Remitting ACR Payments

By Jessica A.R. Thomas, ASRS Rules Writer

Since July 1, 2012, Arizona laws have required Employers to remit an Alternate Contribution Rate (ACR) for ASRS retirees who return to work. 

In our last issue, we explained the new ACR rule that became effective on July 4, 2016 which can be found in the Arizona Administrative Register, 22 A.A.R. 1341.  You may also view it on the Rules page on our website. In the previous article, we addressed which ASRS-retiree employees would require the Employer to remit an ACR payment to the ASRS.  In this article we will address how the ACR payment should be made.   

The ACR rule, R2-8-116, states that the ACR must be remitted directly from the Employer’s funds and the ACR should not be deducted from the ASRS-retiree employee’s compensation.  Including the ACR amount in the ASRS-retiree employee’s overall compensation when the Employer deducts the ACR amount from the ASRS-retiree employee’s paycheck can create several issues, one of which may be inaccurate reporting on federal tax documents. 

The ACR amount is determined as a percentage (currently 9.47%) of the ASRS-retiree employee’s compensation and the ACR amount may be more if the Employer includes the ACR amount as part of the compensation amount for which the ACR is due.  For example: 

If the ASRS-retiree is hired in a position that earns $50,000 per year, the ACR amount that the Employer owes to the ASRS will be 9.47% of the $50,000, or $4,735. However, if the Employer deducts the ACR amount from the ASRS-retiree’s pay, then the ASRS-retiree’s compensation is not actually the $50,000, but $45,265 ($50,000-$4,735).  The ACR amount due on the $45,265 compensation amount is $4,286.60, which is less than the ACR amount that would be due based on the ASRS-retiree receiving $50,000. 

In addition to the tax and accounting implications, the amount of the ACR should not be reflected as a deduction on the ASRS-retiree’s paycheck. The retiree should not be making those payments according to the new rule and the retiree is not receiving any kind of benefit from the ASRS in exchange for the ACR amount.  As an Employer, it is your responsibility to ensure that the ASRS receives the correct amount of ACR for each ASRS-retiree who returns to work. 

Please see the ACR page on our website, or contact our Employer Relations department with any questions or concerns.

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