PHOENIX (AP) -- A bill replacing pensions for new judges and other elected officials with a 401(k)-style retirement plan — a top priority of Republicans this Legislative session — was signed into law Wednesday by Gov. Jan Brewer.
The closure of the Elected Officials Retirement Plan for new state lawmakers, county officials and judges passed both the Senate and House of Representatives on party-line votes. HB 2608 does allow new judges who are already in the state's regular retirement system to remain there.
The plan is the smallest and most troubled of the four state retirement plans and only has assets to cover about 58 percent of its liabilities. It also has 992 retirees and their survivors drawing benefits, which is more than the 845 active members paying into the system.
Republican senate President Andy Biggs has called the officials' pension plan a "Ponzi scheme."
"It's unsustainable by any stretch, had to be done regardless of some of the complaints," Biggs said last month. "We've actually done right by the judges. ... I think we've done right by everybody."
The state will have to continue paying $3 million to $5 million a year into the EORP for decades to make it whole as current members retire and begin drawing pensions, Biggs said.
The plan had about $356 million in assets and $610 million in liabilities at the end of 2012, and the state contribution has gone from about 6 percent of salaries in 1999 to 39 percent today. A legislative effort to cut cost-of-living increases is being challenged in court.
The plan covers state legislators, elected officials at the state and county level, and some city officials as well as most judges. One of the problems is that pensions are based on the person's highest salary even if they only earned a small fraction of that amount earlier in their career.
Democrats opposed the bill, arguing that shutting down the EORP will mean the state's other three retirement plans will be next.
The Arizona Judges Association agreed that the EORP was unsustainable and tried to get the bill amended to allow elected officials to sign up for the Arizona State Retirement System, the largest state pension plan.
They mostly failed in that effort but did manage to get an increase in the proposed state match to a 401(k)-style defined-contribution plan, from 5 percent to 6 percent of earnings. And they were able to insert a provision allowing new state or other employees who currently are in ASRS to stay in the plan when they become judges. The association agreed not to oppose the bill with the changes.