Account Balance vs Pension Benefit
As a member of the Arizona State Retirement System, you make contributions with each of your paychecks. Both you and your employer contribute equal amounts, which are invested to generate revenue and build the ASRS trust fund, which in turn pays your guaranteed lifetime pension benefit upon retirement. These contributions, plus interest, combine to form your account balance.
It's a common misperception that a member's account balance is tied to their future pension calculation. Your pension benefit is actually calculated using the “ASRS Defined Benefit Formula”, which is as follows:
Credited Service x Graded Multiplier (based on your years of service) x Average Monthly Compensation = Your Unreduced Lifetime Monthly Pension upon reaching normal retirement
On average, most members received more in pension benefits within 6-8 years of being retired than they paid in contributions over the course of their career. With our cost-sharing model, this doesn’t mean your pension payments will stop. You will continue to be paid the same monthly pension for the rest of your life through the ASRS trust fund.
When does a members account balance matter? The two primary situations:
- Should pass away before your contributions have been paid back to you (either while still employed or retired), they will be paid to your beneficiary.
- Second, if you refund your account and terminate your ASRS membership.
If refunding, your ASRS membership date does influence what percentage of refund you're eligible for, and whether or not you're entitled to a portion of your employer's contributions made on your behalf. Refunding also can have tax penalties as well.