Information from the Arizona Retirement Security Coalition about HB2138

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HB2138 will allow universities to open their optional retirement plan (ORP) to all employees & will have negative impacts on the state pension system

HB2138 is sponsored by John Kavanagh. The bill will allow the universities to open up their optional retirement plan (ORP) which is a defined contribution plan, to all employees (as the bill is written now). Currently, universities only offer it to a select number of employees; Classified and university staff are only offered the ASRS pension.  The legislation would allow all employees who couldn’t choose before, to go into the ORP.

As the bill is written now, the ASRS believes if all employees went into the ORP, the fund would be impacted by $95 million the first year, and it would only go up from there. The system gets harmed by not having enough people paying into it for the current public employees, so many current employees who are part of the ASRS would see their contribution rates go up.

Coalitions Concerns about HB2138:

  • It will increase the ASRS' unfunded liability. Right now, we have one of the best state retirement systems in the country. Without university employees entering, the system will go into further debt. This means contribution rates for educators, school staff, city and county employees and other public employees will go up.

  • The proposed legislation gives the universities a free pass while increasing contribution rates for the other employers in the system. Universities were happy to pay low contribution rates for this great benefit for years, but now that the rates are higher, they want out.

  • Employees may not have enough money when they retire. The universities’ optional retirement program (ORP) does not guarantee payment for life. The retiree’s pension is at the mercy of the stock market and may not last the employee’s lifetime.

  • The ORP is financially advantageous for the universities due to their lower contribution rate. Therefore, employees may not receive the information necessary to make the best choice for their financial security. Instead, they will most likely be steered towards the universities' risky plan.

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University Union of Northern Arizona

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