New Fiscal Year and Contribution Rates

On July 1, the ASRS will begin a new fiscal year – FY 2021-22. For members, this is always when your new contribution rates will go into effect. For the fiscal year starting July 1, the new total contribution rate (which includes pension benefits, health insurance benefits, and long term disability benefits) will be 12.41%, adjusted slightly from the current rate of 12.22%.

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 benefit for retirees, and contributions collected to fund the long term disability benefit. While 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 2021-22, the Pension and Health Insurance contribution rate is 12.22%, while the Long Term Disability Income Plan contribution rate is 0.19%

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 total FY 2021-22 rate of 12.41% 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. The most recent experience study was presented to the ASRS Board of Trustees on May 28. Current actuarial assumptions of the ASRS were 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 recently presented 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.

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