On July 1, the ASRS will begin a new fiscal year – FY 2023-24. For members, this is always when new contribution rates go into effect. Starting July 1, 2023, the new total contribution rate will be 12.29%, an increase of slightly more than a tenth of a percent from the FY 2022-23 rate of 12.17%.
Understanding Your Contribution Rate
The total contribution rate paid by both ASRS members and employers is actually comprised of two parts: contributions collected to fund both the pension and health insurance benefits, and contributions collected to fund the long term disability benefit. The percentages of these two parts combine to equal your total contribution rate. The Pension and Health Insurance Benefit contributions are collected as pre-tax dollars, while the Long Term Disability Income Plan contributions are collected as post-tax dollars.
For FY 2023-24, the Pension and Health Insurance contribution rate is 12.14%, while the Long Term Disability Income Plan contribution rate is 0.15%
How Rates Are Determined, Where They’re Going
A big question most members have regarding the contribution rate is how the ASRS determines what the contribution rates should be and what they’ll be going forward. Based on current projections, we’re optimistic that contribution rates will remain stable for the foreseeable future, likely staying within ± 1% of the current total rate for the next 10+ years.
Contribution rates are determined each year through an actuarial valuation conducted by an external actuary. Every four or five years, the actuary performs a deeper analysis, called an experience study. In these experience studies, actuarial assumptions of the ASRS are evaluated, along with how those assumptions may or may not need to adjust going forward, and what effect those adjustments in assumptions are projected to mean for contributions rates over the next 30 years.
The most recent experience study can be viewed online in the May 28, 2021 Board Agenda Packet, available on the Board and Committee Meetings page of AzASRS.gov. The experience study was agenda item #8, which starts on page 364 and ends on page 427.
The experience study provides estimates of what future contribution rates will be based upon reasonable assumptions and serves as an important piece of the puzzle that the ASRS uses to determine a path forward, with the goal of continuing to be a healthy, properly funded retirement system.
