General Information
Legislation passed in 2011 under Senate Bill 1609 authorizes the ASRS to implement an Alternate Contribution Rate (ACR) to employers who hire ASRS retirees who return to work. The rate will be charged to and remitted to the ASRS by the employer. The purpose of the legislation is to mitigate the potential actuarial impact that retired members who return to work may have on the Trust Fund.
Here is a summary of the provisions now contained in Arizona Revised Statute 38-766.02:
- Beginning July 1, 2012, requires employers to pay an Alternate Contribution Rate (ACR) for members who return to work in any capacity and in a position ordinarily filled by an employee of the employer.
- Charges the ACR starting the first day after retirement for a member who reached normal retirement and for a member who is an early retiree working less than 20/20 for as long as that member stays in service and for any future employment periods during which the member does not suspend their benefits and resume active membership.
- States that the retired member does not accrue credited service, member service (for UORP), account balances, retirement benefits or LTD Program benefits, and the time is not later eligible for service purchase.
- Requires employers to pay the ACR on behalf of any retiree that it employs regardless of 20/20 status, direct/leasing/contracting arrangement, or whether the retiree satisfied the 12-month break in service without working in a leased or contract arrangement.
- States that late contributions are subject to interest (8%) and may be recovered in court or by state revenue offsets.
- Requires employers to submit any reports, data, paperwork, or materials required by the ASRS to determine the function, utilization, efficacy or operation of the return to work program.
- Includes a Legislative Intent clause that states the purpose of the legislation is to mitigate the potential actuarial impact that retired members who return to work might have on the Trust Fund.
ASRS Return to Work - Violations
- Clarifies the period for which a member shall repay suspended pensions to the ASRS starts with the date the ASRS notifies the member in writing that their employment violated the statute, the date the ASRS determines the member knew or should have known that their employment violated the statute, or any other time period that approximates the duration of the violation, as determined by the ASRS.
- Requires an employer that employed a member whose pension was suspended to pay the ASRS the ACR starting with the date the member returned to employment. The employer is required to make the ACR payment through the earlier of:
- The date the member terminates employment,
- The date the employer begins making the ACR payment required by the new Return to Work statute, or
- The date the member resumes active membership in the ASRS.
Current ACR Information
Alternate Contribution Rate Fiscal year 2016-17, effective July 1, 2016 9.47% Fiscal year 2017-18, effective July 1, 2017 9.49% |
ACR Guide - Step-by-step instructions for online alternate contribution rate processing and payment. (Updated March 2016)
ACR Template - This template is for web-based contribution reporting employers to provide the required ACR data to the ASRS.
Frequently Asked Questions
When is the ACR effective?
The ACR became effective on July 1, 2012 and applies only to wages earned on and after that date. Pay periods which began prior to July 1, 2012 and end on or after July 1, 2012 must be split for ACR purposes. This is only applicable for the initiation of the ACR and is contrary to conventional reporting of active contributions, in which pay periods are not split and one rate is applied to an entire pay period based upon the rate in effect on the Pay Period Ending (PPE) date.
Is there a grandfather clause?
There is no grandfather clause. The ACR applies to all ASRS retirees regardless of when they retire, when they return to work, or how long they wait before returning to work.
For which ASRS retirees is the ACR applicable?
The ASRS employer shall remit to the ASRS contributions determined by the ACR for each ASRS retired member who returns to work in a position that would be considered an employee position of the employer. The ACR applies to all ASRS retirees who return to work for an ASRS employer regardless of early or normal retirement status, and regardless of the number of hours worked in a pay period.
The ACR also applies to all ASRS retirees who return to work in any capacity in a position ordinarily filled by an employee of the employer. The ASRS retiree may return to work as a direct hire, as an independent contractor, or as an employee of a leasing company. The determining factor is whether that returning retiree works in a position that would be considered an employee position of the employer.
If the employer provides proof that the retired member is leased from a third party, all employees in the entire class of positions to which the retired member’s position belongs have been leased from a third party, and the employer does not have any direct employees performing the same, or substantially similar, functions or duties as the retired member, then the employer is not required to pay the ACR for that retiree. As an example, a school who leases an ASRS-retiree substitute teacher through a leasing company would pay ACR even if all substitute teachers were leased from a third party, as long as the school has at least one direct employee (not leased from a third party) who is a teacher.
The ACR also applies to all ASRS retirees who return to work in any capacity in a position ordinarily filled by an employee of the employer. The ASRS retiree may return to work as a direct hire, as an independent contractor, or as an employee of a leasing company. The determining factor is whether that returning retiree works in a position that would be considered an employee position of the employer.
If the employer provides proof that the retired member is leased from a third party, all employees in the entire class of positions to which the retired member’s position belongs have been leased from a third party, and the employer does not have any direct employees performing the same, or substantially similar, functions or duties as the retired member, then the employer is not required to pay the ACR for that retiree. As an example, a school who leases an ASRS-retiree substitute teacher through a leasing company would pay ACR even if all substitute teachers were leased from a third party, as long as the school has at least one direct employee (not leased from a third party) who is a teacher.
What is the ACR this year, and how is it determined?
For Fiscal Year 2016-17, which began July 1, 2016, the ACR is 9.47%. The ACR is determined on an annual basis along with the regular contribution rates (pension and LTD) for eligible employees and employers. The rates are approved by the ASRS Board of Trustees typically in November for the following fiscal year beginning July 1. This determination by the Board is made following a presentation by the ASRS actuary on the annual actuarial valuation of the plan. The ACR shall not be less than 2% in any fiscal year or greater than the regular contribution rate set for employers and is the result of a calculation that determines an amortization of the plan’s deficit, if any.
How is the ACR applied?
The ACR will be applied to the compensation, gross salary, or contract fee of an ASRS retiree who returns to work for an ASRS employer. These terms are used to describe the payments made to direct hires, employees of a leasing company, and independent contractors respectively. Though “compensation,” as it pertains to a direct hire, is not defined in § 38-766.02, the term is defined in § 38-711 and shares the same meaning. A.R.S. §38-766.02 defines “gross salary” as the gross amount paid to a retired member by a leasing company as salary or wages, including amounts that are subject to deferred compensation or tax shelter agreements, for services rendered or that would have been paid to the retired member except for the member’s election or a legal requirement that all or part of the gross amount be used for other purposes. Also, in this statute, “contract fee” is defined as the gross amount paid to a retired member as an independent contractor minus an amount, not to exceed ten per cent, for an administrative fee.
Does the ACR apply to ASRS retirees who are hired to work less than 20 hours per week or less than 20 weeks?
Yes, the ACR applies to the compensation, gross salary, or contract fee earned by ASRS retirees who return to work in any capacity and for any number of hours. For example, if the ASRS retiree is substitute teaching for only one day in a fiscal year, then the employer must pay an amount as calculated by the ACR based on compensation earned for that one day. If an ASRS retiree is engaged to work 10 hours per week, the employer must pay an amount as calculated by the ACR based on compensation earned for working 10 hours per week.
What kind of data is collected for ACR payments?
Employers shall report the retiree’s SSN, first and last name, gross pay amount, employer ACR amount, employer reporting unit number and employer number, and retiree return to work type (direct hire, leased, or contracted). The retiree return to work date is required for the first contribution and is then optional on subsequent records from the same employer. The retiree termination date should be provided upon final ACR contribution submission.
What if an employer uses a third party employer for staffing purposes?
If your employer uses a vendor to employ a retired ASRS member, the employer will be responsible for working with the vendor to obtain employee information (e.g., salary information, eligibility, etc.), required for ACR reporting.
How are ACR data and payments submitted to ASRS?
The ACR process is designed to be similar to the existing online contribution reporting system. There are two ways employers can upload the ACR data for each pay period.
-Employers may download a template from the ASRS website, which is a Comma Separated Values (CSV) file. Once the employer completes the information required and saves the file in CSV format, the file can be uploaded to the ASRS website.
-In lieu of the ASRS template provided, a CSV file generated by the employer’s payroll system can be uploaded to the ASRS website each pay period. The ASRS CSV file format is available within the ACR Guide.
Employers whose payroll system is unable to produce a compatible CSV file must use the ASRS template provided. The amount calculated by the ACR shall be remitted on a per pay period basis through the ASRS website. ACR payments must be submitted to ASRS online via Automated Clearing House (ACH). There are no exceptions. If your employer does not yet have an ACH account set up, please refer to the ACR Guide located on this page and on the Employer Reference Materials page of the ASRS website.
-Employers may download a template from the ASRS website, which is a Comma Separated Values (CSV) file. Once the employer completes the information required and saves the file in CSV format, the file can be uploaded to the ASRS website.
-In lieu of the ASRS template provided, a CSV file generated by the employer’s payroll system can be uploaded to the ASRS website each pay period. The ASRS CSV file format is available within the ACR Guide.
Employers whose payroll system is unable to produce a compatible CSV file must use the ASRS template provided. The amount calculated by the ACR shall be remitted on a per pay period basis through the ASRS website. ACR payments must be submitted to ASRS online via Automated Clearing House (ACH). There are no exceptions. If your employer does not yet have an ACH account set up, please refer to the ACR Guide located on this page and on the Employer Reference Materials page of the ASRS website.
Can there be multiple files for the same pay period?
Employers may submit multiple files for the same pay period end (PPE) date. For example, one file for PPE 7/7/2012 is submitted with a deposit date of 7/10/2012; another is submitted with a deposit date of 7/13/2012; and a third is submitted with a deposit date of 7/20/2012. All three files are submitted with the same PPE date, and each has a deposit date within 14 calendar days of the PPE.
How frequently is ACR due?
For return to work retirees, ACR payments must be reported by pay period ending date (PPE), which is the same as the PPE date used to submit regular contributions for active, non-retired employees. The appropriate remittance of ACR payments is due 14 calendar days after the last day of the applicable pay period. Any payment received after this date is delinquent and subject to the assessment of late charges until received. The ACR payment due will be calculated automatically based on the compensation paid to the retiree. If the deposit date is delinquent, late charges will automatically be assessed.
The term “last day of the applicable pay period” may be different for some employers. Some employers pay weekly, bi-weekly, semi-monthly, or monthly while other employers use different pay periods for different employee classifications and still others may have customized pay period schedules. An ASRS retiree who works for an employer as an independent contractor or as an employee of a leasing company may not receive payment for their services on a schedule that matches the “last day of an applicable pay period” used for active contributing members. Therefore, to provide employers some degree of flexibility in administering the ACR for eligible ASRS retirees who return to work and to avoid delinquent ACR payments, the following is provided:
-If the ASRS retiree returns to work as a direct hire of the employer, the remittance of ACR payments is due by 14 calendar days after the last day of the applicable pay period commonly used by the employer for its employees in general or for that employee classification in particular, if warranted, and,
-If the ASRS retiree returns to work as an independent contractor or as an employee of a leasing company, the remittance of ACR payments is due by 14 calendar days after the last day of the applicable pay period that is subsequent to
--The payment for the services rendered by the independent contractor or
--Payment to the leasing company for the services rendered by the leasing company’s employees.
The employer retains the flexibility to remit ACR payments for those retirees who return to work as independent contractors or as employees of a leasing company on the employer’s normal pay period basis (i.e., using an accrual method) if the employer wishes to do so. However, doing so may cause the employer to make adjustments during the subsequent reporting period if the retiree’s schedule as an independent contractor or as an employee of a leasing company is not reported accurately. If you are an employer that handles payroll for an ASRS employer, please make sure you have contacted that employer to determine which entity will be submitting ACR payments to ASRS.
The term “last day of the applicable pay period” may be different for some employers. Some employers pay weekly, bi-weekly, semi-monthly, or monthly while other employers use different pay periods for different employee classifications and still others may have customized pay period schedules. An ASRS retiree who works for an employer as an independent contractor or as an employee of a leasing company may not receive payment for their services on a schedule that matches the “last day of an applicable pay period” used for active contributing members. Therefore, to provide employers some degree of flexibility in administering the ACR for eligible ASRS retirees who return to work and to avoid delinquent ACR payments, the following is provided:
-If the ASRS retiree returns to work as a direct hire of the employer, the remittance of ACR payments is due by 14 calendar days after the last day of the applicable pay period commonly used by the employer for its employees in general or for that employee classification in particular, if warranted, and,
-If the ASRS retiree returns to work as an independent contractor or as an employee of a leasing company, the remittance of ACR payments is due by 14 calendar days after the last day of the applicable pay period that is subsequent to
--The payment for the services rendered by the independent contractor or
--Payment to the leasing company for the services rendered by the leasing company’s employees.
The employer retains the flexibility to remit ACR payments for those retirees who return to work as independent contractors or as employees of a leasing company on the employer’s normal pay period basis (i.e., using an accrual method) if the employer wishes to do so. However, doing so may cause the employer to make adjustments during the subsequent reporting period if the retiree’s schedule as an independent contractor or as an employee of a leasing company is not reported accurately. If you are an employer that handles payroll for an ASRS employer, please make sure you have contacted that employer to determine which entity will be submitting ACR payments to ASRS.
Can the employer pass the cost of the contribution required by the ACR on to the employee?
The employer is the entity required by statute to remit the ACR payment. ASRS rule states that the ACR amount is not deducted from the employee’s compensation and the Employer shall directly remit payment of an ACR to the ASRS from the Employer’s funds.
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