Arizona Public Safety Personnel Retirement System Solvency Analysis
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Policy Study

Arizona Public Safety Personnel Retirement System Solvency Analysis

Recent reforms to the public safety personnel public pension system are showing significant savings and increased retirement security for employees.

Arizona Public Safety Personnel Retirement Systems (PSPRS) Pension Solvency Analysis

Four years after the Arizona Public Safety Retirement System (PSPRS) adopted major stakeholder-driven reforms to stem a precipitous increase in unfunded pension liabilities resulting from faulty plan design, the system now appears to be on a sustainable financial trajectory, according to a new stress test analysis prepared by the Pension Integrity Project at Reason Foundation.

The historic reform—for which the Pension Integrity Project played a major technical assistance and stakeholder engagement role—brought together the legislature, police and fire associations, taxpayer organizations and others to address the serious problems facing the public pension system.

Our newest analysis of Arizona PSPRS, updated this month (October 2020), shows that the 2016 reforms have already achieved many of the goals set by stakeholders, including providing increased retirement security for members and retirees, reducing long-term costs for employers, taxpayers, and employees, and providing new retirement design choices to allow new public safety personnel to better match an evolving set of worker preferences.

While actual results will depend on market outcomes, the most likely expected scenario is that the reforms will save PSPRS employers approximately $141 million over the studied 30-year window. This is welcome news for the state and the many local governments who have struggled to manage the rapidly growing costs of the pension system in the last 15 years. Additionally, while the benefits of a low-risk tier for new members will ultimately take decades to fully realize, this change will reduce risk incrementally with every new hire going into the future.

The system still faces challenges as it works to remain on a path back from its current 50 percent funding ratio. Not only does the latest solvency analysis examine the factors still driving the growth of PSPSRS’ unfunded liabilities and assesses the positive impacts of reforms to the system, but it also presents a stress test analysis to measure the impacts that future market scenarios could have on unfunded liabilities and required employer contributions. The analysis also provides a number of policy suggestions that, if implemented, would add to the already positive reforms that Arizona stakeholders have implemented.

New, updated analyses will be added to this page periodically to track PSPRS’s performance and solvency as new data and information become available. The analyses will continue to examine the primary factors driving historical changes in unfunded liabilities and offer stress testing designed to highlight potentially latent financial risks the plan is facing.

Arizona Public Safety Personnel Retirement Systems (PSPRS) Pension Solvency Analysis

The Pension Integrity Project at Reason Foundation offers pro-bono consulting to public officials and other stakeholders to help design and implement policy solutions aimed at improving public pension plan resiliency and promoting retirement security for all public employees. We stand ready to help motivated policymakers and stakeholders understand the issues, and we maintain up-to-date actuarial models for both the Arizona State Retirement System and the Arizona Public Safety Personnel Retirement System, which allows us to test the potential actuarial and fiscal impacts of a wide variety of potential policy changes

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Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.

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