Public Safety Personnel Retirement System—The System’s Three Retirement Plans’ Funded Statuses Have Declined and Additional Actions Are Needed to Improve Their Long-term Sustainability

The Public Safety Personnel Retirement System (System) plans’ assets have not kept pace with estimated pension obligations. The System manages three different defined benefit retirement plans that provide a guaranteed life-long pension benefit: the Public Safety Personnel Retirement System plan (PSPRS plan), the Corrections Officer Retirement Plan (CORP), and the Elected Officials’ Retirement Plan (EORP). As of June 30, 2014, 282 employers participated in these plans, and there were nearly 55,000 members. All three system plans’ ratio of assets to estimated pension obligations (i.e., funded statuses) have declined from June 30, 2005 through June 30, 2014. Required permanent benefit increases, which have raised the plans’ pension obligations, and lower-than-expected investment returns have contributed to the low funded statuses. The System and the Legislature have taken several steps to improve the system plans’ funded statuses and long-term sustainability such as changing investment strategies and establishing more stringent criteria for providing permanent benefit increases, but some of these actions have been challenged in court and overturned. The System should collaborate with stakeholders to develop sustainable benefit increase structures, including pursuing legislative changes to implement solutions and considering whether proposing a ballot initiative to amend Arizona’s Constitution would be warranted. Additionally, the System should develop a funding improvement strategy that outlines actions that it or the plans’ participating employers would need to take once their funded status falls below a certain threshold and should collaborate with stakeholders to determine the feasibility of offering multiple benefit options that will allow employers to choose pension options they can afford.