Avoid Unfunded Liabilities!

As we close out calendar year 2022, the ASRS wants to remind you about the importance of reporting contributions accurately and in a timely manner. The purpose of this reminder is to help our employers avoid late fees and, in some cases, the potentially expensive result of creating an unfunded liability.

An unfunded liability can be very costly to an employer. The ASRS wants to ensure that you, the employer, with proper reporting of contributions and membership, can avoid these costs. Please be vigilant when submitting contributions. If you have any questions regarding a person’s membership or eligible contributions, please submit an Employer Secure Message or reach out to your Employer Quality Analyst 

ARS §38-748 requires an employer to pay to ASRS any unfunded liability that results from the ASRS providing benefits or service credit to a person if the employer paid contributions for that person and they were ineligible for ASRS membership by statute. In 2019, SB1016 made some changes to this statute. The bill added a definition of unfunded liability to be used in situations where the ASRS provides benefits based on ineligible compensation:

    • If the person was ineligible for ASRS membership by rule, this law would still apply, or
    • If the person was eligible for ASRS membership, but the employer reported contributions for that member for payments that were not ASRS-eligible compensation, then this law will also apply.

To help ensure proper contribution reporting, you can find the ASRS Compensation Quick Reference Guide and the ASRS Pay Types Define reference sheet on our Contribution Reporting page.

by Aaron Bernardino, Employer Relations

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