SAN JOSE, Calif., April 17, 2017—The Retirement Security Initiative (RSI) today called reform to Arizona’s Corrections Officers Retirement Plan (CORP) a huge win for the state’s correctional employees and taxpayers. The legislation, authored by State Senate President Pro Tem Debbie Lesko and signed into law by Governor Doug Ducey, will help ensure the long-term solvency of CORP’s pension plan while saving the state billions of dollars.
Passed by the Senate and House with strong bipartisan support, the reform package, SB1442, will repair CORP’s structural flaws, provide greater retirement security, slow the accrual of new pension liabilities, lower pension costs and significantly reduce future taxpayer risk.
With only 53 percent funding and an accumulated $1.4 billion debt, the long-term solvency of CORP’s pension plan was threatened. Over the last 15 years, the aggregate employer contribution rate had grown from 3.2 percent to 20.76 percent of payroll.
“The CORP plan, as it was structured, was not sustainable and failing the vast majority of employees it was designed to benefit,” said RSI Executive Director Pete Constant, who helped lead reform efforts. “Overall, this reform protects the promises made to current members of the plan, while providing retirement security for new employees.”
The new reform, which adopts a defined contribution plan for new correction officers, will help current employees and retirees in the existing CORP pension plan by capping liability and improving the plan’s solvency, while ensuring adequate retirement security for all employees regardless of tenure.
Taking into account employees’ demographics and career behavior, SB1442 allows new employees to be 100 percent vested within three years of service, improves the portability of benefits and creates more retirement planning choices. Prior to reform, the plan had been failing 80 percent of all plan members who left the job before vesting, forfeiting their full benefits.
Last year Arizona lead the nation with a comprehensive reform package to the Public Safety Pension System. Emulating last year’s successful process, Sen. Lesko convened a pension reform working group that brought together employees, employers, taxpayer advocates and pension experts to examine and address CORP’s structural pension issues.
“We congratulate Sen. Lesko and are proud that this effort, too, had the support of employees, employers and taxpayer groups,” said Constant. “It’s a job well done and demonstrates to other state and city governments that meaningful pension reform is possible through collaborative stakeholder engagement.”