greater. Notwithstanding any other provision of this section, the accidental disability pension for a member shall be a monthly amount that equals not less than fifty percent of the member's average monthly benefit compensation.

C. A member who meets the requirements for an ordinary disability pension shall receive a monthly amount that is equal to a fraction times the member's normal pension that is computed according to subsection A, H or I of this section if the member had twenty years of credited service. The fraction is the result obtained by dividing the member's actual years of credited service, not to exceed twenty years of credited service, by the member's required credited service for the applicable normal retirement date.

D. A member who meets the requirements for a temporary disability pension shall receive a monthly amount that is equal to one-twelfth of fifty percent of the member's annual compensation received immediately prior to the date on which the member's disability was incurred.

E. A member who meets the requirements for a catastrophic disability pension is entitled to receive a monthly amount computed as follows:

For the first sixty months, ninety percent of the member's average monthly benefit compensation before termination of employment.
After sixty months, sixty-two and one-half percent of the member's average monthly benefit compensation before termination of employment or computed in the same manner as a normal pension using the member's average monthly benefit compensation before termination of employment and the member's actual credited service, whichever is greater.

F. For the purposes of calculating an accidental, ordinary or catastrophic disability pension pursuant to this section for a member as defined in section 38-842, paragraph 31, subdivision (b), the average monthly benefit compensation shall exclude any part-time earnings.

G. A member who was employed before September 15, 1989 by an employer participating in the system and who retires on or after November 1, 2001 is entitled to receive a tax equity benefit allowance consisting of a permanent increase of two percent of the member's base benefit retroactive to the day of retirement.

H. A member who meets the requirements for a normal pension, who becomes a member of the system on or after January 1, 2012 and before July 1, 2017 and who has twenty-five years of credited service shall receive a monthly amount that equals sixty-two and one-half percent of the member's average monthly benefit compensation. If the member has at least fifteen years of credited service, but less than twenty-five years of service, the monthly amount shall be equal to the member's average monthly benefit compensation multiplied by the number of whole and fractional years of credited service multiplied by the appropriate percentage specified in subsection I of this section. If the member has twenty-five years of service and retires with other than twenty-five years of credited service, the foregoing amount shall be:

Reduced by four percent for each year of credited service under twenty-five years, with pro rata reduction for any fractional year.
Increased by a monthly amount equal to two and one-half percent of the member's average monthly benefit compensation multiplied by the number of the member's years of credited service in excess of twenty-five years, with pro rata increase for any fractional year.

I. A member who becomes a member of the system on or after July 1, 2017 and who retires on or after the member's normal retirement date shall receive a monthly amount equal to the member's average monthly benefit compensation multiplied by the number of whole and fractional years of credited service multiplied by the following:

1.50 percent if the member has at least fifteen years of credited service but less than seventeen years of credited service.
1.75 percent if the member has at least seventeen years of credited service but less than nineteen years of credited service.
2.00 percent if the member has at least nineteen years of credited service but less than twenty-two years of credited service.
2.25 percent if the member has at least twenty-two years of credited service but less than twenty-five years of credited service.
2.50 percent if the member has at least twenty-five years of credited service.

J. Notwithstanding subsections A, H and I of this section, the maximum amount payable as a normal pension is eighty percent of the average monthly benefit compensation.

§ 38-845.01 Maximum annual pension; limitations; definition

A. The maximum annual pension for a limitation year shall not exceed the following:

For limitation years beginning before 1995, the lesser of ninety thousand dollars, as indexed for inflation, or one hundred per cent of the member's average monthly benefit compensation.
For limitation years beginning in 1995 and ending before 2002, ninety thousand dollars, as indexed for inflation.
For limitation years ending in and after 2002, one hundred sixty thousand dollars, as indexed for inflation.

B. The limitations prescribed in subsection A shall be determined under section 415 of the internal revenue code and the regulations that are then in effect under that section.

C. Notwithstanding this section, the pension payable under this system may be reduced to the extent necessary, as determined by the system, to prevent disqualification of the system under section 415 of the internal revenue code, which imposes additional limitations on the pension payable to members who also may be participating in another tax qualified pension plan or other plan of this state. The system shall advise affected members of any additional limitation of their pension required by this section.

D. For the purposes of this section, "limitation year" means the system's fiscal year.

§ 38-845.02 Payment of pension

The board shall not make a retroactive payment of a pension to a person that is more than one hundred eighty days before the date of the person's application for benefits.

§ 38-845.03 Early retirement

Members who are hired on or after July 1, 2017 and who have earned at least fifteen years of credited service may retire at fifty-two and one-half years of age and will receive an actuarially equivalent retirement benefit to the benefit amount prescribed in section 38-845, subsection I.

§ 38-846 Death benefits

B. The surviving spouse of a deceased member shall be paid a surviving spouse's pension if the spouse was married to the member on the date of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs.

C. The surviving spouse of a deceased retired member is entitled to receive a monthly amount equal to four-fifths of the monthly amount of pension that the decedent would have received immediately before death.

D. The surviving spouse of a deceased member who was not killed in the line of duty or did not die from injuries suffered in the line of duty is entitled to receive a monthly amount calculated in the same manner as an accidental disability pension is calculated pursuant to section 38-845, subsection B. The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member's average monthly benefit compensation less any amount payable for an eligible child under this section. A member who was eligible for or receiving a temporary disability pension at the time of the member's death is not deemed to be retired for the purposes of this subsection. For the purposes of this subsection, "killed in the line of duty" means the decedent's death was the direct and proximate result of the performance of the decedent's public safety duties and does not include suicide. For actuarial valuation purposes, the actuarial present value of the amount computed under this subsection for a surviving spouse of a deceased member who is killed in the line of duty or who dies from injuries suffered in the line of duty, plus any amount payable for an eligible child under this section, shall be deposited directly into the employer account and charged against the investment earnings of the fund before those earnings are distributed to each employer.

E. A surviving spouse shall file a written application with the system in order to receive a survivor benefit.

F. If at least one eligible child is surviving at the death of a member or retired member, but no surviving spouse's pension then becomes payable, a guardian's or conservator's pension shall be payable to the person who is serving, or who is deemed by the local board to be serving, as the legally appointed guardian or custodian of the eligible child. If an eligible child of a member or retired member is surviving at the member's or retired member's death, the eligible child is entitled to receive a child's pension payable to the person who is serving or who is deemed by the local board to be serving as the legally appointed guardian or custodian of the eligible child until the eligible child reaches eighteen years of age, at which time the eligible child's pension shall be paid directly to the eligible child if the person remains eligible to receive the pension and is not subject to a guardianship or conservatorship due to disability or incapacity. The pension of a child with a disability who is eighteen years of age or older and who is subject to a guardianship or conservatorship due to disability or incapacity shall continue to be paid to the guardian or conservator if the child remains eligible for the pension payment. A child's pension or a guardian's or conservator's pension terminates if the child is adopted. In the case of a child with a disability, the child's pension or the guardian's or conservator's pension terminates if the child ceases to be under a disability or ceases to be a dependent of the surviving spouse or guardian. The member may also direct by designation to the local board that the guardian or conservator pension or child's pension be paid to the trustee of a trust created for the benefit of the eligible child. A guardian's or conservator's pension shall also become payable if at least one eligible child is surviving when a surviving spouse's pension terminates. The guardian or conservator shall file a written application with the system in order to receive the guardian's or conservator's pension and child's pension.

G. The board shall pay a guardian's or conservator's pension during the same period in which a pension is payable to at least one eligible child. The guardian, conservator or designated trustee is entitled to receive the same monthly amount as would have been payable to the decedent's surviving spouse had a surviving spouse's pension become payable on the decedent's death.

H. Each eligible child is entitled to a monthly amount equal to one-tenth of the monthly amount of pension that the deceased member or retired member would have received immediately before death. The pension for a child of a deceased member shall be calculated in the same manner as an accidental disability is calculated pursuant to section 38-845, subsection B. A deceased member shall be assumed to be retired for reasons of accidental disability immediately before the member's death. If there are three or more children eligible for a child's pension, a maximum of two shares of the child's pension shall be payable, the aggregate of such shares to be apportioned in equal measure to each eligible child.

I. If a member has accumulated contributions remaining in the system at the date of death of the last beneficiary, a lump sum refund of such accumulated contributions shall be payable to the person whom the member has designated to the local board as the member's refund beneficiary, or if the member's refund beneficiary is not then surviving, to the designated contingent refund beneficiary, or if the designated contingent refund beneficiary is not then surviving or if the surviving designated beneficiary does not apply for the benefit within twelve months from the date of the member's death, at the election of the local board to the person's nearest of kin as determined by the local board or to the estate of the deceased member. The amount of the lump sum refund shall be the remaining accumulated contributions. The beneficiary or person who is claiming to be the nearest of kin shall file a written application in order to receive the refund.

J. In calculating the right to and the amount of the surviving spouse's pension, the law in effect on the date of the death of the member or retired member controls, unless the law under which the member retired provides for a greater benefit amount for a surviving spouse.

§ 38-846.01 Deferred annuity; exception

A. If any member who has at least ten years of credited service terminates employment for reasons other than retirement or disability, the member may elect to receive a deferred annuity, except that if the annuitant withdraws all or part of the annuitant's accumulated contributions in the system all rights in and to a deferred annuity shall be forfeited by the annuitant. A deferred annuity is a lifetime monthly payment actuarially equivalent to the annuitant's accumulated contributions in the system plus an equal amount paid by the employer and shall commence on application on or after the sixty-second birthday of the annuitant. The annuity is not a retirement benefit and annuitants are not entitled to receive any amount prescribed by section 38-845, subsection G or section 38-846, 38-856.05 or 38-857.

B. This section does not apply to a member who becomes a member of the system on or after January 1, 2012. For a member who is hired on or after January 1, 2012 and before July 1, 2017, a member who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for normal retirement if the member attains the service requirement for normal retirement. For a member who is hired on or after July 1, 2017, a member who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for normal retirement if the member attains the credited service requirement for normal retirement. Once a member described in this subsection reaches the normal retirement age, the member may receive payments made under section 38-845.

§ 38-846.02 Termination of membership

A. On termination of employment for any reason other than death or retirement, within twenty days after filing a completed application with the board, a member who becomes a member of the system before January 1, 2012 is entitled to receive the following amounts, less any benefit payments the member has received or any amount the member may owe to the system:

If the member has less than five years of credited service with the system, the member may withdraw the member's accumulated contributions from the system.
If the member has five or more years of credited service with the system, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty-five percent of all member contributions deducted from the member's salary pursuant to section 38-843, subsection C.

(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38-843, subsection C.

(c) 7.0 to 7.9 years of credited service, fifty-five percent of all member contributions deducted from the member's salary pursuant to section 38-843, subsection C.

(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38-843, subsection C.

(e) 9.0 to 9.9 years of credited service, eighty-five percent of all member contributions deducted from the member's salary pursuant to section 38-843, subsection C.

(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38-843, subsection C.

B. If a member who becomes a member of the system before January 1, 2012 has more than ten years of credited service with the system, leaves the monies prescribed in subsection A of this section on account with the system for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection A of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.

C. On termination of employment for any reason other than death or retirement, within twenty days after filing a completed application with the board, a member who becomes a member of the system on or after January 1, 2012 is entitled to receive a lump sum payment equal to the member's accumulated contribution plus interest at a rate determined by the board as of the date of termination, less any benefit payments the member has received as of the date of termination or any amount the member may owe to the system.

D. A member who withdraws the amount prescribed in subsection A, B or C of this section from the system or who elects a transfer pursuant to section 38-846.06 forfeits all rights to benefits under the system and rights to rehearing and appeal, except as provided in section 38-849.

§ 38-846.03 Reinstatement of surviving spouse's pension

A. A surviving spouse whose pension was terminated by reason of remarriage is entitled to reinstatement of the surviving spouse's pension if the surviving spouse is otherwise qualified for a surviving spouse's pension and applies for reinstatement with the public safety personnel retirement system and no other person is currently receiving a guardian's or conservator's pension for an eligible child of the member or retired member. The level of pension payments shall be that amount which was received by the surviving spouse at the date the surviving spouse's pension was terminated, adjusted to reflect ad hoc and scheduled increases from the date of termination to the date of reinstatement.

B. A surviving spouse who is receiving a guardian's or conservator's pension by reason of remarriage and who is otherwise eligible may apply for reinstatement of a surviving spouse's pension. If the surviving spouse's pension becomes payable the guardian's or conservator's pension is terminated.

C. Reinstated surviving spouse's pensions are not retroactive. Payment of a reinstated surviving spouse's pension shall commence as of the first day of the month following receipt by the public safety personnel retirement system of a properly executed written application for reinstatement from the surviving spouse.

§ 38-846.04 Reinstatement of credited service; effect of prior law

A. A member who received a severance refund on termination of employment as provided in section 38-846.02, who is subsequently reemployed by an employer and who may have redeposited the amount withdrawn with interest as provided in section 38-849 or a member who redeems prior service pursuant to statute is subject to the benefits and duties in effect at the following times for the specified situations:

At the time of the member's reemployment if the member is reemployed by an employer other than the same employer.
At the time of the member's reemployment if the member is reemployed by the same employer at least ninety days after the date of termination.
At the time of the member's most recent termination if the member is reemployed by the same employer in any capacity within ninety days after the date of termination.

B. Subsection A of this section does not apply if a court of competent jurisdiction orders reinstatement of benefits and duties under a prior law.

C. If a member was initially employed on or after July 1, 2017, regardless of whether the member received a severance refund or redeposits the amount withdrawn with interest, the member shall return to the system as irrevocably elected pursuant to section 38-842.01.

D. A member who transfers credited service from one employer to another employer pursuant to section 38-853 retains the benefits and duties in effect at the time of the member's transfer.

§ 38-846.05 Retiree pool account; transfers; funding

A. The retiree pool account is established in the fund for the purpose of sharing the actuarial liability attributable to uncontrollable costs for the employers of members who are hired on or after July 1, 2017 and who are determined eligible for a normal retirement benefit pursuant to section 38-844 or for an accidental, ordinary or catastrophic disability pension pursuant to section 38-844 and for survivors of members who are hired on or after July 1, 2017 and who are determined eligible for a death benefit pursuant to section 38-846.

B. For members who are determined eligible for a normal retirement benefit pursuant to section 38-844, an amount equal to the actuarial present value of future benefit payments, calculated as of the member's retirement date, shall be transferred from the employer's account to the retiree pool account.

C. For a member who is determined eligible for an accidental, ordinary or catastrophic disability pension pursuant to section 38-844 and who has not reached the member's normal retirement date, an amount equal to the actuarial present value of future benefit payments already accrued, calculated as of the date of disability retirement, shall be transferred from the employer's account to the retiree pool account. For a member as defined in section 38-842, paragraph 31, subdivision (b) who is determined eligible for an accidental, ordinary or catastrophic disability pension pursuant to section 38-844 and who has not reached the member's normal retirement date, the system actuary shall determine and the system shall assess the employer an amount equal to the actuarial present value of future benefit payments already accrued, calculated as of the member's disability retirement date, consistent with section 38-845, subsection F. If a member who is determined eligible for an accidental, ordinary or catastrophic disability pension has reached the member's normal retirement date, the amount transferred to the retiree pool account is calculated in the same manner as a normal retirement pursuant to subsection B of this section.

D. For a survivor of a deceased member determined eligible for a death benefit pursuant to section 38-846, if the member was not retired and had not reached the member's normal retirement date, an amount equal to the actuarial present value of future survivor benefit payments already accrued, calculated as of the survivor's retirement date, shall be transferred from the employer's account to the retiree pool account. If the deceased member had reached the member's normal retirement date, an amount equal to the actuarial present value of future survivor benefit payments, plus any amount payable, calculated as of the survivor's retirement date, shall be transferred from the employer's account to the retiree pool account.

E. The retiree pool account shall remain one hundred percent funded. In any fiscal year that the retiree pool account is not one hundred percent funded as of June 30, the amount necessary to adjust the retiree pool account up or down to one hundred percent funded shall be transferred from or to the investment earnings of the fund before those earnings are distributed to each employer's account.

§ 38-846.06 Eligible rollover distributions; direct rollovers

A. Notwithstanding any other provision of this article, a member or the member's surviving spouse beneficiary who is entitled to receive an eligible rollover distribution may elect to directly roll over all or part of that distribution to an eligible retirement plan.

B. A member's beneficiary who is not the member's spouse may elect to directly roll over all or part of an eligible rollover distribution from the system on the death of the member under the same terms and conditions as apply to a member or the member's surviving spouse beneficiary pursuant to this section, except that a nonspouse beneficiary may elect to make a direct rollover only to an eligible retirement plan as defined in section 38-842, paragraph 25, subdivision (a) or (b).

C. If a member or the member's beneficiary elects to have an eligible rollover distribution paid directly to an eligible retirement plan, that distribution shall be made in the form of a direct trustee-to-trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board.

D. All rollovers made pursuant to this section are subject to the direct rollover requirements under section 401(a)(31) of the internal revenue code, the rollover notice requirements under section 402(f) of the internal revenue code and the mandatory withholding requirements under section 3405(c) of the internal revenue code. The period for providing the rollover notice as required under section 402(f) of the internal revenue code is not less than thirty days and not more than one hundred eighty days before the date of distribution.

§ 38-847 Local boards

A. To the extent outlined in this section, the administration of the system and responsibility for making the provisions of the system effective for each employer are vested in a local board. The department of public safety, the Arizona game and fish department, the department of emergency and military affairs, the university of Arizona, Arizona state university, northern Arizona university, each county sheriff's office, each county attorney's office, each county parks department, each municipal fire department, each eligible fire district, each community college district, each municipal police department, the department of law, the department of liquor licenses and control, the Arizona department of agriculture, the Arizona state parks board, each Indian reservation police agency and each Indian reservation firefighting agency shall have a local board. A nonprofit corporation operating pursuant to sections 28-8423 and 28-8424 shall have one local board for all of its members. Each local board shall be constituted as follows:

For political subdivisions or Indian tribes, the mayor or chief elected official or a designee of the mayor or chief elected official approved by the respective governing body as chairperson, two members elected by secret ballot by members employed by the appropriate employer and two citizens, one of whom shall be the head of the merit system, or the head's designee from among the other members of the merit system, if it exists for the group of members, appointed by the mayor or chief elected official and with the approval of the governing body of the city or the governing body of the employer. The appointed two citizens shall serve on both local boards in a city or Indian tribes where both fire and police department employees are members.
For state agencies and nonprofit corporations operating pursuant to sections 28-8423 and 28-8424, two members elected by secret ballot by the members employed by the appropriate employer and three citizens appointed by the governor. Each state agency local board shall elect a chairperson.
For fire districts, the chairperson of the fire district governing board or the chairperson's designee, two members elected by secret ballot by members employed by the fire district and two citizens appointed by the chairperson of the fire district governing board, one of whom is a resident of the fire district and one of whom has experience in personnel administration but who is not required to be a resident of the fire district.
For joint powers authorities organized pursuant to section 48-805.01, the joint powers authority board chairperson or a designee approved by the governing body, two members elected by secret ballot by members employed by the joint powers authority and two citizens, one of whom is a resident of one of the partner entities and one of whom has experience in personnel administration but who is not required to be a resident of a partner entity.

B. On the taking effect of this system for an employer, the appointments and elections of local board members shall take place with one elective and appointive local board member serving a term ending two years after the effective date of participation for the employer and other local board members serving a term ending four years after the effective date. Thereafter, every second year, and as a vacancy occurs, an office shall be filled for a term of four years in the same manner as previously provided.

C. Each local board shall be fully constituted pursuant to subsection A of this section within sixty days after the employer's effective date of participation in the system. If the deadline is not met, on the written request of any member who is covered by the local board or the employer to the board of trustees, the board of trustees may appoint all vacancies of the local board pursuant to subsection A of this section and designate whether each appointive position is for a two-year or four-year term. If the board of trustees cannot find individuals to serve on the local board who meet the requirements of subsection A of this section, the board of trustees may appoint individuals to serve as interim local board members until qualified individuals are appointed or elected. Each local board shall meet at least twice a year. Each member of a local board, within ten days after the member's appointment or election, shall take an oath of office that, so far as it devolves on the member, the member shall diligently and honestly administer the affairs of the local board and that the member shall not knowingly violate or willingly allow to be violated any of the provisions of law applicable to the system. Within one hundred eighty days after appointment or election, each board member shall complete local board training as prescribed by the board of trustees, including open meeting laws, ethics, legal review and fiduciary responsibilities and duties.

D. Except as limited by subsection E of this section, a local board shall have such powers as may be necessary to discharge the following duties:

To decide all questions of eligibility for membership and disability and in the line of duty death benefits under the system.
To prescribe procedures to be followed by claimants in filing applications for disability and in the line of duty death benefits.
To make a determination as to the right of any claimant to a disability and in the line of duty death benefit, to issue opinions on questions of whether benefits are consistent with and allowable under the system and to afford any claimant or the board of trustees, or both, a right to a rehearing on the original determination. Except as otherwise required by law, unless all parties involved in a matter presented to the local board for determination otherwise agree, the local board shall commence a hearing on the matter within ninety days after the date the matter is presented to the local board for determination. If a local board fails to commence a hearing as provided in this paragraph, on a matter presented to the local board for determination, the relief demanded by the party petitioning the local board is deemed granted and approved by the local board.
To request and receive from the employers and from members such information as is necessary for the proper administration of the system and action on claims for eligibility for membership and disability and in the line of duty death benefits, and to forward such information to the board of trustees.
To distribute, in such manner as the local board determines to be appropriate, information explaining the system received from the board of trustees.
To furnish the employer, the board of trustees and the legislature, on request, with such annual reports with respect to the administration of the system as are reasonable and appropriate.
To receive and review the actuarial valuation of the system for its group of members.
To receive and review reports of the financial condition and of the receipts and disbursements of the fund from the board of trustees.
To appoint medical boards as provided in section 38-859.
To sue and be sued to effectuate the duties and responsibilities set forth in this article.

E. A local board may not add to, subtract from, modify or waive any of the terms of the system, change or add to any benefits provided by the system or waive or fail to apply any requirement of eligibility for membership or disability and in the line of duty death benefits under the system. Notwithstanding any limitations periods imposed in this article, including subsection D, paragraph 3 and subsections G and H of this section, if the board of trustees determines a local board decision violates the internal revenue code or threatens to impair the system's status as a qualified plan under the internal revenue code, the local board's decision is not final and binding and the board of trustees may refrain from implementing or complying with the local board decision.

F. A local board shall establish and adopt such rules as it deems necessary for its administration and to adjudicate claims and disputes. At a minimum, the board's rules shall incorporate the model uniform rules for local board procedure that are issued by the board of trustees. All rules and decisions of a local board shall be uniformly and consistently applied to all members in similar circumstances. If a claim or dispute is presented to a local board for determination but the local board has not yet adopted uniform rules of procedure for adjudication of the claim or dispute, the local board shall adopt and use the model uniform rules of local board procedure that are issued by the board of trustees' fiduciary counsel to adjudicate the claim or dispute.

G. Except as otherwise provided in this article, any action by a majority vote of the members of a local board that is not inconsistent with the provisions of the system and the internal revenue code shall be final, conclusive and binding on all persons affected by it unless a timely application for a rehearing or appeal is filed as provided in this article. Not later than twenty days after taking action, the local board shall submit to the board of trustees the minutes from the local board meeting that include the name of the member affected by its decision, a description of the action taken and an explanation of the reasons and all documents submitted to the local board for the action taken, including the reports of a medical board. The board of trustees may require additional records from the local board or the employer or may require that the local board conduct a rehearing on the matter. The board of trustees may not implement and comply with any local board action that does not comply with the internal revenue code or that threatens to jeopardize the system's status as a qualified plan under the internal revenue code.

H. A claimant may apply for or the board of trustees may require a rehearing before the local board within the time periods prescribed in this subsection, except that if a decision of a local board violates the internal revenue code or threatens to jeopardize the system's status as a qualified plan under the internal revenue code, any limitation period for the board of trustees to require a rehearing of a local board decision does not apply. An application for a rehearing shall be filed in writing with a member of the local board or its secretary within sixty days after:

The applicant-claimant receives notification of the local board's original action by certified mail, by attending the meeting at which the action is taken or by receiving benefits from the system pursuant to the local board's original action, whichever occurs first.
The applicant-board of trustees receives notification of the local board's original action as prescribed by subsection G of this section by email or certified mail.

I. A hearing before a local board on a matter remanded from the superior court is not subject to a rehearing before the local board.

J. Decisions of local boards are subject to judicial review pursuant to title 12, chapter 7, article 6.

K. When making a ruling, determination or calculation, the local board shall be entitled to rely on information furnished by the employer, a medical board, the board of trustees, independent legal counsel or the actuary for the system.

L. Each member of a local board is entitled to one vote. A majority is necessary for a decision by the members of a local board at any meeting of the local board.

M. The local board shall adopt such bylaws as it deems desirable. The local board shall elect a secretary who may, but need not, be a member of the local board. The secretary of the local board shall keep a record and prepare minutes of all meetings in compliance with chapter 3, article 3.1 of this title and forward the minutes and all necessary communications to the board of trustees as prescribed by subsection G of this section. Within one hundred eighty days after election, the local board's secretary shall complete local board training as prescribed by the board of trustees, including open meeting laws, ethics, legal review and fiduciary responsibilities and duties.

N. The fees of the medical board and of the local board's independent legal counsel and all other expenses of the local board necessary for the administration of the system shall be paid by the employer and not the board of trustees or system at such rates and in such amounts as the local board shall approve. Each local board shall hire an independent legal counsel who is not an employee of or contracted with the employer or any employee organization and owes its duty of loyalty only to the local board in connection with its representation of the local board. The independent legal counsel may not represent a member of the plan before any local board or any judicial appeal of a local board decision. The local board's independent legal counsel shall review the model uniform rules for local board procedure that are issued by the board of trustees.

O. The local board shall issue directions to the board of trustees concerning all benefits that are to be paid from the employer's account pursuant to the provisions of the fund. The local board shall keep on file, in such manner as it may deem convenient or proper, all reports from the board of trustees and the actuary.

P. The local board and the individual members of the local board shall be indemnified from the assets of the employer for any judgment against the local board or its members, including attorney fees and costs, arising from any act, or failure to act, made in good faith pursuant to the provisions of the system, including expenses reasonably incurred in the defense of any claim relating to the act or failure to act.

Q. A local board shall submit to the board of trustees the names of the members of the local board and the local board's secretary and independent legal counsel and shall submit any changes to those positions within ten days after the change.

R. An employer and a local board shall submit any reports, data, paperwork or other materials that are requested by the board of trustees for any reason, including local board action or inaction or to investigate a complaint regarding a local board. If the board of trustees or its designee through an audit or investigation finds that the local board is not in compliance with statute or the model uniform rules for local board procedure, the board of trustees shall notify the local board of the noncompliance and the local board shall have sixty days to take corrective action. If the local board fails to take adequate corrective action, the board of trustees may act on behalf of the local board until the matter is resolved. The board of trustees or its designee shall work with the local board members to take the appropriate corrective actions, including appointing any vacant or noncompliant local board member positions, if necessary, to bring the local board and its membership, policies and procedures into compliance.

§ 38-847.01 Membership in retirement plan; eligibility

A. Each employee of an eligible group shall participate in the plan on proper determination of eligibility for membership by the local board pursuant to section 38-847, subsection D.

B. The employer shall provide to the local board all necessary information to render a decision on the employee's eligibility for membership. The information shall include:

The date the employee was hired or appointed to the position.
The employee's position title.
A description of the essential functions for the position.

C. An employee receiving a pension from the plan is not subject to this section, but is subject to section 38-849.

§ 38-847.02 Voluntary local board consolidation; membership; duties

A. A local board may enter into an intergovernmental agreement with other local boards to consolidate the boards for the respective employers.

B. The consolidated local board shall work with the board of trustees to ensure that the new board is duly empaneled consistent with the representation outlined in section 38-847, subsection A and that all appointments or elections for local board members are completed in a timely manner. The consolidated local board shall submit to the board of trustees the names of the members of the consolidated local board and the consolidated local board's secretary and independent legal counsel and shall submit any changes to those positions within ten days after the change.

C. The consolidated local board shall decide eligibility for membership and disability and in the line of duty death benefits and have all of the duties and responsibilities of a local board pursuant to this article.

D. Within one hundred eighty days after appointment or election, all consolidated local board members and the local board's secretary shall complete local board training as prescribed by the board of trustees, including open meeting laws, ethics, legal review and fiduciary responsibilities and duties. The local board's independent legal counsel shall review the model uniform rules for local board procedure that are issued by the board of trustees.

E. The local board's independent legal counsel may not be employed by or contracted with the employer or any employee organizations. The independent legal counsel may not represent a member of the plan before any local board or any judicial appeal of a local board decision.

§ 38-847.03 Uniform medical review; administrator; disability decisions; definitions

A. Within ten days after a local board receives an application for disability benefits or in the line of duty death benefits, the local board secretary shall submit the application to the administrator.

B. After a local board has made a determination on the application, or the application is deemed granted pursuant to section 38-847, subsection D, paragraph 3 or section 38-893, subsection D, paragraph 2 for disability benefits or in the line of duty death benefits, the administrator or the administrator's designee shall review the findings. The administrator may contract with medical professionals to review applications under this section.

C. The board of trustees or the administrator may require additional records from the local board or the employer or may require that the local board conduct a rehearing on the matter.

D. If the board of trustees disagrees with the decision of the local board after a rehearing requested pursuant to subsection C of this section, the decision is subject to judicial review pursuant to title 12, chapter 7, article 6.

E. For the purposes of this section:

"Administrator" means the administrator appointed by the board pursuant to section 38-848.
"Local board" means a local board formed under section 38-847, 38-847.02, 38-893 or 38-893.01.

§ 38-847.04 Board of trustees; determination of retirement benefits; definitions

A. Each employer, within ten days after receiving a completed retirement application from a member, shall submit the retirement application to the board. The board or its designee shall decide all questions of eligibility for service credits and retirement benefits and will determine the amount, manner and time of payment of the retirement benefits. If the board or its designee finds discrepancies in the information received, the board or its designee shall contact the employer and applicant and resolve the discrepancies before the start date of the benefits.

B. For the purposes of this section, "employer" and "member" have the same meanings prescribed in section 38-842 or 38-881.

§ 38-848 Board of trustees; powers and duties; reporting requirements; independent trust fund; administrator; agents and employees; advisory committee

A. The board of trustees shall consist of nine members and shall have the rights, powers and duties that are set forth in this section. The term of office of members shall be five years to expire on the third Monday in January of the appropriate year. The board shall select a chairperson from among its members each calendar year. Members are eligible to receive compensation in an amount of $50 a day, but not to exceed $1,000 in any one fiscal year, and are eligible for reimbursement of expenses pursuant to chapter 4, article 2 of this title. The board consists of the following members appointed as follows:

Two members representing law enforcement, one of whom is appointed by the president of the senate and one of whom is appointed by the governor. A statewide association representing law enforcement in this state shall forward nominations to the appointing elected officials, providing at least three nominees for each position. At least one of the members appointed under this paragraph shall be an elected local board member.
Two members representing firefighters, one of whom is appointed by the speaker of the house of representatives and one of whom is appointed by the governor. A statewide association representing firefighters in this state shall forward nominations to the appointing elected officials, providing at least three nominees for each position. At least one of the members appointed under this paragraph shall be an elected local board member.
Three members representing cities and towns in this state, one of whom is appointed by the president of the senate, one of whom is appointed by the speaker of the house of representatives and one of whom is appointed by the governor. An association representing cities and towns in this state shall forward nominations to the appointing elected officials, providing at least three nominees for each position. These nominees shall represent taxpayers or employers and may not be members of the system.
One member who represents counties in this state and who is appointed by the governor. An association representing county supervisors in this state shall forward nominations to the governor, providing at least three nominees for the position. These nominees shall represent taxpayers or employers and may not be members of the system.
One member who is appointed by the governor from a list of three nominees forwarded by the board. The board shall select the nominees to forward to the governor from a list of at least five nominees received from the advisory committee.

B. Each appointment made pursuant to subsection A of this section shall be chosen from the list of nominees provided to the appointing elected official. For any appointment made by the governor pursuant to subsection A of this section, before appointment by the governor, a prospective member of the board shall submit a full set of fingerprints to the governor to obtain a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. A board member may be reappointed. Notwithstanding section 38-295, a board member may be removed from office only for cause by the appointing power or because the board member has vacated the member's seat on the board. A board member who is removed for cause shall be provided written notice and an opportunity for a response. The appointing power may remove a board member based on written findings that specify the reason for removal. Any vacancy that occurs other than by expiration of a term shall be filled for the balance of the term. All vacancies shall be filled in the same manner as the initial appointment. A board member vacates the office if the member either:

Is absent without excuse from three consecutive regular meetings of the board.
Resigns, dies or becomes unable to perform board member duties.

C. The members of the board who are appointed pursuant to subsection A of this section and who are not members of the system shall be independent, qualified professionals who are responsible for the performance of fiduciary duties and other responsibilities required to preserve and protect the fund and shall have at least ten years' substantial experience as any one or a combination of the following:

A portfolio manager acting in a fiduciary capacity.
A securities analyst.
A senior executive or principal of a trust institution, investment organization or endowment fund acting either in a management or an investment-related capacity.
A chartered financial analyst in good standing as determined by the chartered financial analyst institute.
A current or former professor or instructor at the college or university level in the field of economics, finance, actuarial science, accounting or pension-related subjects.
An economist.
Any other senior executive engaged in the field of public or private finances or with experience with public pension systems.
A senior executive in insurance, banking, underwriting, auditing, human resources or risk management.

D. All monies in the fund shall be deposited and held in a public safety personnel retirement system depository. Monies in the fund shall be disbursed from the depository separate and apart from all monies or funds of this state and the agencies, instrumentalities and subdivisions of this state, except that the board may commingle the assets of the fund and the assets of all other plans entrusted to its management in one or more group trusts, subject to the crediting of receipts and earnings and charging of payments to the appropriate employer, system or plan. The monies shall be secured by the depository in which they are deposited and held to the same extent and in the same manner as required by the general depository law of this state. For purposes of making the decision to invest in securities owned by the fund or any plan or trust administered by the board, the fund and assets of the plans and the plans' trusts are subject to the sole management of the board for the purpose of this article except that, on the board's election to invest in a particular security or make a particular investment, the assets comprising the security or investment may be chosen and managed by third parties approved by the board. The board may invest in portfolios of securities chosen and managed by a third party. The board's decision to invest in securities such as mutual funds, commingled investment funds, exchange traded funds, private equity or venture capital limited partnerships, real estate limited partnerships or limited liability companies and real estate investment trusts whose assets are chosen and managed by third parties is not an improper delegation of the board's investment authority.

E. All contributions under this system and other retirement plans that the board administers shall be forwarded to the board and shall be held, invested and reinvested by the board as provided in this article. All property and monies of the fund and other retirement plans that the board administers, including income from investments and from all other sources, shall be retained for the exclusive benefit of members, as provided in the system and other retirement plans that the board administers, and shall be used to pay benefits to members or their beneficiaries or to pay expenses of operation and administration of the system and fund and other retirement plans that the board administers.

F. The board shall have the full power in its sole discretion to invest and reinvest, alter and change the monies accumulated under the system and other retirement plans and trusts that the board administers as provided in this article. In addition to its power to make investments managed by others, the board may delegate the authority the board deems necessary and prudent to investment management pursuant to section 38-848.03, as well as to the administrator, employed by the board pursuant to subsection M, paragraph 6 of this section, and any deputy or assistant administrators to invest the monies of the system and other retirement plans and trusts that the board administers if the administrator, investment management and any deputy or assistant administrators follow the investment policies that are adopted by the board. The board may commingle securities and monies of the fund, the elected officials' retirement plan, the corrections officer retirement plan and other plans or monies entrusted to its care, subject to the crediting of receipts and earnings and charging of payments to the account of the appropriate employer, system or plan. In making every investment, the board shall exercise the judgment and care under the circumstances then prevailing that persons of ordinary prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income from their funds as well as the probable safety of their capital, if:

Not more than eighty percent of the combined assets of the system or other plans that the board manages is invested at any given time in corporate stocks, based on the cost value of the stocks irrespective of capital appreciation.
Not more than five percent of the combined assets of the system or other plans that the board manages is invested in corporate stock issued by any one corporation, other than corporate stock issued by corporations chartered by the United States government or corporate stock issued by a bank or insurance company.
Not more than five percent of the voting stock of any one corporation is owned by the system and other plans that the board administers, except that this limitation does not apply to membership interests in limited liability companies.
Corporate stocks and exchange traded funds eligible for direct purchase are restricted to stocks and exchange traded funds that, except for bank stocks, insurance stocks, stocks acquired as an investment in any commingled investment, stocks acquired for coinvestment in connection with the system's or the plans' or trusts' commingled investments and interests in limited liability companies and mutual funds, are any of the following:

(a) Listed or approved on issuance for listing on an exchange registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78pp).

(b) Designated or approved on notice of issuance for designation on the national market system of a national securities association registered under the securities exchange act of 1934, as amended (15 United States Code sections 78a through 78pp).

(c) Listed or approved on issuance for listing on an exchange registered under the laws of this state or any other state.

(d) Listed or approved on issuance for listing on an exchange of a foreign country with which the United States is maintaining diplomatic relations at the time of purchase, except that not more than twenty percent of the combined assets of the system and other plans that the board manages is invested in foreign securities, based on the cost value of the stocks irrespective of capital appreciation.

(e) An exchange traded fund that is recommended by the chief investment officer of the system, that is registered under the investment company act of 1940 (15 United States Code sections 80a-1 through 80a-64) and that is both traded on a public exchange and based on a publicly recognized index.

G. Notwithstanding any other law, the board is not required to invest in any type of investment that is dictated or required by any entity of the federal government and that is intended to fund economic development projects, public works or social programs, but may consider such economically targeted investments pursuant to its fiduciary responsibility. The board, on behalf of the system and all other plans or trusts the board administers, may invest in, lend monies to or guarantee the repayment of monies by a limited liability company, limited partnership, joint venture, partnership, limited liability partnership or trust in which the system and plans or trusts have a financial interest, whether the entity is closely held or publicly traded and that, in turn, may be engaged in any lawful activity, including venture capital, private equity, the ownership, development, management, improvement or operation of real property and any improvements or businesses on real property or the lending of monies.

H. Conference call meetings of the board that are held for investment purposes only are not subject to chapter 3, article 3.1 of this title, except that the board shall maintain minutes of these conference call meetings and make them available for public inspection within twenty-four hours after the meeting. The board shall review the minutes of each conference call meeting and shall ratify all legal actions taken during each conference call meeting at the next scheduled meeting of the board.

I. The board is not liable for the exercise of more than ordinary care and prudence in the selection of investments and performance of its duties under the system and is not limited to so-called "legal investments for trustees", but all monies of the system and other plans that the board administers shall be invested subject to all of the conditions, limitations and restrictions imposed by law.

J. Except as provided in subsection F of this section, the board may:

Invest and reinvest the principal and income of all assets that the board manages without distinction between principal and income.
Sell, exchange, convey, transfer or otherwise dispose of any investments made on behalf of the system or other plans the board administers in the name of the system or plans by private contract or at public auction.
Also:

(a) Vote on any stocks, bonds or other securities.

(b) Give general or special proxies or powers of attorney with or without power of substitution.

(c) Exercise any conversion privileges, subscription rights or other options and make any payments incidental to the exercise of the conversion privileges, subscription rights or other options.

(d) Consent to or otherwise participate in corporate reorganizations or other changes affecting corporate securities, delegate discretionary powers and pay any assessments or charges in connection therewith.

(e) Generally exercise any of the powers of an owner with respect to stocks, bonds, securities or other investments held in or owned by the system or other plans whose assets the board administers.

Make, execute, acknowledge and deliver any other instruments that may be necessary or appropriate to carry out the powers granted in this section.
Register any investment held by the system or other plans whose assets the board administers in the name of the system or plan or in the name of a nominee or trust.
At the expense of the system or other plans that the board administers, enter into an agreement with any bank or banks for the safekeeping and handling of securities and other investments coming into the possession of the board. The agreement shall be entered into under terms and conditions that secure the proper safeguarding, inventory, withdrawal and handling of the securities and other investments. Access to and deposit or withdrawal of the securities from any place of deposit selected by the board is not allowed and may not be made except as the terms of the agreement provide.
Appear before local boards and the courts of this state and political subdivisions of this state through counsel or an appointed representative to protect the fund or the assets of other plans that the board administers. The board is not responsible for the actions or omissions of the local boards under this system but may require a review or rehearing of actions or omissions of local boards. A limitation period does not prohibit the board or administrator from contesting or require the board or administrator to implement or comply with a local board decision that violates the internal revenue code or that threatens to impair the tax-qualified status of the system or any plan administered by the board or administrator.
Empower the fund administrator to take actions on behalf of the board that are necessary for the protection and administration of the fund or the assets of other plans that the board administers pursuant to the guidelines of the board.
Do all acts, whether or not expressly authorized, that may be deemed necessary or proper for the protection of the investments held in the fund or owned by other plans or trusts that the board administers.
Settle threatened or actual litigation against any system or plan that the board administers.

K. Investment expenses and operation and administrative expenses of the board shall be accounted for separately and allocated against investment income.

L. The board, as soon as possible within a period of six months following the close of any fiscal year, shall transmit to the governor and the legislature a comprehensive annual financial report on the operation of the system and other plans that the board administers that contains, among other things:

A balance sheet.
A statement of income and expenditures for the year.
A report on an actuarial valuation of its assets and liabilities.
A list of investments owned.
The total rate of return, yield on cost, percentage of cost to market value of the fund and the assets of other plans that the board administers.
Any other statistical and financial data that may be necessary for the proper understanding of the financial condition of the system and other plans that the board administers and the results of their operations. A synopsis of the annual report shall be published for the information of members of the system, the elected officials' retirement plan or the corrections officer retirement plan.
An analysis of the long-term level percent of employer contributions and compensation structure and whether the funding methodology is sufficient to pay one hundred percent of the unfunded accrued liability under the elected officials' retirement plan.
An estimate of the aggregate employer contribution rate for the public safety personnel retirement system for the next ten fiscal years and an estimate of the aggregate employer contribution rate for the corrections officer retirement plan for the next ten fiscal years.
An estimate of the employer contribution rates for the next ten fiscal years for each of the following employers within the public safety personnel retirement system:

(a) Department of liquor licenses and control.

(b) Department of public safety.

(d) University of Arizona.

(e) Arizona state university.

(f) Arizona game and fish department.

(g) Department of law.

(h) Department of emergency and military affairs.

(i) Arizona state parks board.

An estimate of the employer contribution rates for the next ten fiscal years for each of the following employers within the corrections officer retirement plan:

(a) State department of corrections.

(b) Department of public safety.

(d) Department of juvenile corrections.

An estimate of the aggregate fees paid for private equity investments and other alternative investments, including management fees and performance fees and carried interest.

M. The board shall:

Maintain the accounts of the system and other plans that the board administers and issue statements to each employer annually and to each member who requests a statement.
Report the results of the actuarial valuations to the local boards and employers.
Contract on a fee basis with an independent investment counsel to advise the board in the investment management of the fund and assets of other plans that the board administers and with an independent auditing firm to audit the board's accounting.
Allow the auditor general to make an annual audit and transmit the results to the governor and the legislature.
Contract on a fee basis with an actuary who shall make actuarial valuations of the system and other plans that the board administers, be the technical adviser of the board on matters regarding the operation of the funds created by the provisions of the system, the elected officials' retirement plan, the corrections officer retirement plan and the public safety cancer insurance policy program and perform other duties required in connection therewith. The actuary must be a member of a nationally recognized association or society of actuaries.
Employ, as administrator, a person, state department or other body to serve at the pleasure of the board.
Establish procedures and guidelines for contracts with actuaries, auditors, investment counsel and legal counsel and for safeguarding of securities.
Issue a request for proposals every five years for an external auditor. The board is not required to change its auditor after issuing the request for proposals.
Develop a policy regarding routine stress testing of the retirement systems and plans administered by the board at the employer level and system level. The stress test shall use industry standards, such as the inclusion of assumptions regarding investment returns, inflation, population growth, payroll growth and employer contributions. For the purposes of this paragraph, "stress test" means an assessment of the risk exposure of the retirement system or plan, including scenario analysis, simulation analysis and sensitivity analysis.

N. The administrator, under the direction of the board, shall:

Administer this article.
Be responsible for the recruitment, hiring and day-to-day management of employees.
Invest the monies of the system and other plans that the board administers as the board deems necessary and prudent as provided in subsections F and J of this section and subject to the investment policies and fund objectives adopted by the board.
Establish and maintain an adequate system of accounts and records for the system and other plans that the board administers, which shall be integrated with the accounts, records and procedures of the employers so that the system and other plans that the board administers operate most effectively and at minimum expense and that duplication of records and accounts is avoided.
In accordance with the board's governance policy and procedures and the budget adopted by the board, hire employees and services the administrator deems necessary and prescribe their duties, including the hiring of one or more deputy or assistant administrators to manage the system's operations, investments and legal affairs.
Be responsible for income, the collection of the income and the accuracy of all expenditures.
Recommend to the board annual contracts for the system's actuary, auditor, investment counsel, legal counsel and safeguarding of securities.
Perform additional duties and powers prescribed by the board and delegated to the administrator.

O. The system is an independent trust fund, and the board is not subject to title 41, chapter 6. Contracts for goods and services approved by the board are not subject to title 41, chapter 23. As an independent trust fund whose assets are separate and apart from all other funds of this state, the system and the board are not subject to the restrictions prescribed in section 35-154 or article IX, sections 5 and 8, Constitution of Arizona. Loans, guarantees, investment management agreements and investment contracts that are entered into by the board are contracts memorializing obligations or interests in securities that the board has concluded, after thorough due diligence, do not involve investments in Sudan or Iran or otherwise provide support to terrorists or in any way facilitate illegal immigration into the United States. These contracts do not involve the procurement, supply or provision of goods, equipment, labor, materials or services that would require the warranties required by section 41-4401.

P. All trust funds administered by the board are exempt from title 44, chapter 3. The board shall adopt policies for monies presumed to be abandoned, including requirements for the notification of the presumed owner and for distributing the monies if the owner establishes an entitlement in the monies. Monies in the retirement plans and system administered by the board are presumed to be abandoned two years after any of the following, whichever occurs first:

The date of the distribution or attempted distribution of the monies.
The date of the required distribution as stated in the plan or trust agreement that governs the plan.
If determinable by the holder, the date specified in the income tax laws of the United States by which distribution of the monies must begin in order to avoid a tax penalty.

Q. The board, the administrator, the deputy or assistant administrators and all persons employed by them are subject to title 41, chapter 4, article 4. The administrator, deputy or assistant administrators and other employees of the board are entitled to receive compensation pursuant to section 38-611.

R. In consultation with the director of the department of administration, the board may enter into employment agreements and establish the terms of those agreements with persons holding any of the following system positions:

Administrator.
Deputy or assistant administrator.
Chief investment officer.
Deputy chief investment officer.
Fiduciary or investment counsel.

S. The attorney general or an attorney approved by the attorney general and paid by the fund is the attorney for the board and shall represent the board in any legal proceeding or forum that the board deems appropriate. The board, administrator, deputy or assistant administrators and employees of the board are not personally liable for any acts done in their official capacity in good faith reliance on the written opinions of the board's attorney.

T. At least once in each five-year period after the effective date, the actuary shall make an actuarial investigation into the mortality, service and compensation experience of the members and beneficiaries of the system and other plans that the board administers and shall make a special valuation of the assets and liabilities of the monies of the system and plans. Taking into account the results of the investigation and special valuation, the board shall adopt for the system and other plans that the board administers those mortality, service and other tables deemed necessary.

U. On the basis of the tables the board adopts, the actuary shall make a valuation of the assets and liabilities of the funds of the system and other plans that the board administers at least every year. By November 1 of each year the board shall provide a preliminary report and by December 1 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.

V. Neither the board nor any member or employee of the board shall directly or indirectly, for the board, the member or the employee or as an agent, in any manner use the monies or deposits of the fund except to make current and necessary payments, nor shall the board or any member or employee become an endorser or surety or in any manner an obligor for monies loaned by or borrowed from the fund or the assets of any other plans that the board administers.

W. Financial or commercial information that is provided to the board, employees of the board and attorneys of the board in connection with investments in which the board has invested or investments the board has considered for investment is confidential, proprietary and not a public record if the information is information that would customarily not be released to the public by the person or entity from whom the information was obtained.

X. A person who is a dealer as defined in section 44-1801 and who is involved in securities or investments related to the board's investments is not eligible to serve on the board.

Y. The public safety personnel retirement system advisory committee is established and shall serve as a liaison between the board and the members and employers of the system. The president of the senate and the speaker of the house of representatives shall each appoint to the committee one member. The remaining members of the committee shall be appointed by the chairperson of the board from names submitted to the chairperson by associations representing law enforcement, firefighters, state government, counties, cities and towns and tribal governments. The committee shall select a chairperson from among its members each calendar year. The committee members appointed by the chairperson of the board shall consist of the following ten members:

A member who is a law enforcement officer.
A member who is a firefighter.
A member of the elected officials' retirement plan.
A member of the corrections officer retirement plan.
A retiree from the public safety personnel retirement system.
A representative from a city or town in this state.
A representative from a county in this state.
A representative from a fire district in this state.
A representative from a state employer.
A representative from a tribal government located in this state.

§ 38-848.01 Qualified governmental excess benefit arrangement; definitions

A. The board may establish a qualified governmental excess benefit arrangement for the sole purpose of enabling the board to continue to apply the same formula for determining benefits payable to all employees covered by the system whose benefits under the system are limited by section 415 of the internal revenue code.

C. All members and retired members of the system are eligible to participate in the qualified governmental excess benefit arrangement if their benefits under the system would exceed the limitations imposed by section 415 of the internal revenue code.

D. On or after the effective date of the qualified governmental excess benefit arrangement, the employer shall pay to each eligible member of the system who retires on or after the effective date and to each retired member who retired before the effective date and that member's beneficiary, if required, a supplemental pension benefit equal to the amount by which the benefit that would have been payable under the system, without regard to any provisions in the system incorporating the limitation on benefits imposed by section 415 of the internal revenue code, exceeds the benefit actually payable taking into account the limitation imposed on the system by section 415 of the internal revenue code. The board shall compute and pay the supplemental pension benefits under the same terms and conditions and to the same person as the benefits payable to or on account of a retired member under the system.

F. The terms and conditions contained in the system, other than those relating to the benefit limitation imposed by section 415 of the internal revenue code, apply, unless the terms and conditions are inconsistent with the purpose of the qualified governmental excess benefit arrangement.

G. For the purposes of this section:

"Internal revenue code" has the same meaning prescribed in section 42-1001.
"Qualified governmental excess benefit arrangement" means a portion of the system if:

(a) The portion is maintained solely to provide to members of the system that part of a member's annual benefit that is otherwise payable under the terms of the system and that exceeds the limitations imposed by section 415 of the internal revenue code.

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the system unless the trust is maintained solely for the purpose of providing excess benefits.

§ 38-848.02 Board of trustees; report on employer and employee costs; posting funding ratio

A. On or before December 1 of each year, the board of trustees shall provide to the legislature and the joint legislative budget committee and shall post on its website the shared cost structure of employees and employers, the funding status and the rate of return. The report to the legislature shall include when the trigger to the reduction in the employee rates is being met.

B. The board of trustees shall post on its website for each plan the board administers each employer's funding ratio.

§ 38-848.03 Appointed investment management

A. The board may appoint investment management. Investment management shall have:

The highest professional and fiduciary recommendations.
Not less than three years' experience at handling institutional investments of at least two hundred fifty million dollars. This paragraph is satisfied if investment management, the individual retained by investment management or individual employees in a firm of investment managers meet this requirement.
Had responsibility for investment decision making as an insurance company investment fund, an investment division of a bank, a mutual fund, an investment organization or institution, a pension fund or an investment adviser who is designated as a chartered financial analyst by the chartered financial analyst institute.

B. A bank serving as investment management does not have a conflict of interest because it is also a depository in which any monies administered by the board are deposited.

C. The board shall appoint investment management for a term of one year and may appoint the investment management to succeeding terms. The board may remove investment management for not complying with this article or for failure to comply with or adhere to the board's investment goals, objectives or policies.

D. Investment management appointed by the board:

May purchase and sell in the name of the system and other plans that the board administers any of the securities and investments held by the system or plans.
Subject to any restrictions imposed by the board, is responsible for making all investment decisions relating to the investments the board has assigned investment management to manage.

E. Investment management shall not directly or indirectly:

Except for the fees agreed to be paid by the board to investment management or as otherwise agreed by the board, have any interest in the investments being managed by investment management for the board.
Borrow monies, funds or deposits of the system or other plans that the board administers or use these monies in any manner except as directed under this article.
Be an endorser, surety or obligor on investments made under this article.

F. Subject to the limitations in this article, the board may authorize the administrator, chief investment officer and other in-house investment professionals employed by the board to make discretionary investments for the system and other plans or trusts that the board administers that do not exceed fifty per cent of the assets of the system and other plans or trusts measured at cost.

G. To exercise the responsibilities prescribed in this article, the board may enter into contracts that may be interpreted and enforced under the laws of a jurisdiction other than this state and that are not subject to section 35-214 or 38-511 or title 41, chapter 23.

§ 38-848.04 Board fiduciary obligations and duties; enforcement; definitions

A. The board and any other fiduciary of the system shall discharge their duties:

Solely in the interest of the members and beneficiaries.
For the exclusive purpose of providing benefits to members and beneficiaries and paying reasonable expenses in administering the plans and systems administered by the board.
With the care, skill and caution under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with those matters would use in the conduct of an activity of like character and purpose.
Impartially, taking into account any differing interests of members and beneficiaries.
Incurring only costs that are appropriate and reasonable.
Pursuant to a good faith interpretation of the law governing the retirement plans and systems administered by the board.

B. In investing and managing assets of the retirement plans and systems administered by the board, a trustee with authority to invest and manage assets:

Shall consider at least the following:

(a) The general economic conditions.

(b) The possible effect of inflation or deflation.

(c) The role that each investment or course of action plays within the overall portfolio of the retirement plans and systems administered by the board or appropriate grouping of plans or systems.

(d) The expected total return from income and the appreciation of capital.

(e) The needs for liquidity, regularity of income and preservation or appreciation of capital.

(f) For defined benefit plans, the adequacy of funding for the plan based on reasonable actuarial factors.

Shall diversify the investments of the retirement plans and systems administered by the board or appropriate grouping of plans or systems unless the trustee reasonably determines that, because of special circumstances, it is clearly prudent not to do so.
Shall make a reasonable effort to verify facts relevant to the investment and management of assets of a retirement plan or system.
May invest in any kind of property or type of investment consistent with this article.
May consider benefits created by an investment in addition to investment return only if the trustee determines that the investment providing these collateral benefits would be prudent even without the collateral benefits.

C. A trustee with authority to invest and manage assets of a retirement plan or system shall adopt a statement of investment objectives and policies for each retirement plan and system administered by the board or appropriate grouping of plans or systems. The statement must include the desired rate of return on assets overall, the desired rates of return and acceptable levels of risk for each asset class, asset-allocation goals, guidelines for the delegation of authority and information on the types of reports to be used to evaluate investment performance. At least annually, the trustee shall review the statement and change or reaffirm it.

D. In evaluating the performance of a trustee or any other fiduciary of the plan or system:

Compliance with this section must be determined in light of the facts and circumstances existing at the time of the trustee's or fiduciary's decision or action and not by hindsight.
The trustee's investment and management decisions must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the retirement plans and systems administered by the board or appropriate grouping of plans or systems.

E. An employer, member, beneficiary or fiduciary may maintain an action in which the court may award reasonable attorney fees and costs to either party:

To enjoin an act, practice or omission that violates this section.
For appropriate equitable relief to redress the violation of or to enforce this section.

F. For the purposes of this section:

"Fiduciary" means a person who does any of the following:

(a) Exercises any discretionary authority to manage a retirement plan or system administered by the board.

(b) Exercises any authority to invest or manage assets of a retirement plan or system administered by the board.

(c) Provides investment advice for a fee or other direct or indirect compensation with respect to assets of the system or has any authority or responsibility to do so.

(d) Serves as a trustee or member of the board.

"Trustee" means a person who has ultimate authority to manage a retirement system or plan or to invest or manage its assets.

§ 38-849 Limitations on receiving pension; violation; classification; reemployment after severance; reinstatement of service credits; reemployment of retired member or member with a disability; definition

A. If a member is convicted of, or discharged because of, theft, embezzlement, fraud or misappropriation of an employer's property or property under the control of the employer, the member shall be subject to restitution and fines imposed by a court of competent jurisdiction. The court may order the restitution or fines to be paid from any payments otherwise payable to the member from the retirement system.

B. A person who knowingly makes any false statement or who falsifies or allows to be falsified any record of the system with an intent to defraud the system is guilty of a class 5 felony. If any change or error in the records results in any member or beneficiary receiving from the system more or less than the member or beneficiary would have been entitled to receive had the records been correct, the local board shall correct such error, and as far as practicable shall adjust the payments in such manner that the actuarial equivalent of the benefit to which such member or beneficiary was correctly entitled shall be paid. If a member is convicted of a crime specified in this subsection, section 13-713 applies.

C. If a member who received a severance refund on termination of employment pursuant to section 38-846.02 becomes reemployed with the same employer within two years after the former member's termination date, the member may have forfeited credited service attributable to service rendered during a prior period of service as an employee restored on satisfaction of each of the following conditions:

The member files with the system a written application for reinstatement of forfeited credited service within ninety days after again becoming an employee.
The retirement fund is paid the total amount previously withdrawn pursuant to section 38-846.02 plus compound interest from the date of withdrawal to the date of repayment. Interest shall be computed at the rate of nine percent for each year compounded each year from the date of withdrawal to the date of repayment. Forfeited credited service shall not be restored until complete payment is received by the fund.
The required payment is completed within one year after returning to employee status.

D. If a member who received a severance refund on termination of employment, as provided in section 38-846.02, is subsequently reemployed by an employer, the member's prior service credits shall be cancelled and service shall be credited only from the date the member's most recent reemployment period commenced. However, a present active member of the system who forfeited credited service, received a severance refund pursuant to section 38-846.02 and becomes reemployed with the same employer two years or more after the member's termination date or becomes reemployed with another employer may elect to redeem any part of that forfeited credited service by paying into the system any amounts required pursuant to this subsection. A present active member who elects to redeem any part of forfeited credited service for which the member is deemed eligible by the board shall pay into the system the amounts previously paid or transferred to the member as a severance refund plus an amount that is computed by the system's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the system's actuary. On satisfaction of this obligation, the member's prior service credits shall be reinstated.

E. If a retired member becomes reemployed in any capacity, including as a contracted or leased employee, by the employer from which the member retired before six months after the date of retirement following retirement:

The following apply:

(a) Within ten days after the retired member is reemployed, the local board shall advise the system in writing of the retired member's reemployment.

(b) The system shall not make pension payments to the retired member during the period of reemployment.

(c) Employee contributions shall not be made on the retired member's account, nor shall any service be credited during the period of reemployment. On subsequent termination of employment by the retired member, the retired member is entitled to receive a pension based on the member's service and compensation before the date of the member's reemployment. The employer shall pay the alternate contribution rate pursuant to section 38-843.05.

(d) Any pension payments received by the retired member, who retired on or after July 1, 2009, during the period of reemployment are considered overpayments pursuant to section 38-850, unless subsection B of this section applies. If the board determines in the board's sole discretion, for a member who retired on or after July 1, 2009, that the retired member's reemployment with the employer from which the member retired during the six-month period and the failure of the employer or the local board to suspend the member's pension were not intentional to circumvent the requirements of this subsection, the pension payments received by the retired member after the retired member's reemployment are subject to repayment up to only the amount received between the date of the member's reemployment and the expiration of the six-month period.

The retired member, who retired on or after July 1, 2009 and who is reemployed terminates employment, may be subsequently reemployed with the employer from which the member retired and resume receiving pension payments after a period of six months, less the period of time the retired member was not reemployed after retirement with the employer from which the member retired, if at least sixty days of the six months are consecutive.
Paragraph 1, subdivisions (a), (b) and (d) of this subsection do not apply if any of the following occurs:

(a) The retired member becomes reemployed after sixty consecutive days from the member's retirement date as a result of participating in an open competitive new hire process except if the retired member is hired for the same position or if the retired member has a prearranged reemployment agreement with the employer.

(b) The retired member is hired as a fire inspector, arson investigator or school resource officer.

(c) The retired member who is receiving an accidental disability, ordinary disability, catastrophic disability or temporary disability pension accepts a job reassignment as an accommodation in accordance with the Americans with disabilities act of 1990 due to a disability that is directly related to the retired member being awarded an accidental disability, ordinary disability, catastrophic disability or temporary disability benefit.

F. If a retired member is assigned voluntary duties acting as a limited authority peace officer, pursuant to the Arizona peace officer standards and training board rules, employee contributions shall not be made on the retired member's account, and any service shall not be credited during the period of reemployment. The employer shall not pay the alternate contribution rate pursuant to section 38-843.05.

G. If after six months after the date of retirement a retired member becomes reemployed in any capacity, including as a contracted or leased employee, by the employer from which the member retired, employee contributions shall not be made on the retired member's account, and any service shall not be credited during the period of reemployment. The employer shall pay the alternate contribution rate pursuant to section 38-843.05.

H. At any time following retirement, if the retired member becomes employed by an employer, other than the employer from which the member retired, in a position ordinarily filled by an employee of an eligible group, employee contributions shall not be made on the retired member's account, and any service shall not be credited during the period of reemployment. The employer shall pay the alternate contribution rate pursuant to section 38-843.05.

I. If a member who retired under an accidental or ordinary disability becomes reemployed as an employee of an eligible group, section 38-844 applies and a determination shall be made by the local board as to whether subsection E, F, G or H of this section applies.

J. The local board shall review all reemployment determinations and voluntary assignments as described in subsection F of this section. If the local board or the system is not provided the necessary information required by the system to make a reemployment determination, the local board and the system shall suspend pension payments until information is received and a determination is made regarding whether the reemployment meets the requirements of subsection E, F, G, H or I of this section.

K. A person who defrauds the system or who takes, converts, steals or embezzles monies owned by or from the system and who fails or refuses to return the monies to the system on the board's written request is subject to civil suit by the system in the superior court in Maricopa county. On entry of an order finding the person has defrauded the system or taken, converted, stolen or embezzled monies owned by or from the system, the court shall enter an order against that person and for the system awarding the system all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the system a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the system, plus interest at the rate prescribed by section 44-1201, until all amounts owed are paid to the system.

L. Notwithstanding any other provision of this article, the board may offset against any benefits otherwise payable by the system to an active or retired member or survivor any court ordered amounts awarded to the board and system and assessed against the member or survivor.

M. Notwithstanding any other provision of this article, a member who retires having met all of the qualifications for retirement and who subsequently becomes an elected official, by election or appointment, is not considered reemployed by the same employer.

N. For the purposes of this section, "same position" means a position in which the member performs substantially similar duties that were performed and exercises substantially similar authority that was exercised by the retired member before retirement.

§ 38-850 Assurances and liabilities; board of trustee discretion; overpayments; underpayments

A. Nothing contained in the system shall be construed as a contract of employment between an employer and any employee, or as a right of any employee to be continued in the employment of an employer, or as a limitation of the rights of an employer to discharge any of its employees, with or without cause.

B. No employee shall have any right to, or interest in, any assets of the fund on termination of his employment or otherwise, except as provided from time to time under the system, and then only to the extent of the benefits payable to such employee out of the assets of the fund. All payments of benefits as provided for in the system shall be made solely out of the assets of the fund, and the employers, the board and any member of the board are not liable for payment of benefits in any manner.

C. Benefits, employee contributions or employer contributions, including interest, earnings and all other credits, payable under this system shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, prior to actually being received by the person entitled to the benefit, contribution, earning or credit, under the terms of the system, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any such right hereunder shall be void. The fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to such rights hereunder. This subsection does not preclude arrangements for the withholding of taxes from benefit payments, arrangements for the recovery of benefit overpayments, arrangements for the transfer of benefit rights to another plan or arrangements for direct deposit of benefit payments in an account in a bank, savings and loan association or credit union if the arrangement is not part of an arrangement constituting an assignment or alienation.

D. The employers, the board of trustees, the board of trustees' administrator, deputy or assistant administrators and employees and any member of a local board do not guarantee the fund in any manner against loss or depreciation, and none of them shall be liable for any act or failure to act, that is made in good faith pursuant to the provisions of the system. The employers are not responsible for any act or failure to act of a local board or any of its members or for any act or failure to act of the board of trustees. A local board and the individual members of a local board are not responsible for any act or failure to act of any employer or the board of trustees.

E. The board, in its discretion, may make payment to a person entitled to any payment under the system who is under a legal disability in any one or more of the following ways:

Directly to such person.
To his legal guardian or conservator.
To his spouse or to any other person charged with his support to be expended for his benefit.

F. If, through misstatement or computation error, benefits are underpaid or overpaid, there is no liability for any more than the correct benefit sums under the system. Overpayments may be deducted from future payments under the system, and underpayments may be added to future payments under the system. A member or other benefit recipient may elect to repay in a lump sum any overpayment in lieu of receiving reduced benefits under the system.

G. This section does not exempt employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record that are the result of a judgment taken for arrearages for child support or for a child support debt or restitution or fines imposed in accordance with section 38-849, subsection A.

§ 38-851 Participation of new employers

A. This state, any municipality, county or other political subdivision of the state, any Indian tribe or any public or quasi-public organization created wholly or partly by, or deriving its powers from, the legislature, may request to become a participating employer in the system on behalf of a designated eligible employee group. Such a request shall be made by the state departmental director or after a proper resolution has been adopted by the governing body of the political subdivision, Indian tribe or public organization, and after such resolution has been approved by any other party or officer required by law to approve the resolution. A certified copy of such resolution shall be filed with the board. This state or the political subdivision, Indian tribe or public organization shall be considered as a participating employer on proper execution of a joinder agreement in which the employer unconditionally accepts the provisions of the system and binds the employer's designated eligible employees to those provisions. All members of an eligible group shall be designated for membership, unless written consent to the contrary is obtained from the board. A member shall be qualified for participation in order to obtain written consent to the contrary from the board.

B. The effective date of participation in the system by this state or a political subdivision, Indian tribe or public organization shall be the July 1 next succeeding the approval of its participation, unless the board consents to another date, as shall be specifically stipulated in the joinder agreement.

C. The new employer shall designate the departments, groups or other classifications of public safety employees that are eligible to participate in the system and shall agree to make contributions each year that are sufficient to meet both the normal cost on a level cost method attributable to inclusion of its employees and the prescribed interest on the past service cost for its employees.

D. This state or any political subdivision, Indian tribe or public organization that is contemplating participation in the system shall request a preliminary actuarial survey to determine the estimated cost of participation, the benefits to be derived and such other information as may be deemed appropriate. The cost of such a survey shall be paid by this state or the political subdivision, Indian tribe or public organization requesting it.

E. As a condition to participation in the system an Indian tribe employer, by resolution of the governing body, shall:

Agree that all disputes involving interpretation of state statutes involving the system, and any amendments to such statutes, will be resolved through the court system of this state.
Agree to be bound by state statutes and laws that regulate and interpret the provisions of the system, including eligibility to membership in the system, service credits and the rights of any claimant to benefits and the amount of such benefits.
Agree to meet any requirement that the board may prescribe to ensure timely payment of member and employer contributions and any other amounts due from the employer to the system.
Include in the joinder agreement any other provision deemed necessary by the board for the administration or enforcement of the agreement.

F. Assets under any existing public employee defined benefit retirement program, except a military retirement program, necessary to equal the actuarial present value of projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation attributable to the employer's designated employee group, calculated using the actuarial methods and assumptions adopted by the existing public employee retirement program, shall be transferred from such program to this fund no later than sixty days after the employer's effective date. That portion of the transferred assets that is attributable to employee contributions, including interest credits thereon, shall be properly allocated to each affected employee of the employer and credited to the employee's initial accumulated contributions, in accordance with a schedule furnished by the employer to the board.

§ 38-852 Taxation of benefits; exemption of contributions and securities

The employer contributions and the securities in the several funds provided for in this article shall be exempt from state, county and municipal taxes. Employee and employer contributions that are withdrawn from the system after December 31, 1974 by a public officer or employee from the accounts of the system and not received as benefits therefrom and benefits, annuities and pensions received by a public officer or employee from the system after December 31, 1988 shall be subject to tax pursuant to title 43.

§ 38-852.01 Benefits not to be reduced by social security payments

From and after the effective date of this section, all benefits now or hereafter received pursuant to this article or prior retirement systems shall not be reduced because of any payment received as benefits under the federal old age and survivors insurance system.

§ 38-853 Transfer of credited service

A member who terminates employment with an employer and accepts a position with the same or another employer participating in the system, after completing an application that is acceptable to the board, shall have the member's credited service transferred to the member's record with the new employer provided the member leaves the member's accumulated contributions on deposit with the fund. The termination of employment shall not constitute a break in service. However, the period not employed shall not be considered as service.

§ 38-853.01 Redemption of prior service; calculation

A. Except as provided in subsection B of this section, an active member of the system who has at least five years of service with the system may elect to redeem up to sixty months of any part of the following prior service or employment by paying into the system any amounts required under subsection C of this section if the prior service or employment is not on account with any other retirement system:

Prior service in this state as an employee with an employer now covered by the system or prior service with an agency of the United States government, a state of the United States or a political subdivision of this state or of a state of the United States as a full-time paid firefighter, full-time paid certified peace officer or full-time paid corrections officer engaged in law enforcement duties.
Subject to any limitations prescribed by federal law, prior employment as an employee of a corporation that contracted with an employer now covered by the system to provide firefighting services on behalf of that employer as a full-time paid firefighter or that provided firefighting services for a political subdivision of this state.

B. An active member who became a member of the system before January 1, 2012 may redeem any amount of eligible prior service as specified in subsection A of this section without having to have accrued any minimum amount of credited service.

C. An active member who elects to redeem any part of the prior service or employment for which the employee is deemed eligible by the board under this section shall pay into the system the amounts previously withdrawn by the member, if any, as a refund of the member's accumulated contributions plus accumulated interest as determined by the board and the additional amount, if any, computed by the system's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the system's actuary.

D. A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the system, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.

§ 38-853.02 Purchase of service; payment

A member who purchases service pursuant to this article or section 38-922 or 38-924 shall make payments directly to the system in whole or in part by any one or a combination of the following methods:

In lump sum payments.
Through an arrangement with the system that the payments be made in installment payments over a period of time.
Subject to the limitations prescribed in sections 401(a)(31) and 402(c) of the internal revenue code, accepting a direct transfer of any eligible rollover distribution or a contribution by a member of an eligible rollover distribution from one or more:

(a) Retirement programs that are qualified under section 401(a) or 403(a) of the internal revenue code.

(b) Annuity contracts described in section 403(b) of the internal revenue code.

Subject to the limitations prescribed in section 408(d)(3)(A)(ii) of the internal revenue code, accepting from a member a rollover contribution of that portion of a distribution from an individual retirement account or individual retirement annuity described in section 408(a) or 408(b) of the internal revenue code that is eligible to be rolled over and would otherwise be includable as gross income.

§ 38-854 Guarantees from prior systems

A. An employee covered under the prior systems set forth in sections 9-912 to 9-934, inclusive, and in sections 9-951 to 9-971, inclusive, or prior statutes amended thereby and antecedent thereto, and covered under such prior systems on June 30, 1968, and who becomes a member of this system shall nevertheless retain the right to elect, prior to retirement, benefits under this system or to elect benefits under the employee's prior system for which the employee's service and age make the employee eligible, provided that an employee shall elect in writing at the time benefits are claimed the system under which the employee elects to have the employee's eligibility for benefits and the amount thereof determined. Such election shall be irrevocable on retirement and shall be filed with the employee's local board.

B. An employee of the state highway patrol who was a member of the state highway patrol retirement system on June 30, 1968 and who became a member on July 1, 1968 and who qualifies for a pension under the system, shall have the employee's pension determined in an actuarial equivalent form of payment such that the system's benefits shall not be less than the amount payable during this period under the preexisting system. Any such employee shall nevertheless retain rights to elect to receive any benefit for which the employee's service and age make the employee eligible, including but not limited to the following:

The employee shall be entitled to a pension if the employee's employment terminates after attainment of age sixty and completion of at least twenty years of service in an amount equal to fifty per cent of the employee's average monthly compensation.
The employee shall be entitled to a separation benefit in the form of a deferred vested pension if the employee's employment terminates after completion of at least twenty years of service, provided that the employee leaves the employee's accumulated contributions on deposit with the fund.

§ 38-855 Transfer outside the public safety personnel retirement system

A member who changes employment or transfers or is assigned to a position in which such member is no longer eligible to be a member of this system, because of a change in duties or otherwise, with the same or another public employer of this state maintaining a retirement program for public officers or employees authorized by law may have all credited service transferred to the retirement system or program applicable to the new position. If the member does not transfer credited service as provided in this section within two years after the change in employment or transfer, the member shall request a refund of member contributions or shall have the credited service transferred pursuant to this section. Any transfer of credited service pursuant to this section to a state retirement system or plan shall be made pursuant to article 7 of this chapter and must be approved by the board.

§ 38-856.05 Cost-of-living adjustment; members hired on or before June 30, 2017

A. For members hired on or before June 30, 2017, each retired member or survivor of a retired member is eligible to receive a compounding cost-of-living adjustment in the base benefit as provided in this section. The first payment under this section shall be made immediately following the first year the cost-of-living adjustment specified in subsection C of this section is paid. The cost-of-living adjustment shall be made on July 1 each year thereafter.

C. In the first year of a member's retirement, the cost-of-living adjustment specified in subsection B of this section shall be prorated based on the date of retirement.

D. The system actuary shall include the projected cost of providing the cost-of-living adjustment specified in subsection B of this section in the calculation of normal cost and accrued liability.

§ 38-856.06 Cost-of-living adjustment; members hired on or after July 1, 2017; definition

A. For members who are hired on or after July 1, 2017, each eligible retired member or survivor of a retired member may receive a compounding cost-of-living adjustment in the base benefit as provided in this section.

B. A retired member or survivor of a retired member is eligible to receive a cost-of-living adjustment under this section beginning the earlier of the first calendar year after the seventh anniversary of the retired member's retirement or when the retired member is or would have been sixty years of age.

C. A cost-of-living adjustment shall be paid on July 1 each year that the funded ratio for members who are hired on or after July 1, 2017 is seventy percent or more, as reported in the most recent actuarial valuation.

D. An eligible retired member or survivor of a retired member shall receive annually a cost-of-living adjustment in the base benefit based on the average annual percentage change in the metropolitan Phoenix-Mesa consumer price index published by the United States department of labor, bureau of labor statistics, with the immediately preceding year as the base year for making the determination, not to exceed annually the following:

Two percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2017 is ninety percent or more, as reported in the most recent actuarial valuation.
One and one-half percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2017 is eighty percent or more but less than ninety percent, as reported in the most recent actuarial valuation.
One percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2017 is seventy percent or more but less than eighty percent, as reported in the most recent actuarial valuation.

E. The system actuary shall include the projected cost of providing the cost-of-living adjustment specified in subsection D of this section in the calculation of normal cost and accrued liability.

F. For the purposes of this section, "funded ratio" means the ratio of the market value of assets to the actual accrued liabilities.

§ 38-857 Group health and accident coverage for retired members; payment; forfeiture of interest

A. On notification, the board shall pay from the assets of the separate account established pursuant to subsection G of this section part of the single coverage premium of any group health and accident insurance for each retired member or survivor of the system who receives a pension and who has elected to participate in the coverage provided by section 38-651.01 or 38-782 or any other retiree health and accident insurance coverage provided or administered by a participating employer of the system or a tax-exempt welfare benefit trust described in section 501(c)(9) of the internal revenue code that provides for the payment of sickness, accident, hospitalization and medical expenses and is designed for the benefit of public safety personnel in this state. The board shall pay up to:

One hundred fifty dollars per month for each retired member or survivor of the system who is not eligible for medicare.
One hundred dollars per month for each retired member or survivor of the system who is eligible for medicare.

B. On notification, the board shall pay from assets of the separate account established pursuant to subsection G of this section part of the family coverage premium of any group health and accident insurance each month for a benefit recipient who elects family coverage and otherwise qualifies for payment pursuant to subsection A of this section. The board shall pay up to:

Two hundred sixty dollars per month if the retired member or survivor of the system and one or more dependents are not eligible for medicare.
One hundred seventy dollars per month if the retired member or survivor of the system and one or more dependents are eligible for medicare.
Two hundred fifteen dollars per month if either:

(a) The retired member or survivor of the system is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the system is eligible for medicare and one or more dependents are not eligible for medicare.

C. The board shall not pay from assets of the fund more than the amount prescribed in this section for a benefit recipient as a member or survivor of the system.

D. A retired member or survivor of the system may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's former employer if that former employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired member or survivor of the system.

E. This section does not apply to a retired member of the system who becomes a member on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the member's new employer.

F. This section does not apply to a survivor of the system whose deceased spouse becomes a member on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the survivor's new employer.

H. Payment of the benefits provided by this section is subject to the following conditions:

The payment of the benefits is subordinate to the payment of retirement benefits payable by the system.
The total of the contributions for the benefits and actual contributions for life insurance protection, if any, shall not exceed twenty-five percent of the total actual employer and employee contributions to the system, minus the contributions to fund past service credits, after the day the account is established.
The contributions by the employer to the account shall be reasonable and ascertainable.

§ 38-858 Credit for military service

A. Except as provided in subsection B of this section, a member of the system who has at least five years of service with the system may receive credited service for periods of active military service performed before employment with the member's current employer if:

The member was honorably separated from the military service.
The period of military service for which the member receives credited service does not exceed sixty months.
The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736 or except if the member is not yet eligible for a military retirement benefit.
The member pays the cost to purchase the prior active military service. The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the additional credited service.
The amount of benefits purchased pursuant to this subsection is subject to limits established by section 415 of the internal revenue code.

B. A member who became a member of the system before January 1, 2012 may receive credited service for eligible prior active military service as specified in subsection A of this section without having to have accrued any minimum amount of credited service in the system.

C. An active member of the system who volunteers or is ordered to perform military service may receive credited service for not more than sixty months of military service as provided by the uniformed services employment and reemployment rights act of 1994 (38 United States Code part III, chapter 43). The member's employer shall make employer contributions and the member shall make the member contributions pursuant to subsection D of this section if the member meets the following requirements:

Was an active member of the system on the day before the member began military service.
Entered into and served in the armed forces of the United States or any military reserve unit of any branch of the armed forces of the United States or is a member of the national guard.
Complies with the notice and return to work provisions of 38 United States Code section 4312.

The date the member is separated from military service.
The date the member is released from service-related hospitalization or two years after initiation of service-related hospitalization, whichever date is earlier.
The date the member dies as a result of or during military service.

F. The employer and the member shall make contributions pursuant to subsection C of this section as follows:

Contributions shall be based on the compensation that the member would have received but for the period that the member was ordered into active military service.
If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into military service, contributions shall be based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.
If a member has been employed less than twelve months before being ordered into military service, contributions shall be based on the member's compensation being earned immediately preceding the period of military service.
The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions. Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum. Death benefits shall be calculated as prescribed by law.
If the member's employer pays military differential wage pay to members serving in the military, contributions shall be paid to the system pursuant to section 38-843 for any military differential wage pay paid to the member while performing military service.

I. In addition to, but not in duplication of, the provisions of subsection C of this section, beginning December 12, 1994 contributions, benefits and credited service provided pursuant to this section shall be provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

K. For deaths occurring from and after December 31, 2006, in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the system as though the member resumed and then terminated employment on account of death.

§ 38-859 Medical boards; purposes; composition; medical examinations

A. The purposes of a medical board are to:

Identify a physical or mental condition or injury that existed or occurred prior to the member's date of membership in the system and for which benefits may otherwise be limited by section 38-844, subsection D.
Evaluate a member's eligibility for an accidental disability pension.
Evaluate a member's eligibility for an ordinary disability pension.
Evaluate a member's eligibility for a temporary disability pension.
Evaluate a member's eligibility for a catastrophic disability pension.
For the purposes of section 38-846, determine through appropriate medical evidence the proximate cause of death for members who are killed in the line of duty if the death occurs more than one year after the date of injury.

B. For the purpose of determining a disability, the medical board shall be composed of a designated physician or physicians working in a clinic other than the employer's regular employee or contractee. Employees employed after October 1, 1992 shall undergo a medical examination for the purpose of identifying a physical or mental condition or injury that existed or occurred prior to a member's date of membership in the system and for which benefits may otherwise be limited by section 38-844, subsection D, and for this purpose, the medical board shall be composed of a designated physician or physicians working in a clinic that may be the employer's regular employee or contractee.

C. A finding of accidental, ordinary, temporary or catastrophic disability shall be based on medical evidence by a designated physician or a physician working in a clinic that is appointed by the local board pursuant to section 38-847, subsection D, paragraph 9 that established the disability. The local board shall resolve material conflicts in medical evidence. If required, the local board may employ other physicians or clinics to report on special cases. With the approval of the local board, a designated physician or physicians working in a clinic that is employed by the local board may employ occupational specialists to assist the designated physician or physicians working in a clinic in rendering an opinion.

D. All employees shall undergo medical examinations before a designated physician or a physician working in a clinic that is appointed by the local board pursuant to and for the reasons prescribed in this article. An employee who fails to comply with this subsection waives all rights to disability benefits under this article.

E. The examining physician or clinic shall report the results of examinations to the local board, and the secretary of the local board shall preserve the report as a permanent record. Medical examinations conducted pursuant to this article shall be conducted by a physician and shall not be conducted or utilized for the purposes of hiring, advancement, discharge, job training or other terms, conditions and privileges of employment unrelated to the receipt of or qualification for pension benefits or service credits under the system.

F. This section does not affect or impair the right of an employer to prescribe medical or physical standards for employees or prospective employees.

§ 38-860 Domestic relations orders; procedures; payments

A. Notwithstanding any other law, in a judicial proceeding for annulment, dissolution of marriage or legal separation that provides for the distribution of community property, or in any judicial proceeding to amend or enforce such a property distribution, a court in this state may issue a domestic relations order that provides that all or any part of a participant's benefit or refund in the system that would otherwise be payable to that participant shall instead be paid by the system to an alternate payee. The value of a participant's benefit shall be the value on the earliest date of service of the petition for annulment, dissolution of marriage or legal separation.

B. A domestic relations order is not effective against the system unless the domestic relations order is approved by the system and qualifies as a plan approved domestic relations order. To qualify as a plan approved domestic relations order, a domestic relations order shall comply with any policies or procedures adopted pursuant to subsection K of this section and shall also meet all of the following requirements:

The domestic relations order shall state the name and the last known mailing address of the participant and the name and last known mailing address of the alternate payee that is covered by the domestic relations order.
The domestic relations order shall clearly state the amount or percentage of the participant's benefits that is payable by the system to the alternate payee or the precise manner in which the amount or percentage is to be determined.
The domestic relations order shall state the number of payments or periods to which the domestic relations order applies, if applicable.
The domestic relations order shall state that the domestic relations order applies to the system.
The domestic relations order shall not require the system to provide any type or form of benefit or any option not otherwise provided by this article.
The domestic relations order shall not require the system to provide increased benefits determined on the basis of actuarial value.
The domestic relations order shall not require the payment of benefits to an alternate payee if the benefits are required to be paid to another alternate payee under a separate plan approved domestic relations order.
The domestic relations order shall have been issued by a court of competent jurisdiction of a state, territory or possession of the United States.

C. On receipt by the system of a certified copy of a domestic relations order and a written request for a determination that the domestic relations order is a plan approved domestic relations order, the system shall promptly issue a written notice of receipt stating that the domestic relations order and request were received to the participant and alternate payee at the addresses on file, if any.

D. The system has a determination period to issue a written determination indicating whether a domestic relations order qualifies as a plan approved domestic relations order. If the participant is receiving benefits during the determination period and if the system can determine the amount of the benefits that currently would be payable to the alternate payee if the domestic relations order were a plan approved domestic relations order, the system shall hold the segregated funds and shall pay the remaining portion of the benefits to the participant. If the system determines the domestic relations order is a plan approved domestic relations order, the system shall pay the participant and alternate payee pursuant to the plan approved domestic relations order in the month following the month in which the determination was issued or in the month following the month in which a benefit is payable under the plan approved domestic relations order, whichever is later. If the system determines the domestic relations order fails to qualify as a plan approved domestic relations order, the system shall specify in its determination how the domestic relations order is deficient and how it may be amended to qualify as a plan approved domestic relations order. If the participant is currently receiving benefits and if the system can determine the amount of segregated funds that would be payable to the alternate payee if the domestic relations order were a plan approved domestic relations order, the system shall hold the segregated funds during the cure period to allow the parties to submit a certified copy of an amended domestic relations order and a written request for a determination that the amended domestic relations order is a plan approved domestic relations order. During the cure period, the system shall pay the participant's portion to the participant. At the end of the cure period, if the issue of whether an amended domestic relations order qualifies as a plan approved domestic relations order remains undetermined or if an amended domestic relations order is determined not to be a plan approved domestic relations order, the system shall pay the segregated funds and the participant's portion to the participant. The participant shall hold the segregated funds in trust for the alternate payee as provided in subsection J of this section. If an amended domestic relations order that is submitted after the expiration of the cure period is determined to be a plan approved domestic relations order, the system shall make payments to an alternate payee under the plan approved domestic relations order only prospectively. A determination by the system that a domestic relations order is not a plan approved domestic relations order does not prohibit a participant or alternate payee from submitting an amended domestic relations order to the system.

E. Each participant and alternate payee is responsible for maintaining a current mailing address on file with the system. The system has no duty to attempt to locate any participant or alternate payee. The system has no duty to provide a notice of receipt or determination or pay benefits by means other than mailing the notice or payments to the participant or alternate payee at the last known address that is on file with the system. If the address of an alternate payee is unknown to the system, but benefits are payable to the alternate payee pursuant to a plan approved domestic relations order, the system shall either:

Hold the alternate payee's portion until the alternate payee provides the system with a current address. Once the system is notified of the alternate payee's current address, the system shall prospectively pay the alternate payee's portion to the alternate payee.
Pay the alternate payee's portion to the participant, who shall hold the alternate payee's portion in trust as provided in subsection J of this section, until the alternate payee is located. At that time, the participant shall pay the alternate payee's portion directly to the alternate payee.

F. If the address of a participant is unknown to the system, but benefits are payable to the participant pursuant to a plan approved domestic relations order, the system shall hold the participant's portion until the participant provides the system with a current address.

G. If the alternate payee identified in a plan approved domestic relations order predeceases the participant and the plan approved domestic relations order does not otherwise provide for the disposition of the alternate payee's interest, the system shall pay the alternate payee's portion to the personal representative of the deceased alternate payee pursuant to this subsection. The personal representative is responsible for maintaining a current mailing address on file with the system. The system has no duty to attempt to locate any personal representative. The system is not responsible for making benefit payments to a personal representative until the personal representative has both:

Persuaded the system that the personal representative is authorized to receive payments designated for the deceased alternate payee.
Provided the system with an address to which the payments should be sent.

H. If, within thirty days after the date the system verifies an alternate payee's death, a personal representative does not make demand on the system for the alternate payee's portion, the system shall either:

Hold the alternate payee's portion until the time a personal representative makes a proper demand for payment of the alternate payee's portion.
Remit the alternate payee's portion to the participant, who shall hold the amounts in trust for the estate of the alternate payee until the personal representative is identified. At that time, the participant shall pay the alternate payee's portion paid by the system to the participant to the personal representative.

Thereafter, the plan shall prospectively pay the alternate payee's portion to the personal representative.

I. Amounts held or paid pursuant to this section shall not accrue interest unless otherwise prescribed by this article.

J. The system is not liable to the participant, the alternate payee, any personal representative of the estate of an alternate payee or any other person for any amount paid, withheld or disbursed by the system pursuant to this section. If one or more payments are made by the system to a person not otherwise entitled to receive the payments, the recipient of the payment is designated a constructive trustee for the payment received and, together with the marital community, if any, is the sole party against whom an action may be brought to recover the payment.

K. The system may adopt policies and procedures that govern the implementation of this section.

§ 38-861 Future benefit increases; payment; cost calculation; definition

A. Any future benefit increase adopted by the legislature or any participating employer for any member of the system shall be fully paid in the year of enactment of the benefit and may not be amortized over any period of years. A benefit for members hired before July 1, 2017 shall be paid by the employer and the cost of the benefit for members hired on or after July 1, 2017 shall be split equally between the employer and the member.

B. The plan actuary shall calculate the cost of the benefit increase using all of the following:

A discount rate equal to the ten-year treasury constant maturity rate for the fiscal year in which the benefit is enacted.
An expected rate of return on assets equal to the ten-year treasury constant maturity rate for the fiscal year in which the benefit is enacted.
A mortality table based on the most recent proposal from the retirement plans experience committee of the society of actuaries that is not older than the RP-2014 mortality table.
All other actuarial assumptions approved by the board for the most recent fiscal year valuation.

C. For the purposes of this section, "future benefit increase" includes any benefit increase that leads to a change in the present value of future benefits or a change to accrued liabilities.

§ 38-862 Discount rate; service purchase; transfer of service credits

A. Beginning July 1, 2017, the discount rate specified in subsection B of this section applies to service purchases or transfers of service credits to the system pursuant to the following sections:

Section 38-849, subsection D.
Section 38-853.01, subsection C.
Section 38-858, subsection A or B.
Sections 38-921, 38-922, 38-923 and 38-924.

B. For members enrolled in the system:

Before July 1, 2017, the discount rate is the assumed rate of return that is prescribed by the board.
On or after July 1, 2017, the discount rate is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten-year treasury note as of March 1 that is published by the federal reserve board plus two percent. The discount rate is effective beginning in the next fiscal year, and the board shall recalculate the rate each year.

§ 38-863 Employer disclosure; funding ratio

An employer shall disclose the employer's funding ratio for each of the employer's eligible groups under the system on the employer's public website.

§ 38-863.01 Pension funding policies; employers

A. Each governing body of an employer shall annually:

Adopt a pension funding policy for the system for employees who were hired before July 1, 2017. The pension funding policy shall include funding objectives that address at least the following:

(a) How to maintain stability of the governing body's contributions to the system.

(b) How and when the governing body's funding requirements of the system will be met.

(c) Defining the governing body's funded ratio target under the system and the timeline for reaching the targeted funded ratio.

Formally accept the employer's share of the assets and liabilities under the system based on the system's actuarial valuation report.

B. The governing body shall post the pension funding policy on the governing body's public website and transmit the pension funding policy to the board.

§ 38-863.02 Pension funding policies; board; employers' pension funding policies; posting; popular annual financial report

A. The board shall annually review and adopt a pension funding policy for each defined benefit retirement plan and system administered by the board that analyzes and reviews the methods to ensure systematic funding of all retirement benefit payments for the members of each defined benefit retirement plan and system and that outlines the strategy to achieve financial solvency of each plan and system.

B. The board shall annually consolidate the pension funding policies of employers adopted pursuant to section 38-863.01 and post the document on the system's public website.

C. On or before June 30 of each year, the board shall submit a popular annual financial report to the governor, the president of the senate and the speaker of the house of representatives and post to the system's public website that includes the following:

For each retirement system and plan that is administered by the board:

(a) Funding status.

(b) Aggregate contribution rates.

For the aggregate of the systems and plans administered by the board:

(a) Investment returns.

(b) An analysis of the system's aggregate experience over the previous year.

(d) Future trends and objectives.

Article 4.1 Public Safety Personnel Defined Contribution Retirement Plan

§ 38-865 Definitions

In this article, unless the context otherwise requires:

"Annuity account" means an account that is established for each participant to record the deposit of participant contributions, employer contributions and interest, dividends or other accumulations credited on behalf of the participant.
"Board" means the board of trustees of the public safety personnel retirement system established by section 38-848.
"Compensation":

(a) For participants as defined in paragraph 7, subdivision (a) of this section and section 38-865.01, has the same meaning prescribed in section 38-842.

(b) For participants as defined in paragraph 7, subdivision (b) of this section, means salary as defined in section 38-881.

"Defined contribution plan" means the public safety personnel defined contribution retirement plan established pursuant to this article.
"Employer" has the same meaning prescribed in section 38-842 or 38-881, as applicable.
"Employer contribution" means an amount deposited by an employer, from the employer's own monies, in the participant's annuity account on a periodic basis coinciding with the participant's regular pay period.
"Participant" means:

(a) A member as defined in section 38-842, paragraph 31, subdivision (a) or (b), excluding subdivision (a), item (vi), who is one of the following:

(i) An employee who is hired on or after July 1, 2017, who makes the irrevocable election to participate solely in the defined contribution plan established pursuant to this article and who was not an active, an inactive or a retired member of the system or a member of the system with a disability on June 30, 2017.

(ii) An employee who is hired on or after July 1, 2017, who is not covered by the federal old age and survivors insurance system and who makes the irrevocable election to participate in the system or is enrolled in the system pursuant to section 38-842.01, subsection A.

(b) A member as defined in section 38-881, paragraph 27, subdivision (a) who is one of the following:

(i) An employee who is hired on or after July 1, 2018, who is not in a designated position as defined in section 38-881, paragraph 13, subdivision (g) and who was not an active, an inactive or a retired member of the corrections officer retirement plan or a member of the corrections officer retirement plan with a disability on June 30, 2018.

(ii) An employee who is hired on or after July 1, 2018, who is in a designated position as defined in section 38-881, paragraph 13, subdivision (g), who makes the irrevocable election pursuant to section 38-881.01 to participate solely in the defined contribution plan established pursuant to this article and who was not an active, an inactive or a retired member of the corrections officer retirement plan or a member of the corrections officer retirement plan with a disability on June 30, 2018.

"Pensionable compensation" means the amount of the participant's annual compensation that does not exceed the limitation specified in section 38-843.04 or 38-895.01, as applicable.
"System" means the public safety personnel retirement system established by article 4 of this chapter.

§ 38-865.01 Definition of participant

For the purposes of this article, "participant" includes a member as defined in section 38-842, paragraph 31, subdivision (a) or (b), excluding subdivision (a), item (vi), who is hired on or after January 1, 2012 and before July 1, 2017, who is not covered by the federal old age and survivors insurance system and who is a member of the system.

§ 38-866 Defined contribution plan design; purpose; powers and duties of the board; administration; annual report

A. The board shall establish, design and administer a defined contribution plan to provide for the retirement of specified participants beginning July 1, 2017.

B. The purpose of this article is to provide a defined contribution plan that is fully funded on a current basis from employer and participant contributions.

C. The legislature intends that the defined contribution plan for participants under this article be designed to be a qualified governmental plan under section 401(a) of the internal revenue code, as amended, or successor provisions of law, and be exempt from taxation under section 501 of the internal revenue code. The board may adopt any additional provision to the defined contribution plan that is necessary to fulfill this intent. Consistent with this intent, the board may submit to the internal revenue service a request for a determination letter that the defined contribution plan is a plan qualified under section 401(a) of the internal revenue code and a private letter ruling that all participant contributions that are picked up by the employer as provided in section 38-867 shall be treated as employer contributions pursuant to section 414(h) of the internal revenue code.

D. The board shall:

Enter into a contract with a provider or providers to provide retirement plan investments, plan administration and services to participants in the defined contribution plan. The plan shall provide for appropriate long-term retirement-oriented investments and shall include both fixed and variable deferred annuity options. The board shall consider all of the following when determining a company with which to contract:

(a) The financial stability of the company and the ability of the company to provide the contracted rights and benefits to the participants.

(b) The cost of the investments, plan administration and services to the participants.

(c) The experience of the company in providing defined contribution retirement plans in lieu of defined benefit plan participation to public employees.

(d) The experience of the company in paying retirement income to public employees.

(e) The experience of the company in providing plan education, counseling and advice to participants in public employee retirement plans that are offered in lieu of state defined benefit plan participation.

Require under a contract that a provider provide education, counseling and objective participant-specific plan advice to participants. Any participant-specific advice and counseling shall be administered by a federally registered investment advisor. The federally registered investment advisor shall act as a fiduciary to participants and is required to act in the participant's best interest.
Require under the contract that the defined contribution plan include not less than five and not more than twenty-five predetermined investment portfolio options to participants. The predetermined investment portfolio options shall include options that reflect different risk profiles and options that automatically reallocate and rebalance contributions as a participant ages. In addition, the defined contribution plan may allow participants to construct investment portfolios using some or all of the investment options comprising the predetermined investment portfolio options.
Require under a contract that the defined contribution retirement plan offer participants a menu of lifetime annuity options, either fixed or variable or a combination of both.

E. The board may:

Employ other services it deems necessary, including legal services, for the operation and administration of the defined contribution plan.
Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the operation and protection of the plan.

F. The board shall adopt policies regarding the defined contribution plan, including the administration of the participant and employer contributions, investment options, termination of participation in the defined contribution plan, administration of the payout options under the defined contribution plan and administration of the participant distributions.

G. The board shall participate in a competitive bid process at least once every five years to contract with a private person or any qualified company or companies to administer the defined contribution plan established pursuant to this article.

H. Any contract for a third-party administrator of the defined contribution plan shall include competitive fees and provisions requiring quarterly meetings with the system, annual updates to the board on the status of the defined contribution plan and quarterly statements to each participant. On or before December 1 of each year, the board shall report the status of the defined contribution plan to the governor, the president of the senate, the speaker of the house of representatives and the joint legislative budget committee.

§ 38-867 Contributions; member; employer; pickup

(L24, Ch. 116, sec. 4; Eff. until 7/1/26)

A. Each participant in the defined contribution plan shall contribute the following percentage of the participant's gross pensionable compensation by salary reduction that shall be deposited in the participant's annuity account:

For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (ii), three percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i), nine percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (b), seven percent.

B. A participant as defined in section 38-865 may make a onetime irrevocable election, before the participant is eligible to participate in any qualified plan of the employer, to contribute more than the percentage of the participant's gross pensionable compensation specified in this section, up to the amount allowable under section 415(c) of the internal revenue code. A participant as defined in section 38-865, paragraph 7, subdivision (b) may make a onetime irrevocable election, before the participant is eligible to participate in any qualified plan of the employer, to contribute less than the percentage of the participant's gross pensionable compensation specified in this section but may not elect to contribute less than five percent of the participant's gross pensionable compensation. The election made pursuant to this subsection shall be the participant's contribution rate for the remainder of the participant's employment.

C. Although designated as employee contributions, all participant contributions made to the defined contribution plan shall be picked up and paid by the employer in lieu of contributions by the employee. The contributions picked up by an employer may be made through a reduction in the participant's compensation. A participant in the defined contribution plan may not choose to receive the contributed amounts directly instead of the employer paying the amounts to the defined contribution plan. All participant contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code, shall be excluded from the participant's gross income for federal and state income tax purposes and are includable in the gross income of the participant or the participant's beneficiaries only in the taxable year in which they are distributed.

D. Each employer shall annually make a contribution equal to the following percentages of each participant's gross pensionable compensation:

For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (ii), three percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i), nine percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (b), five percent.

E. The pro rata share of the amount paid in subsection D of this section shall be paid on each date that a participant contribution is made and shall be credited to the participant's annuity account.

F. Each participant as defined in section 38-865, paragraph 7, subdivision (a), item (i) and subdivision (b) and each employer shall contribute:

To the public safety personnel defined contribution retirement plan disability program established by article 4.2 of this chapter.
For participants who make an election pursuant to section 38-869, an equal amount for the group health benefits plan payments as specified in section 38-869 as determined by actuarial valuations reported by the board to the employer and local board, which shall be deposited in a separate account established pursuant to section 38-869.

G. A participant's contributions and earnings on those contributions are immediately vested.

H. A participant as defined in section 38-865, paragraph 7, subdivision (a) or section 38-865.01 is fully vested in the defined contribution plan after ten years of service, with employer contributions vesting at a rate of ten percent per year. If a participant described in this subsection dies or is determined to be eligible for an accidental or catastrophic disability pension pursuant to section 38-844 before completing ten years of service, the employer contributions are immediately fully vested.

I. A participant as defined in section 38-865, paragraph 7, subdivision (b) is fully vested in the defined contribution plan after three years of service, with the employer contributions vesting at the following rates:

Twenty-five percent after the first year of service.
Fifty percent after the second year of service.
One hundred percent after the third year of service.

J. If a participant as defined in section 38-865, paragraph 7, subdivision (b) dies or is determined to be eligible for an accidental or total and permanent disability pension pursuant to section 38-886 before completing three years of service, the employer contributions are immediately fully vested.

§ 38-867 (Version 2) Contributions; member; employer; pickup

(L25, Ch. 237, sec. 5; Eff. 7/1/26)

For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (ii), three percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i), nine percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (b), seven percent.

D. Each employer shall annually make a contribution equal to the following percentages of each participant's gross pensionable compensation:

For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (ii), three percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i), nine percent.
For a participant as defined in section 38-865, paragraph 7, subdivision (b), five and one-half percent.

E. The pro rata share of the amount paid in subsection D of this section shall be paid on each date that a participant contribution is made and shall be credited to the participant's annuity account.

F. Each participant as defined in section 38-865, paragraph 7, subdivision (a), item (i) and subdivision (b) and each employer shall contribute:

To the public safety personnel defined contribution retirement plan disability program established by article 4.2 of this chapter.
For participants who make an election pursuant to section 38-869, an equal amount for the group health benefits plan payments as specified in section 38-869 as determined by actuarial valuations reported by the board to the employer and local board, which shall be deposited in a separate account established pursuant to section 38-869.

G. A participant's contributions and earnings on those contributions are immediately vested.

Twenty-five percent after the first year of service.
Fifty percent after the second year of service.
One hundred percent after the third year of service.

§ 38-867.01 Rollover distributions and contributions; definitions

A. A lump sum distribution made pursuant to section 38-844.08, subsection B or section 38-885.01, subsection J shall be deposited in a separate rollover account for the participant as defined in subsection C, paragraph 2, subdivision (a) or (b) of this section and made immediately available for the participant to either withdraw all or any portion of the lump sum deposit or directly transfer all or any portion of the lump sum deposit to an eligible retirement plan as required by section 401(a)(31) of the internal revenue code.

B. A participant as defined in subsection C, paragraph 2, subdivision (c) of this section may make a rollover contribution from a qualified plan or an IRA that shall be deposited in a separate rollover account for the participant and made immediately available for the participant to either withdraw all or any portion of the lump sum deposit or directly transfer all or any portion of the lump sum deposit to an eligible retirement plan as required by section 401(a)(31) of the internal revenue code.

C. For the purposes of this section:

"IRA" means an individual retirement account or an individual retirement annuity described in sections 408(a) or 408(b) of the internal revenue code.
"Participant" means any of the following:

(a) A member as defined in section 38-842, paragraph 31, excluding subdivision (a), item (vi), who is hired before January 1, 2012 and who has elected to enter the deferred retirement option plan established by section 38-844.02.

(b) A member as defined in section 38-881 who has elected to enter the reverse deferred retirement option plan established by section 38-885.01.

(i) A current employee of an employer as defined in section 38-842 or section 38-881.

(ii) Currently receiving or entitled to receive a pension from the public safety personnel retirement system or the corrections officer retirement plan.

(iii) A former employee who was an active participant, as defined in section 38-865 or 38-865.01, in the defined contribution plan who has an annuity account balance or a separate rollover account balance.

"Qualified plan" means an eligible deferred compensation plan under section 457(b) of the internal revenue code that is maintained by a state, a political subdivision of a state or any agency or instrumentality of a state or a political subdivision of a state, a tax-qualified retirement plan described in section 401(a) or 403(a) of the internal revenue code or an annuity contract described in section 403(b) of the internal revenue code.
"Separate rollover account" means a fully vested and nonforfeitable separate account maintained under the defined contribution plan for the benefit of a participant who has made a rollover contribution to the plan as authorized by subsection A or B of this section.

§ 38-867.02 Trustee-to-trustee transfers from system; definitions

A. A trustee-to-trustee transfer made pursuant to section 38-844.06, subsection C shall be deposited in a separate transfer account established on behalf of the participant and made immediately available for the participant's beneficiary to either withdraw all or any portion of the deposited monies or directly transfer all or any portion of the monies to an eligible retirement plan in accordance with section 401(a)(31) of the internal revenue code.

B. For the purposes of this section:

"Beneficiary" means the person designated as the beneficiary of a participant's deferred retirement option plan participation account pursuant to section 38-844.07.
"Participant" means a member as defined in section 38-842, paragraph 31, subdivision (a), item (vi) or (b), who has both:

(a) Elected to enter into the deferred retirement option plan established by section 38-844.02.

(b) Died while a participant in the deferred retirement option plan.

"Separate transfer account" means a fully vested and nonforfeitable separate account under the defined contribution plan established by the trustee in accordance with subsection A of this section.

§ 38-868 Contributions; member; employer; applicability of article

A. On or before June 30, 2017, a participant as defined in section 38-865.01 may make an irrevocable election to opt out of the defined contribution plan established by this article, which shall be the participant's election for the remainder of the participant's employment with any employer under the system.

B. Beginning July 1, 2017, a participant as defined in section 38-865.01 in the defined contribution plan shall contribute three percent of the participant's gross pensionable compensation by salary reduction that shall be deposited in the participant's annuity account.

C. Each employer of a participant as defined in section 38-865.01 shall annually make a contribution equal to the following percentages of the participant's gross pensionable compensation:

For a participant that is hired in 2012, for fiscal years 2017-2018 through 2023-2024, four percent and three percent for each fiscal year thereafter.
For a participant that is hired in 2013, for fiscal years 2017-2018 through 2022-2023, four percent and three percent for each fiscal year thereafter.
For a participant that is hired in 2014, for fiscal years 2017-2018 through 2021-2022, four percent and three percent for each fiscal year thereafter.
For a participant that is hired in 2015, for fiscal years 2017-2018 through 2020-2021, four percent and three percent for each fiscal year thereafter.
For a participant that is hired in 2016, for fiscal years 2017-2018 through 2019-2020, four percent and three percent for each fiscal year thereafter.
For a participant that is hired on or after January 1, 2017 and before July 1, 2017, for fiscal year 2017-2018, four percent and three percent for each fiscal year thereafter.

D. If a participant as defined in section 38-865.01 is subsequently covered by the federal old age and survivors insurance system, the participant and the participant's employer may not make any contributions on the participant's behalf pursuant to this section during the period the participant is covered by the federal old age and survivors insurance system. If at a later time the participant is not covered by the federal old age and survivors insurance system through an employer under the system, the participant and the participant's employer shall again be required to contribute on behalf of the employee pursuant to this section.

E. All of the provisions of this article apply to a participant as defined in section 38-865.01.

F. For a participant as defined in section 38-865.01, an employer may choose to pay a portion of the participant's contributions under this section in an amount of not more than the difference between the contribution rate specified under section 38-843 for employees hired on or after January 1, 2012 and before July 1, 2017 and for any employee hired before January 1, 2012.

§ 38-868.01 Credit for military service

Was an active member of the defined contribution system on the day before the member began military service.
Entered into and served in the armed forces of the United States or any military reserve unit of any branch of the armed forces of the United States or is a member of the national guard.
Complies with the notice and return to work provisions of 38 United States Code section 4312.

The date the member is separated from military service.
The date the member is released from service-related hospitalization or two years after initiation of service-related hospitalization, whichever date is earlier.
The date the member dies as a result of or during military service.

D. The employer and the member shall make contributions pursuant to subsection A of this section as follows:

Contributions are based on the compensation that the member would have received but for the period that the member was ordered into or volunteered for military service.
If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into or volunteered for military service, contributions are based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.
If a member has been employed less than twelve months before being ordered into or volunteering for military service, contributions are based on the member's compensation being earned immediately preceding the period of military service.
The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions. Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum. Death benefits shall be calculated as prescribed by law.
If the member's employer pays military differential wage pay to members serving in the military, contributions are paid to the defined contribution system pursuant to section 38-843 for any military differential wage pay paid to the member while performing military service.

E. In computing the length of total credited service of a member for the purpose of determining vesting pursuant to section 38-867 or disability pursuant to article 4.2 of this chapter, the period of military service, as prescribed by this section, is included.

G. In addition to, but not in duplication of, the provisions of subsection A of this section, beginning July 1, 2017, contributions, benefits and credited service provided pursuant to this section are provided pursuant to section 414(u) of the internal revenue code, and this section shall be interpreted in a manner consistent with that internal revenue code section.

H. For plan years beginning after July 1, 2017, a member who does not currently perform services for an employer by reason of qualified military service as defined in section 414(u)(5) of the internal revenue code is not considered having a severance from employment during that qualified military service. Any payments by the employer to the member during the qualified military service shall be considered compensation to the extent those payments do not exceed the amounts the member would have received if the member had continued to perform services for the employer rather than entering qualified military service.

I. For deaths occurring from and after July 1, 2017, in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the defined contribution system as though the member resumed and then terminated employment on account of death.

§ 38-869 Group health benefits plan; retired participants; definition

A. The board shall establish, design and administer a group health benefits plan to provide group health benefits as prescribed in sections 38-857 and 38-906 for retired participants who make an election pursuant to this section. Monies collected pursuant to section 38-867, subsection F, paragraph 2 shall be deposited in a separate account solely to pay for group health benefits provided under this section, and the amounts shall be held by the board in trust for the purpose of providing the group health benefits.

B. The purpose of this section is to provide a group health benefits plan that is fully funded on a current basis from employer and participant contributions. The board shall subject the account to actuarial analysis and manage the account in an actuarially sound manner.

C. Contributions made to the account are nonrefundable and are separate assets for the purposes of funding the group health benefits plan.

D. The legislature intends that the group health benefits plan for participants constitutes the exercise by the board of an essential governmental function as provided in section 115(1) of the internal revenue code, as amended, or successor provisions of law and that the trust created pursuant to this section is exempt from federal and state income tax. Notwithstanding subsection A of this section, if the board dissolves the trust created pursuant to this section, any remaining assets shall be returned to the employers that have contributed to the trust in such amounts as the board determines. The board may adopt any additional provisions to the group health benefits plan that are necessary to fulfill this intent.

E. For ninety days after July 1, 2022, existing participants shall have the opportunity to participate in the group health benefits plan by opting in through an irrevocable election to pay the required costs of the group health benefits plan through payroll deduction. For ninety days after employment, participants who are hired after July 1, 2022 may participate in the group health benefits plan by making an irrevocable election to pay the required costs of the group health benefits plan through payroll deduction. If a participant fails to make an irrevocable election within the ninety-day period specified in this subsection, the participant shall be excluded from receiving any benefits specified in this section during the participant's retirement and may not again have an election to participate if the participant is ever reemployed in a position in which the participant may again participate in the defined contribution plan.

F. Each participant who makes an election pursuant to subsection E of this section and the participant's employer shall pay an equal amount for costs, as actuarially determined, for the group health benefits plan pursuant to section 38-867.

G. Each employer shall transfer to the board the employer and participant contributions paid pursuant to section 38-867, subsection F, paragraph 2 within ten working days after each payroll date. Contributions transferred after that date shall include a penalty to be paid by the employer of ten percent per year, compounded annually, for each day the contributions are late. Delinquent payments due under this subsection, together with interest charges as provided in this subsection, may be recovered by an action in a court of competent jurisdiction against an employer that is liable for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to such an employer by any department or agency of this state.

H. Notwithstanding any other law, the board may authorize the system to administer the group health benefits plan, to pay costs from the account to the system for administrative expenses and to allocate costs on a pro rata basis consistent with subsection F of this section.

I. The group health benefits plan established pursuant to this section shall provide a retired participant who has made an election pursuant to this section, payments prescribed in section 38-857, subsection A or B, or section 38-906, subsection A or B, as applicable, if the retired participant both:

Meets the requirements of the normal retirement date as defined in section 38-842, paragraph 32, subdivision (c) or section 38-881, paragraph 28, subdivision (c), as applicable.
Has elected either:

(a) To participate in the group health and accident coverage provided by section 38-651.01 or 38-782 or any other retiree health and accident insurance coverage provided or administered by a participating employer.

(b) To purchase individual health care coverage and receive a payment pursuant to this section through the retired participant's former employer if that former employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired participant.

J. For the purposes of this section, "participant" means a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i) and subdivision (b).

Article 4.2 Public Safety Personnel Defined Contribution Retirement Plan Disability Program

§ 38-870 Definitions

In this article, unless the context otherwise requires:

"Assets" means the accumulated resources of the disability program.
"Board" means the board of trustees established by section 38-848.
"Compensation":

(a) For a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i), has the same meaning prescribed in section 38-842.

(b) For a participant as defined in section 38-865, paragraph 7, subdivision (b), means salary as defined in section 38-881.

"Disability program" or "program" means the public safety personnel defined contribution retirement plan disability program established by this article.
"Local board" has the same meaning prescribed in section 38-842 or 38-881, as applicable.
"Participant" means a participant who is in the public safety personnel defined contribution retirement plan and who is a participant as defined in section 38-865, paragraph 7, subdivision (a), item (i) or subdivision (b).
"Pensionable compensation" has the same meaning prescribed in section 38-865.

§ 38-870.01 Disability program; administration; power and duties of the board; hearing

A. The public safety personnel defined contribution retirement plan disability program is established for participants in the public safety personnel defined contribution retirement plan who either have elected to participate solely in the defined contribution plan established pursuant to article 4.1 of this chapter or are participants as defined in section 38-865, paragraph 7, subdivision (b). The board shall administer the disability program.

B. The board may delegate authority to administer the program as it deems necessary and prudent to the administrator employed pursuant to section 38-848.

C. The board, in the administration, management and operation of the program, shall:

Account for the operation, administration and investment expenses and allocate them against investment income.
Contract on a fee basis with an actuary to make an actuarial valuation of the program based on the valuation method and valuation assumptions recommended by the actuary and approved by the board. The actuary shall be a member of the American academy of actuaries.
Contract on a fee basis with an independent auditing firm to make an annual audit of the accounting records of the fund and file a copy of the audit with the auditor general.
Invest the monies in the fund as provided in article 4 of this chapter.

D. The board, in the administration, management and operation of the program, may:

Employ services as it deems necessary.
Either keep invested monies separate or commingle invested monies as it deems appropriate.
Do all acts, whether expressly authorized, that may be deemed necessary or proper for the protection of the fund.
Determine the rights, benefits or obligations of any person under this article and afford any person dissatisfied with a determination of the person's rights, benefits or obligations under this article with a hearing on the determination.

§ 38-870.02 Disability program trust fund

A. The disability program trust fund is established for the purpose of paying benefits under and costs of administering the disability program. The trust fund shall be administered by the board.

B. The disability program trust fund consists of all monies paid into the trust fund pursuant to this article, whether in the form of cash, securities or other assets, and all monies received from any other source. Except as provided in subsection C, paragraph 1 of this section, the disability program trust fund is exempt from title 44, chapter 3.

C. Abandoned monies shall revert to the disability program trust fund under the following conditions:

Monies in the trust fund are presumed abandoned if the system has taken the required action described in this subsection to identify and locate the apparent owner and the apparent owner as defined in section 44-301 has not communicated in writing with the system and has not otherwise indicated an interest in the monies for the three-year period following the required beginning date of distributions.
Before monies are presumed abandoned, the system shall attempt to contact the apparent owner in writing. If this notice is returned by the postal authority as undeliverable, each year for three years from the date that distributions should have begun, the system shall make a good faith attempt to locate the apparent owner, including contacting any known beneficiary on record with the system, searching public databases to identify the address of the apparent owner or using the services of a third-party address verification service. If the good faith attempt to locate the apparent owner fails, monies are presumed abandoned pursuant to this subsection.
At the time monies are presumed abandoned pursuant to this subsection, any other property right accrued or accruing to the apparent owner as a result of the interest in those monies, and not previously presumed abandoned, is also presumed abandoned.
Interest ceases to accrue on the monies on the date the monies are presumed abandoned.

D. The custody, management and investment of the disability program trust fund are as prescribed by this article and article 4 of this chapter.

§ 38-870.03 Eligibility

All participants are subject to this article and shall participate in the disability program.

§ 38-870.04 Employer and participant contributions

A. Beginning July 1, 2017, employers shall contribute the percentage of the gross pensionable compensation of all of the participants under their employment so that the total employer contributions equals the amount that the board determines is necessary to pay one-half of all benefits under and costs of administering the disability program.

B. Beginning July 1, 2017, a participant shall contribute a percentage of the participant's gross pensionable compensation equal to the employer contribution for the participant required pursuant to subsection A of this section.

C. The employer shall pay the participant contributions required of participants on account of gross pensionable compensation earned. All employer and participant contributions shall be paid to the board. The board shall allocate the contributions to the disability program trust fund and shall place the contributions in the disability program's depository.

D. Each employer shall certify on each payroll the amount to be contributed to the disability program and shall remit that amount to the board.

E. The department of administration and the treasurer of each county and participating city and town shall transfer to the board the contributions provided for in subsections A and B of this section within ten working days after each payroll date. Contributions transferred after these dates shall include a penalty equal to ten percent per annum, compounded annually, for each day that the contributions are late. Delinquent payments due under this subsection, together with interest charges as provided in this subsection and court costs, may be recovered by action in a court of competent jurisdiction against the person or persons responsible for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to a political subdivision by any department or agency of this state.

G. Participant contributions are not refundable.

§ 38-870.05 Contribution rate

A. Employer contributions shall be a percentage of gross pensionable compensation for each participant, as the system actuary determines pursuant to this section. The actuary shall make this determination in an annual valuation performed as of June 30. The valuation as of June 30 of a calendar year shall determine the percentage to be applied to compensation for the fiscal year beginning July 1 of the following calendar year. The actuary shall determine the total employer contribution using an actuarial cost method consistent with generally accepted actuarial standards. The total employer contributions shall be equal to the employer normal cost plus the amount required to amortize the past service funding requirement over a period consistent with generally accepted actuarial standards.

B. All contributions made by the employer and allocated to the disability program trust fund established by section 38-870.02 are irrevocable and shall be used as benefits under this article or to pay expenses of the disability program.

§ 38-870.06 Disability program benefit

A. The local board shall follow the same procedures and method as prescribed in section 38-844, for a participant who is employed by an employer as defined in section 38-842, and section 38-886, for a participant who is employed by an employer as defined in section 38-881, to determine eligibility for and continuation of a disability benefit and in computing the amount available to the participant. A participant is not eligible for a disability benefit under this article for an ordinary disability as defined in section 38-881. A participant is not eligible for a disability benefit under this article for an ordinary disability as defined in section 38-842.

B. A participant, as defined in section 38-865, paragraph 7, subdivision (a), item (i), who meets the requirements for a disability pension as prescribed in section 38-844, except for an ordinary disability, shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a public safety personnel retirement system member who is hired on or after July 1, 2017, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost-of-living adjustment, as determined by the board. A participant, as defined in section 38-865, paragraph 7, subdivision (b), who meets the requirements for a disability pension as prescribed in section 38-886, except for an ordinary disability, shall receive a monthly disability benefit equal to a monthly disability pension that would be provided to a corrections officer retirement plan member who is hired on or after July 1, 2018, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost-of-living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the disability benefit paid pursuant to this section, the board shall instruct its actuary to calculate the monthly payment that would be paid to the participant assuming the participant had elected a straight life annuity commencing on the participant's date of disability, using the mortality and interest factors then used by the actuary in determining the valuation of the public safety personnel retirement system or the corrections officer retirement plan, as applicable.

§ 38-870.07 Death benefits; survivor or eligible child

A. If a participant, as defined in section 38-865, paragraph 7, subdivision (a), item (i), is killed in the line of duty or dies from injuries suffered in the line of duty, the local board shall follow the same procedures and methods as prescribed in section 38-846 to determine eligibility for and the continuation of a death benefit to a surviving spouse or any eligible child.

B. A surviving spouse or eligible child of a participant as specified in subsection A of this section who meets the requirements for a death benefit as prescribed in section 38-846 shall receive a monthly death benefit equal to a monthly death pension that would be provided to a public safety personnel retirement system member who is hired on or after July 1, 2017, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost-of-living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the death benefit paid pursuant to this section, the board shall instruct its actuary to calculate the monthly payment that would be paid to the surviving spouse or eligible child assuming the participant had elected a straight life annuity commencing on the participant's date of death, using the mortality and interest factors then used by the actuary in determining the valuation of the public safety personnel retirement system.

§ 38-870.08 Death benefits; surviving spouse; eligible child

A. If a participant, as defined in section 38-865, paragraph 7, subdivision (b), is killed in the line of duty or dies from injuries suffered in the line of duty, the local board shall follow the same procedures and methods as prescribed in section 38-888 to determine eligibility for and the continuation of a death benefit to a surviving spouse or any eligible child.

B. A surviving spouse or eligible child of a participant as specified in subsection A of this section who meets the requirements for a death benefit as prescribed in section 38-888 shall receive a monthly death benefit equal to a monthly death pension that would be provided to a corrections officer retirement plan member who is hired on or after July 1, 2018, reduced by an amount equal to the monthly annuitized value of the participant's annuity account under article 4.1 of this chapter that does not include a cost-of-living adjustment, as determined by the board. In determining the monthly annuitized offset value of the participant's annuity account under article 4.1 of this chapter to be used in reducing the death benefit paid pursuant to this section, the board shall instruct its actuary to calculate the monthly payment that would be paid to the surviving spouse or eligible child assuming the participant had elected a straight life annuity commencing on the participant's date of death, using the mortality and interest factors then used by the actuary in determining the valuation of the corrections officer retirement plan.

Article 5.1 Public Safety Personnel Retirement System Deferred Compensation Plan

§ 38-875 Definitions

In this article, unless the context otherwise requires:

"Board" means the board of trustees of the public safety personnel retirement system established by section 38-848.
"Deferred compensation plan" means an eligible deferred compensation plan as defined in section 457(b) of the internal revenue code.
"Employer" means any entity that participates as an employer in a retirement system or plan that is administered by the board.
"Participant" means any individual who is employed by an employer and who is enrolled in one of the retirement systems or plans administered by the board.

§ 38-876 Deferred compensation plan; administration

A. The board shall establish, design and administer a deferred compensation plan in which a participant may participate.

B. The board, in the administration, management and operation of the deferred compensation plan, may:

Employ services as it deems necessary, including legal services, for the operation and administration of the deferred compensation plan.
Administer the deferred compensation plan through contracts with multiple vendors.
Perform all acts that it deems necessary and proper for the operation and protection of the deferred compensation plan.

§ 38-877 Voluntary participation; authorization; payroll salary deductions; employer contributions

A. A participant may participate in the deferred compensation plan established pursuant to this article. A participant in the deferred compensation plan shall authorize the participant's employer in writing to make reductions or deductions in the participant's remuneration as provided in an executed deferred compensation agreement.

B. Each employer shall initiate payroll salary reductions or deductions for the deferred compensation plan as directed by their employees who are participating in the deferred compensation plan.

C. An employer may make contributions to the deferred compensation plan as selected by the employer and allowed by law.

§ 38-878 Effect of participation

A. Any benefits provided pursuant to this article are in addition to any other benefits provided for the participants and are supplemental to any other retirement plan under which such participants participate.

B. Any income deferred under the deferred compensation plan are included as regular compensation for the purpose of computing the retirement and pension benefits earned by an employee participating in the deferred compensation plan and in any other plan maintained by the employee's employer, unless specifically excluded under the other plan or the state laws governing such other plan.

Article 6 Corrections Officer Retirement Plan

§ 38-881 Definitions

In this article, unless the context otherwise requires:

"Accidental disability" means a physical or mental condition that the local board finds totally and permanently prevents an employee from performing a reasonable range of duties within the employee's department and was incurred in the performance of the employee's duties.
"Accumulated member contributions" means for each member the sum of the amount of all the member's contributions deducted from the member's salary and paid to the fund, plus member contributions transferred to the fund by another retirement plan covering public employees of this state, plus previously withdrawn accumulated member contributions that are repaid to the fund in accordance with this article, minus any benefits paid to or on behalf of a member.
"Actuarial equivalent" means equality in present value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest assumptions adopted by the board.
"Alternate payee" means the spouse or former spouse of a participant as designated in a domestic relations order.
"Alternate payee's portion" means benefits that are payable to an alternate payee pursuant to a plan approved domestic relations order.
"Annuitant" means a person who is receiving a benefit pursuant to section 38-911.
"Average monthly salary" means:

(a) For an employee who becomes a member of the plan:

(i) Before January 1, 2012, one-thirty-sixth of the aggregate amount of salary that is paid a member by a participating employer during a period of thirty-six consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service.

(ii) On or after January 1, 2012 and before July 1, 2018, one-sixtieth of the aggregate amount of salary that is paid a member by a participating employer during a period of sixty consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service.

(iii) On or after July 1, 2018, one-sixtieth of the aggregate amount of salary that is paid a member by a participating employer during a period of sixty consecutive months of service in which the member received the highest salary within the last one hundred twenty months of service.

(b) The aggregate amount of salary that is paid a member divided by the member's months of service if the member has less than thirty-six or sixty months of service. In the computation under this paragraph, a period of nonpaid or partially paid industrial leave shall be considered based on the salary the employee would have received in the employee's job classification if the employee was not on industrial leave.

"Beneficiary" means an individual who is being paid or who has entitlement to the future payment of a pension on account of a reason other than the individual's membership in the retirement plan.
"Board" means the board of trustees of the public safety personnel retirement system.
"Claimant" means a member, beneficiary or estate that files an application for benefits with the retirement plan.
"Credited service" means credited service transferred to the retirement plan from another retirement system or plan for public employees of this state, plus those compensated periods of service as a member of the retirement plan for which member contributions are on deposit in the fund.
"Cure period" means the ninety-day period in which a participant or alternate payee may submit an amended domestic relations order and request a determination, calculated from the time the plan issues a determination finding that a previously submitted domestic relations order did not qualify as a plan approved domestic relations order.
"Designated position" means:

(a) For a county:

(i) A county detention officer.

(ii) A nonuniformed employee of a sheriff's department whose primary duties require direct contact with inmates.

(b) For the state department of corrections and the department of juvenile corrections, only the following specifically designated positions:

(i) Food service.

(ii) Nursing personnel.

(iii) Corrections physician assistant.

(iv) Therapist.

(v) Corrections dental assistant.

(vi) Hygienist.

(vii) Corrections medical assistant.

(viii) Correctional service officer, including assistant deputy warden, deputy warden, warden and superintendent.

(ix) State correctional program officer.

(x) Parole or community supervision officers.

(xi) Investigators.

(xii) Teachers.

(xiii) Institutional maintenance workers.

(xiv) Youth corrections officer.

(xv) Youth program officer.

(xvi) Behavioral health treatment unit managers.

(xvii) The director and assistant directors of the department of juvenile corrections and the superintendent of the state educational system for committed youth.

(xviii) The director, deputy directors and assistant directors of the state department of corrections.

(xix) Other positions designated by the local board of the state department of corrections or the local board of the department of juvenile corrections pursuant to section 38-891.

(d) For an employer of an eligible group as defined in section 38-842, full-time dispatchers.

(e) For the judiciary, juvenile detention officers and those positions designated by the local board of the judiciary pursuant to section 38-891.

(f) For the department of public safety, state detention officers.

(g) For the judiciary, probation and surveillance officers.

"Determination" means a written document that indicates to a participant and alternate payee whether a domestic relations order qualifies as a plan approved domestic relations order.
"Determination period" means the ninety-day period in which the plan must review a domestic relations order that is submitted by a participant or alternate payee to determine whether the domestic relations order qualifies as a plan approved domestic relations order, calculated from the time the plan mails a notice of receipt to the participant and alternate payee.
"Direct rollover" means a payment by the plan to an eligible retirement plan that is specified by the distributee.
"Distributee" means a member, a member's surviving spouse or a member's spouse or former spouse who is the alternate payee under a plan approved domestic relations order.
"Domestic relations order" means an order of a court of this state that is made pursuant to the domestic relations laws of this state and that creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive a portion of the benefits payable to a participant.
"Eligible child" means an unmarried child of a deceased active or retired member who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty-three years of age and remains a dependent of the surviving spouse or guardian.

"Eligible retirement plan" means any of the following that accepts a distributee's eligible rollover distribution:

(a) An individual retirement account described in section 408(a) of the internal revenue code.

(b) An individual retirement annuity described in section 408(b) of the internal revenue code.

(d) A qualified trust described in section 401(a) of the internal revenue code.

(e) An annuity contract described in section 403(b) of the internal revenue code.

(g) Effective January 1, 2008, a Roth individual retirement account that satisfies the requirements of section 408A of the internal revenue code.

(h) For distributions made after December 18, 2015, a simple retirement account as defined in section 408(p) of the internal revenue code.

"Eligible rollover distribution" means a payment to a distributee, but does not include any of the following:

(a) Any distribution that is one of a series of substantially equal periodic payments made not less frequently than annually for the life or life expectancy of the member or the joint lives or joint life expectancies of the member and the member's beneficiary or for a specified period of ten years or more.

(b) Any distribution to the extent the distribution is required under section 401(a)(9) of the internal revenue code.

(d) Any distribution made to satisfy the requirements of section 415 of the internal revenue code.

(e) Hardship distributions.

(f) Similar items designated by the commissioner of the United States internal revenue service in revenue rulings, notices and other guidance published in the internal revenue bulletin.

"Employee" means a person employed by a participating employer in a designated position.
"Employer" means an agency or department of this state or a political subdivision of this state that has one or more employees in a designated position.
"Fund" means the corrections officer retirement plan fund.
"Juvenile detention officer" means a juvenile detention officer responsible for the direct custodial supervision of juveniles who are detained in a county juvenile detention center.
"Local board" means the retirement board of the employer that consists of persons appointed or elected to administer the plan as it applies to the employer's members in the plan.
"Member":

(a) Means any employee who meets all of the following qualifications:

(i) Who is a full-time paid person employed by a participating employer in a designated position.

(ii) Who is receiving salary for personal services rendered to a participating employer or would be receiving salary except for an authorized leave of absence.

(iii) Whose customary employment is at least forty hours each week.

(b) Includes an employee who meets the requirements of subdivision (a) of this paragraph, who is hired on or after July 1, 2018, who is in a designated position as defined in paragraph 13, subdivision (g) of this section and who makes the irrevocable election to participate in the plan pursuant to section 38-881.01.

(c) Except as provided in subdivision (b) of this paragraph, does not include an employee who is hired on or after July 1, 2018, unless the employee was an active, an inactive or a retired member of the plan or a member of the plan with a disability on June 30, 2018.

"Normal retirement date" means:

(a) For an employee who becomes a member of the plan before January 1, 2012, the first day of the calendar month immediately following the employee's completion of twenty years of service or, in the case of a dispatcher, twenty-five years of service, the employee's sixty-second birthday and completion of ten years of service or the month in which the sum of the employee's age and years of credited service equals eighty.

(b) For an employee who becomes a member of the plan on or after January 1, 2012 and before July 1, 2018, the first day of the calendar month immediately following the employee's completion of twenty-five years of service if the employee is at least fifty-two and one-half years of age or the employee's sixty-second birthday and completion of ten years of service.

(c) For an employee who becomes a member of the plan on or after July 1, 2018, the first day of the calendar month immediately following the employee's completion of ten years of credited service if the employee is at least fifty-five years of age.

"Notice of receipt" means a written document that is issued by the plan to a participant and alternate payee and that states that the plan has received a domestic relations order and a request for a determination that the domestic relations order is a plan approved domestic relations order.
"Ordinary disability" means a physical condition that the local board determines will totally and permanently prevent an employee from performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will totally and permanently prevent an employee from engaging in any substantial gainful activity.
"Participant" means a member who is subject to a domestic relations order.
"Participant's portion" means benefits that are payable to a participant pursuant to a plan approved domestic relations order.
"Participating employer" means an employer that the board has determined to have one or more employees in a designated position or a county, city, town or department of this state that has entered into a joinder agreement pursuant to section 38-902.
"Pension" means a series of monthly payments by the retirement plan but does not include an annuity that is payable pursuant to section 38-911.
"Personal representative" means the personal representative of a deceased alternate payee.
"Physician" means a physician who is licensed pursuant to title 32, chapter 13 or 17.
"Plan approved domestic relations order" means a domestic relations order that the plan approves as meeting all the requirements for a plan approved domestic relations order as otherwise prescribed in this article.
"Plan year" or "fiscal year" means the period beginning on July 1 of any year and ending on June 30 of the next succeeding year.
"Probation or surveillance officer" means an officer appointed pursuant to section 8-203, 12-251 or 12-259 but does not include other personnel, office assistants or support staff.
"Retired member" means an individual who terminates employment and who is receiving a pension pursuant to either section 38-885 or 38-886.
"Retirement" or "retired" means termination of employment after a member has fulfilled all requirements for a pension or, for an employee who becomes a member of the plan on or after January 1, 2012, attains the age and service requirements for a normal retirement date.
"Retirement plan" or "plan" means the corrections officer retirement plan established by this article.
"Salary" means the base salary, shift differential pay, military differential wage pay and holiday pay paid a member for personal services rendered in a designated position to a participating employer on a regular monthly, semimonthly or biweekly payroll basis. Salary includes amounts that are subject to deferred compensation or tax shelter agreements. Salary does not include payment for any remuneration or reimbursement other than as prescribed by this paragraph. For the purposes of this paragraph, "base salary" means the amount of compensation each member is regularly paid for personal services rendered to an employer before the addition of any extra monies, including overtime pay, shift differential pay, holiday pay, fringe benefit pay and similar extra payments.
"Segregated funds" means the amount of benefits that would currently be payable to an alternate payee pursuant to a domestic relations order under review by the plan, or a domestic relations order submitted to the plan that failed to qualify as a plan approved domestic relations order, if the domestic relations order were determined to be a plan approved domestic relations order.
"Service" means employment rendered to a participating employer as an employee in a designated position. Any absence that is authorized by an employer, including any periods during which the employee is on an employer-sponsored long-term disability program, is considered as service if the employee returns or is deemed by the employer to have returned to a designated position within the period of the authorized absence.
"Total and permanent disability" means a physical or mental condition that is not an accidental disability, that the local board finds totally and permanently prevents a member from engaging in any gainful employment and that is the direct and proximate result of the member's performance of the member's duty as an employee of a participating employer.

§ 38-881.01 Employees hired on or after July 1, 2018; defined contribution plan; benefit election; disability

A. Except as provided in subsection B of this section, an employee who is hired on or after July 1, 2018, who is a member as defined in section 38-881, paragraph 27, subdivision (a) and who was not an active, an inactive or a retired member of the plan or a member of the plan with a disability on June 30, 2018 shall participate in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter. For an employee who is hired on or after September 1, 2019, the employee's participation in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter begins ninety days after the date the employee is hired.

B. An employee who is hired on or after July 1, 2018, who is in a designated position as defined in section 38-881, paragraph 13, subdivision (g) and who was not an active, an inactive or a retired member of the plan or a member of the plan with a disability on June 30, 2018 is eligible to participate in the corrections officer retirement plan or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter, depending on the employee's election under this section. During the first sixty days of an employee's employment and before the employee makes a decision regarding the individual's retirement plan, the board shall provide each probation and surveillance officer who is hired on or after July 1, 2018 interactive, objective educational training, counseling and participant-specific plan information about both the corrections officer retirement plan and the public safety personnel defined contribution retirement plan options. The employee's participation in either the plan or the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter begins ninety days after the date the employee is hired. Unless the elections made under this section are made before the ninetieth day after the date of employment, the employee is automatically enrolled in the plan for the remainder of the employee's employment. Any election made under this section is irrevocable and is the employee's election for the remainder of the employee's employment, unless the employee is subsequently in a position that allows for an election under this section. If an employee is subsequently rehired after a bona fide termination of employment from the employee's employer of not less than six months with no prearranged reemployment agreement with the employer or hired by a new employer, the employee may make a new election under this section before the ninetieth day after the date of hire. If the employee does not make a new election within that time frame, the employee's previous election will continue. The employee may make one of the following irrevocable elections:

To participate solely in the corrections officer retirement plan.
To participate solely in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter.

C. If an employee specified in subsection B of this section in the employee's first ninety days of employment is determined to be eligible for an accidental or total and permanent disability pension pursuant to section 38-886, the employee shall be automatically enrolled in the corrections officer retirement plan for the remainder of the employee's employment with any employer under the plan commencing on the employee's date of disability and shall receive an accidental or total and permanent disability pension as prescribed in this article.

D. If an employee specified in subsection B of this section in the employee's first ninety days of employment is killed in the line of duty or dies from injuries suffered in the line of duty, the employee shall be considered as having been enrolled in the corrections officer retirement plan and the surviving spouse of the deceased employee is eligible for survivor benefits as prescribed in this article.

E. Notwithstanding subsection B of this section, if an employee who is hired on or after July 1, 2018 and who is an active or inactive member of the plan or a participant in the public safety personnel defined contribution plan established pursuant to article 4.1 of this chapter is subsequently rehired by the employee's previous employer or another employer under the plan, the employee's participation in either the plan or the public safety personnel defined contribution plan, for which the employee had elected to participate, begins on the date the employee is rehired or hired by another employer. If the employee makes a new election pursuant to subsection B of this section, the employee's participation in the previous plan continues until the date in which the employee makes a different election, not to exceed ninety days after the date of hire for the eligible position.

§ 38-882 Corrections officer retirement plan and fund; administration

A. The corrections officer retirement plan and the corrections officer retirement plan fund are established.

B. The fund consists of the monies and assets generated by the operation of the retirement plan. The fund shall be used exclusively to pay benefits to and on behalf of members and beneficiaries in accordance with the provisions of this article and to pay the administration, operation and investment expenses of the plan and fund. In no case shall all or any portion of the fund revert or otherwise be paid to an employer.

C. The board is entitled to administer, manage and operate the plan and fund.

D. The corrections officer retirement plan is a jural entity that may sue and be sued.

§ 38-883 Board of trustees; powers and duties; reporting requirements

A. The board shall:

Maintain records of the operation and administration of the plan and fund.
Contract on a fee basis for an independent annual audit of the accounting records of the plan and fund and file a copy of the audit report with the auditor general.
Employ on a fee basis an independent firm of actuaries to perform annual actuarial valuations for each participating employer of the plan and fund based on an actuarial cost method and actuarial assumptions recommended by the actuary and adopted by the board. The actuarial valuations shall be performed by or under the direct supervision of an actuary who is a member of the American academy of actuaries. By November 1 of each year, the board shall provide a preliminary report and by December 1 of each year provide a final report to the governor, the speaker of the house of representatives and the president of the senate on the contribution rate for the ensuing fiscal year.
Invest and reinvest the monies and assets of the fund in accordance with the investment provisions of the public safety personnel retirement system. The board may commingle securities and monies of the fund subject to the crediting of receipts and earnings and charging of payments to the account of the appropriate employer.
Submit a detailed annual report of the operation and investment performance of the plan and fund to the governor, the legislature and the members of the plan. The board shall submit the annual report not later than six months after the end of the fiscal year to which it pertains.

B. The board of trustees may:

Employ services it deems necessary, including legal services, for the operation and administration of the plan and fund.
Utilize separate or commingled investment vehicles.
Delegate authority to the administrator employed pursuant to section 38-848, subsection M, paragraph 6.
Appear before local boards and the courts and political subdivisions of this state through counsel or appointed representatives to protect the fund. The board of trustees is not responsible for the actions or omissions of the local boards under this plan but may seek review or a rehearing of actions or omissions of local boards. The board of trustees does not have a duty to review actions of the local boards but may do so, in its discretion, in order to protect the fund.
Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the protection of the plan and fund.

§ 38-883.01 Qualified governmental excess benefit arrangement; definitions

G. For the purposes of this section:

"Internal revenue code" has the same meaning prescribed in section 42-1001.
"Qualified governmental excess benefit arrangement" means a portion of the plan if:

(b) Under that portion, a direct or indirect election to defer compensation is not provided at any time to the member.

(c) Excess benefits are not paid from a trust that is a part of the plan unless the trust is maintained solely for the purpose of providing excess benefits.

§ 38-884 Membership of retirement plan; termination; credited service; redemption; reemployment

A. Each employee of a participating employer is a member of the plan unless the employee is receiving a pension from the plan. A person employed shall undergo a medical examination performed by a designated physician or a physician working in a clinic that is appointed by the local board or, in the case of a state correctional officer who is employed by the state department of corrections, complete a physical examination pursuant to section 41-1822, subsection B. For the purposes of subsection B of this section, the designated physician or a physician working in a clinic that is appointed by the local board may be the employer's regular employee or contractor.

B. The purpose of the medical examination authorized by this section is to identify a member's physical or mental condition or injury that existed or occurred before the member's date of membership in the plan. Any employee who fails or refuses to submit to the medical examination prescribed in this section is deemed to waive all rights to disability benefits under this article. Medical examinations conducted under this article shall be conducted by a physician and shall not be conducted or used for purposes of hiring, advancing, discharging, job training or other terms, conditions and privileges of employment unrelated to receipt or qualification for pension benefits or service credits from the fund. This subsection does not affect or impair the right of an employer to prescribe medical or physical standards for employees or prospective employees.

C. If a member who becomes a member of the plan before January 1, 2012 ceases to be an employee for any reason other than death or retirement, within twenty days after filing a completed application with the board, the member is entitled to receive the following amounts, less any benefit payments the member has received and any amount the member may owe to the plan:

If the member has less than five years of credited service with the plan, the member may withdraw the member's accumulated contributions from the plan.
If the member has five or more years of credited service with the plan, the member may withdraw the member's accumulated contributions plus an amount equal to the amount determined as follows:

(a) 5.0 to 5.9 years of credited service, twenty-five percent of all member contributions deducted from the member's salary pursuant to section 38-891, subsection B.

(b) 6.0 to 6.9 years of credited service, forty percent of all member contributions deducted from the member's salary pursuant to section 38-891, subsection B.

(c) 7.0 to 7.9 years of credited service, fifty-five percent of all member contributions deducted from the member's salary pursuant to section 38-891, subsection B.

(d) 8.0 to 8.9 years of credited service, seventy percent of all member contributions deducted from the member's salary pursuant to section 38-891, subsection B.

(e) 9.0 to 9.9 years of credited service, eighty-five percent of all member contributions deducted from the member's salary pursuant to section 38-891, subsection B.

(f) 10.0 or more years of credited service, one hundred percent of all member contributions deducted from the member's salary pursuant to section 38-891, subsection B.

D. If a member who becomes a member of the plan before January 1, 2012 has more than ten years of credited service with the plan, leaves the monies prescribed in subsection C of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection C of this section plus interest at a rate determined by the board for each year computed from and after the member's termination of employment.

E. The accumulated member contributions of a member who ceases to be an employee for a reason other than death or retirement and who becomes a member of the plan:

On or after January 1, 2012 and before July 1, 2018 shall be paid to the member plus interest at a rate determined by the board as of the date of termination within twenty days after filing with the plan a written application for payment.
For a member who has less than ten years of credited service with the plan, on or after July 1, 2018 shall be paid to the member plus interest at a rate determined by the board as of the date of termination within twenty days after filing with the plan a written application for payment.

F. If the refund includes monies that are an eligible rollover distribution and the member elects to have the distribution paid directly to an eligible retirement plan or individual retirement account or annuity and specifies the eligible retirement plan or individual retirement account or annuity to which the distribution is to be paid, the distribution shall be made in the form of a direct trustee-to-trustee transfer to the specified eligible retirement plan. The distribution shall be made in the form and at the time prescribed by the board.

J. Service shall be credited to a member's individual credited service account in accordance with rules the local board prescribes. In no case shall more than twelve months of credited service be credited on account of all service rendered by a member in any one year. In no case shall service be credited for any period during which the member is not employed in a designated position, except as provided by sections 38-921 and 38-922.

K. Credited service is forfeited if the amounts prescribed in subsection C, D or E of this section are paid or are transferred in accordance with this section.

L. If a former member becomes reemployed with the same employer within two years after the former member's termination date, a member may have forfeited credited service attributable to service rendered during a prior period of service as an employee restored on satisfaction of each of the following conditions:

The member files with the plan a written application for reinstatement of forfeited credited service within ninety days after again becoming an employee.
The retirement fund is paid the total amount previously withdrawn pursuant to subsection C, D or E of this section plus compound interest from the date of withdrawal to the dates of repayment. Interest shall be computed at the rate of nine percent for each year compounded each year from the date of withdrawal to the date of repayment. Forfeited credited service shall not be restored until complete payment is received by the fund.
The required payment is completed within one year after returning to employee status.

M. If a member who receives a severance refund on termination of employment pursuant to subsection C, D or E of this section is subsequently reemployed by an employer, the member's prior service credits are cancelled, and the board shall credit service only from the date the member's most recent reemployment period commenced. A present active member of the plan who received a refund of accumulated contributions from the plan pursuant to subsection C, D or E of this section, forfeited credited service pursuant to subsection K of this section and becomes reemployed with the same employer two years or more after the member's termination date or becomes reemployed with another employer may elect to redeem any part of that forfeited credited service by paying into the plan any amounts required pursuant to this subsection. A present active member who elects to redeem any part of forfeited credited service for which the member is deemed eligible by the board shall pay into the plan the amounts previously paid or transferred as a refund of the member's accumulated contributions plus an amount, computed by the plan's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the plan's actuary. On satisfaction of this obligation, the board shall reinstate the member's prior service credits.

N. A retired member may become employed by the employer from which the employee retired in a designated position and continue to receive a pension if the employment occurs at least six months after retirement. The retired member shall not contribute to the fund and shall not accrue credited service. If a retired member becomes employed by the employer from which the employee retired in a designated position, including in a contracted or leased position, before six months after retirement, the following apply:

Payment of the retired member's pension shall be suspended until the retired member again ceases to be an employee. The amount of pension shall not be changed on account of service as an employee subsequent to retirement.
The retired member shall not contribute to the fund and shall not accrue credited service.
Any pension payments received by a retired member, who retired on or after July 1, 2009, during a period of reemployment are considered overpayments pursuant to section 38-899. If the board determines in the board's sole discretion, for a member who retired on or after July 1, 2009, that the retired member's reemployment during the six-month period and the failure of the employer or the local board to suspend the member's pension were not intentional to circumvent the requirements of this subsection, the pension payments received by the retired member during reemployment are subject to repayment up to only the amount received between the date of the member's reemployment and the expiration of the six-month period.
If a retired member who retired on or after July 1, 2009 and who is reemployed terminates employment, the retired member may be subsequently reemployed with the employer from which the member retired in a designated position and resume receiving pension payments after a period of six months, less the period of time the retired member was not reemployed by the employer from which the member retired in a designated position after retirement, if at least sixty days of the six months are consecutive.

O. Notwithstanding any other provision of this article, a member who retires having met all of the qualifications for retirement and who subsequently becomes an elected official, by election or appointment, is not considered reemployed by the same employer.

§ 38-884.01 Reinstatement of credited service; effect of prior law

A. A member who received a severance refund on termination of employment as provided in section 38-884, who is subsequently reemployed by an employer and who may have redeposited the amount withdrawn with interest as provided in section 38-884 or a member who redeems prior service pursuant to statute is subject to the benefits and duties in effect at the following times for the specified situations:

At the time of the member's reemployment if the member is reemployed by an employer other than the same employer.
At the time of the member's reemployment if the member is reemployed by the same employer at least ninety days after the date of termination.
At the time of the member's most recent termination if the member is reemployed by the same employer in any capacity within ninety days after the date of termination.

B. Subsection A of this section does not apply if a court of competent jurisdiction orders reinstatement of benefits and duties under a prior law.

C. If a member was initially employed on or after July 1, 2018, regardless of whether the member received a severance refund or redeposits the amount withdrawn with interest, the member shall return to the plan as irrevocably elected pursuant to section 38-881.01.

D. A member who transfers credited service from one employer to another employer pursuant to section 38-908 retains the benefits and duties in effect at the time of the member's transfer.

§ 38-885 Normal retirement; conditions and pension

A. A member may retire if the member:

Files a written application for normal retirement with the plan in the form prescribed by the plan.
Ceases to be an employee before the date of retirement.
Meets one of the age and service requirements for normal retirement prescribed in subsection B, D or F of this section.

B. A member who becomes a member of the plan before January 1, 2012 is eligible for a normal retirement pension if the member satisfies one of the following requirements:

Is at least sixty-two years of age and has ten or more years of service.
Has twenty or more years of service or, in the case of a dispatcher, twenty-five or more years of service.
The sum of the member's age and years of credited service equals at least eighty.

C. A member who meets the requirements for a normal retirement pension pursuant to subsection B of this section and who has twenty years or twenty-five years, as applicable, of credited service is entitled to receive a pension that equals fifty percent of the member's average monthly salary, except that:

If the member retires with more than twenty years of credited service the foregoing amount shall be increased by a monthly amount equal to two percent of the member's average monthly salary multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional years, except that if a member retires with twenty-five or more years of credited service the foregoing amount shall be increased by a monthly amount equal to two and one-half percent of the member's average monthly salary multiplied by the number of the member's years of credited service in excess of twenty years, with pro rata increase for any fractional year.
If the member retires pursuant to subsection B of this section but has less than twenty years of credited service, the member is entitled to receive a pension equal to the product of:

(a) Two and one-half percent of the member's average monthly salary.

(b) The member's credited service.

D. A person who becomes a member of the plan on or after January 1, 2012 and before July 1, 2018 is eligible for a normal retirement pension if the person satisfies one of the following requirements:

Is at least sixty-two years of age and has ten or more years of service.
Is at least fifty-two and one-half years of age and has twenty-five or more years of service.

E. A person who meets the requirements for a normal retirement pension pursuant to subsection D of this section and who has twenty-five years of credited service is entitled to receive a pension that equals sixty-two and one-half percent of the member's average monthly salary, except that:

If the person retires with more than twenty-five years of credited service the foregoing amount shall be increased by a monthly amount equal to two and one-half percent of the member's average monthly salary multiplied by the number of the member's years of credited service in excess of twenty-five years, with pro rata increase for any fractional year.
If the person retires pursuant to subsection D of this section but has less than twenty-five years of credited service, the person is entitled to receive a pension equal to the product of:

(a) Two and one-half percent of the member's average monthly salary.

(b) The member's credited service.

F. A member who becomes a member of the plan on or after July 1, 2018 is eligible for a normal retirement pension if the member is at least fifty-five years of age and has ten or more years of credited service. A person who becomes a member of the plan on or after July 1, 2018 and who retires on or after the member's normal retirement date shall receive a monthly amount equal to the member's average monthly salary multiplied by the number of whole and fractional years of credited service multiplied by the following:

1.25 percent if the member has at least ten years of credited service but less than fifteen years of credited service.
1.50 percent if the member has at least fifteen years of credited service but less than twenty years of credited service.
1.75 percent if the member has at least twenty years of credited service but less than twenty-two years of credited service.
2.00 percent if the member has at least twenty-two years of credited service but less than twenty-five years of credited service.
2.25 percent if the member has at least twenty-five years of credited service.

G. In no case shall the amount of a member's pension exceed eighty percent of the member's average monthly salary. Such limitation does not preclude cost-of-living increases granted by the legislature.

§ 38-885.01 Reverse deferred retirement option plan; purpose

A. A reverse deferred retirement option plan is established. The purpose of the reverse deferred retirement option plan is to add flexibility to the plan and to provide members who elect to participate in the reverse deferred retirement option plan access to a lump sum benefit in addition to their normal monthly retirement benefit on actual retirement.

B. The board shall offer the reverse deferred retirement option plan to members on a voluntary basis as an alternative method of benefit accrual under the plan.

C. Any member who is eligible for a normal pension pursuant to section 38-885, who is not awarded an accidental, ordinary or total and permanent disability pension and who has at least twenty-four years of credited service, or in the case of a dispatcher, who has at least twenty-five years of credited service, is eligible to participate in the reverse deferred retirement option plan.

D. A member who elects to participate in the reverse deferred retirement option plan shall voluntarily and irrevocably:

Designate a reverse deferred retirement option plan date that is the first day of the calendar month immediately following a member's completion of twenty-four years of credited service or a date not more than sixty consecutive months before the date the member elects to participate in the reverse deferred retirement option plan, whichever is later.
Agree to terminate employment on the date the member elects to participate in the reverse deferred retirement option plan.
Receive benefits from the plan on termination of employment at the same time and in the same manner as otherwise prescribed in this article using the factors of credited service and average monthly salary in effect on the reverse deferred retirement option plan date.

E. On election, a reverse deferred retirement option plan participation account is established within the plan on behalf of each reverse deferred retirement option plan participant. All benefits accrued pursuant to this article shall be accounted for in the reverse deferred retirement option plan participation account. A reverse deferred retirement option plan participant does not have a claim on the assets of the plan with respect to the member's reverse deferred retirement option plan participation account and assets shall not be set aside for any reverse deferred retirement option plan participant that are separate from all other system assets.

F. All amounts credited to a member's reverse deferred retirement option plan participation account are fully vested.

G. A member's reverse deferred retirement option plan participation account shall be credited with the following:

An amount that is credited as though accrued monthly from the reverse deferred retirement option plan date to the date the member elected to participate in the reverse deferred retirement option plan and that is computed in the same manner as a normal retirement benefit using the factors of credited service and average monthly salary in effect on the reverse deferred retirement option plan date.
An amount that is credited as though accrued monthly and that represents interest at a rate equal to the yield on a five year treasury note as of the first day of the month as published by the federal reserve board.

H. Employee and employer contributions pursuant to section 38-891 that are deposited during the period of the reverse deferred retirement option plan are not eligible to be refunded to the employer or member.

I. The participant is not entitled to receive any amount prescribed by section 38-906 during the reverse deferred retirement option plan participation period.

J. The form of payment shall be a lump sum distribution that is directly deposited in an account created for the member in the public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter. On deposit of the lump sum payment, the member shall immediately be able to either withdraw all or any portion of the lump sum deposit or directly transfer all or any portion of the lump sum deposit to an eligible retirement plan as required by section 401(a)(31) of the internal revenue code.

K. The reverse deferred retirement option plan shall not jeopardize in any way the tax qualified status of the plan under the rules of the internal revenue service. The board may adopt additional provisions to the extent necessary or appropriate for the reverse deferred retirement option plan to comply with applicable federal laws or rules.

§ 38-885.02 Early retirement

Members who are hired on or after July 1, 2018 and who have earned at least ten years of credited service may retire at fifty-two and one-half years of age and will receive an actuarially equivalent retirement benefit to the benefit amount prescribed in section 38-885, subsection F.

§ 38-886 Accidental disability retirement; total and permanent disability retirement; qualification; amount of pension; conditions for continued payment of pension

A. A member may retire and receive an accidental disability pension or a total and permanent disability pension if the local board finds that all of the following conditions occur:

An application for disability retirement is filed with the retirement plan or the local board by either the member or the member's participating employer after the disabling incident or within one year after the date the member ceases to be an employee and the member's employment is terminated by reason of accidental disability or total and permanent disability. Timely application for an accidental or a total and permanent disability pension is a prerequisite to receipt of the pension.
The member undergoes all medical examinations and tests ordered by the local board and releases to the local board all medical reports and records requested by the local board.
The local board determines that an accidental disability or total and permanent disability condition exists that meets the requirements for accidental disability retirement or total and permanent disability retirement.

B. The effective date of an accidental disability retirement or a total and permanent disability retirement shall not predate the date of disability or the date the member ceases to be an employee, and the disability pension payments shall not violate section 38-895.02.

C. The amount of an accidental disability pension or a total and permanent disability pension is equal to fifty per cent of the member's average monthly salary or the amount computed using the member's average monthly salary and the member's actual years of credited service, whichever is higher.

D. The local board may require a retired member with a disability to undergo periodic reevaluation of the continuation of accidental disability or total and permanent disability. If the retired member with a disability refuses to submit to reevaluation, the local board may suspend payment of the pension. If the refusal continues for one year, the local board may revoke the retired member's with a disability rights to the pension. An accidental disability pension or a total and permanent disability pension is terminated if the local board finds the retired member no longer meets the requirements for accidental disability retirement or total and permanent disability retirement. This subsection does not apply after a retired member with a disability reaches the member's normal retirement date. The amount of a disability pension shall not be recomputed at a retired member's with a disability normal retirement date.

E. A member does not qualify for an accidental disability pension or a total and permanent disability pension if the local board determines that the member's disability results from any of the following:

An injury suffered while engaged in a felonious criminal act or enterprise.
Service in the armed forces of the United States that entitles the member to a veteran's disability pension.
A physical or mental condition or injury that existed or occurred before the member's date of membership in the plan.

F. Local boards shall base a finding of total and permanent disability and accidental disability on medical evidence obtained by a designated physician or a physician working in a clinic that is selected by the local board and shall disregard any other medical evidence or opinions. If the local board retains more than one physician in connection with any case, the local board shall resolve any material conflicts in the medical evidence that is presented by the local board's designated physicians or clinics.

G. If an accidental disability ceases before a retired member reaches the member's normal retirement date and the member is reemployed by an employer under the plan, the pension payable on the member's subsequent retirement shall be determined as provided in section 38-885.

§ 38-886.01 Ordinary disability retirement; qualifications; amount of pension; conditions for continued payment of pension; definition

A. A member may retire and receive an ordinary disability pension if the local board finds that all of the following conditions occur:

An application for disability retirement is filed with the retirement plan or the local board by either the member or the member's participating employer after the disabling incident or within one year after the date the member ceases to be an employee and the member's employment is terminated before the member's normal retirement date by reason of ordinary disability. Timely application for an ordinary disability pension is a prerequisite to receipt of the pension.
The member undergoes all medical examinations and tests ordered by the local board and releases to the local board all medical reports and records requested by the local board.
The local board determines that an ordinary disability condition exists that meets the requirements for an ordinary disability.
The member is not participating in the reverse deferred retirement option plan pursuant to section 38-885.01.

B. The effective date of an ordinary disability retirement shall not predate the date of disability or the date the member ceases to be an employee, and the disability pension payments shall not violate section 38-895.02.

C. Except for a full-time dispatcher or a person who becomes a member of the plan on or after January 1, 2012, the amount of an ordinary disability pension is equal to a fraction times the member's normal retirement pension that is computed pursuant to section 38-885, subsection C as if the member had twenty years of credited service. The fraction is the result obtained by dividing the member's actual years of credited service, not to exceed twenty years of credited service, by twenty. For a full-time dispatcher or a person who becomes a member of the plan on or after January 1, 2012, the amount of an ordinary disability pension is equal to a fraction times the member's normal retirement pension that is computed pursuant to section 38-885, subsection E as if the member had twenty-five years of credited service or subsection F as if the member had twenty-five years of credited service. The fraction is the result obtained by dividing the member's actual years of credited service, not to exceed twenty-five years of credited service, by twenty-five.

D. The local board may require a retired member with a disability to undergo periodic reevaluation of the continuation of ordinary disability. If the retired member with a disability refuses to submit to reevaluation, the local board may suspend payment of the pension. If the refusal continues for one year, the local board may revoke the rights to the pension of the retired member with a disability. An ordinary disability pension is terminated if the local board finds the retired member no longer meets the requirements for ordinary disability retirement. This subsection does not apply after a retired member with a disability reaches the member's normal retirement date. The amount of a disability pension shall not be recomputed at the normal retirement date of a retired member with a disability.

E. A member does not qualify for an ordinary disability pension if the local board determines that the member's disability results from any of the following:

An injury suffered while engaged in a felonious criminal act or enterprise.
Service in the armed forces of the United States that entitles the member to a veteran's disability pension.
A physical or mental condition or injury that existed or occurred before the member's date of membership in the plan.

F. Local boards shall base a finding of ordinary disability on medical evidence that is obtained by a designated physician or a physician working in a clinic selected by the local board and shall disregard any other medical evidence or opinions. If the local board retains more than one physician or clinic in connection with the application, the local board shall resolve any material conflicts presented in the medical evidence that is presented by the designated physicians or clinics.

G. If an ordinary disability ceases before a retired member reaches the member's normal retirement date and the member is reemployed by an employer under the plan, the pension payable on the member's subsequent retirement shall be determined as provided in section 38-885.

H. For the purposes of this section, "ordinary disability" means a physical condition that the local board determines will prevent an employee from totally and permanently performing a reasonable range of duties within the employee's department or a mental condition that the local board determines will prevent an employee from totally and permanently engaging in any substantial gainful activity.

§ 38-887 Pension to surviving spouse of deceased retired member

The surviving spouse of a deceased retired member is entitled to receive a surviving spouse's pension if the spouse was married to the member for a period of at least two consecutive years at the time of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the retired member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. The amount of pension paid a surviving spouse is equal to four-fifths of the amount of the deceased retired member's pension at the time of death. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.

§ 38-888 Pension to the surviving spouse of a member

A. The surviving spouse of a deceased member is entitled to receive a surviving spouse's pension if the spouse was married to the member on the date of the member's death. Payment of a surviving spouse's pension commences as of the last day of the month following the member's date of death. The last payment shall be made as of the last day of the month in which the surviving spouse's death occurs. The amount of a surviving spouse's pension is forty percent of the deceased member's average monthly salary or four-fifths of what the deceased member's pension would have been on the date of death had the member been retired, whichever is greater. The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.

B. The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member's average monthly benefit compensation. For the purposes of this subsection, "killed in the line of duty" means the decedent's death was the direct and proximate result of physical injuries incurred in the performance of the decedent's public safety duties and does not include suicide.

C. If a deceased member does not have an eligible surviving spouse or the pension of the eligible surviving spouse is terminated, each eligible child is entitled to a child's pension as calculated pursuant to section 38-904.

§ 38-889 Guaranteed minimum aggregate payout

If all pension payments permanently terminate before an aggregate amount equal to the retired member's or deceased member's accumulated member contributions has been paid, the difference between the amount of accumulated member contributions and the aggregate amount of pension payments made shall be paid to the individual or individuals whom the member may have named on a form provided by and filed with the retirement plan. If no such named individual survives, the difference shall be paid to the legal representative of the last surviving individual who was being paid a pension or the last surviving named individual.

§ 38-890 Pensions; commencement and duration

A. A normal retirement pension, an accidental disability pension, a total and permanent disability pension or an ordinary disability pension commences on the first day of the calendar month next following the member's date of retirement. A survivor pension commences on the first day of the calendar month next following the month in which the death causing payment of the pension occurs.

B. Termination of payment of a pension occurs at the end of the calendar month in which the event causing the termination occurred. The payment shall be made for the full month of termination.

C. A change in the amount of a pension occurs on the first day of the calendar month next following the date of the event causing the change.

D. The plan shall make payments pursuant to section 401(a)(9) of the internal revenue code and the regulations that are issued under that section. Notwithstanding any other provision of the plan, beginning January 1, 1987 payment of benefits to a member shall commence not later than April 1 of the calendar year following the later of:

The calendar year in which the member attains seventy-two years of age.
The date the member terminates employment.

§ 38-891 Employer and member contributions

A. As determined by actuarial valuations reported to the employers and the local boards by the board, each employer shall make contributions sufficient under the actuarial valuations to meet both the normal cost for members hired before July 1, 2018 plus the actuarially determined amount required to amortize the unfunded accrued liability on a level percent of salary basis for all employees of the employer who are members of the plan or participants as defined in section 38-865, paragraph 7, subdivision (b) over, beginning July 1, 2018, a closed period of not more than twenty years, except as provided in subsection P or R of this section, that is established by the board taking into account the recommendation of the plan's actuary. An employer may pay a higher level percent of salary thereby reducing its unfunded past service liability. All contributions made by the employers and all state taxes allocated to the fund shall be irrevocable and shall be used to pay benefits under the plan or to pay expenses of the plan and fund. The minimum employer contribution that is paid and that is in excess of the normal cost plus the actuarially determined amount required to amortize the unfunded accrued liability as calculated pursuant to this subsection shall be used to reduce future employer contribution increases and shall not be used to pay for an increase in benefits that are otherwise payable to members. The board shall separately account for these monies in the fund. Forfeitures arising because of severance of employment before a member becomes eligible for a pension or for any other reason shall be applied to reduce the cost to the employer, not to increase the benefits otherwise payable to members. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of an employer's account contains excess valuation assets other than excess valuation assets that were in the employer's account as of fiscal year 2004-2005 and is more than one hundred percent funded, the board shall account for the excess valuation assets up to one hundred percent of present value of all future benefits of the employer in a stabilization reserve account. After the close of any fiscal year, if the plan's actuary determines that the actuarial valuation of an employer's account has a valuation asset deficiency and an unfunded actuarial accrued liability, the board shall use any valuation assets in the stabilization reserve account for that employer, to the extent available, to limit the decline in that employer's funding ratio to not more than two percent.

B. Each member who was hired before July 1, 2018, shall contribute the amount prescribed in subsection H of this section to the retirement plan. Each member who was hired on or after July 1, 2018, through the member's period of service from the member's effective date of participation, shall contribute an amount equal to the amount prescribed in subsection K of this section. Member contributions shall be made by payroll deduction. Continuation of employment by the member constitutes consent and agreement to the deduction of the applicable member contribution. Payment of the member's salary less the deducted contributions constitutes full and complete discharge and satisfaction of all claims and demands of the member relating to salary for services rendered during the period covered by the payment. A member may not, under any circumstance, borrow from, take a loan against or remove contributions from the member's account before the termination of membership in the plan or the receipt of a pension.

C. Each employer shall transfer to the board the employer and employee contributions provided for in this section within ten working days after each payroll date. Contributions transferred after that date shall include a penalty of ten percent per annum, compounded annually, for each day the contributions are late. The employer shall pay this penalty. Delinquent payments due under this subsection, together with interest charges as provided in this subsection, may be recovered by action in a court of competent jurisdiction against an employer liable for the payments or, at the request of the board, may be deducted from any other monies, including excise revenue taxes, payable to the employer by any department or agency of this state.

D. During a period when an employee is on industrial leave and the employee elects to continue contributions during the period of industrial leave, the employer and employee shall make contributions based on the salary the employee would have received in the employee's job classification if the employee was in normal employment status.

E. The local board of the state department of corrections or the local board of the department of juvenile corrections may specify a position within that department as a designated position if the position is filled by an employee who has at least five years of credited service under the plan, who is transferred to temporarily fill the position and who makes a written request to the local board to specify the position as a designated position within ninety days after being transferred. On the employee leaving the position, the position is no longer a designated position.

F. The local board of the state department of corrections, the local board of the department of juvenile corrections, the local board of the judiciary or the local board of a county, city or town that operates detention facilities may specify a designated position within the department or facility as a nondesignated position if the position is filled by an employee who has at least five years of credited service under the Arizona state retirement system and who makes a written request to the local board to specify the position as a nondesignated position within ninety days after accepting the position. On the employee leaving the position, the position reverts to a designated position.

G. The local board of the judiciary may specify positions within the administrative office of the courts that require direct contact with and primarily provide training or technical expertise to county probation, surveillance or juvenile detention officers as a designated position if the position is filled by an employee who is a member of the plan currently employed in a designated position as a probation, surveillance or juvenile detention officer and who has at least five years of credited service under the plan. An employee who fills such a position shall make a written request to the local board to specify the position as a designated position within ninety days after accepting the position. On the employee leaving the position, the position reverts to a nondesignated position.

H. The amount contributed by a member who was hired before July 1, 2018 pursuant to subsection B of this section is:

Through June 30, 2011, 8.41 percent of the member's salary, except for a full-time dispatcher. The amount contributed by a full-time dispatcher through June 30, 2011 is 7.96 percent of the member's salary.
For fiscal year 2011-2012 and each fiscal year thereafter, 8.41 percent of the member's salary or fifty percent of the sum of the member's contribution rate from the preceding fiscal year and the aggregate computed employer contribution rate that is calculated pursuant to subsection A of this section, whichever is lower, except that the member contribution rate shall not be less than 7.65 percent of the member's salary and the employer contribution rate shall not be less than the rate prescribed in subsection A of this section.

I. Notwithstanding subsection H, paragraph 2 of this section, the contribution rate for a full-time dispatcher is forty-five basis points less than the member contribution amount calculated pursuant to subsection H, paragraph 2 of this section, except that after the close of any fiscal year, if the plan's actuary determines that the aggregate ratio of the funding value of the accrued assets to the accrued liabilities of the fund is at least one hundred percent, from and after June 30 of the following year the member contribution rate for a full-time dispatcher is equal to the member contribution rate for a member who is not a full-time dispatcher.

J. The amount of the member's contribution that exceeds 8.41 percent of the member's salary for a member other than a full-time dispatcher or 7.96 percent of the member's salary for a full-time dispatcher shall not be used to reduce the employer's contributions that are calculated pursuant to subsection A of this section until the employer's funded ratio as expressed as a percentage of the employer's actuarial value of assets to accrued actuarial liability as determined by the actuarial valuations reported pursuant to subsection A of this section is at or above one hundred percent. If the employer's funded ratio falls below one hundred percent, the amount of the member's contributions above 8.41 percent or 7.96 percent, as applicable pursuant to this subsection, shall accumulate from that time and not be used to reduce the employer's contribution rate until the employer's funded ratio returns to one hundred percent funded.

K. For members hired on or after July 1, 2018, the employer and member contributions are determined as follows:

As determined by actuarial valuations reported to the employer and the local board by the board of trustees, each employer shall make contributions sufficient under such actuarial valuations to pay 33.3 percent of the normal cost plus 50 percent of the actuarially determined amount required to amortize the total unfunded accrued liability for each employer attributable only to those members hired on or after July 1, 2018. For each year that new unfunded liabilities are attributable to the employer's own members hired on or after July 1, 2018, a new amortization base representing the most recent annual gain or loss, smoothed over a period not more than five years as determined by the board, shall be created on a level-dollar basis over a closed period equal to the average expected remaining service lives of all members but not more than ten years, as determined by the board.
The remaining 66.7 percent of the normal cost and the remaining 50 percent of the actuarially determined amount required to amortize the total unfunded accrued liability as determined pursuant to paragraph 1 of this subsection shall be divided by the total number of the employer's members who were hired on or after July 1, 2018 such that each member contributes an equal percentage of the member's compensation. Member contributions shall begin simultaneously with membership in the plan and shall be made by payroll deduction.

L. In any fiscal year, an employer's contribution to the plan in combination with member contributions may not be less than the actuarially determined normal cost for that fiscal year. The board may not suspend contributions to the plan unless both of the following apply:

The plan's actuary, based on the annual valuation, determines the stabilization reserve of an employer's account is funded to one hundred percent of present value of all future benefits of the employer.
The board determines that suspending, in whole or in part, the normal cost contributions as calculated under subsection A of this section would not be in conflict with its fiduciary responsibility.

M. An employer may request that the board transfer excess assets of an employer's account that has no liabilities or beneficiaries to another account of the employer that is managed by the board. The board may authorize the transfer of assets if all of the following apply:

The board verifies that the employer's liabilities have been reconciled with the administrator and there are no remaining or potential liabilities or beneficiaries of the employer's account.
The board and the system bear no liability that the proposed transfer conforms with any other restrictions on the use or transfer of the assets of the proposed transfer.
The transfer does not violate the internal revenue code or threaten to impair the system's status as a qualified plan under the internal revenue code.

N. For the purposes of requesting a transfer of assets pursuant to this section, an employer must meet both of the following requirements:

The governing body of the employer adopts a resolution requesting the transfer of assets in an open session where public comment is allowed.
The employer submits a written request to the administrator of the board for the transfer of assets along with the adopted resolution.

O. For a state employer that meets the requirements of subsection M of this section, the joint legislative budget committee may request from the administrator of the board confirmation that an employer's account meets the requirements to transfer the account assets. The legislature shall pass a bill directing the board to transfer the assets from the eligible employer account to another account of the employer. Before the legislature passes the bill, the joint legislative budget committee shall confirm with the administrator of the board that the assets are eligible for transfer to another employer account and discuss the matter in a scheduled public meeting.

P. For the purposes of calculating unfunded liability amortization payments pursuant to subsection A of this section, an employer may make a onetime election to request that the board use a closed period of not more than thirty years if the employer meets both of the following requirements:

The governing body of the employer adopts a resolution requesting the longer amortization period and specifying the actuarial valuation date for which the new amortization period is to begin. The actuarial valuation date chosen must be the plan's fiscal year end either immediately before or immediately after the date of the resolution.
The employer submits a written request for the longer amortization period along with the adopted resolution to the administrator of the board.

Q. For the purposes of subsection P of this section, employer does not include this state or any state agency.

R. For the purposes of calculating unfunded liability amortization payments pursuant to subsection A of this section, the board may use a closed period of not more than thirty years for the judiciary.

S. Except as provided in subsection T of this section, if a member's employment is terminated with an employer by either party, the total liability under the plan associated with the member's service with the employer remains with the employer.

T. If an active or inactive member is reemployed in the same retirement plan with a subsequent employer, assets equal to the actuarially accrued liability earned with the previous employer through the date of reemployment shall transfer to the subsequent employer and all benefit liabilities for the member are attributed to that employer. Actuarially accrued liability shall be computed using the actuarial methods and assumptions prescribed by the public safety personnel retirement system's actuary and adopted by the board.

§ 38-891.01 Retired member; return to work; employer contributions

A. An employer shall pay contributions at an alternate contribution rate on behalf of a retired member who returns to work in any capacity in a position ordinarily filled by an employee of the employer in a designated position. This section applies to a retired member who has been retired for more than six consecutive months.

B. The alternate contribution rate shall be equal to that portion of the individual employer's total required contribution that is applied to the amortization of the unfunded actuarial accrued liability for the fiscal year beginning July 1, based on the fund's actuary's calculation of the total required contribution for the preceding fiscal year ended on June 30. The alternate contribution rate shall 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 six percent in any fiscal year.

D. All contributions made by the employer and allocated to the fund established by section 38-882 are irrevocable and shall be used as benefits under this article or to pay the expenses of the plan. Payments made pursuant to this section by employers become delinquent after the due date prescribed in section 38-891, subsection C, and thereafter shall be increased by interest from and after that date until payment is received by the plan.

§ 38-892 Internal revenue code section 414(h) pickup of member contributions

Each participating employer shall pick up the contributions required of members on account of compensation paid after the effective date specified in the resolution of the board activating the provisions of this section. The picked up contributions shall be treated as participating employer contributions for the purpose of tax treatment under the United States internal revenue code. The specified effective date shall not be before the date the retirement plan receives notification from the internal revenue service that pursuant to section 414(h) of the internal revenue code the member contributions picked up shall not be included in gross income for income tax purposes until the time that the picked up contributions are distributed by refund or pension payments. The participating employers shall pick up the member contributions from funds established and available in a retirement deduction account, which funds would otherwise have been designated as member contributions and paid to the retirement plan. Member contributions picked up pursuant to this section shall be treated for all other purposes, in the same manner and to the same extent, as member contributions made before the effective date.

§ 38-893 Local boards; powers and duties; rules; hearings; administrative review

A. To the extent outlined in this section, the administration of the plan and the responsibility for making the provisions of the plan effective for each employer are vested in a local board. The state department of corrections, the department of juvenile corrections, the department of public safety, each participating county sheriff's department, each participating city or town, each participating employer of full-time dispatchers for eligible groups as defined in section 38-842 and the judiciary shall have a local board. Each local board is constituted as follows:

For the state departments, two members who are elected by secret ballot by members employed by that department in a designated position and two citizens who are appointed by the governor. The director of each state department shall appoint one member to the local board who is knowledgeable in personnel actions. Each state department local board shall elect a chairperson.
For each participating county, the chairperson of the board of supervisors, or the chairperson's designee who is approved by the board of supervisors, as chairperson, two members who are elected by secret ballot by members employed by the participating county in a designated position and two citizens, one of whom shall be the head of the merit system if it exists for the group of members, who are appointed by the chairperson of the board of supervisors with the approval of the board of supervisors.
For political subdivisions, the mayor or chief elected official or a designee of the mayor or chief elected official approved by the respective governing body as chairperson, two members elected by secret ballot by members employed by the appropriate employer and two citizens, one of whom shall be the head of the merit system if it exists for the group of members, appointed by the mayor or chief elected official and with the approval of the city council or governing body of the employer.
For the judiciary, two members who are elected by secret ballot by members who are employed as a probation, surveillance or juvenile detention officer, a designee of the chief justice of the Arizona supreme court and two citizens, one of whom shall be the head of a human resource department for the group of members, appointed by the chief justice.

B. The appointments and elections of local board members shall take place with one elective and one appointive board member, as designated by the appointing authority, serving a term ending two years after the date of appointment or election and the other local board members serving a term ending four years after the date of appointment or election. Thereafter, every second year, and as a vacancy occurs, an office shall be filled for a term of four years in the same manner as provided in this section. Each local board shall meet at least twice each year.

C. Each local board shall be fully constituted pursuant to subsection A of this section within sixty days after the employer's effective date of participation in the plan. If the deadline is not met, on the written request of any member who is covered by the local board or the employer to the board of trustees, the board of trustees shall appoint all vacancies of the local board pursuant to subsection A of this section and designate whether each appointive position is for a two-year or four-year term. If the board of trustees cannot find individuals to serve on the local board who meet the requirements of subsection A of this section, the board of trustees may appoint individuals to serve as interim local board members until qualified individuals are appointed or elected. Within ten days after the member's appointment or election, each member of a local board shall take an oath of office that, so far as it devolves on the member, the member shall diligently and honestly administer the affairs of the local board and shall not knowingly violate or willingly allow to be violated any of the provisions of law applicable to the plan. Within one hundred eighty days after appointment or election, each board member shall complete local board training as prescribed by the board of trustees, including open meeting laws, ethics, legal review and fiduciary responsibilities and duties.

D. Except as limited by subsection E of this section, a local board shall:

Decide all questions of eligibility for membership and disability and in the line of duty death benefits under the plan.
Make a determination as to the right of a claimant to a disability or in the line of duty death benefit, issue opinions on questions of whether benefits are consistent with and allowable under the plan and afford a claimant or the board of trustees, or both, a right to a rehearing on the original determination. Except as otherwise required by law, unless all parties involved in a matter presented to the local board for determination otherwise agree, the local board shall commence a hearing on the matter within ninety days after the date the matter is presented to the local board for determination. If a local board fails to commence a hearing as provided in this paragraph, on a matter presented to the local board for determination, the relief demanded by the party petitioning the local board is deemed granted and approved by the local board.
Request and receive from the employers and from members information as is necessary for the proper administration of the plan and action on claims for disability and in the line of duty death benefits and forward the information to the board of trustees.
Distribute, in the manner the local board determines to be appropriate, information explaining the plan that is received from the board of trustees.
Furnish the employer, the board of trustees and the legislature, on request, with annual reports with respect to the administration of the plan that are reasonable and appropriate.
Appoint a medical board that is composed of a designated physician or physicians working in a clinic other than the employer's regular employee or contractor. If required, the local board may employ other physicians to report on special cases. The examining physician or clinic shall report the results of examinations made to the local board, and the secretary of the local board shall preserve the report as a permanent record.
Sue and be sued to effectuate the duties and responsibilities set forth in this article.
Prescribe procedures to be followed by claimants in filing applications for benefits.
Receive and review the actuarial valuation of the plan for its group of members.
Receive and review reports of the financial condition and of the receipts and disbursements of the fund from the board of trustees.

E. A local board may not add to, subtract from, modify or waive any of the terms of the plan, change or add to any benefits provided by the plan or waive or fail to apply any requirement of eligibility for membership or disability and in the line of duty death benefits under the plan. Notwithstanding any limitations periods imposed in this article, including subsections G and H of this section, if the board of trustees determines a local board decision violates the internal revenue code or threatens to impair the plan's status as a qualified plan under the internal revenue code, the local board's decision is not final and binding and the board of trustees may refrain from implementing or complying with the local board decision.

F. A local board shall establish and adopt rules as it deems necessary for its administration and to adjudicate claims or disputes. At a minimum the board's rules shall incorporate the model uniform rules for local board procedure that are issued by the board of trustees. All rules and decisions of a local board shall be uniformly and consistently applied to all members in similar circumstances. If a claim or dispute is presented to a local board for determination but the local board has not yet adopted uniform rules of procedure for adjudication of the claim or dispute, the local board shall adopt and use the model uniform rules of local board procedure that are issued by the board of trustees' fiduciary counsel to adjudicate the claim or dispute.

G. Except as otherwise provided in this article, an action by a majority vote of the members of a local board that is not inconsistent with the provisions of the plan and the internal revenue code is final, conclusive and binding on all persons affected by it, unless a timely application for a rehearing or appeal is filed as provided in this article. Not later than twenty days after taking action, the local board shall submit to the board of trustees the minutes from the local board meeting that include the name of the member affected by its decision, a description of the action taken and an explanation of the reasons and all documents submitted to the local board for the action taken, including the reports of a medical board. The board of trustees may require additional records from the local board or the employer or may require that the local board conduct a rehearing on the matter. The board of trustees may not implement and comply with any local board action that does not comply with the internal revenue code or that threatens to jeopardize the plan's status as a qualified plan under the internal revenue code.

H. A claimant may apply for or the board of trustees may require a rehearing before the local board within the time periods prescribed in this subsection, except that if a decision of a local board violates the internal revenue code or threatens to jeopardize the plan's status as a qualified plan under the internal revenue code, any limitation period for the board of trustees to require a rehearing of a local board decision does not apply. A claimant or the board of trustees shall file an application for rehearing in writing with a member of the local board or its secretary within sixty days after:

The claimant receives notification of the local board's original action by certified mail, by attending the meeting at which the action is taken or by receiving benefits from the plan pursuant to the local board's original action, whichever occurs first.
The board of trustees receives notification of the local board's original action as prescribed by subsection G of this section by email or certified mail.

I. A hearing before a local board on a matter remanded from the superior court is not subject to a rehearing before the local board.

J. Decisions of local boards are subject to judicial review pursuant to title 12, chapter 7, article 6.

K. When making a ruling, determination or calculation, the local board is entitled to rely on information furnished by the employer, the board of trustees, independent legal counsel or the actuary for the plan.

L. Each member of a local board is entitled to one vote. A majority is necessary for a decision by the members of a local board at any meeting of the local board.

M. The local board shall adopt bylaws as it deems necessary. The local board shall elect a secretary who may, but need not, be a member of the local board. The secretary of the local board shall keep a record and prepare minutes of all meetings in compliance with chapter 3, article 3.1 of this title and forward the minutes and all necessary communications to the board of trustees as prescribed by subsection G of this section. Within one hundred eighty days after election, the local board secretary shall complete local board training as prescribed by the board of trustees, including open meeting laws, ethics, legal review and fiduciary responsibilities and duties.

N. Each local board shall hire an independent legal counsel. The local board's independent legal counsel may not be employed by or contracted with the employer or any employee organizations. The independent legal counsel may not represent a member of the plan before any local board or any judicial appeal of a local board decision. The local board's independent legal counsel shall review the model uniform rules for local board procedure that are issued by the board of trustees.

O. The employer and not the board of trustees or plan shall pay the fees of the medical board and of the local board's legal counsel and all other expenses of the local board necessary for the administration of the plan at rates and in amounts as the local board approves.

P. The local board shall issue directions to the board of trustees concerning all benefits that are to be paid from the employer's account pursuant to the provisions of the fund. The local board shall keep on file, in the manner it deems convenient and proper, all reports from the board of trustees and the actuary.

Q. The local board and the individual members of the local board are indemnified from the assets of the fund for any judgment against the local board or its members, including attorney fees and costs, arising from any act, or failure to act, made in good faith pursuant to the provisions of the plan.

R. A local board shall submit to the board of trustees the names of the members of the local board and the local board's secretary and independent legal counsel and shall submit any changes to those positions within ten days after the change.

S. An employer and a local board shall submit any reports, data, paperwork or other materials that are requested by the board of trustees for any reason, including local board action or inaction or to investigate a complaint regarding a local board. If the board of trustees or its designee through an audit or investigation finds that the local board is not in compliance with statute or the model uniform rules for local board procedure, the board of trustees shall notify the local board of the noncompliance and the local board shall have sixty days to take corrective action. If the local board fails to take adequate corrective action, the board of trustees may act on behalf of the local board until the matter is resolved. The board of trustees or its designee shall work with the local board members to take the appropriate corrective actions, including appointing any vacant or noncompliant local board member positions, if necessary, to bring the local board and its membership, policies and procedures into compliance.

§ 38-893.01 Voluntary local board consolidation; membership; duties

A. A local board may enter into an intergovernmental agreement with other local boards to consolidate the boards for the respective employers.

B. The consolidated local board shall work with the board of trustees to ensure that the new board is duly empaneled consistent with the representation outlined in section 38-893, subsection A and that all appointments or elections for local board members are completed in a timely manner. The consolidated local board shall submit to the board of trustees the names of the members of the consolidated local board and the consolidated local board's secretary and independent legal counsel and shall submit any changes to those positions within ten days after the change.

§ 38-894 Financial objective of the retirement plan; participating employer contributions

A. The financial objective of the retirement plan is to receive contributions each fiscal year which are sufficient to both:

Fund the actuarial cost of benefits likely to be paid on account of credited service earned by members during the fiscal year.
Fund the unfunded actuarial cost of benefits likely to be paid on account of credited service earned by members before the fiscal year over a period of not more than forty years. Contribution requirements shall be determined by an annual actuarial valuation using a generally recognized level per cent of payroll actuarial cost method.

B. The board may require an employer that proposes to become a participating employer after the plan has been in operation for more than one year to make supplemental contributions based on the excess of the actuarial costs associated with the proposed participation over the actuarial costs of the plan indicated by the last annual actuarial valuation of the plan. The amount of supplemental contributions shall be determined by actuarial valuation. The board may pay the cost of the actuarial valuation or may require the employer to pay the cost.

C. The board shall certify to each participating employer the amount of annual contribution needed to meet the financial objective and the participating employer shall appropriate and cause the contribution to be paid to the retirement plan.

D. Payment of contributions shall be made in accordance with the schedule adopted by the board. Payments not made in a timely manner are subject to an interest charge at rates established by the board.

§ 38-895 Maximum annual pension; limitations; definition

A. The maximum annual pension for a limitation year shall not exceed the following:

For limitation years beginning before 1995, the lesser of ninety thousand dollars, as indexed for inflation, or one hundred per cent of the member's average monthly salary.
For limitation years beginning in 1995 and ending before 2002, ninety thousand dollars, as indexed for inflation.
For limitation years beginning in and after 2002, one hundred sixty thousand dollars, as indexed for inflation.

B. The limitations prescribed in subsection A shall be determined under section 415 of the internal revenue code and the regulations that are then in effect under that section.

D. For the purposes of this section, "limitation year" means the plan's fiscal year.

§ 38-895.01 Compensation limitation; adjustments; definition

A. The annual compensation of each member taken into account for purposes of the plan shall not exceed the following:

Beginning January 1, 1996 through December 31, 2001, $150,000.
Except for members hired on or after July 1, 2018, beginning January 1, 2002, $200,000. The board shall adjust the $200,000 annual compensation limit under this paragraph at the same time and in the same manner as adjusted by the United States secretary of the treasury under section 401(a)(17)(B) of the internal revenue code. The adjustment under this paragraph for a calendar year applies to annual compensation for that calendar year.
For members who are hired on or after July 1, 2018, $70,000. The board shall adjust the $70,000 annual compensation limit under this paragraph as prescribed in subsection C of this section. Notwithstanding the adjustments made under subsection C of this section, the limit under this paragraph, as adjusted by the board, may not exceed the maximum compensation limit of section 401(a)(17) of the internal revenue code, as adjusted by the United States secretary of the treasury.

B. If compensation under the plan is determined on a period of time that contains fewer than twelve calendar months, the compensation limit for that period of time is equal to the dollar limit for the calendar year during which the period of time begins, multiplied by the fraction in which the numerator is the number of full months in that period of time and the denominator is twelve.

C. Beginning in fiscal year 2021-2022, and every third fiscal year thereafter, the board shall adjust the annual compensation limit specified in subsection A, paragraph 3 of this section by the average change in the probation wage index as determined pursuant to this subsection. The board shall annually publish the probation wage index in January. The annual compensation limit adjustment under this subsection for a calendar year applies to the annual compensation for that calendar year. To determine the probation wage index:

The administrative office of the courts shall provide to the board pay scales for the month of July for the classifications of probation officers, by county, annually in July.
The board shall determine the weighted average of the change in the top of the pay scale for probation officers. The average change shall be weighted by measuring each county's total number of members divided by the total number of members of all counties represented in the probation wage index.

D. The board shall establish a probation wage index that reflects the calculation made pursuant to subsection C of this section.

E. For the purposes of this section, "probation officers" means the classifications of probation officers or surveillance officers or their equivalent classifications.

§ 38-895.02 Payment of pension

The board shall not make a retroactive payment of a pension to a person for a period of more than one hundred eighty days before the date of the person's application for benefits.

§ 38-895.03 Required distributions

§ 38-896 Taxation of pensions; exemption for contributions

The participating employer contributions and the assets of the fund are exempt from state, county and municipal taxes. Member contributions made to the fund after December 31, 1974 and subsequently withdrawn from the fund as other than a pension and benefits and pensions received by a member from the fund after December 31, 1988 are subject to tax pursuant to title 43.

§ 38-897 Assignments prohibited; liability of fund

A. The right of an individual to a pension, to a refund of accumulated member contributions, to the pension itself or to any other right accrued or accruing to any individual, and the monies and assets of the retirement plan, are not subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency law or other process of law except a qualified domestic relations order and are unassignable except as may be otherwise specifically provided.

B. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right provided in subsection A is void. The fund is not liable in any manner for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to these rights.

C. This section does not exempt employee benefits of any kind from a writ of attachment, a writ of execution, a writ of garnishment and orders of assignment issued by a court of record as the result of a judgment for arrearages of child support or for child support debt.

D. A person who defrauds the plan or who takes, converts, steals or embezzles monies owned by or from the plan and who fails or refuses to return the monies to the plan on the board's written request is subject to civil suit by the plan in the superior court in Maricopa county. On entry of an order finding the person has defrauded the plan or taken, converted, stolen or embezzled monies owned by or from the plan, the court shall enter an order against that person and for the plan awarding the plan all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the plan a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the plan, plus interest at the rate prescribed by section 44-1201, until all amounts owed are paid to the plan.

E. Notwithstanding any other provision of this article, the board may offset against any benefits otherwise payable by the plan to an active or retired member or survivor any court ordered amounts awarded to the board and plan and assessed against the member or survivor.

§ 38-898 Subrogation; right of setoff

A. If an individual becomes entitled to a pension or other benefit payable by the retirement plan as a result of an accident or injury caused by the act of a third party, the fund is subrogated to the rights of the individual against the third party to the extent of fund financed benefits which the retirement plan pays or becomes liable for payment.

B. The retirement plan is entitled to the right of setoff to recover overpayments made by the retirement plan and to satisfy any claim arising from embezzlement or fraud committed by a member, retired member, former member, beneficiary or other individual having a claim to benefits.

§ 38-899 Correction of errors

The retirement plan shall correct errors in the records of the retirement plan. The retirement plan shall seek to recover overpayments and shall make up underpayments. Recovery of overpayments may be accomplished by reducing the amount of future payments so that the actuarial present value of actual payments to the recipient is equal to the actuarial present value of the payments to which the recipient was correctly entitled.

§ 38-900 Internal revenue code qualification

The legislature intends that the retirement plan is a qualified pension plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that the trust is exempt from taxation under section 501 of the internal revenue code, as amended. The assets of the fund are held in trust for the exclusive benefit of the members and beneficiaries of the retirement plan. The board may adopt such additional provisions to the retirement plan as are necessary to fulfill this intent.

§ 38-900.01 Statutory construction

B. The plan was established in order to provide a uniform, consistent and equitable statewide program for those eligible corrections officers as defined by the plan. A member of the plan does not have a vested right to benefits under the plan until the member files an application for benefits and is found eligible for those benefits. An eligible claimant's right to benefits vests on the date of the member's application for those benefits or the member's last day of employment under the plan, whichever occurs first.

§ 38-900.02 Adjustment and refund; termination of plan

A. If more than the correct amount of employer or member contributions is paid into the plan by an employer through a mistake of fact, the board shall return those contributions to the employer if the employer requests return of the contributions within one year after the date of the overpayment. The board may not pay an employer earnings attributable to excess contributions but shall reduce the amount returned to an employer pursuant to this subsection by the amount of losses attributable to the excess contributions.

B. On termination or partial termination of the plan, the accrued benefit of each member is, as of the date of termination or partial termination, fully vested and nonforfeitable to the extent then funded.

§ 38-901 Transfers into or out of retirement plan

A. A member who changes employment or transfers or is assigned to a position in which the member is no longer eligible to be a member of this plan, because of a change in duties or otherwise, with the same or another employer of this state or a municipality of this state participating in a different retirement system or plan, is entitled to have all credited service transferred to the retirement system or plan applicable to the new position in accordance with article 7 of this chapter.

B. A member who begins employment with a participating employer in this plan and who has credited service from a different system or plan may transfer the prior service to this plan in accordance with article 7 of this chapter.

§ 38-902 Joinder agreement

A. County detention officers and nonuniformed employees of a sheriff's department whose primary duties require direct contact with inmates may participate in this plan if the board of supervisors of the county enters into a joinder agreement with the board of trustees to bring such employees into this plan. The joinder agreement shall be in accordance with the provisions of this plan. All such employees shall be designated for membership in the joinder agreement unless written consent to the contrary is obtained from the board.

B. City or town detention officers may participate in this plan if the governing body of the city or town enters into a joinder agreement with the board to bring its detention officers into this plan. The joinder agreement shall be in accordance with the provisions of the plan. The governing body of the city or town shall designate all detention officers for membership in the plan unless written consent to the contrary is obtained from the board.

C. Full-time dispatchers may participate in this plan if the governing body or agency of the employer of an eligible group as defined in section 38-842 enters into a joinder agreement with the board to bring its full-time dispatchers into this plan before November 24, 2009 and if the person was employed by the employer as a full-time dispatcher before November 24, 2009. The joinder agreement shall be in accordance with the provisions of this plan and for those dispatchers designated for membership in the plan on the joinder date all credited service from any other Arizona defined benefit state retirement system or plan that represents credited service in a designated position shall be transferred to the corrections officer retirement plan. The governing body or agency of the employer shall designate all full-time dispatchers for membership in the plan except for a full-time dispatcher who signs an irrevocable agreement before the joinder agreement becomes effective electing not to become a member of the plan. A full-time dispatcher employed by an employer who becomes eligible for membership in the plan pursuant to this section may elect to participate in the plan within the deadlines and pursuant to the terms prescribed for such participation by the board.

D. Probation, surveillance and juvenile detention officers may participate in this plan if the administrative office of the courts enters into a joinder agreement with the board to bring its probation, surveillance and juvenile detention officers into this plan. The joinder agreement shall be in accordance with the provisions of this plan. The administrative office of the courts shall designate all probation, surveillance and juvenile detention officers for membership in this plan unless written consent to the contrary is obtained from the board.

E. Detention officers who are employed by the department of public safety may participate in this plan if the director of the department of public safety enters into a joinder agreement with the board to bring the department's detention officers into this plan. The joinder agreement shall be in accordance with the provisions of this plan. The director of the department of public safety shall designate all detention officers for membership in this plan unless written consent to the contrary is obtained from the board.

F. The new employer shall designate the groups of employees who are eligible to participate in the plan and shall agree to make contributions each year that are sufficient to meet both the normal cost of a level cost method attributable to inclusion of its employees and the prescribed interest on the past service cost for its employees.

G. Before the execution of any joinder agreement each employer contemplating participation in the plan shall have an actuarial valuation made, which is payable by the employer, to determine the estimated cost of participation in accordance with section 38-894.

H. Assets under any existing public employee defined benefit retirement program, except a military retirement program, that are necessary to equal the actuarial present value of projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation attributable to the employer's designated employee group, calculated using the actuarial methods and assumptions adopted by the existing public employee retirement program, shall be transferred from the program to this fund no later than ninety days after the employer's effective date. That portion of the transferred assets that is attributable to employee contributions, including interest credits, shall be properly allocated to each affected employee of the employer and credited to the employee's initial accumulated contributions in accordance with a schedule furnished by the employer to the board.

§ 38-903 Reservation to the legislature

The right to modify, amend or repeal this article or any provision thereof is reserved to the legislature.

§ 38-904 Death benefits; amount

A. If an active or inactive member dies and no pension is payable on account of the member's death, an amount equal to two times the member's accumulated contributions to the retirement plan is payable to the person designated by the deceased member in writing and filed with the board. If the designated person or persons do not survive the deceased member or if the designated person does not claim the benefit, the payment is payable, at the election of the local board, to the designated person's nearest of kin as determined by the local board or to the estate of the deceased member. The beneficiary or person who is claiming to be the nearest of kin shall file a written application in order to receive the refund. For the purposes of this subsection, "inactive member" means a person who previously made contributions to the plan, who has not retired, who is not currently making contributions to the plan and who has not withdrawn contributions from the plan.

B. If the deceased retired or active member does not have an eligible surviving spouse or the pension of the eligible surviving spouse is terminated, each eligible child is entitled to a child's pension. A child's pension terminates if the child is adopted. In the case of a child with a disability, the child's pension terminates if the child ceases to be under a disability or ceases to be a dependent of the surviving spouse or guardian. The amount of the pension of each eligible child is an equal share of the amount of the surviving spouse's pension. The board shall pay the surviving minor or child's with a disability pension to the person who is the legally appointed guardian or custodian of the eligible child until the eligible child reaches eighteen years of age, at which time the eligible child's pension shall be paid directly to the eligible child if the person remains eligible to receive the pension and is not subject to a guardianship or conservatorship due to disability or incapacity. The pension of a child with a disability who is eighteen years of age or older and who is subject to a guardianship or conservatorship due to disability or incapacity shall continue to be paid to the guardian or conservator if the child remains eligible for the pension payment.

§ 38-905.05 Cost-of-living adjustment; members hired on or before June 30, 2018

A. For members hired on or before June 30, 2018, each retired member or survivor of a retired member is eligible to receive a compounding cost-of-living adjustment in the base benefit as provided in this section. The first payment under this section shall be made immediately following the first year the cost-of-living adjustment specified in subsection C of this section is paid. The cost-of-living adjustment shall be made on July 1 each year thereafter.

C. In the first year of a member's retirement, the cost-of-living adjustment specified in subsection B of this section shall be prorated based on the date of retirement.

D. The plan's actuary shall include the projected cost of providing the cost-of-living adjustment specified in subsection B of this section in the calculation of normal cost and accrued liability.

§ 38-905.06 Cost-of-living adjustment; members hired on or after July 1, 2018; definition

A. For members who are hired on or after July 1, 2018, each eligible retired member or survivor of a retired member may receive a compounding cost-of-living adjustment in the base benefit as provided in this section.

C. A cost-of-living adjustment shall be paid on July 1 each year that the funded ratio for members who are hired on or after July 1, 2018 is seventy percent or more, as reported in the most recent actuarial valuation.

Two percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2018 is ninety percent or more, as reported in the most recent actuarial valuation.
One and one-half percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2018 is eighty percent or more but less than ninety percent, as reported in the most recent actuarial valuation.
One percent of the retired member's or survivor's base benefit if the funded ratio for members who are hired on or after July 1, 2018 is seventy percent or more but less than eighty percent, as reported in the most recent actuarial valuation.

E. The plan's actuary shall include the projected cost of providing the cost-of-living adjustment specified in subsection D of this section in the calculation of normal cost and accrued liability.

F. For the purposes of this section, "funded ratio" means the ratio of the market value of assets to the actual accrued liabilities.

§ 38-906 Group health and accident coverage for retired members; payment; forfeiture of interest

One hundred fifty dollars per month for each retired member or survivor of the plan who is not eligible for medicare.
One hundred dollars per month for each retired member or survivor of the plan who is eligible for medicare.

B. On notification, the board shall pay from the assets of the separate account established pursuant to subsection G of this section part of the family coverage premium of any group health and accident insurance for each retired member or survivor of the plan who elects family coverage and who otherwise qualifies for payment pursuant to subsection A of this section. Payment under this subsection is in the following amounts:

Up to two hundred sixty dollars per month if the retired member or survivor of the plan and one or more dependents are not eligible for medicare.
Up to one hundred seventy dollars per month if the retired member or survivor of the plan and one or more dependents are eligible for medicare.
Up to two hundred fifteen dollars if either:

(a) The retired member or survivor of the plan is not eligible for medicare and one or more dependents are eligible for medicare.

(b) The retired member or survivor of the plan is eligible for medicare and one or more dependents are not eligible for medicare.

C. The board shall not pay more than the amount prescribed in this section for a benefit recipient as a member or survivor of the plan.

D. A retired member or survivor of the plan may elect to purchase individual health care coverage and receive a payment pursuant to this section through the retired member's former employer if that former employer assumes the administrative functions associated with the payment, including verification that the payment is used to pay for health insurance coverage if the payment is made to the retired member or survivor of the plan.

E. This section does not apply to a retired member of the plan who becomes a member on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the member's new employer.

F. This section does not apply to a survivor of the plan whose deceased spouse becomes a member on or after September 13, 2013 and who is reemployed and participates in health care coverage provided by the survivor's new employer.

G. The board shall establish a separate account that consists of the benefits provided pursuant to this section. The board shall deposit the benefits provided by this section in the account. The board shall not use or divert any part of the corpus or income of the account for any purpose other than the provision of benefits pursuant to this section unless the liabilities to provide the benefits pursuant to this section are satisfied. If the liabilities to provide the benefits described in this section are satisfied, the board shall return any amount remaining in the account to the employer.

H. Payment of the benefits provided by this section is subject to the following conditions:

The payment of the benefits is subordinate to the payment of retirement benefits payable by the plan.
The total of contributions for the benefits and actual contributions for life insurance protection, if any, shall not exceed twenty-five percent of the total actual employer and employee contributions to the plan, minus the contributions to fund past service credits, after the day the account is established.
The contributions by the employer to the account shall be reasonable and ascertainable.

§ 38-907 Credit for military service

The member was honorably separated from the military service.
The period of military service for which the member receives credited service does not exceed sixty months.
The period of military service for which the member receives credited service is not on account with any other retirement system, except as provided by 10 United States Code section 12736 or except if the member is not yet eligible for a military retirement benefit.
The member pays the cost to purchase the prior active military service. The cost is the amount necessary to equal the increase in the actuarial present value of projected benefits resulting from the additional credited service.
The amount of benefits purchased pursuant to this subsection is subject to limits established by section 415 of the internal revenue code.

B. A member who became a member before January 1, 2012 may redeem eligible prior military service as specified in subsection A of this section without having to have accrued any minimum amount of credited service.

Was an active member of the plan on the day before the member began military service.
Entered into and served in the armed forces of the United States or any military reserve unit of any branch of the armed forces of the United States or is a member of the national guard.
Complies with the notice and return to work provisions of 38 United States Code section 4312.

The date the member is separated from military service.
The date the member is released from service-related hospitalization or two years after initiation of service-related hospitalization, whichever date is earlier.
The date the member dies as a result of or during military service.

F. The employer and the member shall make contributions pursuant to subsection C of this section as follows:

Contributions shall be based on the compensation that the member would have received but for the period that the member was ordered into active military service.
If the employer cannot reasonably determine the member's rate of compensation for the period that the member was ordered into military service, contributions shall be based on the member's average rate of compensation during the twelve-month period immediately preceding the period of military service.
If a member has been employed less than twelve months before being ordered into military service, contributions shall be based on the member's compensation being earned immediately preceding the period of military service.
The member has up to three times the length of military service, not to exceed sixty months, to make the member contributions. Once the member has made the member contributions or on receipt of the member's death certificate, the employer shall make the employer contributions in a lump sum. Death benefits shall be calculated as prescribed by law.
If the member's employer pays military differential wage pay to members serving in the military, contributions shall be paid to the plan pursuant to section 38-891 for any military differential wage pay paid to the member while performing military service.

K. For deaths occurring from and after December 31, 2006 in the case of a member who dies while performing qualified military service as defined in section 414(u)(5) of the internal revenue code, the survivors of the member are entitled to any benefits, other than benefit accruals relating to the period of qualified military service, provided under the plan as though the member resumed and then terminated employment on account of death.

§ 38-908 Transfer of credited service

A. A member who terminates employment with an employer and accepts a position with the same or another employer participating in the plan shall have the member's credited service transferred to the member's record with the new employer provided the member leaves the member's accumulated contributions on deposit with the fund. The period not employed shall not be considered as service or credited service.

B. The new employer's account shall be credited with the member's accumulated contributions plus the additional amount, if any, necessary to equal the increase in the actuarial present value to the extent funded on a market value basis as of the most recent actuarial valuation of projected benefits resulting from the transfer calculated by the system's actuary using the actuarial methods and assumptions adopted by the board.

§ 38-909 Redemption of prior service; calculation

A. Except as provided in subsection B of this section, an active member of the plan who has at least five years of credited service with the plan who had previous service in this state as an employee with an employer now covered by the plan or who had previous service with an agency of the United States government, a state of the United States or a political subdivision of this state or a state of the United States as a full-time paid corrections officer or full-time paid certified peace officer may elect to redeem up to sixty months of any part of the prior service by paying into the plan any amounts required under subsection C of this section if the prior service is not on account with any other retirement system.

B. An active member who became a member of the plan before January 1, 2012 may redeem any amount of eligible prior service as specified in subsection A of this section without having to have accrued any minimum amount of credited service.

C. An active member who elects to redeem any part of the prior service or employment for which the employee is deemed eligible by the board under this section shall pay into the plan the amounts previously withdrawn by the member, if any, as a refund of the member's accumulated contributions plus accumulated interest as determined by the board and the additional amount, if any, computed by the plan's actuary that is necessary to equal the increase in the actuarial present value of projected benefits resulting from the redemption calculated using the actuarial methods and assumptions prescribed by the plan's actuary.

D. A member electing to redeem service pursuant to this section may pay for service being redeemed in the form of a lump sum payment to the plan, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.

§ 38-909.01 Purchase of service; payment

A member who purchases service pursuant to this article or section 38-922 or 38-924 shall make payments directly to the plan in whole or in part by any one or a combination of the following methods:

In lump sum payments.
Through an arrangement with the plan that the payments be made in installment payments over a period of time.
Subject to the limitations prescribed in sections 401(a)(31) and 402(c) of the internal revenue code, accepting a direct transfer of any eligible rollover distribution or a contribution by a member of an eligible rollover distribution from one or more:

(a) Retirement programs that are qualified under section 401(a) or 403(a) of the internal revenue code.

(b) Annuity contracts described in section 403(b) of the internal revenue code.

Subject to the limitations prescribed in section 408(d)(3)(A)(ii) of the internal revenue code, accepting from a member a rollover contribution of that portion of a distribution from an individual retirement account or individual retirement annuity described in section 408(a) or 408(b) of the internal revenue code that is eligible to be rolled over and would otherwise be includable as gross income.

§ 38-910 Domestic relations orders; procedures; payments

The domestic relations order shall state the name and the last known mailing address of the participant and the name and last known mailing address of the alternate payee that is covered by the domestic relations order.
The domestic relations order shall clearly state the amount or percentage of the participant's benefits that is payable by the plan to the alternate payee or the precise manner in which the amount or percentage is to be determined.
The domestic relations order shall state the number of payments or periods to which the domestic relations order applies, if applicable.
The domestic relations order shall state that the domestic relations order applies to the plan.
The domestic relations order shall not require the plan to provide any type or form of benefit or any option not otherwise provided by this article.
The domestic relations order shall not require the plan to provide increased benefits determined on the basis of actuarial value.
The domestic relations order shall not require the payment of benefits to an alternate payee if the benefits are required to be paid to another alternate payee under a separate plan approved domestic relations order.
The domestic relations order shall have been issued by a court of competent jurisdiction of a state, territory or possession of the United States.

D. The plan has a determination period to issue a written determination indicating whether a domestic relations order qualifies as a plan approved domestic relations order. If the participant is receiving benefits during the determination period, and if the plan can determine the amount of the benefits that currently would be payable to the alternate payee if the domestic relations order were a plan approved domestic relations order, the plan shall hold the segregated funds and shall pay the remaining portion of the benefits to the participant. If the plan determines the domestic relations order is a plan approved domestic relations order, the plan shall pay the participant and alternate payee pursuant to the plan approved domestic relations order in the month following the month in which the determination was issued or in the month following the month in which a benefit is payable under the plan approved domestic relations order, whichever is later. If the plan determines the domestic relations order fails to qualify as a plan approved domestic relations order, the plan shall specify in its determination how the domestic relations order is deficient and how it may be amended to qualify as a plan approved domestic relations order. If the participant is currently receiving benefits and if the plan can determine the amount of segregated funds that would be payable to the alternate payee if the domestic relations order were a plan approved domestic relations order, the plan shall hold the segregated funds during the cure period to allow the parties to submit a certified copy of an amended domestic relations order and a written request for a determination that the amended domestic relations order is a plan approved domestic relations order. During the cure period, the plan shall pay the participant's portion to the participant. At the end of the cure period, if the issue of whether an amended domestic relations order qualifies as a plan approved domestic relations order remains undetermined or if an amended domestic relations order is determined not to be a plan approved domestic relations order, the plan shall pay the segregated funds and the participant's portion to the participant. The participant shall hold the segregated funds in trust for the alternate payee as provided in subsection J of this section. If an amended domestic relations order that is submitted after the expiration of the cure period is determined to be a plan approved domestic relations order, the plan shall make payments to an alternate payee under the plan approved domestic relations order only prospectively. A determination by the plan that a domestic relations order is not a plan approved domestic relations order does not prohibit a participant or alternate payee from submitting an amended domestic relations order to the plan.

Hold the alternate payee's portion until the alternate payee provides the plan with a current address. Once the plan is notified of the alternate payee's current address, the plan shall prospectively pay the alternate payee's portion to the alternate payee.
Pay the alternate payee's portion to the participant, who shall hold the alternate payee's portion in trust as provided in subsection J of this section, until the alternate payee is located. At that time, the participant shall pay the alternate payee's portion directly to the alternate payee.

Persuaded the plan that the personal representative is authorized to receive payments designated for the deceased alternate payee.
Provided the plan with an address to which the payments should be sent.

Hold the alternate payee's portion until the time a personal representative makes a proper demand for payment of the alternate payee's portion.
Remit the alternate payee's portion to the participant, who shall hold the amounts in trust for the estate of the alternate payee until the personal representative is identified. At that time, the participant shall pay the alternate payee's portion paid by the plan to the participant to the personal representative.

Thereafter, the plan shall prospectively pay the alternate payee's portion to the personal representative.

I. Amounts held or paid pursuant to this section shall not accrue interest unless otherwise prescribed by this article.

K. The plan may adopt policies and procedures that govern the implementation of this section.

§ 38-911 Deferred annuity; eligibility; amount; exception

A. If any member who has at least ten years of credited service terminates employment for reasons other than retirement or disability, the person may elect to receive a deferred annuity, except that if the person withdraws the person's accumulated contributions from the plan, all rights to a deferred annuity are forfeited. A deferred annuity is a lifetime monthly payment that is actuarially equivalent to the annuitant's accumulated contributions in the plan plus an equal amount paid by the employer and commences on application on or after the sixty-second birthday of the annuitant. The deferred annuity is not a retirement benefit and annuitants are not entitled to receive any amount prescribed by section 38-887, 38-888, 38-904 or 38-906.

B. This section does not apply to a member who becomes a member of the plan on or after January 1, 2012 and before July 1, 2018. Such a person who attains a normal retirement date is eligible for retirement and a retirement benefit even if the member terminates employment with an employer before the age requirement for normal retirement if the member attains the service requirement for normal retirement.

§ 38-912 Civil liability; restitution or payment of fine; forfeiture of benefits; violation; classification; offset of benefits

A. A person who defrauds the plan or who takes, converts, steals or embezzles monies owned by or from the plan and who fails or refuses to return the monies to the plan on the board's written request is subject to civil suit by the plan in the superior court in Maricopa county. On entry of an order finding the person has defrauded the plan or taken, converted, stolen or embezzled monies owned by or from the plan, the court shall enter an order against that person and for the plan awarding the plan all of its costs and expenses of any kind, including attorney fees, that were necessary to successfully prosecute the action. The court shall also grant the plan a judicial lien on all of the nonexempt property of the person against whom judgment is entered pursuant to this subsection in an amount equal to all amounts awarded to the plan, plus interest at the rate prescribed by section 44-1201, until all amounts owed are paid to the plan.

B. If a member is convicted of, or discharged because of, theft, embezzlement, fraud or misappropriation of an employer's property or property under the control of the employer, the member is subject to restitution and fines imposed by a court of competent jurisdiction. The court may order the restitution or fines to be paid from any payments otherwise payable to the member from the plan.

C. A person who knowingly makes any false statement or who falsifies or permits to be falsified any record of the plan with an intent to defraud the plan is guilty of a class 5 felony. If any change or error in the records results in any member or beneficiary receiving from the plan more or less than the member or beneficiary would have been entitled to receive had the records been correct, the local board shall correct the error, and as far as practicable shall adjust the payments in a manner that the actuarial equivalent of the benefit to which the member or beneficiary was correctly entitled shall be paid. If a member is convicted of a crime pursuant to this subsection, section 13-713 applies.

D. Notwithstanding any other provision of this article, the board may offset against any benefits otherwise payable by the plan to a member or survivor any court ordered amounts awarded to the board and plan and assessed against the member or survivor.

§ 38-913 Discount rate; service purchase; transfer of service credits

A. Beginning July 1, 2017, the discount rate specified in subsection B of this section applies to service purchases or transfers of service credits to the plan pursuant to the following sections:

Section 38-907, subsection A or B.
Section 38-909, subsection C.
Sections 38-921, 38-922, 38-923 and 38-924.

B. For members enrolled in the system:

Before July 1, 2017, the discount rate is the assumed rate of return that is prescribed by the board.
On or after July 1, 2017, the discount rate is an amount equal to the lesser of the assumed rate of return that is prescribed by the board or an amount equal to the yield on a ten-year treasury note as of March 1 that is published by the federal reserve board plus two percent. The discount rate is effective beginning in the next fiscal year, and the board shall recalculate the rate each year.

§ 38-914 Employer disclosure; funding ratio

An employer shall disclose the employer's funding ratio under the plan on the employer's public website.

Article 7 Transfers to Another Retirement System or Plan

§ 38-921 Transfer of retirement service credits from one retirement system or plan to another retirement system or plan in this state; definitions

A. An active or inactive member of a state retirement system or plan, including the retirement system provided for in article 2 of this chapter, the elected officials' retirement plan provided for in article 3 of this chapter, the public safety personnel retirement system provided for in article 4 of this chapter or the corrections officer retirement plan provided for in article 6 of this chapter, may transfer service credits from one system or plan to the member's current or former system or plan pursuant to section 38-922 if all of the following conditions are met:

The board governing the retirement system or plan from which the service credits are being transferred mutually agrees with the board governing the retirement system or plan to which the service credits are being transferred regarding the terms of the transfer.
The transfer does not cause either the retirement system or plan to which the transfer is made or the retirement system or plan from which the transfer is made to incur any unfunded accrued liabilities as a result of the transfer.
The member initiates the transfer by making written application to the governing board of the retirement system or plan to which the member is contributing or has contributed.

B. For the purposes of this section:

"Active member" means a member who satisfies the eligibility criteria of the state retirement system or plan and who is currently making member contributions to or receiving credited service from the state retirement system or plan.
"Inactive member" means a member of the state retirement system or plan who previously made contributions to the state retirement system or plan and who satisfies each of the following:

(a) Has not retired.

(b) Is not eligible for active membership in the state retirement system or plan.

(d) Has not withdrawn contributions from the state retirement system or plan.

§ 38-922 Transfer or redemption of service credits

A. Service credits qualified in accordance with section 38-730 or 38-921 may be transferred or redeemed in accordance with this section.

B. In the case of a member whose contributions remain on deposit with the prior retirement system or plan, the following shall be calculated:

The prior system or plan shall calculate the amount equal to the actuarial present value of a member's projected benefits to the extent funded on a market value basis as of the most recent actuarial valuation under the prior system or plan as calculated by that system's or plan's actuary using the same actuarial method and assumptions used in calculating that system's or plan's funding requirements based on the transferring member's service credits at the time of transfer. If a system's or plan's market value is greater than one hundred per cent, the system or plan shall use a one hundred per cent market value.
The system or plan to which the member is transferring shall calculate the increase in the actuarial present value of the projected benefits provided as a result of the transfer of the member's service credits. This calculation shall be performed by that system's or plan's actuary using the same actuarial method and assumptions used in calculating that system's or plan's funding requirements based on the transferring member's service credits at the time of transfer.

C. In the event a member decides to transfer:

If the amount calculated in subsection B, paragraph 2 is greater than the amount calculated in subsection B, paragraph 1:

(a) The prior system or plan shall transfer to the present system or plan the greater of the amount calculated in subsection B, paragraph 1 or the member's accumulated contribution account balance.

(b) If the amount transferred is less than the amount calculated under subsection B, paragraph 2, the transferring member shall elect either to pay the difference or to accept a reduced transfer of service credits. If the member elects to pay the difference, the amount paid shall be added to the member's accumulated contribution account balance. If the member elects to accept a reduced transfer of service credits, the amount of service credits transferred shall be equal to the amount of service credits used in making the calculation under subsection B, paragraph 1 multiplied by the ratio of the amount calculated under subsection B, paragraph 1 to the amount calculated under subsection B, paragraph 2.

If the amount calculated in subsection B, paragraph 2 is less than or equal to the amount calculated in subsection B, paragraph 1, the prior system or plan shall transfer to the present system or plan the greater of the amount calculated in subsection B, paragraph 2 or the member's accumulated contribution account balance.

D. In the case of an applicant who has withdrawn the applicant's member contributions from another prior system or plan of this state, the applicant shall pay into the new system or plan to which the applicant is transferring an amount equal to the increase in the actuarial present value of the projected benefits provided by the service credits being redeemed and this amount shall be included in the member's current accumulated contribution account balance. This calculation shall be performed by the actuary of the system or plan to which the service credits are being transferred using the same actuarial method and assumptions used in calculating that system's or plan's funding requirements.

E. Service credits shall not be applied to the applicant's account until such time as complete payment is made to the retirement system or plan to which the applicant is transferring. On completion of the transfer provided for in this article, the member's rights in the retirement system or plan from which the member is transferring are extinguished.

F. A member electing to transfer to or redeem service with the public safety personnel retirement system, the elected officials' retirement plan or the corrections officer retirement plan pursuant to this section may pay for the service being transferred or redeemed in the form of a lump sum payment to the system or plan, a trustee-to-trustee transfer or a direct rollover of an eligible distribution from a plan described in section 402(c)(8)(B)(iii), (iv), (v) or (vi) of the internal revenue code or a rollover of an eligible distribution from an individual retirement account or annuity described in section 408(a) or (b) of the internal revenue code.

§ 38-923 Transfer of service credits between municipal retirement systems and special retirement plans; definitions

A. An active or inactive member of a retirement system or plan of a municipality of this state or the public safety personnel retirement system who becomes a member of one or the other of these retirement systems or plans may transfer service credits from the member's prior retirement system or plan to the member's current retirement system or plan pursuant to section 38-924 if all of the following conditions are met:

The board governing the retirement system or plan from which the service credits are being transferred and the board governing the retirement system or plan to which the service credits are being transferred approve the terms of the transfer.
The transfer does not cause either the retirement system or plan to which the transfer is made or the retirement system or plan from which the transfer is made to incur any unfunded accrued liabilities as a result of the transfer.
The member initiates the transfer by making written application to the governing board of the retirement system or plan to which the member is contributing.

B. An active or inactive member of a retirement system or plan of a municipality of this state or the corrections officer retirement plan who becomes a member of one or the other of these retirement systems or plans may transfer service credits from the member's prior retirement system or plan to the member's current retirement system or plan pursuant to section 38-924 if all of the following conditions are met:

The board governing the retirement system or plan from which the service credits are being transferred and the board governing the retirement system or plan to which the service credits are being transferred approve the terms of the transfer.
The transfer does not cause either the retirement system or plan to which the transfer is made or the retirement system or plan from which the transfer is made to incur any unfunded accrued liabilities as a result of the transfer.
The member initiates the transfer by making written application to the governing board of the retirement system or plan to which the member is contributing.

C. An active or inactive member of a retirement system or plan of a municipality of this state or of the elected officials' retirement plan who becomes a member of one or the other of these retirement systems or plans may transfer service credits from the member's prior retirement system or plan to the member's current retirement system or plan pursuant to section 38-924 if all of the following conditions are met:

The board governing the retirement system or plan from which the service credits are being transferred and the board governing the retirement system or plan to which the service credits are being transferred approve the terms of the transfer.
The transfer does not cause either the retirement system or plan to which the transfer is made or the retirement system or plan from which the transfer is made to incur any unfunded accrued liabilities as a result of the transfer.
The member initiates the transfer by making written application to the governing board of the retirement system or plan to which the member is contributing.

D. For the purposes of this section:

"Active member" means a member who satisfies the eligibility criteria of the retirement system or plan and who is currently making member contributions to or receiving credited service from the retirement system or plan.
"Inactive member" means a member of the retirement system or plan who previously made contributions to the retirement system or plan and who satisfies each of the following:

(a) Has not retired.

(b) Is not eligible for active membership in the retirement system or plan.

(d) Has not withdrawn contributions from the retirement system or plan.

"Municipality" means a city in this state with a population of more than five hundred thousand persons.

§ 38-924 Transfer of service credits

A. Service credits qualified pursuant to section 38-923 may be transferred pursuant to this section.

B. In the case of a member whose contributions remain on deposit with the prior retirement system or plan, the following shall occur:

The prior system or plan shall determine the amount of the member’s accumulated contribution account balance under the prior system or plan plus accumulated interest as determined by the governing body of the system or plan.
The system or plan to which the member is transferring shall calculate any increase in the actuarial present value of the projected benefits provided as a result of the transfer of the member's service credits. The actuary of the system or plan to which the service credits are being transferred shall perform this calculation using the actuarial method and assumptions recommended by the actuary and adopted by the governing body of the retirement system or plan.

C. If a member decides to transfer:

The prior system or plan shall transfer to the present system or plan the amount determined pursuant to subsection B, paragraph 1 of this section. If the amount calculated in subsection B, paragraph 2 of this section is greater than the amount determined in subsection B, paragraph 1 of this section, the transferring member shall either elect to pay the difference in order to receive all service credits earned under the prior system or plan or to accept a reduced transfer of service credits. If the member elects to pay the difference, the amount paid shall be added to the member’s accumulated contribution account balance. If the member elects to accept a reduced transfer of service credits, the amount of service credits transferred shall be equal to the amount of service credits earned under the prior system or plan corresponding to the amount determined under subsection B, paragraph 1 of this section multiplied by the ratio of the amount calculated under subsection B, paragraph 1 of this section to the amount calculated under subsection B, paragraph 2 of this section.
If the amount calculated in subsection B, paragraph 2 of this section is less than or equal to the amount determined in subsection B, paragraph 1 of this section, the current system or plan shall credit the member with service credits under the current system or plan equal to the service credit earned under the prior system or plan corresponding to the amount determined under subsection B, paragraph 1 of this section.

D. The retirement system or plan shall not apply service credits to the applicant’s account until such time as complete payment is made to the retirement system or plan to which the applicant is transferring. On completion of the transfer provided for in this article, the member’s rights in the retirement system or plan from which the member is transferring are extinguished.

Article 7.1 Arizona Employers' Pension Prefunding Plan

§ 38-931 Definitions

In this article, unless the context otherwise requires:

"Administering and investing":

(a) Means administering, managing, operating, investing and distributing the prefunding plan and its assets, including accepting, depositing, holding, investing, reinvesting and transferring the assets of the prefunding plan.

(b) Includes employing legal services.

"Board" means the board of trustees of the system.
"Defined benefit pension" means the elected officials' retirement plan established by article 3 of this chapter, the public safety personnel retirement system established by article 4 of this chapter and the corrections officer retirement plan established by article 6 of this chapter.
"Employer" means an employer as defined in section 38-801, 38-842 or 38-881.
"Participating employer" means an employer that is authorized and has elected to participate in the prefunding plan and whose governing body has entered into a contract with the board as provided in this article.
"Prefunding plan" means the Arizona employers' pension prefunding plan established by this article.
"Required pension contributions" means an employer's unfunded liability and future required contributions under the applicable defined benefit pension, whether pertaining to a single year or multiple years.
"System" means the public safety personnel retirement system.
"Tax-exempt status of the prefunding plan's income" means that the prefunding plan's income is excluded from gross income for the purposes of the assessment of federal income tax under section 115 of the internal revenue code, intergovernmental immunity or similar grounds.
"Trustee" has the same meaning prescribed in section 38-848.04.

§ 38-932 Arizona employers' pension prefunding plan

A. The Arizona employers' pension prefunding plan is established as a special trust fund for the purpose of allowing participating employers that provide a defined benefit pension plan to their employees to prefund the employer's required pension contributions.

B. The prefunding plan and the assets held in the prefunding plan are separate and apart from:

The public safety personnel retirement fund and any other fund, program or plan administered by the board.
Any pension prefunding plan investment accounts established pursuant to section 35-314.04 or any other section of title 35 and any pension prefunding plan monies in such accounts.

C. The prefunding plan is an integral part of this state and of the political subdivisions of this state, performs an essential governmental function and is an entity with the power to sue and be sued. The prefunding plan is intended to be structured and administered in a manner that results in the tax-exempt status of the prefunding plan's income.

§ 38-933 Administration and investment by the board; investment options; administrative costs

A. The board shall have the sole and exclusive control of the administration and investment of the prefunding plan.

B. The board shall administer and invest the prefunding plan as provided in this article. Notwithstanding any other provision of this title, the board shall offer each participating employer investment options for monies in the prefunding plan consisting of cost-effective, diversified investment portfolios in publicly traded investment options that do not exceed the risk and return profiles established by the board, consistent with the board's fiduciary duty.

C. Except as otherwise specified in this article, the provisions of article 4 of this chapter pertaining to the administration and investment of the system, including delegation of authority to the administrator and others persons, supplement this article.

D. The board may keep assets of the prefunding plan separate or commingle the assets of the prefunding plan in one or more group trusts, subject to the crediting of assets, receipts and earnings and charging of payments to the appropriate employer.

E. All assets of and income earned on the prefunding plan shall be credited to the prefunding plan.

F. Each participating employer shall pay the reasonable administrative costs as determined by the board in its sole and absolute discretion for the administration and investment of the prefunding plan. The board shall deposit in the prefunding plan all monies received by the board for those administrative costs.

§ 38-934 Board authorization of employer participation; employer election

A. The board, pursuant to the terms and conditions set by the board, may authorize an employer to participate in the prefunding plan.

B. An employer authorized by the board may elect to participate in the prefunding plan if all of the following occur:

The governing body of the employer adopts a resolution requesting to participate in the prefunding plan.
The employer submits a written request to participate in the prefunding plan with the resolution to the administrator of the board.
The governing body of the employer enters into a contract with the board setting forth the terms and conditions of that employer's participation in the prefunding plan, including reflecting or incorporating the requirements of this article and addressing funding and expenditures and actuarial, accounting, reporting and investment considerations.

§ 38-935 Transfer of monies by employer

A. The board may authorize a participating employer to transfer monies into the prefunding plan. A transfer of monies into the prefunding plan shall comply with all of the following:

The transfer satisfies the terms of the contract between the governing body of the participating employer and the board.
The transfer satisfies the requirements under the applicable governmental accounting standards.
The transfer does not jeopardize the tax-exempt status of the prefunding plan's income.

B. Except as otherwise provided in this section and sections 38-936 and 38-937, monies transferred by a participating employer to the prefunding plan pursuant to subsection A of this section are irrevocable and may not be refused by the board or refunded or returned to the participating employer making the transfer.

§ 38-936 Transfer of assets out of the prefunding plan; requirements

A. The board may authorize a participating employer to transfer assets out of the prefunding plan if the asset transfer complies with subsection B of this section and all of the following:

The transfer satisfies the terms of the contract between the governing body of the participating employer and the board.
The transfer satisfies the requirements under the applicable governmental accounting standards.
The transfer does not jeopardize the tax-exempt status of the prefunding plan's income.

B. Except as otherwise provided in section 38-937:

The prefunding plan assets shall be used exclusively for the purpose of paying required pension contributions and the administrative costs associated with the prefunding plan and may not be used for any other purpose.
A transfer of assets out of the prefunding plan shall be made solely for the purpose of transferring assets to the system to discharge the participating employer's required pension contributions to the applicable defined benefit pension.

C. The prefunding plan assets and any transfer of assets out of the prefunding plan are not subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws or other process of law and are not unassignable.

D. Except for a participating employer to the extent expressly provided in subsection A of this section, an employee, member, beneficiary or other individual or person does not have any right, title or interest in the prefunding plan or any prefunding plan assets.

§ 38-937 Termination of employer's participation; prefunding plan termination

A. The board may terminate the participation of a participating employer in the prefunding plan if any of the following applies:

The board determines that all obligations of a participating employer to pay required pension contributions in accordance with the terms of the applicable defined pension plan of the participating employer have been satisfied in full by payment or by defeasance with no remaining risk regarding the amounts to be paid or the value of the assets held in the prefunding plan.
A participating employer elects to cease to participate in the prefunding plan.
The board finds that the participating employer has failed to satisfy the terms and conditions required by this article, by board rules or by the contract between the governing body of the participating employer and the board.
The prefunding plan is terminated by the board or the prefunding plan otherwise terminates.

B. If the board terminates the participation of a participating employer in the prefunding plan as described in subsection A, paragraph 1, 2 or 3 of this section, any assets attributable to that participating employer's transfers into the prefunding plan, including any earnings on such assets, after the payment of any obligation of that participating employer owed to the prefunding plan for reasonable administrative costs, shall be transferred to the system to pay the participating employer's required pension contributions under the applicable defined benefit pension. Any remaining monies in excess of the amount necessary to satisfy the participating employer's required pension contributions shall be transferred to the participating employer only if both of the following apply:

The transfer does not jeopardize the tax-exempt status of the prefunding plan's income.
The transfer complies with the requirements under the applicable governmental accounting standards.

C. If the prefunding plan is terminated as described in subsection A, paragraph 4 of this section, the assets attributable to a participating employer's transfers into the prefunding plan, including any earnings on such assets, after the payment of any obligation of that participating employer owed to the prefunding plan for reasonable administrative costs, shall be transferred to the system to pay the participating employer's required pension contributions. Any remaining monies in excess of the amount necessary to satisfy the participating employer's required pension contributions shall be transferred to the participating employer if the transfer complies with subsection B, paragraphs 1 and 2 of this section.

§ 38-938 Annual financial statements; audit

The board shall cause the annual financial statements of the prefunding plan to be prepared in accordance with the applicable governmental accounting standards and an audit to be conducted of those financial statements by a qualified independent certified accounting firm for each fiscal year in accordance with the applicable governmental auditing standards.

§ 38-939 Nontaxable status of prefunding plan; intent

A. Assets transferred into or out of or held in the prefunding plan and investment income on assets in the prefunding plan are exempt from state, county and municipal taxes.

B. The legislature intends that the prefunding plan's income not be subject to federal income tax. The board may adopt additional rules, policies and procedures as the board deems necessary or appropriate to fulfill the legislature's intent that the prefunding plan's income not be subject to federal income tax.

C. If the board receives notification from the United States internal revenue service that this article or any portion of this article will jeopardize the tax-exempt status of the prefunding plan's income, the portion of this article that will cause the disqualification does not apply.

§ 38-940 Board rules; procedures; discretionary fiduciary duty

A. The board may adopt rules, policies and procedures regarding the prefunding plan, including administering and investing the assets transferred into the prefunding plan by participating employers, investment options and termination of employer's participation in the prefunding plan, as the board deems necessary to implement this article. The board, in administering and investing the prefunding plan, may employ services, including legal services, and do all acts, whether expressly authorized, that it deems necessary or appropriate for defending, protecting or advancing the prefunding plan.

B. The board has full discretionary fiduciary authority to determine all questions arising in connection with administering and investing the prefunding plan, including its interpretation and any factual questions arising under the prefunding plan. Any determination, authorization, approval, request, requirement or other action, election or decision, including the setting of terms and conditions, in connection with the prefunding plan by the board pursuant to this article is subject to, and shall be made in, the sole and absolute discretion of the board. The board, individual trustees, the administrator, deputy or assistant administrators and employees of the board do not guarantee the prefunding plan in any manner against loss or depreciation, are not personally liable for any act or failure to act made in their official capacity in good faith and are indemnified from the assets of the prefunding plan for any judgment against any of them, including attorney fees, costs and expenses reasonably incurred in the defense of any claim arising from any act or failure to act made in good faith. The board may appear before and maintain an action in political subdivisions of this state, courts and other forums, in each case through a representative or counsel appointed by the board, as the board deems necessary or appropriate, to defend, protect, advance or otherwise assert the interests of the prefunding plan, the board, a trustee or member of the board, the administrator, deputy or assistant administrators, employees of the board and participating employers.

C. A trustee or member of the board is, in discharging duties with respect to or in connection with the prefunding plan or the system, entitled to rely on, among other things, information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by any of the following:

The administrator, one or more deputy or assistant administrators or employees of the system whom the trustee or member of the board reasonably believes are reliable and competent in the matters presented.
Legal counsel, public accountants or other persons as to matters the trustee or member of the board reasonably believes are within the person's professional or expert competence.
A committee of the board of which the trustee or member of the board is not a member if the trustee or member of the board reasonably believes the committee merits confidence.

D. A trustee or member of the board is not liable for any action taken as a trustee or member of the board or any failure to take any action if the duties of the trustee or member of the board were performed in compliance with section 38-848.04. In any legal proceeding or other forum, a trustee or member of the board has all of the defenses and presumptions ordinarily available to a trustee or member of the board. A trustee or member of the board is presumed in all cases to have acted, failed to act or otherwise discharged such duties in accordance with section 38-848.04 and any other applicable law. The burden is on the party challenging the act, failure to act or other discharge of duties of or by a trustee or member of the board to establish by clear and convincing evidence facts rebutting the presumption.

Article 8 Defined Contribution Plans

§ 38-951 Definitions

In this article, unless the context otherwise requires:

"Board" means the Arizona state retirement system board established by section 38-713 or the board of trustees established by section 38-848.
"Eligible group" means any of the following:

(a) The Arizona state retirement system established by article 2 of this chapter.

(b) The elected officials' retirement plan established by article 3 of this chapter.

(d) The corrections officer retirement plan established by article 6 of this chapter.

(e) An optional retirement program established pursuant to section 15-1451 or 15-1628.

(f) The elected officials' defined contribution retirement system established pursuant to article 3.1 of this chapter.

(g) The public safety personnel defined contribution retirement plan established pursuant to article 4.1 of this chapter.

(h) State elected officials who were subject to term limits and exempt state officers and employees who elected to participate in the defined contribution retirement plan option established pursuant to section 38-952 in effect on August 6, 1999.

"Employer" means an agency or department of this state or an agency or department of a political subdivision of this state that has employees in an eligible group.
"Plan" means a defined contribution plan authorized by this article.

§ 38-952 Supplemental defined contribution plan; establishment; administration

A. The board or employer of an eligible group may establish, administer, manage and operate a supplemental defined contribution plan. The board of trustees established by section 38-848 may establish a single supplemental defined contribution plan for all contributing members of the retirement system and plans it administers.

B. If a board or employer establishes a supplemental defined contribution plan:

The Arizona state retirement system board may delegate authority to implement the plan to its director appointed pursuant to section 38-715.
The employer may delegate authority to implement the plan to its internal benefits administrator or designee.
The board of trustees may delegate authority to implement the plan to the administrator employed pursuant to section 38-848, subsection M, paragraph 6.
The board or employer may:

(a) Employ services it deems necessary, including legal services, for the operation and administration of the plan.

(b) Administer the plan through contracts with multiple vendors.

(c) Perform all acts, whether or not expressly authorized, that it deems necessary and proper for the operation and protection of the plan.

(d) For the purposes of this article, enter into intergovernmental agreements pursuant to title 11, chapter 7, article 3.

C. A supplemental defined contribution plan shall be designed to be a qualified governmental plan under section 401(a) of the internal revenue code. The legislature intends that a supplemental defined contribution plan is a qualified plan under section 401 of the internal revenue code, as amended, or successor provisions of law, and that a plan is exempt from taxation under section 501 of the internal revenue code. The board or employer may adopt any additional provisions to a plan that are necessary to fulfill this intent.

D. Although designated as employee contributions, all employee contributions made to a plan shall be picked up and paid by the employer in lieu of contributions by the employee. The contributions picked up by an employer may be made through a reduction in the employee's compensation or an offset against future compensation increases, or a combination of both. An employee participating in a plan does not have the option of choosing to receive the contributed amounts directly instead of the employer paying the amounts to the plan. It is intended that all employee contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions under section 414(h) of the internal revenue code, shall be excluded from employees' gross income for federal and state income tax purposes and are includable in the gross income of the employees or their beneficiaries only in the taxable year in which they are distributed. The specified effective date of the pickup pursuant to this subsection shall not be before the date the plan receives notification from the internal revenue service that all employee contributions that are picked up by the employer as provided in this subsection shall be treated as employer contributions pursuant to section 414(h) of the internal revenue code. Until notification is received, any employee contributions made under section 38-953 are made with after-tax contributions.

§ 38-953 Supplemental option

A. A supplemental defined contribution plan is in addition to and does not replace an employee's existing state defined benefit or defined contribution retirement plan.

B. Except as provided in subsection C of this section, any contributing member of an eligible group that establishes a supplemental defined contribution plan as authorized by this article may participate in the supplemental defined contribution plan. Participation in any plan established by an eligible group authorizes the member's employer to make reductions or deductions in the member's compensation. The employer shall submit any reports required by the plan. Any compensation deferred under the plan shall be included as regular compensation or compensation for the purpose of computing the retirement and pension benefits earned by any employee participating in the plan.

C. If the Arizona state retirement system establishes a supplemental defined contribution plan and an employer member of the Arizona state retirement system elects to participate in the supplemental defined contribution plan, any employee member of the employer who meets the eligibility requirements that are prescribed by the board for participation in the supplemental defined contribution plan and that are selected by the member's employer may participate in the supplemental defined contribution plan.

D. An employee shall make an election to participate in a supplemental defined contribution plan within two years after the employee first meets the eligibility requirements to participate in the plan. An election to participate in a plan is irrevocable and continues for the remainder of the employee's employment with the employer.

E. If an employee elects to participate in a plan pursuant to this section, the employee shall contribute a prescribed amount of the employee's gross compensation, which shall be a percentage of the employee's gross compensation, a fixed dollar amount, an amount prescribed in the plan or some other definitive amount that may not be modified or revoked by the employee. As the plan prescribes, an employer may annually increase or decrease the employee contributions in increments of one percent up to the maximum allowed by law, or the employee may make a one-time irrevocable election of the employee's contribution amount. An employee is not required to contribute under this subsection in order to qualify for an employer match under subsection F or G of this section. The employer match may accrue from any program established by the employer.

F. An employer may elect to match the contributions made by the employee to the supplemental defined contribution plan at a rate determined by the employer. The employer shall pay this amount to the supplemental defined contribution plan in which the employee participates.

G. An employer may elect to match the contributions made by the employee to any other program established by the employer under the internal revenue code, including any plan established under internal revenue code section 401(a), 403(b) or 457, at a rate determined by the employer. The employee shall determine whether the employer pays the matching contribution to the 401(a), 403(b) or 457 plan in which the employee participates to the supplemental defined contribution plan in which the employee participates or to any other plan established by the employer.

H. The rate of the employer match under subsection F or G of this section shall be determined at the beginning of that employer's budget cycle and shall terminate at the end of that budget cycle. If an employer elects to match under subsection F or G of this section, the employer shall make the contributions.

§ 38-954 Vesting

A. Employee contributions and earnings on employee contributions are immediately vested.

B. Employer matching contributions, if any, and the earnings on employer matching contributions are vested and the employee is entitled to receive employer matching contributions and earnings on those contributions as follows:

If the employee has less than one year of credited service in an eligible group, zero per cent.
If the employee has at least one year but less than two years of credited service in an eligible group, twenty per cent.
If the employee has at least two years but less than three years of credited service in an eligible group, forty per cent.
If the employee has at least three years but less than four years of credited service in an eligible group, sixty per cent.
If the employee has at least four years but less than five years of credited service in an eligible group, eighty per cent.
If the employee has at least five years of credited service in an eligible group, one hundred per cent.

C. All nonvested employer contributions and earnings on those contributions may be used to pay for the administrative costs of the plan.

Chapter 6 Public Safety Supplemental Benefits Plan

Article 1 General Provisions

§ 38-961 Public safety officer; duty-related injury; supplemental benefits plan; definitions

A. This state or a political subdivision of this state that employs a public safety employee on a full-time basis shall establish a supplemental benefits plan for a public safety employee who is injured while on duty to the extent that the public safety employee cannot perform the functions of the position. To become eligible for the supplemental benefits plan, the public safety employee must be receiving workers' compensation benefits pursuant to title 23, chapter 6. This state or a political subdivision of this state shall design the supplemental benefits plan so that, with the addition of other benefits being paid to the public safety employee pursuant to title 23, chapter 6, the public safety employee will receive approximately the identical base salary less the amount of taxes the public safety employee was paying.

B. If a public safety employee is accepted into the supplemental benefits plan, the public safety employee's employer shall continue to pay the employer portion of the health care benefits that was being paid to the public safety employee on the date of the employee's injury.

C. If a public safety employee is accepted into the supplemental benefits plan, the public safety employee's employer shall pay the employee contribution to the public safety personnel retirement system or corrections officer retirement plan, as applicable, and shall continue to pay the employer contribution to the respective retirement system or plan. The public safety employee is entitled to accrue credited service for the period of time enrolled in the supplemental benefits plan.

D. A public safety employee who is eligible for the supplemental benefits plan shall apply for benefits to this state or a political subdivision of this state. This state or a political subdivision of this state, on an individual basis, shall determine if the public safety employee is entitled to the benefits in the plan. This state or a political subdivision of this state may establish injury standards for eligibility into the plan that may include the exclusion of a public safety employee whose injury is a result of the public safety employee's gross negligence, or any other condition that this state or the political subdivision chooses to consider within the plan.

E. A public safety employee who is accepted into the plan shall comply with all risk management requirements, including evaluation for light duty options and rehabilitation programs. If a public safety employee fails to comply with risk management decisions, the public safety employee's participation in the supplemental benefits plan will be terminated. The public safety employee who is accepted into the plan is responsible for the public safety employee's portion of the health care benefit costs the public safety employee was paying on the date of the injury. The public safety employee remains responsible for any elective health care plan deductions, health related optional deductions or optional life insurance deductions.

F. If a public safety employee is accepted into the supplemental benefits plan, the public safety employee shall not accrue any additional sick or annual leave and any sick or annual leave amount on the public safety employee's account shall not be decreased while the public safety employee is participating in the plan.

G. A public safety employee who is accepted into the supplemental benefits plan is not precluded from disciplinary action, including termination of employment, pursuant to chapter 8 of this title or any agreements that supplant, revise or otherwise alter the provisions of this title, including preexisting agreements between the employer and the public safety employee's lawful representative association.

H. This section shall not supersede any plan or policy that provides a greater benefit being offered by this state or a political subdivision of this state to a public safety employee who is injured while on duty. This state or a political subdivision of this state shall offer the supplemental benefits plan for an initial six-month period. This state or the political subdivision may determine if the plan shall be extended, on an individual basis, an additional six months, for a maximum of one year.

I. State employee appeals for denials for supplemental benefits are exempt from the hearing process set forth in title 41, chapter 6, article 10. For state employees exercising appeals for denial of supplemental benefits, the department of administration may establish an alternative appeal hearing process, including the requirement that parties agree to arbitration heard by the industrial commission pursuant to section 23-107, or an alternative procedure established by the Arizona department of administration. If the department of administration establishes an alternative hearing process for the denial of claims for supplemental benefits, the department may contract with another government agency or with a third party to conduct hearings of appeals pursuant to section 38-961. The department may specify by rule or administrative policy the scope of the program and the alternative hearing procedures.

J. The department of administration shall report by March 1 each year on the overall claim, appeal and payment history for state employee claims and appeals made pursuant to this section during the prior year. The report shall include claims made and claims resolved.

K. For the purposes of this section:

"Member" includes a retired member of the public safety personnel retirement system who is a certified peace officer.
"Public safety employee" means:

(a) An individual who is a member of the public safety personnel retirement system or the corrections officer retirement plan.

(b) A probation officer, surveillance officer or juvenile detention officer who is employed by this state or a political subdivision of this state.

Chapter 7 Merit Systems

Article 1 Law Enforcement Officers Merit System

§ 38-1001 Definitions

In this chapter, unless the context otherwise requires:

"Council" means the merit system council for law enforcement officers appointed under the provisions of this article.
"Department" means the branch of government in which a law enforcement officer is employed.
"Department head" means the officer charged with the duty of administering the branch of government having the jurisdiction over the law enforcement officer.
"Law enforcement officer" means:

(a) A regularly appointed and paid deputy sheriff of a county.

(b) A regularly employed police officer in a city or town.

§ 38-1002 Merit system council for law enforcement officers

A. In each county coming within the provisions of this article, there shall be a merit system council which shall consist of five members appointed by the board of supervisors of the county. No more than three members shall belong to the same political party and all members shall be persons having recognized knowledgeable interest in the merit principles of personnel administration, and are prohibited from delegating their authority.

B. In each city or town adopting the provisions of this article, there shall be a merit system council which shall consist of five members appointed by the governing body of such city or town. No more than three members shall belong to the same political party and all members shall be persons having recognized knowledgeable interest in the merit principles of personnel administration.

C. The term of each member of a council shall be five years, one term to expire December 31 each year, except that a member shall continue to serve until his successor is duly appointed and qualified. Of the members of the council first appointed, one shall be appointed for a term ending December 31, 1970, and one each for terms ending one, two, three and four years thereafter. Upon the expiration of the term of a member a successor shall be appointed for a full term of five years. Appointment to fill a vacancy resulting other than from expiration of term shall be for the unexpired portion of the term only.

D. The council shall hold regular quarterly meetings and in addition, may hold such special meetings as the chairman of the council deems necessary. A chairman and vice-chairman shall be elected by the members of the council in January of each year and the chairman shall not be permitted to succeed himself. Meetings of the council shall be open to the public and executive sessions may be held as provided by law.

E. Any one of the following shall constitute the resignation of a council member and authorize the appointing authority to appoint a new member to fill the unexpired portion of the term so vacated:

Absence from three consecutive quarterly meetings.
Becoming a candidate for any elective public office.
Accepting any appointive office or employment in the service of the state, or a county, city or town.

F. Members of the council shall receive subsistence and travel expenses incurred while traveling from their places of residence to the place meetings are held or in the performance of other duties of the council in the same manner as is provided by law for state officers.

§ 38-1003 Powers and duties of council

The council, pursuant to recognized merit system principles of public employment, shall from time to time:

On a recommendation from the department head, classify or reclassify the specified positions occupied by law enforcement officers within the branch of government employing the officer and recommend schedules of salary and other compensation payable for the officer classification.
Review standards and qualifications of all positions that are classified and recommend any changes to the human resources director.
In consultation with the department head, provide a plan for fair and impartial selection, appointment, retention and separation or removal from service by resignation or dismissal of all classified law enforcement officers. Paragraph 4 of this section applies to appointments.
Provide a plan with recommendations for the promotion of law enforcement officers that shall give appropriate consideration to qualifications, record of performance, seniority and conduct within the field of law enforcement. Vacancies within a department shall be filled whenever possible by promotion within a department and shall be on the basis of competitive examination. If a vacancy occurs within a department, the council, on request, shall certify to the head of the department the names of officers in the order of the officer's relative excellence in the competitive examination from which certified list the appointment or promotion may be made.
Adopt rules necessary for the orderly administration of this article.
Hear and review appeals from any order of the department head in connection with suspension, demotion or dismissal of a classified law enforcement officer. If the order of the department head was for a suspension greater than sixteen hours, demotion or dismissal and the council exonerates the officer, the council may award, in whole or in part, the reasonable costs and attorney fees that the law enforcement officer incurred or were incurred on behalf of the law enforcement officer in connection with the appeal. The award of attorney fees by the council shall not exceed ten thousand dollars. An award of attorney fees does not apply if either of the following applies:

(a) The order of the department head was not for disciplinary purposes but was for administrative purposes such as a reduction in force.

(b) The disciplinary action related to off-duty activities unrelated to the required duties of the law enforcement officer. The council's determination shall be final except on appeal as provided in section 38-1004. If the department head appeals the decision of the council, the council's award of any costs or attorney fees to an officer shall be stayed pending the conclusion of the appeal. If the department head's decision is upheld on appeal, the award of costs or attorney fees in favor of the officer shall be reversed.

§ 38-1004 Appeals; hearings

A. A classified law enforcement officer who is suspended, demoted or dismissed by the department head, after a hearing and review before the merit system council, may have the determination of the council reviewed pursuant to title 12, chapter 7, article 6 in the superior court of the county in which the law enforcement officer resides. If the determination of the council is overruled by the court, the law enforcement officer shall be reinstated in the officer's position and the officer shall be reimbursed for any compensation withheld pending determination by the council and court.

B. If the order of the department head was for a suspension greater than sixteen hours, demotion or dismissal and the court exonerates the officer, the court may award, in whole or in part, the reasonable costs and attorney fees that the law enforcement officer incurred or were incurred on behalf of the law enforcement officer in the court proceedings. The award of attorney fees by the court shall not exceed $15,000. An award of attorney fees does not apply if either of the following applies:

The order of the department head was not for disciplinary purposes but was for administrative purposes such as a reduction in force.
The disciplinary action related to off-duty activities unrelated to the required duties of the law enforcement officer. If the department head appeals the decision of the court, the court's award of any costs or attorney fees to an officer shall be stayed pending the conclusion of the appeal. If the department head's decision is upheld on appeal, the award of costs or attorney fees in favor of the officer shall be reversed.

C. If a law enforcement officer of a county, city or town described in section 38-1007 appeals from a decision of a department head in connection with the law enforcement officer's suspension greater than sixteen hours, demotion or dismissal and the county, city or town maintains a merit system or civil service plan for its employees, and the merit system or civil service plan appeals board exonerates the officer, the merit system or civil service plan appeals board may award, in whole or in part, the reasonable costs and attorney fees that the law enforcement officer incurred or were incurred on behalf of the law enforcement officer in connection with the appeal. The amount of the award by the merit system or civil service plan appeals board shall not exceed $10,000. If the department head appeals the decision of the merit system or civil service appeals board, the award of attorney fees shall be stayed pending the conclusion of the appeal. If the officer appeals to court the decision of the merit system or civil service plan appeals board, or of the city or town council or board of supervisors if the city, town or county has no such board, and the court exonerates the officer, the court may award, in whole or in part, the reasonable costs and attorney fees that the law enforcement officer incurred or were incurred on behalf of the law enforcement officer in connection with the appeal. The award of attorney fees by the governing body or court shall not exceed $15,000. An award of attorney fees under this subsection does not apply if either of the following applies:

The order of the department head was not for disciplinary purposes but was for administrative purposes such as a reduction in force.
The disciplinary action related to off-duty activities unrelated to the required duties of the law enforcement officer. If the department head appeals the decision of the court, the court's award of any costs or attorney fees to an officer shall be stayed pending the conclusion of the appeal. If the department head's decision is upheld on appeal, the award of costs or attorney fees in favor of the officer shall be reversed.

D. A department head shall have the right to have all council policies and decisions reviewed pursuant to title 12, chapter 7, article 6 in the superior court of the county in which the law enforcement officer resides and legal counsel for the department head shall be provided by the county or city attorney in whose jurisdiction the department lies.

E. Notwithstanding section 38-1106, subsection J, any appeal of a suspension, demotion or dismissal in which a single hearing officer or administrative law judge has been appointed by the merit system council or appeals board to conduct the appeal hearing shall be open to the public unless the hearing officer or administrative law judge determines that good cause exists to close the hearing.

§ 38-1005 Status of persons employed prior to merit system institution

All law enforcement officers holding a position on the effective date of this article shall be continued in their respective positions without examination, until removed from such positions, under the provisions of the merit system established pursuant to this article.

§ 38-1006 Authority of city or town to use county merit system council

A. Any city or town so desiring may use the services of the county merit system council, in lieu of appointing a merit council of its own, by applying to the county board of supervisors and paying their proportionate share of the expenses of the council.

B. In the event a county adopts by resolution a merit system for all of its employees, then the provisions of this article as it pertains to county employees shall be administered by the county employee merit system commission.

§ 38-1007 Exemptions

Except as provided by section 38-1004, subsection C, the provisions of this article shall not apply to:

A county having a population, according to the last federal census, of less than two hundred fifty thousand inhabitants, unless the board of supervisors of such county passes a resolution adopting the provisions of this article.
A city or town with a population of less than fifteen thousand inhabitants according to the last federal census, or with a full-time police department of less than fifteen men, unless the city council of such city or town passes an ordinance adopting the provisions of this article.
A city or town in which there is maintained a merit system or civil service plan for its employees.

Chapter 8 Public Safety Officers

Article 1 Law Enforcement Officers

§ 38-1101 Definitions

In this article, unless the context otherwise requires:

"Appeal" means a hearing before a state or local merit board, a civil service board, an administrative law judge or a hearing officer.
"At will" means an employment relationship where either party to the relationship may sever the relationship at any time for any reason other than an unlawful reason.
"Disciplinary action" means the dismissal, the demotion or any suspension of a law enforcement officer that is a result of misconduct or unsatisfactory performance.
"Excusable neglect" means neglect or inadvertence that might be the act of a reasonably prudent person under similar circumstances.
"Good faith" means honesty of purpose and absence of intent to defraud.
"Investigative file" means the law enforcement agency's complete report and any attachments detailing the incidents leading to the disciplinary action, including complaints, audio recordings, video recordings, photographs, witness statements and exculpatory and mitigating evidence.
"Just cause" means:

(a) The employer informed the law enforcement officer of the possible disciplinary action resulting from the officer's conduct through agency manuals, employee handbooks, the employer's rules and regulations or other communications to the officer or the conduct was such that the officer should have reasonably known disciplinary action could occur.

(b) The disciplinary action is reasonably related to the standards of conduct for a professional law enforcement officer, the mission of the agency, the orderly, efficient or safe operation of the agency or the officer's fitness for duty.

(d) The discipline is not excessive and is reasonably related to the seriousness of the offense and the officer's service record.

"Law enforcement officer" means:

(a) An individual, other than a probationary employee, who is certified by the Arizona peace officer standards and training board, other than a person employed by a multi-county water conservation district.

(b) A detention or corrections officer, other than a probationary employee or juvenile detention officer, who is employed by this state or a political subdivision of this state.

(d) A nonprobationary regularly employed police officer in a city or town.

§ 38-1102 Peace officers bill of rights; preemption

The peace officers bill of rights is established. This article outlines the minimum rights given to peace officers in this state. This article does not preempt agreements that supplement or enhance the provisions of this article, including written agreements between the employer and the law enforcement officer or the law enforcement officer's lawful representative association.

§ 38-1103 Discipline of law enforcement officers; exceptions

A. A law enforcement officer is not subject to disciplinary action except for just cause.

B. This section does not apply to:

A dismissal or demotion that is for administrative purposes, including a reduction in force.
A law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1104 Internal investigations; notice; employee representative; confidentality; probation; termination; exception

A. If an employer interviews a law enforcement officer in the course of an administrative investigation and the employer or law enforcement officer reasonably believes that the interview could result in dismissal, demotion or suspension:

The law enforcement officer may request to have a representative of the law enforcement officer present at no additional cost to the employer during the interview. The law enforcement officer shall select a representative who is available on reasonable notice so that the interview is not unreasonably delayed. The representative shall participate in the interview only as an observer. Unless agreed to by the employer, the representative shall not be an attorney and shall be from the same agency, except that if a representative from the same agency is not reasonably available, with the employer's permission, the law enforcement officer's representative may be from the law enforcement officer's professional membership organization. The law enforcement officer's representative may take notes during the interview. The law enforcement officer and the law enforcement officer's representative and attorney may use notes taken during the interview only to assist the law enforcement officer in an investigation or a disciplinary matter. Notes taken by the law enforcement officer, the law enforcement officer's representative or the law enforcement officer's attorney do not constitute an official record of the interview. The law enforcement officer may discuss the law enforcement officer's interview with the law enforcement officer's representative or attorney. If the law enforcement officer or the law enforcement officer's representative or attorney releases information without authorization, the employer may subject the law enforcement officer or the law enforcement officer's representative, if the representative is from the same agency, to disciplinary action. The law enforcement officer shall be allowed reasonable breaks of limited duration during any interview for telephonic or in-person consultation with authorized persons, including an attorney, who are immediately available. An employer shall not discipline, retaliate against or threaten to retaliate against a law enforcement officer for requesting that a representative be present or for acting as the representative of a law enforcement officer pursuant to this paragraph.
Before the commencement of any interview described in this section, the employer shall provide the law enforcement officer with a

written notice informing the law enforcement officer of the alleged facts that are the basis of the investigation, the specific nature of the investigation, the law enforcement officer's status in the investigation, all known allegations of misconduct that are the reason for the interview and the law enforcement officer's right to have a representative present at the interview. The employer shall provide the law enforcement officer with a copy of the written notice that the law enforcement officer may retain. Along with the notice, the employer, at least twenty-four hours before the interview, shall provide any relevant and readily available materials, including complaints that contain the alleged facts, except for complaints that are filed with the employer and that include allegations of unlawful discrimination, harassment or retaliation or complaints that involve matters under the jurisdiction of the United States equal employment opportunity commission. The format of the materials may be written, audio or video. The requirement to provide any relevant and readily available materials to the law enforcement officer at least twenty-four hours before the interview pursuant to this paragraph does not apply if any of the following occurs:

(a) The law enforcement officer waives the requirement.

(b) The employer determines that the interview should be conducted earlier to protect the integrity of the law enforcement officer's statement.

(c) Circumstances or evidence that will be offered at the interview require the interview to be completed twenty-four hours after a major law enforcement incident.

In the course of an administrative investigation, the law enforcement officer is allowed to record the law enforcement officer's own interview. Recordings made by the law enforcement officer, the law enforcement officer's representative or the law enforcement officer's attorney do not constitute an official record of the interview.
At the conclusion of the interview, the law enforcement officer is entitled to a period of time to consult with the law enforcement officer's representative and may make a statement not to exceed five minutes addressing specific facts or policies that are related to the interview.

B. Subsection A of this section does not require the employer to either:

Stop an interview to issue another notice for allegations based on information provided by the law enforcement officer during the interview.
Disclose any fact to the law enforcement officer or the law enforcement officer's representative that would impede the investigation.

C. Subsection A, paragraphs 1 and 2 of this section do not apply to an interview of a law enforcement officer that is:

In the normal course of duty, counseling or instruction or an informal verbal admonishment by, or other routine or unplanned contact with, a supervisor or any other law enforcement officer.
Preliminary questioning to determine the scope of the allegations or if an investigation is necessary.
Conducted during the course of a criminal investigation.

D. If, after an employer completes an investigation of a law enforcement officer, the employer seeks disciplinary action, at the request of the law enforcement officer, the employer shall provide a basic summary of any discipline ordered against any other law enforcement officer of generally similar rank and experience employed by the employer within the previous two years for the same or a similar violation. As an alternative, the employer may provide file copies of the relevant disciplinary cases. The employer shall not take final action and the employer shall not schedule a hearing until the basic summary or file copies are provided to the law enforcement officer.

E. Notwithstanding any other law, an employer may not terminate a law enforcement officer who is promoted above the law enforcement officer's current rank and placed on probationary status for failing to satisfactorily complete the law enforcement officer's probationary period, but may demote the law enforcement officer. An employer may terminate a law enforcement officer at any time with just cause.

F. This section does not apply to a police recruit who is promoted to a law enforcement officer after graduating from the police academy in which the police recruit was trained. An employer may terminate a police recruit who is promoted to a law enforcement officer and who fails to satisfactorily complete the initial probationary period.

G. An employer may terminate a law enforcement officer who is laterally transferred, who is on an initial probationary period and who fails to satisfactorily complete the probationary period.

H. This section does not apply to a law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1105 Law enforcement officer as witness; right to representation; exception

A. If a law enforcement officer is designated as a witness by the law enforcement officer's employer in an investigation that could lead to another law enforcement officer's dismissal, demotion or suspension, the witness law enforcement officer may request to have a representative present at no cost to the employer during the witness interview. Unless agreed to by the employer, the representative shall be from the same agency and shall not be an attorney except that if a representative from the same agency is not reasonably available, with the employer's permission, the witness law enforcement officer's representative may be from the witness law enforcement officer's professional membership organization. The witness law enforcement officer's representative may take notes during the interview.

B. The witness law enforcement officer shall answer all questions asked by the law enforcement officer's department investigator, and information learned during a witness interview is considered proprietary and confidential by the employer and shall remain so until the witness law enforcement officer is served with a notice of investigation by the employer or the witness law enforcement officer is released from the confidentiality requirements of this section.

C. The witness law enforcement officer may discuss the law enforcement officer's witness interview with the witness law enforcement officer's representative or that representative's legal counsel. The witness law enforcement officer, the witness law enforcement officer's representative or that representative's legal counsel may use the witness law enforcement officer representative's notes only to assist the law enforcement officer in any investigation or disciplinary matter. Notes taken by the witness law enforcement officer, the witness law enforcement officer's representative or that representative's legal counsel do not constitute an official record of the interview. If the witness law enforcement officer or the witness law enforcement officer's representative releases information without authorization, the employer may subject the witness law enforcement officer or the witness law enforcement officer's representative to disciplinary action.

D. This section does not apply to a law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1106 Appeal of disciplinary actions; transcripts; change of hearing officer or administrative law judge; burden of proof; final disposition report;exception

A. In any appeal of a disciplinary action by a law enforcement officer, the parties shall cooperate with each other, act in good faith and exchange copies of all relevant documents and a list of all witnesses pursuant to the following time periods and requirements:

Within fourteen calendar days after the employer's receipt of a written request from the law enforcement officer for a copy of the investigative file that is accompanied by a copy of the filed notice of appeal, the employer shall provide a complete copy of the investigative file as well as the names and contact information for all persons interviewed during the course of the investigation.
Not later than fourteen calendar days before the appeal hearing, the parties shall produce and serve on every party the following information:

(a) The name of each witness whom the disclosing party expects to call at the appeal hearing, with a designation of the subject matter on which each witness might be called to testify. A witness may decline an interview. The parties shall not interfere with any decision of a witness regarding whether to be interviewed. An employer shall not discipline, retaliate against or threaten to retaliate against any witness for agreeing to be interviewed or for testifying or providing evidence in the appeal.

(b) The name and contact information of each person who has given statements, whether written or recorded or signed or unsigned, regarding matters relevant to the notice of discipline and the custodian of the copies of those statements.

The duty to disclose information continues to exist throughout the process and up to the end of the appeal process.

B. It is unlawful for a person to disseminate information that is disclosed pursuant to subsection A of this section to any person other than the parties to the appeal and their lawful representatives for purposes of the appeal of the disciplinary action. This subsection does not prohibit the use of the information in the hearing or disclosure pursuant to title 39, chapter 1, article 2.

C. If a transcript is required in an administrative hearing, the employer shall obtain the transcript and provide a copy to the law enforcement officer within ten calendar days after the employer's receipt of the transcript.

D. Failure to comply with the requirements of subsection A or B of this section shall result in the exclusion of the witness, evidence or testimony, unless the failure to comply is because of excusable neglect.

E. The employer or the law enforcement officer may seek a determination by the hearing officer, administrative law judge or appeals board hearing the appeal regarding any evidence that the employer or the law enforcement officer believes should not be disclosed pursuant to subsection A of this section because the risk of harm involved in disclosure outweighs any usefulness of the disclosure in the hearing. In determining whether evidence will be disclosed, the hearing officer, administrative law judge or appeals board may perform an in camera review of the evidence and may disclose the material subject to any restriction on the disclosure, including the closing of the hearing or the sealing of the records, that the hearing officer, administrative law judge or appeals board finds necessary under the circumstances.

F. In any appeal of a disciplinary action by a law enforcement officer in which a single hearing officer or administrative law judge has been appointed to conduct the appeal hearing, the law enforcement officer or the employer, within ten calendar days after the appointment of the hearing officer or administrative law judge, may request a change of hearing officer or administrative law judge. In cases before the office of administrative hearings or if the employer is a county, city or town, on the first request of a party, the request shall be granted. A city or town with a population of less than sixty-five thousand persons or a county with a population of less than two hundred fifty thousand persons must provide, if necessary to comply with this subsection, for an alternate hearing officer by means of an interagency agreement with another city, town or county. If the law enforcement officer is the party who requested the alternate hearing officer, the law enforcement officer shall reimburse the city, town or county for one-half of any additional expenses incurred by the city, town or county in procuring the alternate hearing officer under the interagency agreement. If an alternate hearing officer is requested by means of an interagency agreement, the hearing officer shall provide to the law enforcement officer or employer the option of continuing the hearing for an additional ten calendar days. Any subsequent requests may be granted only on a showing that a fair and impartial hearing cannot be obtained due to the prejudice of the assigned hearing officer or administrative law judge. The supervisor or supervising body of the hearing officer or administrative law judge shall decide whether a showing of prejudice has been made.

G. The employer has the burden of proof in an appeal of a disciplinary action by a law enforcement officer.

H. The hearing officer, administrative law judge or appeals board may take into consideration violations of this article as mitigation in determining discipline.

I. Except where a statute, rule or ordinance makes the administrative evidentiary hearing the final administrative determination and after a hearing where the law enforcement officer and the employer have been equally allowed to call and examine witnesses, cross-examine witnesses, provide documentary evidence and otherwise fully participate in the hearing, an employer or a person acting on behalf of an employer may amend, modify, reject or reverse the portion of a decision made by a hearing officer, administrative law judge or appeals board that was arbitrary or without reasonable justification. The employer or person acting on behalf of the employer shall state the reason for the amendment, modification, rejection or reversal.

J. Notwithstanding chapter 3, article 3.1 of this title, all hearings pursuant to this section shall be open to the public. Executive sessions allowed pursuant to section 38-431.03 shall be limited to legal advice to a personnel appeals board or for deliberations.

K. A law enforcement officer who prevails in an appeal where a termination has been reversed shall be awarded retroactive compensation from the date of the officer's separation to the date of reinstatement. The hearing officer, administrative law judge or appeals board hearing the appeal shall determine the amount of retroactive compensation awarded and any reduction to that amount. Retroactive compensation may be reduced:

If there is undue delay in setting a hearing date caused by the law enforcement officer or the law enforcement officer's representative.
If the law enforcement officer requests a continuance.
If there exists a period between separation and reinstatement that the law enforcement officer would have been unable to perform the duties of a law enforcement officer.
By any amount earned by the law enforcement officer in alternative employment.
If the hearing officer, administrative law judge or appeals board finds that the law enforcement officer's action or misconduct warrants suspension or demotion.

L. The hearing officer, administrative law judge or appeals board shall state in every finding of disciplinary action whether or not just cause existed for the disciplinary action.

M. The hearing officer, administrative law judge or appeals board shall document in the record those circumstances where the hearing officer, administrative law judge or appeals board determines that a party has clearly violated a party's obligation under this section.

N. Immediately after a law enforcement officer receives the final disposition of an appeal of a disciplinary action, the administrative law judge, hearing officer or presiding authority shall provide a final disposition report that includes the final decision and any amended findings of fact to the law enforcement agency that initiated or imposed the discipline.

O. A law enforcement agency that receives a final disposition report shall include the final disposition report in the agency's original investigation record. If the law enforcement agency provided a prosecuting agency with information that was obtained during the investigation of the law enforcement officer for the prosecuting agency's rule 15.1 database, the law enforcement agency shall forward the final disposition report to the prosecuting agency.

P. This section does not apply to a law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1107 Superior court review hearing; remedy; exceptions

A. If a law enforcement officer is demoted or terminated as the result of an employer or a person acting on behalf of an employer reversing the decision or recommendation of a hearing officer, administrative law judge or appeals board where the finding states that there was no just cause for the demotion or termination, the law enforcement officer may bring an action in superior court for a hearing de novo on the demotion or termination.

B. If a law enforcement officer is demoted or terminated by an employer or a person acting on behalf of an employer where there is no hearing officer, administrative law judge or appeals board to review the demotion or termination, the law enforcement officer may bring an action in superior court to review the agency's file. If the court finds from a review of the file that there was no just cause for the demotion or termination, the officer is entitled to a hearing de novo on the demotion or termination.

C. If the superior court finds that just cause for a demotion or termination did not exist, the court shall order the officer reinstated to the officer's previous position with the law enforcement agency and may award to the law enforcement officer monetary damages that shall not exceed the officer's combined total of wages and benefits during the period of imposed disciplinary action that was lost as a result of the demotion or termination.

D. An action pursuant to subsection A or B of this section shall be commenced within thirty-five calendar days after a copy of the decision sought to be reviewed is served on the law enforcement officer.

E. In an action pursuant to subsection A or B of this section the court may award the successful party reasonable attorney fees as set forth in section 12-341.01, subsection B and shall award the successful party all costs pursuant to section 12-341.

F. This section does not apply to a law enforcement officer who is employed as an at will employee:

As a police chief or an assistant police chief in a law enforcement agency.
By an agency of this state.

§ 38-1108 Polygraph examinations; exception

A. An employer may not administer a polygraph examination to a law enforcement officer in administrative investigations.

B. The results of a polygraph examination in an investigation may not be the basis for disciplinary action unless other corroborating evidence or information exists to support that disciplinary action.

C. Notwithstanding section 39-123, all data and reports from a polygraph examination of a law enforcement officer are confidential and may be used only for employment, certification or reactivation of certification purposes or for the administrative matter for which a polygraph was administered, including other ancillary matters. All other uses are prohibited.

D. Except for a preemployment polygraph after which an applicant was not hired or in the case of an appeal, the data and reports from a polygraph examination of a law enforcement officer shall be destroyed as soon as practicable three years after the date of appointment or employment but not more than ninety calendar days after that date.

E. This section does not apply to a law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1109 Confidentiality of records; exception

A. An employer shall not include in that portion of the personnel file of a law enforcement officer that is available for public inspection and copying any information about an investigation until the investigation is complete or the employer has discontinued the investigation.

B. If the law enforcement officer has timely appealed a disciplinary action, the investigation is not complete until the conclusion of the appeal process. This subsection does not apply to a law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1110 Time limitation on disciplinary action against law enforcement officer;

A. An employer shall make a good faith effort to complete any investigation of employee misconduct within one hundred eighty calendar days after the employer receives notice of the allegation by a person authorized by the employer to initiate an investigation of the misconduct. The investigation is considered complete on the date the employee is served with the notice of discipline or the notice of findings. The employer may continue the investigation beyond the one hundred eighty-calendar-day period only if it is demonstrated that additional time is necessary to obtain or review evidence. Before the employer exceeds the one hundred eighty-calendar-day limit, the employer shall provide the employee with a written explanation of the reasons the investigation continued beyond one hundred eighty calendar days. Except as provided in subsection D, paragraph 6 of this section, any extension may not exceed one hundred eighty calendar days. Subject to the conditions in subsection B of this section, if the investigation is not complete at the conclusion of the extension period, the matter shall be dismissed.

B. The time limitation set forth in subsection A does not preclude the employer from initiating a new investigation of the employee for misconduct upon newly discovered material evidence that could not with reasonable diligence have been discovered during the initial one hundred eighty-calendar-day limitation or any extension.

C. If, in the course of an investigation involving multiple law enforcement officers, evidence is discovered that exonerates the law enforcement officer or fails to sustain any wrongdoing, the employer shall issue the individual law enforcement officer a notice of findings. The employer may continue to order the law enforcement officer not to discuss or disclose any information regarding the investigation except to the law enforcement officer's legal counsel, spouse, representative or medical provider.

D. The limitation period established by subsection A of this section:

Is suspended during the time that any criminal investigation or prosecution is pending in connection with the act, omission or other allegation of misconduct.
Is suspended during the period of time in which a law enforcement officer who is involved in the investigation is incapacitated or otherwise unavailable.
May be suspended for a period prescribed in a written waiver of the limitation by the law enforcement officer.
May be suspended for emergencies or natural disasters during the time period in which the governor has declared a state of emergency within the jurisdictional boundaries of the concerned employer.
In a multijurisdictional investigation, may be extended for a period of time reasonably necessary to facilitate the coordination of the employers involved.
For any employer subject to supervision by a court-ordered monitor, the onetime extension provided in subsection A of this section shall be three hundred sixty days.

E. On an appeal of discipline by the employee, a hearing officer, administrative law judge or appeals board shall dismiss the discipline if it is determined that the employer did not make a good faith effort to complete the investigation within one hundred eighty calendar days or any extension. The allegation regarding any act, omission or other misconduct may be sustained, and the employee's record shall reflect that the allegation was sustained but no discipline was administered due to the finding of the hearing officer, administrative law judge or appeals board that the employer did not make a good faith effort to complete the investigation in one hundred eighty calendar days or any extension. The sustained discipline may be considered when determining discipline in any future sustained misconduct allegation. If the employer determines that disciplinary action is appropriate, the employer shall complete the employer's investigation and give notice in writing to the law enforcement officer of the employer's intent to proceed with disciplinary action, along with a proposal of the specific action sought, including length of suspension, if applicable.

F. This section does not apply to a law enforcement officer who is employed by an agency of this state as an at will employee.

§ 38-1111 Critical incident stress management team members; peer support team members; privilege; exceptions; definitions

A. Except as provided in subsection B of this section, a critical incident stress management team member or peer support team member who, in the course of the member's response to a critical incident at the request of the member or member's agency, acquires information secretly and in confidence from a designated person shall not be compelled to disclose that information in a legal proceeding, trial or investigation before any agency of this state or a political subdivision of this state.

B. Subsection A of this section does not apply if:

The communication or advice indicates clear and present danger to the designated person who received crisis response services or to other persons.
The designated person who received crisis response services gives express consent to the testimony.
The communication or advice is made during the course of a criminal investigation.
The designated person who received crisis response services voluntarily testifies, in which case the critical incident stress management team member or peer support team member may be compelled to testify on the same subject.
A breach of agency policy exists and that breach amounts to a violation of laws that are normally enforced by law enforcement.

C. For the purposes of this section:

"Agency" means the branch of government, political subdivision of this state or joint powers authority in which a designated person is employed.
"Civilian employee" means a nonsworn member of an agency or peer support team.
"Crisis response services" means consultation, risk assessment, referral and on-site crisis intervention services provided by a critical incident stress management team, peer support team or peer support team member to a designated person.
"Critical incident stress management team member" means an individual who has completed training through a recognized organization that delivers critical incident stress management training and who is part of a law enforcement, probation, firefighter or emergency medical provider crisis response team.
"Designated person" means an emergency medical provider, firefighter or law enforcement officer or a civilian employee of an agency.
"Emergency medical provider" means municipal, fire district or state emergency medical services personnel or emergency medical services personnel under a joint powers authority.
"Firefighter" means a municipal, fire district or state firefighter or a firefighter under a joint powers authority.
"Law enforcement officer" means:

(a) An individual who is certified by the Arizona peace officer standards and training board, other than a person employed by a multi-county water conservation district.

(b) A detention officer or correction officer, other than a probationary employee, who is employed by this state or a political subdivision of this state.

"Licensed mental health professional" means a licensed individual who specializes in trauma and crisis, who uses evidence-based treatment options and who is one of the following:

(a) A psychiatrist who is licensed pursuant to title 32, chapter 13 or 17 or who holds an equivalent license in another state.

(b) A psychologist who is licensed pursuant to title 32, chapter 19.1 or who holds an equivalent license in another state.

(c) A mental health professional who is licensed pursuant to title 32, chapter 33 or who holds an equivalent license in another state and who holds either a master's or doctoral degree related to the mental health profession.

(d) A mental health nurse practitioner or a psychiatric clinical nurse specialist who is licensed pursuant to title 32, chapter 15 or who holds an equivalent license in another state.

"Member" means a critical incident stress management team member or a peer support team member.
"Peer support team" means a group of individuals that is designated by an agency or an agency's authorized affiliate and that is trained in all of the following areas:

(a) Compassion fatigue.

(b) Crisis support.

(d) Motivational interviewing.

(e) Suicide prevention.

"Peer support team member" means an individual who has completed training that is provided by a licensed mental health professional through a recognized organization that offers peer support training or critical incident stress management training and who is part of any of the following:

(a) A law enforcement crisis response team.

(b) A probation officer crisis response team.

(d) An emergency medical provider crisis response team.

§ 38-1112 Law enforcement officers; fitness for duty examinations; rights of officers; definitions

A. An employer may order a law enforcement officer to submit to a physical, psychological or behavioral examination only if the law enforcement officer has acted or failed to act in an observable manner that indicates that there is a physical, psychological or behavioral condition materially limiting the law enforcement officer's ability to perform the essential functions of the law enforcement officer's job within the law enforcement officer's job description. The order shall state all of the specific objective facts on which the order for the examination is based except that the order may omit the specific names of individuals who reported the law enforcement officer's conduct to the supervisor.

B. The order shall provide at least ten calendar days' notice to the law enforcement officer to be examined and shall specify the time, place, manner, conditions and scope of the examination and the person or persons who will conduct the examination. Specific to psychological examinations, if the law enforcement officer is a danger to himself or others, the ten-day notice is not required. The law enforcement officer to be examined may have a representative present during the examination if the professional conducting the examination agrees.

C. The employer shall provide the law enforcement officer with the final report of the examination containing the professional's findings within five business days after the law enforcement agency receives the final report from the professional. The employer may provide any additional information related to the fitness for duty examination to the examining professional.

D. The report shall be provided only to the employer and the law enforcement officer and shall not be provided to any other person except as required for any subsequent appeal or certification action involving the law enforcement officer. The employer shall provide notice to the law enforcement officer that the report has been received by the employer. The report shall be provided to the law enforcement officer immediately if the law enforcement officer presents the final report of an independent medical examination or if the law enforcement officer waives any right to request an independent medical examination. If the law enforcement officer does not present the results of an independent medical examination within twenty calendar days after the employer provides notice to the law enforcement officer that the report has been received by the employer, the law enforcement officer is deemed to have waived the right to present the results of the independent medical examination.

E. The employer shall make a reasonable good faith effort to deliver the report to the law enforcement officer.

F. The professional may consider and report on only the law enforcement officer's medical or other records that are directly relevant to the actions in question, including preemployment physical, behavioral and psychological evaluations, and when conducting the examination, including medical records that record preexisting conditions that are relevant to the examination. The professional may additionally consider and report any condition of the law enforcement officer that the professional identifies during the course of the examination and that endangers the safety of the law enforcement officer or the community.

G. The employer shall not take any final action until after the law enforcement officer has had at least twenty calendar days to review the report unless the law enforcement officer waives the twenty-day period or the employer grants an extension.

H. This section does not prohibit the preexamination materials from being used in any proceeding held pursuant to section 38-1104.

I. Providing the preexamination materials to the person conducting the independent examination of the law enforcement officer does not change the disclosure requirements under section 38-1104.

J. For the purposes of this section:

"Independent medical examination" means an assessment that is requested by a law enforcement officer, that is conducted by a physician who is licensed pursuant to title 32, chapter 13 or 17 and that is used to provide a second, independent opinion of a current law enforcement officer who has been determined to not be able to perform essential functions of the job as a result of observation and a subsequent employer-ordered physical examination.
"Law enforcement officer" means:

(a) A regularly employed and paid individual, other than a probationary employee, who is certified by the Arizona peace officer standards and training board and who is working in a position requiring certification by the Arizona peace officer standards and training board, other than a person employed by a multi-county water conservation district, an at-will employee or a voluntary or reserve employee.

(b) A corrections officer or detention officer, other than a juvenile detention officer, who is employed by this state or a political subdivision of this state.

"Preexamination materials" means all information or materials, including preemployment material, that the employer gives to the physician who conducts the examination and that serve as the basis for the examination.
"Professional" means any licensed physician, psychologist or psychiatrist or any licensed individual who provides a behavioral, physical or psychological evaluation or opinion on a law enforcement officer after an employer's order.

§ 38-1113 Carrying of firearms by peace officers; exceptions; definitions

A. Notwithstanding any other law and except as provided pursuant to subsection C of this section, a peace officer shall not be prohibited from carrying a firearm, except that if the peace officer is employed as a law enforcement officer in this state, the peace officer must be in compliance with the firearm requirements prescribed by the Arizona peace officer standards and training board.

B. Notwithstanding any other law and except as provided pursuant to subsection C, paragraphs 1, 2, 4, 5, 6, 7 and 8 of this section, a retired peace officer shall not be prohibited from carrying a firearm.

C. A peace officer or retired peace officer may be prohibited from carrying a firearm as follows:

In a jail, correctional facility or juvenile detention facility.
Except for peace officers acting in their official capacity and carrying official peace officer identification, by order of:

(a) The presiding judge or justice when attending any court that is established pursuant to the constitution of this state or title 12, except if the peace officer or retired peace officer is providing court security or responding to an emergency.

(b) A justice court when attending the justice court, except if the peace officer or retired peace officer is providing court security or responding to an emergency.

(c) A municipal court when attending the municipal court, except if the peace officer or retired peace officer is providing court security or responding to an emergency.

When the peace officer is relieved of duty and is under a criminal or administrative investigation.
When in a secured police facility.
When consuming alcohol at a licensed liquor establishment, except if a peace officer's employing agency authorizes the consumption of alcohol in the performance of the peace officer's duties.
In a location prohibited by federal law.
Pursuant to court order.
Pursuant to any state or federal law that makes the officer a prohibited possessor.
When in the judgment of the department head, or the department head's designee, the peace officer exhibits any impairment, including any physical or mental impairment that would cause concern for the well-being and safety of the officer, the officer's law enforcement agency, law enforcement agency employees or the community.

D. A law enforcement agency that employs a peace officer may establish rules that are consistent with this section. The law enforcement agency may determine the number, type, model, caliber and brand of firearm and the ammunition that is carried by its peace officers on or off duty.

E. A presiding judge may establish rules or policies that are consistent with this section for the protection of the court.

F. This section does not create any civil liability for acting or failing to act.

G. For the purposes of this section:

"Firearm" has the same meaning prescribed in section 13-105.
"Peace officer" has the same meaning prescribed in section 1-215 and includes:

(a) Municipal, county and state prosecutors who annually pass a pistol qualifying examination that is approved by the Arizona peace officer standards and training board for obtaining and maintaining peace officer certification requirements and that is conducted by an Arizona peace officer standards and training board recognized instructor or a national rifle association certified firearms instructor.

(b) A person who is employed as a law enforcement officer by any state or political subdivision of any state of the United States or any Indian tribe and who is certified by an entity in that state, political subdivision or tribal government that is equivalent to the Arizona peace officer standards and training board.

"Relieved of duty" means when a peace officer is no longer required to perform, either temporarily or permanently, the duties for which the officer was employed.
"Retired peace officer" means a person who has honorably served as a law enforcement officer in the United States for at least ten consecutive years and who possesses a photographic identification or a letter from a law enforcement agency that states the person has served for at least ten consecutive years as a law enforcement officer in the United States.
"Secured police facility" means a building or structure that is used primarily by a public agency and that is not accessible to the general public except by controlled access.

§ 38-1114 Health insurance payments for spouse or dependents of law enforcement officer killed in the line of duty; applicability; definitions

A. Notwithstanding any other law, the surviving spouse or a surviving dependent of a deceased law enforcement officer is entitled to receive payments for health insurance premiums from public monies of the employer of the law enforcement officer if the law enforcement officer was killed in the line of duty or died from injuries suffered in the line of duty.

B. The employer shall make payments if the surviving spouse or surviving dependent is enrolled or was enrolled at the time the law enforcement officer was killed in the line of duty or died from injuries suffered in the line of duty in either:

The health insurance program of the employer.
The health insurance program that is offered by the state retirement system or plan from which the surviving spouse or surviving dependent is receiving benefits.

C. If a surviving spouse or surviving dependent was enrolled in either health insurance program described in subsection B of this section at the time the law enforcement officer was killed in the line of duty or died from injuries suffered in the line of duty and is eligible pursuant to subsection D of this section to receive health insurance premium payments under this section but is no longer enrolled in either health insurance program described in subsection B of this section, the employer shall allow the surviving spouse and any surviving dependent to enroll in the employer's health insurance program to receive health insurance premium payments pursuant to this section.

D. The health insurance premium amount payable by the employer of the deceased law enforcement officer is the amount the employer of the deceased law enforcement officer would pay for an active law enforcement officer for a family coverage premium or single coverage premium, whichever is applicable. Payments shall be discontinued pursuant to this section if:

The surviving spouse remarries.
The surviving spouse becomes medicare eligible.
The surviving spouse dies.
For dependent coverage, the person is no longer considered a dependent.

E. If the employer currently pays a greater portion of the health insurance premium for a surviving spouse or a surviving dependent than the required amount prescribed in subsection D of this section, the surviving spouse or surviving dependent shall receive the greater amount as payment toward the surviving spouse's or surviving dependent's health insurance premium.

F. This section applies:

To a surviving spouse or a surviving dependent of a deceased law enforcement officer, as defined in subsection G, paragraph 2, subdivision (a), (b) or (c) of this section, who was killed in the line of duty or who died from injuries suffered in the line of duty on or after April 5, 1933.
To a surviving spouse or a surviving dependent of a deceased law enforcement officer, as defined in subsection G, paragraph 2, subdivision (d) of this section, who was killed in the line of duty or who died from injuries suffered in the line of duty on or after April 5, 2013.
For the surviving spouse or the surviving dependent who qualifies pursuant to paragraph 1 of this subsection, only to health insurance premiums paid on or after September 13, 2013.

G. For the purposes of this section:

"Dependent" means an unmarried child of a deceased law enforcement officer who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty-three years of age and remains a dependent of the surviving spouse or a guardian.

"Law enforcement officer" means:

(a) A peace officer who is certified by the Arizona peace officer standards and training board.

(b) A detention officer or corrections officer who, other than a juvenile detention officer, is employed by this state or a political subdivision of this state.

(d) A corrections officer or firefighter who works on behalf of this state or a political subdivision of this state through a contract with a private company.

§ 38-1115 Officers; purchase of firearm; definitions

A. On retirement, an officer who is a member of an eligible retirement system, subject to the officer's employer's approval, may purchase the firearms issued by the employer to the officer at a price determined by the administrator of the agency employing the law enforcement officer. This subsection applies to an officer who is a member of an eligible retirement system and to whom a firearm is issued during the course of the officer's employment by an employer as defined in section 38-711, 38-801, 38-842 or 38-881.

B. For the purposes of this section:

"Eligible retirement system" means the Arizona state retirement system, the elected officials' retirement plan, the public safety personnel retirement system and the corrections officer retirement plan.
"Firearms" means any handguns, pistols, revolvers, rifles, shotguns or other weapons that are designed to, will or may be readily converted to expel a projectile by the action of expanding gases.
"Officer" means a law enforcement officer as defined in section 38-1101 or a probation officer as defined in section 38-1131.

§ 38-1116 Use of force incident investigation; right to view recorded video; statement

A. In an administrative investigation of a law enforcement officer's use of force incident that resulted in a death or serious physical injury to another person, if the law enforcement officer recorded a video, both of the following apply:

The administrative investigation is not complete until after the officer has an opportunity to view the recorded video and provide any further information regarding the footage that the officer believes is relevant.
The law enforcement officer must be read the following notice before viewing the recorded video:

Video evidence has limitations and may depict events differently than you recall. The video evidence may assist your memory and may assist in explaining your state of mind at the time of the incident. Viewing video evidence may or may not provide additional clarity to what you remember. You should not feel in any way compelled or obligated to explain any difference in what you remember and acted on from what viewing the additional evidence provides you.

B. This section does not prohibit a law enforcement agency from adopting a policy or rule that relates to a law enforcement officer's review of that officer's recorded video.

§ 38-1117 Law enforcement officer investigation and discipline committee, board, agency, department, office, entity or person; membership; qualifications; exceptions; statewide concern; definition

A. Notwithstanding any other law, at least two-thirds of the members, staff, employees or seats of any government committee, board, agency, department, office or entity that investigates law enforcement officer misconduct, influences the conduct of or certifies law enforcement officer misconduct investigations, recommends disciplinary actions for law enforcement officer misconduct or imposes discipline for law enforcement officer misconduct must be Arizona peace officer standards and training board certified law enforcement officers who are of any rank and who are from the same department or agency as the law enforcement officer who is the subject of the investigation or disciplinary action.

B. Any findings or recommendations from any government committee, board, agency, department, office or entity shall require a majority vote to do any of the following:

Investigate law enforcement officer misconduct.
Influence the conduct of or certify law enforcement officer misconduct investigations.
Recommend disciplinary actions for law enforcement officer misconduct.
Impose discipline for law enforcement officer misconduct.

C. If the person or government committee, board, agency, department, office or entity does not meet the two-thirds requirement prescribed in subsection A of this section, a supervisor, a department or an agency head that supervises a law enforcement officer may investigate and impose discipline for the law enforcement officer's misconduct if the supervisor, department or agency head acts independently of the person, committee, board, agency, department, office or entity.

D. This section does not apply to any of the following:

A person or a government committee, board, agency, department, office, civil service board or entity that only reviews the actions described in subsection A of this section and that does not determine the initial level of discipline or have the authority to increase the severity of the disciplinary action.
The Arizona peace officer standards and training board.
A multijurisdictional law enforcement agency or task force or a similar entity that is charged with investigating the use of force by law enforcement officers, if at least two-thirds of the membership of the multijurisdictional law enforcement agency or task force or the similar entity consists of Arizona peace officer standards and training board certified law enforcement officers.
An entity that investigates federal employment discrimination.

E. The legislature finds that setting and maintaining standards of professionalism and integrity of law enforcement officers in this state are of statewide concern.

F. For the purposes of this section, "members, staff, employees or seats":

Includes any person who participates in the following:

(a) Investigating law enforcement officer misconduct.

(b) Influencing the conduct or certification of law enforcement officer misconduct investigations.

(d) Imposing discipline for law enforcement officer misconduct.

Does not include support or administrative staff or any person who only reviews the actions of the remainder of the government committee, board, agency, department, office or entity.

§ 38-1118 Use-of-force incidents; data collection; reports; rules; public records; definitions

A. A law enforcement agency shall collect and report use-of-force incidents involving law enforcement officers to the Arizona criminal justice commission beginning January 1, 2022. A law enforcement agency shall submit reports on use-of-force incidents to the Arizona criminal justice commission at least annually thereafter. The reported data may not include any identifying information on a law enforcement officer and the data collected and reported shall be consistent with the federal bureau of investigation's national use-of-force data collection.

B. The Arizona criminal justice commission shall establish procedures governing the collection and reporting of use-of-force incident data that are consistent with the requirements, definitions and methods of the national use-of-force data collection.

C. The Arizona criminal justice commission shall publish the data reported during the immediate past year under subsection A of this section beginning March 1, 2023 and on or before March 1 of each year thereafter, including statewide aggregate data and agency-specific data, in a publicly available database.

D. On or before January 1, 2025, the Arizona criminal justice commission shall conduct an analysis of law enforcement agency use-of-force rates reported pursuant to this section and shall release the analysis of trends or disparities in the use-of-force incident data, if any, to the public. The Arizona criminal justice commission shall update this report at least once every five years.

E. For the purposes of this section:

"Law enforcement agency" means a law enforcement agency of this state or a political subdivision of this state, including the department of public safety, a municipal, city, town, county and tribal police agency, a sheriff and special jurisdiction police.
"National use-of-force data collection" means the national use-of-force data collection that is established and administered by the federal bureau of investigation to provide nationwide statistics on law enforcement use-of-force incidents.
"Serious physical injury" has the same meaning prescribed in section 13-105.
"Use-of-force incident" means an incident in which any of the following occurs:

(a) A law enforcement officer's use of force is connected to a person's death.

(b) A law enforcement officer's use of force is connected to a person receiving a serious physical injury.

(c) In the absence of death or serious physical injury, a law enforcement officer discharged a firearm at or in the direction of a person.

§ 38-1119 Law enforcement officers; database; notice; request for reconsideration; definitions

A. At least ten days, or as soon as practicable, before a prosecuting agency makes a determination to place a law enforcement officer's name in the rule 15.1 database, the prosecuting agency shall send a written notice by mail or email to the law enforcement officer's current or last known employment address. On receipt of the notice, the law enforcement officer's current or last known employer shall send the written notice to the law enforcement officer's current or last known address.

B. At a minimum, the written notice shall include:

A notice of possible placement in the rule 15.1 database.
The law enforcement officer's right to request relevant materials from the prosecuting agency.
The law enforcement officer's right to provide input to the prosecuting agency before the prosecuting agency makes a determination of whether the law enforcement officer's name should be added to the rule 15.1 database.
The prosecuting agency's procedural requirements for a law enforcement officer to provide the input.

C. If the prosecuting agency makes a determination to place the law enforcement officer's name in the rule 15.1 database, the prosecuting agency shall send a written notice by mail or email to the law enforcement officer's current or last known employment address. On receipt of the notice, the law enforcement officer's current or last known employer shall send the written notice to the law enforcement officer's current or last known address. The notice shall include:

The law enforcement officer's right to make a request to reconsider the allegations and placement in the rule 15.1 database.
The prosecuting agency's procedural requirements for submitting a written request for reconsideration, including the method and time frame for submitting the request for reconsideration and any supporting and corroborating documents and evidence from any pertinent sources.
A statement that, if the law enforcement officer intends to make a request to reconsider the placement in the rule 15.1 database, the law enforcement officer must submit the written request for reconsideration to the prosecuting agency within ten business days after receiving the notice.

D. If a law enforcement officer submits a request for reconsideration pursuant to this section and the law enforcement officer's request for reconsideration is approved by the prosecuting agency on its merits, the law enforcement officer's name shall be removed from the rule 15.1 database. If the law enforcement officer's request for reconsideration is denied by the prosecuting agency, the law enforcement officer's name shall remain in the rule 15.1 database. If a law enforcement officer does not submit a request for reconsideration or fails to comply with the requirements for submitting a request for reconsideration, the law enforcement officer's name shall remain in the rule 15.1 database.

E. A prosecuting agency that maintains a rule 15.1 database shall adopt a policy that, at a minimum, includes all of the following:

The criteria used by the prosecuting agency to place a law enforcement officer's name in the rule 15.1 database.
The law enforcement officer's right to receive written notice at least ten days, or as soon as practicable, before the prosecuting agency makes a determination to place the law enforcement officer's name in the rule 15.1 database and the law enforcement officer's right to provide input to the prosecuting agency before the prosecuting agency makes a determination of whether the law enforcement officer's name should be added to the rule 15.1 database.
The duty of the prosecuting agency to provide notice of the prosecuting agency's decision regarding placing the law enforcement officer's name in the rule 15.1 database to the law enforcement officer's current or last employer.
The law enforcement officer's right to make a request for reconsideration of the placement of the law enforcement officer's name in the rule 15.1 database and submit supporting and corroborating documents and evidence in support of the request for reconsideration.
The applicable time frame and procedures for notifying the law enforcement officer of the prosecuting agency's final decision on the law enforcement officer's request for reconsideration.

F. This section does not limit the duty of a prosecuting agency to produce rule 15.1 disclosure information in all cases as required by the United States Constitution, the Arizona Constitution and the Arizona rules of criminal procedure, including after the initial placement of the law enforcement officer's name in the rule 15.1 database while the decision or a request for reconsideration is still under consideration.

G. This section does not limit or restrict a prosecuting agency's ability to remove a law enforcement officer's name from the rule 15.1 database if, on receipt of additional supporting and corroborating information or a change in factual circumstances at any time, the prosecuting agency determines that the law enforcement officer's name no longer requires placement in the rule 15.1 database.

H. A law enforcement agency may not use the placement of a law enforcement officer's name in a rule 15.1 database as the sole reason for taking or denying any of the following employment actions against the law enforcement officer:

Demotion.
Suspension.
Termination.
Any other disciplinary action.

I. Notwithstanding subsection H of this section, a law enforcement agency is not restricted in using the underlying facts that were the basis for placing the law enforcement officer's name in the rule 15.1 database for taking a disciplinary action against the law enforcement officer in accordance with the law enforcement agency's adopted procedures and governing law.

J. A prosecuting agency shall use the rule 15.1 database for only the following purposes:

To make a charging decision.
To disclose information that is required by:

(a) The United States constitution.

(b) The Arizona constitution.

(d) Title 39, chapter 1, article 2.

Any other legal obligation.

K. For the purposes of this section:

"Prosecuting agency" means the attorney general, a county attorney from each county and the entity in a city or town that is responsible for prosecuting criminal violations.
"Rule 15.1 database" or "database" means any list that a prosecuting agency maintains to comply with the United States Constitution, the Arizona constitution, rule 15.1, Arizona rules of criminal procedure, or any other rule that is adopted by the Arizona supreme court.

§ 38-1120 Peace officer complaint; mandatory notice

Before a law enforcement agency accepts a complaint made against a peace officer, the law enforcement agency must provide the person making the complaint with the following notice:

Pursuant to section 13-2907.01, Arizona Revised Statutes, it is a class 1 misdemeanor to knowingly make to a law enforcement agency a false, fraudulent or unfounded report or statement or to knowingly misrepresent a fact for the purpose of interfering with the orderly operation of a law enforcement agency or misleading a peace officer.

Article 2 Adult and Juvenile Probation Officers

§ 38-1131 Definitions

In this article, unless the context otherwise requires:

"Appeal" means a hearing before a state or local merit board, a civil service board or a hearing officer.
"Disciplinary action" means the dismissal, the demotion or any suspension of a probation officer that is authorized by statute, charter or ordinance and that is subject to a hearing or other procedure by a local merit board, a civil service board or a hearing officer.
"Investigative file" means the probation department's complete report and any attachments detailing the incidents leading to the disciplinary action.
"Just cause" means:

(a) The employer informed the probation officer of the possible disciplinary action resulting from the officer's conduct through agency manuals, employee handbooks, the employer's rules and regulations or other communications to the officer or the conduct was such that the officer should have reasonably known disciplinary action could occur.

(b) The disciplinary action is reasonably related to the standards of conduct for a professional probation officer, the mission of the agency, the orderly, efficient or safe operation of the agency or the officer's fitness for duty.

(d) The discipline is not excessive and is reasonably related to the seriousness of the offense and the officer's service record.

"Probation officer" means a surveillance officer, juvenile detention officer or juvenile or adult probation officer, other than a probationary employee, who is employed by this state or a political subdivision of this state.

§ 38-1132 Preemption

This article does not preempt agreements that supplant, revise or otherwise deviate from the provisions of this article, including written agreements between the employer and the probation officer or the probation officer's lawful representative association.

§ 38-1133 Discipline of probation officers

A. A probation officer is not subject to disciplinary action except for just cause.

B. This section does not apply to:

A dismissal or demotion that is for administrative purposes, including a reduction in force.
A probation officer who has not completed an initial probationary period if a probationary period is required by the employer.

§ 38-1134 Internal investigations; employee representative; polygraph examination

A. If an employer interviews a probation officer in the course of an administrative investigation and the employer or probation officer reasonably believes that the interview could result in dismissal, demotion or suspension:

The probation officer may request to have a representative of the officer present at no cost to the employer during the interview. The probation officer shall select a representative who is available on reasonable notice so that the interview is not unreasonably delayed. The representative shall participate in the interview only as an observer. Unless agreed to by the employer, the representative shall not be an attorney and shall be from the same agency except that if a representative from the same agency is not reasonably available, with the employer's permission, the probation officer's representative may be from the probation officer's professional membership organization. The probation officer shall be permitted reasonable breaks of limited duration during any interview for telephonic or in person consultation with authorized persons, including an attorney, who are immediately available. An employer shall not discipline, retaliate against or threaten to retaliate against a probation officer for requesting that a representative be present or for acting as the representative of a probation officer pursuant to this paragraph.
Before the commencement of any interview described in this section, the employer shall provide the probation officer with a written notice informing the officer of the alleged facts that are the basis of the investigation, the specific nature of the investigation, the officer's status in the investigation, all known allegations of misconduct that are the reason for the interview and the officer's right to have a representative present at the interview. The notice shall include copies of all complaints that contain the alleged facts that are reasonably available, except for copies of complaints that are filed with the employer and that include allegations of unlawful discrimination, harassment or retaliation or complaints that involve matters under the jurisdiction of the equal employment opportunity commission.
At the conclusion of the interview, the probation officer is entitled to a period of time to consult with the officer's representative and may make a statement not to exceed five minutes addressing specific facts or policies that are related to the interview.

B. Subsection A of this section does not require the employer to either:

Stop an interview to issue another notice for allegations based on information provided by the probation officer during the interview.
Disclose any fact to the probation officer or the probation officer's representative that would impede the investigation.

C. Subsection A, paragraphs 1 and 2 of this section do not apply to an interview of a probation officer that is:

In the normal course of duty, counseling or instruction or an informal verbal admonishment by, or other routine or unplanned contact with, a supervisor or any other probation officer.
Preliminary questioning to determine the scope of the allegations or if an investigation is necessary.
Conducted during the course of a criminal investigation.
Conducted during the course of a polygraph examination.

D. An employer may require the probation officer to submit to a polygraph examination if the officer makes a statement to the employer during the investigation that differs from other information relating to the investigation that is known to the employer and reconciling that difference is necessary to complete the investigation. If a polygraph examination is administered pursuant to this subsection, the employer or the person administering the polygraph examination shall make an audio recording of the complete polygraph procedure and provide a copy of the recording to the probation officer. Section 38-1137 applies to a polygraph examination that is administered pursuant to this subsection.

E. If after an employer completes an investigation of a probation officer the employer seeks disciplinary action, at the request of the probation officer, the employer shall provide a basic summary of any discipline ordered against any other probation officer of generally similar rank and experience employed by the employer within the previous two years for the same or a similar violation. As an alternative, the employer may provide file copies of the relevant disciplinary cases. The employer shall not take final action and the employer shall not schedule a hearing until the basic summary or file copies are provided to the probation officer. This subsection does not apply if court rule prohibits the release of file copies of disciplinary cases.

§ 38-1135 Probation officers as witnesses; right to representation

A. If a probation officer is designated as a witness by the probation officer's employer in an investigation that could lead to another probation officer's dismissal, demotion or suspension, the witness probation officer may request to have a representative present at no cost to the employer during the witness interview. Unless agreed to by the employer, the representative shall be from the same agency and shall not be an attorney except that if a representative from the same agency is not reasonably available, with the employer's permission, the witness probation officer's representative may be from the witness probation officer's professional membership organization.

B. The witness probation officer shall answer all questions asked by the probation officer's department investigator. Any information learned during a witness interview is considered proprietary and confidential by the employer and shall remain so until the witness probation officer is served with a notice of investigation by the employer or the witness probation officer is released from the confidentiality requirements of this section.

C. The witness probation officer may discuss the probation officer's witness interview with the witness probation officer's representative or that representative's legal counsel. If the witness probation officer or the witness probation officer's representative releases information without authorization, the employer may subject the witness probation officer or the witness probation officer's representative to disciplinary action.

§ 38-1136 Appeal of disciplinary action; change of hearing officer; burden of proof

A. In any appeal of a disciplinary action by a probation officer, the parties shall exchange copies of all relevant documents and a list of all witnesses pursuant to the following time periods and requirements:

Within fourteen calendar days after the employer's receipt of a written request from the probation officer for a copy of the investigative file that is accompanied by a copy of the filed notice of appeal, the employer shall provide a complete copy of the investigative file as well as the names and contact information for all persons interviewed during the course of the investigation.
No later than fourteen calendar days before the appeal hearing, the parties shall produce and serve on every party the following information:

(a) The name of each witness whom the disclosing party expects to call at the appeal hearing, with a designation of the subject matter on which each witness might be called to testify. A witness may consent to a prehearing interview. The parties shall not interfere with any decision of a witness regarding whether to be interviewed. An employer shall not discipline, retaliate against or threaten to retaliate against any witness for agreeing to be interviewed or for testifying or providing evidence in the appeal.

C. Failure to comply with the requirements of subsection A or B of this section shall result in the exclusion of the witness, evidence or testimony, unless the failure to comply is because of excusable neglect.

D. The employer or the probation officer may seek a determination by the hearing officer or appeals board hearing the appeal regarding any evidence that the employer or the probation officer believes should not be disclosed pursuant to subsection A of this section because the risk of harm involved in disclosure outweighs any usefulness of the disclosure in the hearing. In determining whether evidence will be disclosed, the hearing officer or appeals board may perform an in camera review of the evidence and may disclose the material subject to any restriction on the disclosure, including the closing of the hearing or the sealing of the records, that the hearing officer or appeals board finds necessary under the circumstances.

E. In any appeal of a disciplinary action by a probation officer in which a single hearing officer has been appointed to conduct the appeal hearing, the probation officer or the employer, within ten calendar days after the appointment of the hearing officer, may request a change of hearing officer. If the employer is a county, city or town, on the first request of a party, the request shall be granted. A city or town with a population of less than sixty-five thousand persons or a county with a population of less than two hundred fifty thousand persons must provide, if necessary to comply with this subsection, for an alternate hearing officer by means of an interagency agreement with another city, town or county. If the probation officer is the party who requested the alternate hearing officer, the probation officer shall reimburse the city, town or county for one-half of any additional expenses incurred by the city, town or county in procuring the alternate hearing officer under the interagency agreement. Any subsequent requests may be granted only on a showing that a fair and impartial hearing cannot be obtained due to the prejudice of the assigned hearing officer. The supervisor or supervising body of the hearing officer shall decide whether a showing of prejudice has been made.

F. The employer has the burden of proof by a preponderance of the evidence in an appeal of a disciplinary action by a probation officer.

G. Except where a statute, rule or ordinance makes the administrative evidentiary hearing the final administrative determination and after a hearing where the probation officer and the employer have been equally allowed to call and examine witnesses, cross-examine witnesses, provide documentary evidence and otherwise fully participate in the hearing, an employer or a person acting on behalf of an employer may amend, modify, reject or reverse the portion of a decision made by a hearing officer or appeals board that was arbitrary or without reasonable justification. The employer or person acting on behalf of the employer shall state the reason for the amendment, modification, rejection or reversal.

H. If a transcript is required in an administrative hearing, the employer shall obtain the transcript and provide a copy to the probation officer within ten calendar days after the employer's receipt of the transcript.

I. A probation officer who prevails in an appeal where a termination has been reversed may be awarded retroactive compensation from the date of the officer's separation to the date of reinstatement. The employer may exclude any penalties deemed appropriate by the reviewing authority from the retroactive payment.

§ 38-1137 Confidentiality of records

An employer shall not include in that portion of the personnel file of a probation officer that is available for public inspection and copying any information about an investigation until the investigation is complete or the employer has discontinued the investigation. If the probation officer has timely appealed a disciplinary action, the investigation is not complete until the conclusion of the appeal process.

§ 38-1138 Polygraph examinations

A. The results of a polygraph examination in an investigation may not be the basis for disciplinary action unless other corroborating evidence or information exists to support that disciplinary action.

B. Notwithstanding section 39-123, all data and reports from a polygraph examination of a probation officer are confidential and may be used only for employment, certification or reactivation of certification purposes or for the administrative matter for which a polygraph was administered, including other ancillary matters. All other uses are prohibited.

C. Except for a preemployment polygraph after which an applicant was not hired or in the case of an active investigation or an appeal, the data and reports from a polygraph examination of a probation officer shall be destroyed as soon as practicable three years after the date of appointment or employment but not more than ninety calendar days after that date.

§ 38-1139 Critical incident stress management team member; privilege; exceptions; definitions

A. Except as provided in subsection B of this section, a critical incident stress management team member who, in the course of the member's response to a critical incident at the request of the member or member's agency, acquires information secretly and in confidence from a probation officer shall not be compelled to disclose that information in a legal proceeding, trial or investigation before any agency of this state or a political subdivision of this state.

B. Subsection A of this section does not apply if:

The communication or advice indicates clear and present danger to the probation officer who received crisis response services or to other persons.
The probation officer who received crisis response services gives express consent to the testimony.
The communication or advice is made during the course of a criminal investigation.
The probation officer who received crisis response services voluntarily testifies, in which case the critical incident stress management team member may be compelled to testify on the same subject.
A breach of department policy exists and that breach amounts to a violation of laws that are normally enforced by law enforcement.

C. For the purposes of this section:

"Crisis response services" means consultation, risk assessment, referral and onsite crisis intervention services provided by a critical incident stress management team to a probation officer.
"Critical incident stress management team member" means an individual who has completed training through a recognized organization that delivers critical incident stress management training and who is part of a law enforcement, probation, firefighter or emergency medical provider crisis response team.
"Department" means the branch of government in which a probation officer is employed.
"Emergency medical provider" means municipal or state emergency medical services personnel.
"Firefighter" means a municipal or state firefighter.

§ 38-1140 Probation officers; fitness for duty; examinations; rights of probation officers; definitions

A. An employer may order a probation officer to submit to a physical examination only if the probation officer has acted or failed to act in an observable manner that indicates that there is a physical condition materially limiting the probation officer's ability to perform the essential functions of the probation officer's job within the probation officer's job description. The order shall state all of the specific objective facts on which the order for the physical exam is based except that the order may omit the specific names of individuals who reported the probation officer's conduct to the supervisor.

B. The order shall provide at least ten calendar days' notice to the probation officer to be examined and shall specify the time, place, manner, conditions and scope of the examination and the person or persons who will conduct the examination. The probation officer to be examined may have a representative present during the examination if the physician conducting the examination agrees.

C. The employer shall provide the probation officer with the final report of the examination containing the medical professional's findings. The employer may provide any additional information related to the fitness for duty examination to the examining physician.

D. The report shall be provided only to the employer and the probation officer and shall not be provided to any other person except as required for any subsequent appeal or certification action involving the probation officer. The employer shall provide notice to the probation officer that the report has been received by the employer. The report shall be provided to the probation officer immediately if the probation officer presents the final report of an independent medical examination or if the probation officer waives any right to request an independent medical examination. If the probation officer does not present the results of an independent medical examination within twenty calendar days after the employer provides notice to the probation officer that the report has been received by the employer, the probation officer is deemed to have waived the right to present the results of the independent medical examination.

E. The employer shall make a reasonable good faith effort to deliver the report to the probation officer.

F. The physician may consider and report on only the probation officer's medical or other records that are directly relevant to the actions in question and when conducting the examination, including medical records that record preexisting conditions that are relevant to the examination. The physician may additionally consider and report any condition of the probation officer that the physician identifies during the course of the physical examination and that endangers the health and safety of the probation officer or the community.

G. The employer shall not take any final action until after the probation officer has had at least twenty calendar days to review the report unless the probation officer waives the twenty-day period or the employer grants an extension.

H. This section does not prohibit the preexamination materials from being used in any proceeding held pursuant to section 38-1134.

I. Providing the preexamination materials to the person conducting the independent examination of the probation officer does not change the disclosure requirements under section 38-1134.

J. For the purposes of this section:

"Independent medical examination" means an assessment that is requested by a probation officer, that is conducted by a physician who is licensed pursuant to title 32, chapter 13 or 17 and that is used to provide a second, independent opinion of a current probation officer who has been determined to not be able to perform essential functions of the job as a result of observation and a subsequent employer-ordered physical examination.
"Preexamination materials" means all information or materials that the employer gives to the physician who conducts the physical examination and that serve as the basis for the examination.

§ 38-1141 Health insurance payments for spouse or dependents of a probation officer killed in the line of duty; applicability; definitions

A. Notwithstanding any other law, the surviving spouse or a surviving dependent of a deceased probation officer is entitled to receive payments for health insurance premiums from public monies of the employer of the probation officer if the probation officer was killed in the line of duty or died from injuries suffered in the line of duty.

B. The employer shall make payments if the surviving spouse or surviving dependent is enrolled or was enrolled at the time the probation officer was killed in the line of duty or died from injuries suffered in the line of duty in either:

The health insurance program of the employer.
The health insurance program that is offered by the state retirement system or plan from which the surviving spouse or surviving dependent is receiving benefits.

C. If a surviving spouse or surviving dependent was enrolled in either health insurance program described in subsection B of this section at the time the probation officer was killed in the line of duty or died from injuries suffered in the line of duty and is eligible pursuant to subsection D of this section to receive health insurance premium payments under this section but is no longer enrolled in either health insurance program described in subsection B of this section, the employer shall allow the surviving spouse and any surviving dependent to enroll in the employer's health insurance program to receive health insurance premium payments pursuant to this section.

D. The health insurance premium amount payable by the employer of the deceased probation officer is the amount the employer of the deceased probation officer would pay for an active probation officer for a family coverage premium or single coverage premium, whichever is applicable. Payments shall be discontinued pursuant to this section if:

The surviving spouse remarries.
The surviving spouse becomes medicare eligible.
The surviving spouse dies.
For dependent coverage, the person is no longer considered a dependent.

F. This section applies:

To a surviving spouse or a surviving dependent of a deceased probation officer who was killed in the line of duty or who died from injuries suffered in the line of duty on or after April 5, 1933.
Only to health insurance premiums paid on or after September 13, 2013.

G. For the purposes of this section:

"Dependent" means an unmarried child of a deceased probation officer who meets one of the following qualifications:

(a) Is under eighteen years of age.

(b) Is at least eighteen years of age and under twenty-three years of age only during any period that the child is a full-time student.

(c) Is under a disability that began before the child attained twenty-three years of age and remains a dependent of the surviving spouse or a guardian.

"Probation officer" means a surveillance officer, juvenile detention officer or a juvenile or adult probation officer who is employed by this state or a political subdivision of this state.

Article 3 Civilian Review Boards

§ 38-1161 Civilian review board members; required training; statewide concern; exception; definition

(L21, Ch. 403, sec. 17)

A. Before a person becomes a member of a civilian review board that reviews the actions of peace officers in this state, the person must either:

Satisfactorily complete either:

(a) A community college police academy.

(b) A total of eighty hours of Arizona peace officer standards and training board certified training in the following subjects:

(i) Arizona law on use of force justification.

(ii) Dynamics of use of force encounters.

(iii) Dynamics of de-escalation.

(iv) Body-worn camera capabilities and limitations.

(v) In-custody deaths.

(vi) Criminal and administrative investigations and representative due process.

(vii) Twenty hours of simulated event law enforcement training, which shall count toward the eighty hours of training.

Be currently, or has previously been, certified by the Arizona peace officer standards and training board.

B. Members currently serving on civilian review boards shall complete the training required by this section within one year after the effective date of this section.

C. The legislature finds that setting and maintaining standards of professionalism and integrity of peace officers in this state are of statewide concern.

D. This section does not apply to a member of the Arizona peace officer standards and training board.

E. For the purposes of this section, "civilian review board" means a person or a committee, board, agency, department or entity that is comprised entirely or partially of civilian appointees and that does any of the following:

Receives community complaints about the actions taken by employees of a state or local law enforcement agency.
Reviews, monitors, audits or participates in internal investigations of employees of state or local law enforcement agencies.
Recommends policy changes or disciplinary measures to state or local law enforcement agencies regarding actions taken by an employee of the agency.
Issues reports or information about actions taken by an employee of a state or local law enforcement agency.
Investigates law enforcement officer conduct or misconduct, influences the conduct of or certifies law enforcement officer conduct or misconduct investigations, recommends disciplinary actions for law enforcement officer misconduct or imposes discipline for law enforcement officer misconduct. This paragraph does not apply to a person or a committee, board, agency, department or entity that only reviews the actions of another person or committee, board, agency, department or entity and does not determine the initial level of discipline or have the authority to increase the level of discipline.

§ 38-1171 Definitions

(Caution: 1998 Prop. 105 applies; Rpld. 1/1/33)

In this article, unless the context otherwise requires:

"First responder":

(a) Has the same meaning prescribed in section 13-1204.

(b) Includes a member of the Arizona national guard who is on state active duty in this state and a correctional officer who is employed by the state department of corrections.

"Killed in the line of duty" means killed as the result of another person's criminal act while in the performance of the first responder's official duties.

§ 38-1172 State death benefit

(Caution: 1998 Prop. 105 applies; Rpld. 1/1/33)

In addition to any other death benefit, beginning from and after June 30, 2025, if a first responder is killed in the line of duty, on written notice to the state treasurer from the first responder's employer this state shall pay a state death benefit of $250,000 to the first responder's surviving spouse. If the first responder does not have a surviving spouse but has children, this state shall pay a state death benefit of $250,000, divided equally among the first responder's children. The state shall pay the death benefit within thirty days after receiving the written notice from the first responder's employer.

§ 38-1173 State supplemental benefit fund

(Caution: 1998 Prop. 105 applies; Rpld. 1/1/33)

The state supplemental benefit fund is established consisting of monies deposited pursuant to section 12-116.12 and monies appropriated by the legislature. The state treasurer shall administer the fund for the purposes specified in section 38-1172. Monies in the fund are continuously appropriated. If at any time the monies in the fund exceed $2,000,000 the legislature may appropriate those excess monies for peace officer training, equipment and other benefits, including assistance to first responders who are seriously injured in the line of duty and the first responder's family.