ASRS Membership Eligibility
The Arizona State Retirement System (ASRS), with the support of select state legislators, multiple police and fire associations, the League of Cities and Towns (League), and several
ASRS employer-partners, sought a review by the Internal Revenue Service (IRS) as to the eligibility of certain police and fire employees who were potentially misenrolled in the ASRS.
In May, 2015, the IRS ruled that these certain police and fire employees of ASRS employer-partners could retain their ASRS membership provided the state legislature enacted a corrective
measure by August 31, 2016. This corrective measure is addressed in HB 2104; ASRS; Retention of Credited Service that was signed by the governor on May 18, 2016. As an emergency measure,
the law became effective on that date.
HB 2104 allows that "an employee with an ASRS employer in a position that was exempt from ASRS membership because the position was not included in agreements providing for the employee's
coverage under the federal old-age and survivors insurance system but on whose behalf the employer has remitted ASRS contributions shall retain credited service for the period of employment
for which the employer remitted ASRS contributions on the employee's behalf."
To address the ASRS membership requirement for Social Security participation (i.e., the federal old-age and survivors insurance system mentioned above), the ASRS sought to remove this
requirement during the 2014 legislative session. This action allowed certain police and fire personnel to continue to participate in the ASRS from the date of that legislation's enactment,
July 24, 2014. What remained at issue was the employment period that was prior to that date and for which the IRS needed to render an opinion.
To resolve this issue, the ASRS formally requested the IRS, through its Voluntary Compliance Program, to allow certain potentially misenrolled employees to retain their ASRS membership
earned prior to July 24, 2014, notwithstanding the Social Security participation requirement. On May 22, 2015, the IRS granted the ASRS request.
As a result, and upon signature by the governor, certain police and fire employees who were potentially misenrolled in the ASRS will be deemed to have been legitimately enrolled in the
ASRS and the credited service earned by such employees will be retained. ASRS employer-partners need take no action with respect to HB 2104 as the employer's and employee's remittance
of ASRS contributions are deemed to be eligible contributions for the continuous employment period prior to July 24, 2014.
This information letter is being provided to the League, ASRS employer-partners having affected police and fire employees, and the multiple police and fire associations which were
involved in the many discussions and planning sessions to reach consensus on an acceptable, and now successful, course of action to address this issue.
League of Arizona Cities and Towns
1820 W. Washington St.
Phoenix, AZ 85007