Bill Text: AZ SB1052 | 2021 | Fifty-fifth Legislature 1st Regular | Chaptered
Bill Title: ASRS; required beginning date; distributions
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2021-04-16 - Chapter 238 [SB1052 Detail]
Download: Arizona-2021-SB1052-Chaptered.html
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Senate Engrossed |
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ASRS; required beginning date; distributions |
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State of Arizona Senate Fifty-fifth Legislature First Regular Session 2021
CHAPTER 238
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SENATE BILL 1052 |
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AN ACT
Amending sections 38-759, 38-775 and 38-797.07, Arizona Revised Statutes; relating to the Arizona state retirement system.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 38-759, Arizona Revised Statutes, is amended to read:
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 April 1 following the calendar year in which the member attains seventy and one-half years of age or the calendar year in which the member terminates employment, whichever occurs later member's required beginning date.
C. For the purposes of this section, "required beginning date" has the same meaning prescribed in section 38-775.
Sec. 2. Section 38-775, Arizona Revised Statutes, is amended to read:
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:
1. 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.
2. 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.
3. 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 no 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, no not later than as follows:
1. If the member's surviving spouse is the member's sole designated beneficiary, except as provided in paragraph 6 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 and one-half seventy-two years of age, if later.
2. If the member's surviving spouse is not the member's sole designated beneficiary, except as provided in paragraph 6 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.
3. If there is no designated beneficiary as of September 30 of the year following the year of the member's death, the member's entire interest shall be distributed by December 31 of the calendar year containing the fifth anniversary of the member's death.
4. 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 the surviving spouse begin, this subsection, other than paragraph 1 of this subsection, applies as if the surviving spouse were the member.
5. For purposes of this subsection and subsection G of this section, distributions are considered to begin on the member's required beginning date or, if paragraph 4 of this subsection applies, 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.
6. 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:
1. 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 permitted 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.
2. 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.
3. 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:
1. 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.
2. 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:
1. Except as provided in subsection C, paragraph 6 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 no 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.
2. 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.
3. 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.
H. I. For the purposes of this section:
1. "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.
2. "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.
3. "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.
4. "Required beginning date" means the date payment of a member's benefits shall commence, which shall not be later than the April 1 following the calendar year in which the member attains seventy and one-half years of age or the calendar year in which the member terminates employment, whichever occurs later in accordance with section 401(a)(9)(C) of the internal revenue code.
Sec. 3. Section 38-797.07, Arizona Revised Statutes, is amended to read:
38-797.07. LTD program benefits; limitations; definitions
A. The LTD program is subject to the following limitations:
1. 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.
2. 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.
3. Monthly LTD program benefits are not payable until a member has had a disability for a period of six consecutive months.
4. 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.
5. 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.
6. 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.
(c) An injury incurred while engaged in a felonious criminal act or enterprise.
(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.
7. 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.
(c) The date the member withdraws employee contributions with interest and ceases to be a member.
(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.
8. Monthly LTD program benefits are payable only for disabilities that commence on or after July 1, 1988.
9. 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.
10. 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.
11. 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 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 the member receives 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:
1. "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.
2. "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.
3. "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).
APPROVED BY THE GOVERNOR APRIL 16, 2021.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 16, 2021.
