Contribution Prepayment Program

ASRS Contribution Prepayment Program (CPP)
for employers

Recognizing fluid and changing financial conditions and supporting employer requests, the Arizona State Retirement System (ASRS) has implemented an innovative process for employers to voluntarily prepay their future pension contribution obligations, while also maintaining significant future budget flexibility.

Under this new Contribution Prepayment Program (CPP) enabled by state statute, employers may submit a lump-sum payment to the ASRS that may be used to offset the employer portion of future ASRS pension contribution payments. Once employer CPP funds are received by the ASRS, they will be invested by the ASRS and earn the ASRS investment rate of return. Employers have the option of determining when to apply the CPP balance to offset future employer pension plan contributions.

Note that employee contributions are not impacted by this optional employer program, and that the smaller Health Benefit Supplement plan and the Long Term Disability plan are not part of this program.

The CPP has been developed to allow employers significant flexibility with respect to: the timing of moving any current or future funds to the ASRS; when the employer may apply the CPP balances; and the length of time over which the CPP balances may be applied against future pension contributions.

Prepayment Graphic

An example of how the program could work
An employer determines that it has an additional cash balance and decides to transfer that money to the ASRS Contribution Prepayment Program, and does so on June 30, 2023. The employer decides at a later date to use (amortize) those funds to offset future contributions over a 10-year period, beginning July 1, 2025.

As a result, the employer’s future contributions to the ASRS from July 1, 2025, to June 30, 2035, would be decreased by the pro-rated CPP balance. If the amortization schedule for the employer resulted in an offset of $2.6 million during the upcoming fiscal year, then $100,000 ($2.6 million divided by 26 payroll cycles) would be applied to each of the employer’s 26 pay periods, resulting in the required employer payroll cash transfer, less $100,000.

Please review the additional materials in the links below, and note the contact information should you need to reach out with additional questions.