History of the PBI
Arizona Revised Statute § 38-767 outlines the provisions for providing what is termed a Permanent Benefit Increase (PBI) to retired members.
Funds to pay for the PBI come from excess earnings on the actuarial value of the overall ASRS fund. When excess earnings are identified, a formula that includes years of service is used to determine the individual retired member’s PBI , which, if available, is applied at the beginning of the fiscal year, July 1. Once granted, the PBI cannot be taken away; pension checks cannot be reduced, even in years when there are no excess earnings or negative earnings.
The purpose of the PBI is to help retired members keep pace with increasing living expenses, but the PBI is not tied to any cost of living index and is not guaranteed to be paid every year. The PBI should not be seen as a “raise,” as the pension check is an annuity, not a paycheck.
Frequently Asked Questions
Who is qualified to receive a Permanent Benefit Increase?
Members who joined the ASRS prior to September 13, 2013 are eligible for the Permanent Benefit Increase. Members with a membership date on or after Sept. 13, 2013 are not eligible for the PBI.
How does the ASRS arrive at the amount available to fund the PBI?
The pool of money for the PBI is generated from excess returns on the actuarial value of the overall fund; it is not the same as the market rate of return. To determine if there are excess earnings, the fund must have earned more than the actuarial assumed rate of return of 8 percent; however, investment gains and losses to the fund are “smoothed” over a rolling 10-year rolling; that is, the gains and losses are not applied all in the same year, but instead recognized over a 10-year period. The reason gains and losses are “smoothed” over a 10-year rolling period is to minimize excessive increases or decreases in the contribution rate.
What is the amount a retiree may receive for a PBI?
The PBI is calculated per member, based on years of service. For example, the last PBI came in 2005 and was approximately $25 per year of credited service. A retiree with 20 years of service at retirement would receive a PBI of $500, paid in a $41.66 addition to their monthly benefit..
Why were no funds available for a PBI even though the ASRS fund has experienced strong returns in certain years?
Keep in mind that although the fund may earn more than 8 percent in a particular fiscal year, earnings below the 8 percent mark during the rolling 10-year period make it difficult to accumulate sufficient excess earnings to meet statutory requirements for PBI distributions.
When will another PBI be available?
As years in which losses are applied pass the 10-year mark, the outlook for future PBIs improves and gains of more than 8 percent are added the outlook for a PBI improves. Depending upon rates of return in future years, it could be several more years before the PBI pool is built back up to the point where a future PBI will be available. Once excess returns are identified and made available for a PBI, it will likely begin at a much smaller rate than some retirees have experienced in the past.
Current Status of the PBI
Fiscal Year 2023-24
Based upon the plan's actuarial valuation for fiscal year ending June 30, 2022, there are insufficient funds to provide for a Permanent Benefit Increase for the new fiscal year, which begins July 1, 2024.
Fiscal Year 2022-23
The Arizona State Retirement System Board of Trustees announced Friday, November 12, 2021 that qualified retirees will receive a Permanent Benefit Increase (PBI) to their monthly annuities, beginning with their July 2022 benefit check.
This PBI is made possible from an accumulation of excess returns over the past several years, including the most recent total fund return of 25.1 percent for the fiscal year ending June 30, 2021.
To qualify for this PBI, retirees must have an original ASRS membership date of Sept. 12, 2013 or earlier, and have retired by July 31, 2021.
The increase will be set at $11.49 for each year of service a retiree accumulated at retirement.
Here’s an example of the formula to be used for a qualified retiree with 20 years of service at the time of retirement:
$11.49 X 20 years of service = $229.80 annual PBI, divided by 12 months = $19.15 increase to monthly benefit payment
The PBI will be added beginning with benefit checks of July 1, 2022.
PBI Eligibility & Fact Sheet
