Arizona State Retirement System Calculator

What Is The Arizona Property Valuation Freeze

The property valuation freeze is a form of property tax relief available to homeowners in Arizona with total income below a certain level. It freezes a homes value for property tax purposes, which in turn limits any potential increases in annual property taxes.

For individual owners, the income level is $40,368 for 2022. For properties owned by two or more persons, the 2022 income level is $50,460. To be eligible, the property must be the owners’ primary residence and they must have lived there at least two years.

Seniors who are 70 or older may be eligible to defer payment of their property taxes on their principal residence entirely. To be eligible for deferment, they must have lived in their home for six years or in the state of Arizona for 10 years. They must also have a total taxable income of no more than $10,000. If successful, payment of the taxes won’t be due until the owner dies or sells the house.

Retiree Accumulated Sick Leave

As state employees, UA retirees are eligible to participate in the Retiree Accumulated Sick Leave program, maintained and administered by the Arizona Department of Administration and the General Accounting Office . Employees who have accumulated 500 hours or more of unused sick leave at time of retirement may elect a cash payout of their sick leave benefit over a 3-year period.

New Normal: The Market Has Changed

The new normal for institutional investing suggests that achieving even a 6% average rate of return in the future is optimistic.

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Establish A Plan To Pay Off The Unfunded Liability As Quickly As Possible

Current amortization time horizons are too long:

• ASRS 30-year layered level percent of payroll amortization policy leaves unfunded liabilities significantly exposed to additional market risk and should be shortened similar to PSPRS policies.
• The Society of Actuaries Blue Ribbon Panel recommends amortization schedules be no longer than 15 to 20 years.

The legislature could put maximum amortization periods in place and/or require a gradual reduction in the funding period to target a lower number of years:

• Other states have phased in changes by reducing the amortization schedules one year at a time
• The legislature could require that ASRS be funded on a certain time period under specific scenarios, such as alternative assumptions and/or stress test scenarios Arizona Pension Analysis: ASRS 60 December 4, 2020

Arizona Retirement System: Varieties

The pensions that await public employees is one of the best perks of the job. Beyond this, you could find yourself eligible to receive long-term disability benefits, health insurance, survivor benefits and other advantages for retirement. In some cases, tiers dictate what youre eligible to receive. As a result, make sure you know where you stand within these systems.

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Arizonas Retirement System Overview

Arizona State Retirement System The ASRS is a defined benefit plan. That means that the pension contributions of you and your employer are outlined by law. Participants of this plan can choose from seven different retirement payment options, depending on if they want a beneficiary or not. Also, if you need it, you could be eligible for supplemental health insurance and benefits for long-term disability.

Public Safety Personnel Retirement System Members can choose to receive various types of retirement plans within the PSPRS, but the decision comes down to when you were hired. If you fall under Tier 1 or 2, you are forced into a defined benefit plan, whereas Tier 3 members can also take part in a defined contribution plan. Benefits include disability pension, health insurance, survivor benefits and entry into the Public Safety Cancer Insurance Policy program .

• Tier 1: Hired prior to 1/1/2012
• Tier 2: Hired on or after 1/1/2012
• Tier 3: Hired on or after 7/1/2017

Corrections Officer Retirement Plan The three membership tiers of this program determine how your retirement distributions are calculated. Variables include your age, average salary, service credit and other factors. The benefits offered by this plan are very similar to the two systems above, with health insurance, disability and survivor benefits headlining.

• Tier 1: Hired prior to 1/1/2012
• Tier 2: Hired on or after 1/1/2012
• Tier 3: Hired on or after 7/1/2018

What You Need To Know About Arizona State Taxes

The state of Arizona requires you to pay taxes if youâre a resident or nonresident that receives income from an Arizona source. The state income tax rates range from 2.59% to 4.50%, and the sales tax rate is 5.6%, and an average local sales tax rate of 2.8%.

Arizona state offers tax deductions and credits to reduce your tax liability, including a standard and itemized deductions.

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Challenge : The Existing Benefits Design Does Not Work For Everyone

High pre-retirement withdrawal rates signal challenges in recruiting and retaining new public employees:

• 60% of new workers leave before 5 years of service
• 74% of new workers leave before 10 years of service
• Just 17% of ASRS workers remain in the system from start to finish to receive partial benefits at age 50
• Under 12% of ASRS workers remain in the system from start to finish to receive full benefits at ages 55 to 65

Qualifying Charitable Organization Contributions

Donating to a qualifying charitable organization can help lower your state tax bill in Arizona. Qualifying charitable organizations are those that provide immediate basic needs for residents of Arizona who are low-income, disabled or receive temporary assistance for needy families .

The maximum credit is $800 for married couples filing jointly and $400 for single filers, heads of household and married filing separately filers.

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Tips For A Successful Retirement

• Figuring out your monthly budget ahead of actually retiring can take much of the stress out of the transition. The general rule is to have 80% of your pre-retirement income for retirement. But allocating your assets intelligently can help you get by with less.
• The SmartAsset financial advisor matching tool has the ability to pair you up with financial advisors in your area. We base our choices on your answers to a series of financial questions. As a result, well set you up only with professionals who can handle your specific needs.

Resolved: Secure Site Error Message

It came to our attention that, due to a technical issue, some members received an error message when submitting documents in their secure myASRS accounts for a short time between 11/18 – 11/20. Please know this issue has been resolved. For anyone who experienced issues, we encourage you to log into your account and resubmit your documents.

For retirees enrolling in health insurance, our Open Enrollment Period remains open, with the last day being Wednesday, November 30, 2022.

We apologize for any inconvenience.

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Create A Path To Retirement Security For All Participants Of Asrs

ASRS is not providing a path for retirement income security to all Arizona public workers:

• For example, only 12% of public employees make it to the 30 years necessary for a full pension. This means the majority of members would be better served by having the choice of an alternative plan design built for portability and an increasingly mobile workforce, such as a Cash Balance, Hybrid or DC plan.

Employees should have a choice to select a retirement plan design that fits their career and lifestyle goals:

• Cash balance plans can be designed to provide a steady accrual rate, offer portability, and ensure a path to retirement security.
• Defined contribution plans can be designed to auto-enroll members into professionally managed accounts with low fees that target specified retirement income and access to annuities

Learn About Retirement & Financial Wellness

Every step of the way

Nationwide Retirement Solutions and Nationwide Life Insurance Company have trademark and licensing services relationships with the National Association of Counties, the International Association of Fire Fighters-Financial Corporation, the United States Conference of Mayors and the National Association of Police Organizations.

Nationwide may receive payments from mutual funds or their affiliates in connection with certain investment options. Learn more about these payments.

Retirement Specialists provide information for educational purposes only. This information is not meant to be used as investment advice. Retirement Specialists are Registered Representatives of Nationwide Investment Services Corporation, member FINRA, Columbus, Ohio.

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Arizona State Retirement System

Classified and university staff in category 01 must participate in the Arizona State Retirement System and are enrolled automatically. Faculty, administrators, academic professionals and university staff in categories 02 to 05 are also eligible to elect this plan. This is a defined benefit plan qualified under section 401 of the Internal Revenue Code. A formula set by the ASRS determines your pension.

About ASRS

• Begins the first day of the pay period following 182 calendar days of eligible employment or immediately if you have an ASRS account with monies on deposit or were hired before July 20, 2011. ASRS retroactive contributions may be required.
• Contribution rates shown below are subject to change each year on July 1.
• Long-term disability insurance benefits are included with this plan.
• Once you meet ASRS membership eligibility criteria in a fiscal year, you remain a member and contributions continue until the end of the fiscal year in which you become ineligible.
• Participants with five or more years of credited service are eligible for a retiree health insurance subsidy.
• Retirement contributions are withheld from your paycheck on a before-tax basis and long-term disability contributions are withheld on an after-tax basis.
• While actively employed, you may not borrow from or withdraw contributions from your account.

Vesting

• Long-term disability.
• Service purchase.

Qualifying Foster Care Organization Contributions

Donating to qualifying foster care organizations can also help lower your overall state tax bill in Arizona. Qualifying foster organizations are those that provide immediate basic needs for residents of Arizona who are low-income, disabled or receive temporary assistance for needy families and provide immediate basic needs to at least 200 qualifying individuals in the foster care system.

The maximum credit is $1,000 for married couples filing jointly and $500 for single, head of household and married filing separate filers.

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Application Forms And Information

RASL Payment Expectations:

As stated in the RASL literature, please communicate to retirees that the first RASL payment is generally available 60-90 days AFTER a qualified and complete application has been received by the GAO . With an unexpected surge in applications received during the summer months and since applications are processed in the order received, it is now taking closer to 90 days to fully process applications. Reinforcing this message will ensure all RASL applicants have the appropriate payment expectations.

Deferred Compensation:

Applicants retiring prior to October 25, 2015, who wish to utilize deferred compensation in 2015, must ensure their application is processed by their agency and sent to RASL as soon as possible and within 30 days of their termination in order to meet the December 31, 2015 IRS deferral deadline. If the application is not received in time, deferred compensation will not be possible in 2015. Applicants retiring on or after October 25, 2015 can defer in early 2016.

Note: The information below is a brief summary of the Retiree Accumulated Sick Leave program. Please refer to section II-R of the State of Arizona Accounting Manual and to A.R.S. §§ 38-615, 38-616 for complete program requirements.

Although Arizona law ) allows certain ASRS members to retire and receive a pension without termination of employment, the RASL Program requires a termination with retirement.

Adopt Better Funding Policy Risk Assessment And Actuarial Assumptions

Risk Assessment and Actuarial Assumptions:

• Look to lower the assumed return such that it aligns with more realistic probability of success
• Work to reduce fees and costs of active management
• Consider adopting an even more conservative assumption for a new hire defined benefit plan
• Require stress testing for contribution rates, funded ratios, and cash flows with look-forward forecasts for a range of scenarios Arizona Pension Analysis: ASRS 59 December 4, 2020

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Are Other Forms Of Retirement Income Taxable In Arizona

Income from retirement savings accounts like a 403 or a 401 is taxed as regular income by the state of Arizona. It should be combined with income from other sources like wages or salaries as part of your total income. Tax rates range from 2.59% to 4.50%.

Income from pensions is also taxed as regular income. U.S. government civil service pension income and Arizona state or local pension income are all eligible for a deduction of $2,500 annually. Private pensions and pensions from states other than Arizona cannot receive this deduction.

Challenge : Discount Rate & Undervaluing Debt

The ASRS discount rate methodology is undervaluing liabilities.

The discount rate for a public pension plan should reflect the risk inherent in the pension plans liabilities:

• Most public sector pension plans including ASRS use the assumed rate of return and discount rate interchangeably, even though each serve a different purpose.
• The Assumed Rate of Return adopted by ASRS estimates what the plan will return on average in the long run and is used to calculate contributions needed each year to fund the plans.
• The Discount Rate , on the other hand, is used to determine the net present value of all of the already promised pension benefits and supposed to reflect the risk of the plan sponsor not being able to pay the promised pensions.

Setting a discount rate too high will lead to undervaluing the amount of pension benefits actually promised:

• If a pension plan is choosing to target a high rate of return with its portfolio of assets, and that high assumed return is then used to calculate/discount the value of existing promised benefits, the result will likely be that the actuarially recognized amount of accrued liabilities is undervalued.

It is reasonable to conclude that there is almost no risk that Arizona would pay out less than 100% of promised retirement income benefits to members and retirees:

• Arizona ConstitutionArticle 29

The discount rate used to account for this minimal risk should be appropriately low:

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Certified School Tuition Organizations Contributions

A certified school tuition organization provides scholarships to students enrolled in Arizona private schools. If you contribute to these organizations, you can claim a maximum credit of $1,221 for married couples filing jointly and $611 for single filers, heads of household and married filing separately filers.

Challenge : Uncovering Hidden Costs

Adjusting actuarial assumptions to reflect the changing demographics and new normal in investment markets exposes hidden pension cost by uncovering existing but unreported unfunded liabilities.

Heres how actual experience has differed from actuarial assumptions:

New Member Rate Assumptions

ASRS new hire and rehire rates have differed from expectations resulting in a $543 million growth in unfunded liabilities from 2009-2014.

Withdrawal Rate Assumptions

ASRS assumptions on the rates of employer withdrawal have differed from expectations resulting in a $21 million growth in unfunded liabilities from 2009-2014.

Disability Rate Benefits

ASRS disability claims have been more than expected, resulting in a $14 million growth in unfunded liabilities from 2009-2014.

Active Mortality Rate Benefits

ASRS survivor claims for active members have been more than expected, resulting in a $13 million growth in unfunded liabilities from 2009-2014.

Age and Service Retirement

ASRS members have been retiring at younger than expected ages, resulting in a larger liability than expected and $7 million in growth in unfunded liabilities from 2009 to 2014.

Other Missed Assumptions

Other ASRS assumptions have differed from expectations resulting in a $285 million growth in unfunded liabilities from 2009-2014.

Inactive Mortality Rate Benefits

Overestimated Payroll Growth

Overestimated Payroll Growth

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What Was Updated In The Federal W4 In 2020

In 2020, the IRS updated the Federal W4 form that eliminated withholding allowances. The redesigned Form W4 makes it easier for your withholding to match your tax liability. Hereâs how to answer the new questions:

• Step 2: check the box if you have more than one job or you and your spouse both have jobs. This will increase withholding.
• Step 3: enter an amount for dependents.The old W4 used to ask for the number of dependents. The new W4 asks for a dollar amount. Hereâs how to calculate it: If your total income will be $200k or less multiply the number of children under 17 by $2,000 and other dependents by $500. Add up the total.
• Step 4a: extra income from outside of your job, such as dividends or interest, that usually don’t have withholding taken out of them. By entering it here you will withhold for this extra income so you don’t owe tax later when filing your tax return.
• Step 4b: any additional withholding you want taken out. Any other estimated tax to withhold can be entered here. The more is withheld, the bigger your refund may be and youâll avoid owing penalties.

If your W4 on file is in the old format , toggle “Use new Form W-4” to change the questions back to the previous form. Employees are currently not required to update it. However if you do need to update it for any reason, you must now use the new Form W-4.