A.R.S. tit. 38 ch. 5 — Arizona Revised Statutes Title 38 Chapter 5 — Social Security And Retirement

38-701. Definitions In this article, unless the context otherwise requires: 1. "Commissioner of social security" includes any individual to whom the commissioner of social security has delegated any of the commissioner's functions under the social security act with respect to coverage under the act of employees of states and their political subdivisions. 2. "Employee" means any person in the employ of this state or a political subdivision of this state and includes an elective or appointive officer of this state or an eligible political subdivision of this state. 3. "Employment" means any service performed by an employee in the employ of this state or a political subdivision of this state, for the employer, except service that in the absence of an agreement entered into under this article would constitute "employment" as defined in the social security act, or service that under the social security act may not be included in an agreement between this state and the commissioner of social security entered into under this article. 4. "Political subdivision" includes counties, incorporated cities or towns and school districts in this state, and any other political subdivision as defined in article XIII, section 7, Constitution of Arizona. 5. "Social security act" means the federal social security act (42 United States Code chapter 7), including regulations and requirements issued pursuant to that act. 6. "State agency" means the state agency that is designated by the governor to serve as the social security administrator for this state under the federal old age and survivors insurance system. 38-702. Federal-state agreement A. On behalf of this state the governor may enter into an agreement with the commissioner of social security, consistent with this article, for the purpose of extending the benefits of the federal old age and survivors insurance system to employees of this state or any political subdivision of this state with respect to services that are specified in the agreement and that constitute employment. B. The agreement may contain provisions relating to coverage, benefits, contributions, effective date, modification of the agreement, notification of dissolution of entities, administration and other appropriate provisions to which the state agency and commissioner of social security agree, except that the agreement shall provide in effect the following, unless otherwise required under the social security act: 1. Benefits shall be provided for employees whose services are covered by the agreement, and their dependents and survivors, on the same basis as though the services constituted employment within the meaning of title II of the social security act. 2. The agreement is effective with respect to services in employment covered by the agreement performed after a date specified in the agreement, but in no event may it be effective with respect to services performed before the first day of the calendar year in which the agreement is entered into or in which the modification of the agreement making it applicable to the services is entered into, but an agreement or modification of an agreement entered into within the period permitted for retroactive coverage of employees under the agreement by title II of the social security act may provide in the agreement or modification of the agreement that the agreement or modification of the agreement is effective with respect to services performed after January 1, 1951, or any date after that date. 3. All services that constitute employment and that are performed in the employ of this state by employees of this state are covered by the agreement. 4. All services that constitute employment performed in the employ of an eligible political subdivision of this state and that are covered by a plan that is in conformity with the terms of the agreement and that has been approved by the state agency under section 38-703 are covered by the agreement. 5. All services described in either paragraph 3 or 4 and performed by individuals in positions covered by a retirement system with respect to which the governor has issued a certificate to the commissioner of social security pursuant to section 38-706. 38-703. Plans for coverage of employees of eligible political subdivisions; payroll audits A. Each eligible political subdivision of this state may submit for approval by the state agency a plan for extending the benefits of title II of the social security act, in conformity with applicable provisions of the social security act, to employees of the eligible political subdivisions. The state agency shall approve each plan and any amendment of the plan if it finds that the plan or amendment of the plan is in conformity with requirements of the state agency, except that a plan shall not be approved unless: 1. It is in conformity with the requirements of the social security act and with the agreement entered into under section 38-702. 2. It provides that all services that constitute employment and that are performed in the employ of the eligible political subdivision by employees of the political subdivision are covered by the plan. 3. It provides for such methods of administration of the plan by the eligible political subdivisions that the state agency finds to be necessary for the proper and efficient administration of the plan. 4. It provides that the eligible political subdivision make reports, in the form and containing the information, the state agency from time to time requires, and comply with provisions the state agency or the commissioner of social security from time to time finds necessary to assure the correctness and verification of the reports. B. The state agency shall not finally refuse to approve a plan submitted by an eligible political subdivision under subsection A of this section without reasonable notice and the opportunity for a hearing to the political subdivision affected by the refusal. 38-704. Rule making powers of state agency The state agency shall adopt rules that are not inconsistent with this article and that it finds necessary or appropriate for the efficient administration of the functions with which it is charged under this article. 38-705. Studies and reports by state agency The state agency may: 1. Conduct studies concerning the problem of old age and survivors insurance protection for employees and concerning the operation of agreements made and plans approved under this article. 2. Submit a report to the legislature at the beginning of each regular session covering the administration and operation of this article during the preceding calendar year, including recommendations for amendments to this article it considers proper. 38-706. Referenda and certification A. On request of the board of trustees of a retirement system established by this state, the governor may authorize a referendum. On request of the governing body of any political subdivision that has established a retirement system, the governor shall authorize a referendum. B. The referendum shall be conducted and the governor shall designate an agency or individual to supervise its conduct, in accordance with the requirements of section 218(d)(3) of the social security act, on the question of whether service in positions covered by the retirement system should be excluded from or included under an agreement under this article. The notice of referendum required by section 218(d)(3)(C) of the social security act to be given to employees shall contain or shall be accompanied by a statement, in the form and detail deemed necessary and sufficient by the agency or individual designated to supervise the referendum, to inform the employees of the rights that will accrue to them and their dependents and survivors, and the liabilities to which they will be subject, if their services are included under an agreement under this article. C. On receipt of evidence satisfactory to the governor that with respect to any referendum the conditions specified in section 218(d)(3) of the social security act have been met, the governor shall so certify to the commissioner of social security. 38-711. Definitions In this article, unless the context otherwise requires: 1. "Active member" means a member as defined in paragraph 23, subdivision (b) of this section who satisfies the eligibility criteria prescribed in section 38-727 and who is currently making member contributions as prescribed in section 38-736. 2. "Actuarial equivalent" means equality in value of the aggregate amounts expected to be received under two different forms of payment, based on mortality and interest rate assumptions approved from time to time by the board. 3. "ASRS" means the Arizona state retirement system established by this article. 4. "Assets" means the resources of ASRS including all cash, investments or securities. 5. "Average monthly compensation" means: (a) For a member whose membership in ASRS commenced before January 1, 1984 and who left the member's contributions on deposit or reinstated forfeited credited service pursuant to section 38-742 for a period of employment that commenced before January 1, 1984, the higher of either: (i) The monthly average of compensation that is calculated pursuant to subdivision (b) of this paragraph. (ii) The monthly average of compensation on which contributions were remitted during a period of sixty consecutive months during which the member receives the highest compensation within the last one hundred twenty months of credited service. Any month for which no contributions are reported to ASRS or that falls within a period of nonpaid or partially paid leave of absence or sabbatical leave shall be excluded from the computation. The sixty consecutive months may entirely precede, may be both before and after or may be completely after any excluded months. If the member was employed for less than sixty consecutive months, the average monthly compensation is based on the total consecutive months worked. Payments for accumulated vacation or annual leave, sick leave, compensatory time or other forms of termination pay that, before August 12, 2005, constitute compensation for members whose membership in ASRS commenced before January 1, 1984, do not cease to be included as compensation if paid in the form of nonelective employer contributions under a 26 United States Code section 403(b) plan if all payments of employer and employee contributions are made at the time of termination. Contributions shall be made to ASRS on these amounts pursuant to sections 38-735, 38-736 and 38-737. (b) For a member whose membership in ASRS commenced on or after January 1, 1984 but before July 1, 2011, the monthly average of compensation on which contributions were remitted during a period of thirty-six consecutive months during which a member receives the highest compensation within the last one hundred twenty months of credited service. Any month for which no contributions are reported to ASRS or that falls within a period of nonpaid or partially paid leave of absence or sabbatical leave shall be excluded from the computation. The thirty-six consecutive months may entirely precede, may be both before and after or may be completely after any excluded months. If the member was employed for less than thirty-six consecutive months, the average monthly compensation shall be based on the total consecutive months worked. (c) For a member whose membership in ASRS commenced on or after July 1, 2011, the monthly average of compensation on which contributions were remitted during a period of sixty consecutive months during which a member receives the highest compensation within the last one hundred twenty months of credited service. Any month for which no contributions are reported to ASRS or that falls within a period of nonpaid or partially paid leave of absence or sabbatical leave shall be excluded from the computation. The sixty consecutive months may entirely precede, may be both before and after or may be completely after any excluded months. If the member was employed for less than sixty consecutive months, the average monthly compensation shall be based on the total consecutive months worked. 6. "Board" means the ASRS board established in section 38-713. 7. "Compensation" means: (a) For members whose membership began on or before December 31, 2019, the gross amount paid to a member by an employer as salary or wages, including amounts that are subject to deferred compensation or tax shelter agreements, for services rendered to or for an employer, or that would have been paid to the member except for the member's election or a legal requirement that all or part of the gross amount be used for other purposes, but does not include amounts paid in excess of compensation limits established in section 38-746. Compensation includes amounts paid as salary or wages to a member by a second employer if the member meets the requirements prescribed in paragraph 23, subdivision (b) of this section with that second employer. Compensation, as provided in paragraph 5, subdivision (b) or (c) of this section, does not include: (i) Lump sum payments, on termination of employment, for accumulated vacation or annual leave, sick leave, compensatory time or any other form of termination pay whether the payments are made in one payment or by installments over a period of time. (ii) Damages, costs, attorney fees, interest or other penalties paid pursuant to a court order or a compromise settlement or agreement to satisfy a grievance or claim even though the amount of the payment is based in whole or in part on previous salary or wage levels, except that, if the court order or compromise settlement or agreement directs salary or wages to be paid for a specific period of time, the payment is compensation for that specific period of time. If the amount directed to be paid is less than the actual salary or wages that would have been paid for the period if service had been performed, the contributions for the period shall be based on the amount of compensation that would have been paid if the service had been performed. (iii) Payment, at the member's option, in lieu of fringe benefits that are normally paid for or provided by the employer. (iv) Merit awards pursuant to section 38-613 and performance bonuses paid to assistant attorneys general pursuant to section 41-192. (v) Amounts that are paid as salary or wages to a member for which employer contributions have not been paid. (b) For a member whose membership began on or after January 1, 2020, only gross wages paid to a member by the employer for services rendered to the employer during the period considered as credited service, including amounts reported as wages and tips and other compensation on the member's federal form W-2 wage and tax statement, including pretax deductions, except for the following: (i) Payments made for accrued leave that is not being used to replace regular work hours, whether paid in a lump sum or in installments. (ii) Payments made on termination from employment, whether paid in a lump sum or in installments or as a bonus or an incentive for termination or retirement. (iii) Employer-paid contributions that are made to, and any distributions from, plans, programs or arrangements qualified under section 117, 125, 129, 401, 403, 408 or 457 of the internal revenue code. (iv) Payments for allowances. (v) Reimbursements for employee business expenses or employee personal expenses. (vi) Employer-paid contributions for coverage under, or distributions from, an accident, health or life insurance plan, program or arrangement. (vii) Payments made in lieu of any employer-paid insurance coverage. (viii) Workers' compensation, unemployment compensation payments and disability payments. (ix) Merit awards pursuant to section 38-613. (x) Payments paid pursuant to a court order or settlement agreement to satisfy a claim even though the amount of the payment is based on previous salary or wage levels, except if the court order or settlement agreement directs salary or wages to be paid for a specific period of time, the payment is compensation for that specific period of time. (xi) Payments made in the form of goods or services in lieu of gross wages. (xii) Any other payment that is not reported as wages and tips and other compensation on the member's federal W-2 wage and tax statement for actual services rendered. (xiii) Payments in excess of the section 401(a)(17) of the internal revenue code limits established in section 38-746. (xiv) Payments for any other employment benefit. (xv) Payments for which employer or employee contributions have not been paid. 8. "Contingent annuitant" means the person named by a member to receive retirement income payable following a member's death after retirement as provided in section 38-760. 9. "Credited service" means, subject to section 38-739, the number of years standing to the member's credit on the books of ASRS during which the member made the required contributions. 10. "Current annual compensation" means the greater of: (a) Annualized compensation of the typical pay period amount immediately before the date of a request to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-745. The typical pay period amount shall be determined by taking the five pay periods immediately before the date of a request, disregarding the highest and lowest compensation amount pay periods and averaging the three remaining pay periods. (b) Annualized compensation of the partial year, disregarding the first compensation amount pay period, if the member has less than twelve months total compensation on the date of a request to purchase credited service pursuant to section 38-743, 38-744 or 38-745. (c) The sum of the twelve months of compensation immediately before the date of a request to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-745. (d) The sum of the thirty-six months of compensation immediately before the date of a request to ASRS to purchase credited service pursuant to section 38-743, 38-744 or 38-745 divided by three. (e) If the member has retired one or more times from ASRS, the average monthly compensation that was used for calculating the member's last pension benefit times twelve. 11. "Early retirement" means retirement before a member's normal retirement date after five years of total credited service and attainment of age fifty. 12. "Effective date" means July 1, 1970, except with respect to employers and members whose contributions to ASRS commence thereafter, the effective date of their membership in ASRS is as specified in the applicable joinder agreement. 13. "Employer" means: (a) This state. (b) Participating political subdivisions. (c) Participating political subdivision entities. 14. "Employer contributions" means all amounts paid into ASRS by an employer on behalf of a member. 15. "Fiscal year" means the period from July 1 of any year to June 30 of the following year. 16. "Inactive member" means a member who previously made contributions to ASRS and who satisfies each of the following: (a) Has not retired. (b) Is not eligible for active membership in ASRS. (c) Is not currently making contributions to ASRS. (d) Has not withdrawn contributions from ASRS. 17. "Interest" means the assumed actuarial investment earnings rate approved by the board. 18. "Internal revenue code" means the United States internal revenue code of 1986, as amended. 19. "Investment manager" means the persons, companies, banks, insurance company investment funds, mutual fund companies, management or any combinations of those entities that are appointed by ASRS and that have responsibility and authority for investment of the monies of ASRS. 20. "Late retirement" means retirement after normal retirement. 21. "Leave of absence" means any unpaid leave authorized by the employer, including leaves authorized for sickness or disability or to pursue education or training. 22. "Life annuity" means equal monthly installments payable during the member's lifetime after retirement. 23. "Member": (a) Means any employee of an employer on the effective date. (b) Means all employees of an employer who are eligible for membership pursuant to section 38-727 and who are engaged to work at least twenty weeks in each fiscal year and at least twenty hours each week. (c) Means any person receiving a benefit under ASRS. (d) Means any person who is a former active member of ASRS and who has not withdrawn contributions from ASRS pursuant to section 38-740. (e) Does not include any employee of an employer who is otherwise eligible pursuant to this article and who begins service in a limited appointment for not more than eighteen months on or after July 1, 1979. If the employment exceeds eighteen months, the employee shall be covered by ASRS as of the beginning of the nineteenth month of employment. In order to be excluded under this subdivision, classifications of employees designated by employers as limited appointments must be approved by the director. (f) Does not include any leased employee. For the purposes of section 414(n) of the internal revenue code, "leased employee" means an individual who: (i) Is not otherwise an employee of an employer. (ii) Pursuant to a leasing agreement between the employer and another person, performs services for the employer on a substantially full-time basis for at least one year. (iii) Performs services under the primary direction or control of the employer. 24. "Member contributions" means all amounts paid to ASRS by a member. 25. "Normal costs" means the sum of the individual normal costs for all active members for each fiscal year. The normal cost for an individual active member is the cost that is assigned to the fiscal year, through June 29, 2016, using the projected unit credit method and, beginning June 30, 2016, using the actuarial cost method determined by the board pursuant to section 38-714. 26. "Normal retirement age" means the age at which a member reaches the member's normal retirement date. 27. "Normal retirement date" means the earliest of the following: (a) For a member whose membership commenced before July 1, 2011: (i) A member's sixty-fifth birthday. (ii) A member's sixty-second birthday and completion of at least ten years of credited service. (iii) The first day that the sum of a member's age and years of total credited service equals eighty. (b) For a member whose membership commenced on or after July 1, 2011: (i) A member's sixty-fifth birthday. (ii) A member's sixty-second birthday and completion of at least ten years of credited service. (iii) A member's sixtieth birthday and completion of at least twenty-five years of credited service. (iv) A member's fifty-fifth birthday and completion of at least thirty years of credited service. 28. "Political subdivision" means any political subdivision of this state and includes a political subdivision entity. 29. "Political subdivision entity" means an entity: (a) That is located in this state. (b) That is created in whole or in part by political subdivisions, including instrumentalities of political subdivisions. (c) Where a majority of the membership of the entity is composed of political subdivisions. (d) Whose primary purpose is the performance of a government-related service. 30. "Retired member" means a member who is receiving retirement benefits pursuant to this article. 31. "Service year" means fiscal year, except that: (a) If the normal work year required of a member is less than the full fiscal year but is for a period of at least nine months, the service year is the normal work year. (b) For a salaried member employed on a contract basis under one contract, or two or more consecutive contracts, for a total period of at least nine months, the service year is the total period of the contract or consecutive contracts. (c) In determining average monthly compensation pursuant to paragraph 5 of this section, the service year is considered to be twelve months of compensation. 32. "State" means this state, including any department, office, board, commission, agency, institution or other instrumentality of this state. 33. "Vested" means that a member is eligible to receive a future retirement benefit. 38-712. ASRS purpose; trust fund A. The primary intent of ASRS is to: 1. Provide an incentive in the recruitment and retention of employees of the highest possible quality. 2. Contribute toward providing a total compensation package that is generally equivalent to comparable employment in other public and private organizations in this state. 3. Provide a retirement system that encourages employees to remain in service for periods of time that will provide public employers with the full benefit of the training and experience gained by the employees. 4. Provide an orderly method of promoting and maintaining a high level of service to the public through an equitable separation procedure that is available to employees at retirement or on becoming a person with a disability. 5. Provide a base retirement benefit that is less than one hundred per cent of a member's post-retirement income requirements, recognizing that personal savings and social security also contribute toward total post-retirement income requirements. B. ASRS is a defined benefit plan as described in section 414(j) of the internal revenue code. As provided in section 38-771, some eligible members of ASRS are entitled to benefits under the defined contribution program administered by ASRS. With respect to the portion of ASRS that provides benefits to members entitled to benefits under the defined contribution program that are derived from employer contributions and that are based partly on the balance of the separate account of a member, ASRS is a plan described in section 414(k) of the internal revenue code and shall comply with all applicable provisions of section 414(k) of the internal revenue code. C. A public employee's retirement trust fund is established to afford an optimum degree of security to the members of ASRS. All monies and other assets of ASRS are a part of the trust fund. All accounts, depositories and funds of ASRS are included within the trust fund. D. Except as provided in section 38-738, an employer does not have a beneficial interest in any asset of the trust fund, and no part of the trust fund may ever revert to or be paid, directly or indirectly, to an employer. All liabilities with respect to members and their beneficiaries shall be satisfied before any part of the corpus or income of the trust fund is used for or diverted to purposes other than for the exclusive benefit of members or their beneficiaries. 38-713. ASRS board; qualifications; term; compensation A. The ASRS board is established consisting of the following nine members appointed by the governor pursuant to section 38-211: 1. Five members from among the members of ASRS to represent the members of ASRS as follows: (a) An educator. (b) An employee of a political subdivision. (c) A retired member. (d) An employee of this state. (e) An at large member who may represent any ASRS member group. 2. Four members who are not members of ASRS to represent the public. B. Four of the members shall have at least ten years' substantial experience as any one or a combination of the following: 1. A portfolio manager acting in a fiduciary capacity. 2. A securities analyst. 3. An employee or principal of a trust institution, investment organization or endowment fund acting either in a management or an investment related capacity. 4. A chartered financial analyst in good standing as determined by the CFA institute. 5. A professor at the university level teaching economics or investment related subjects. 6. An economist. 7. Any other professional engaged in the field of public or private finances. C. Each member who represents an ASRS member group shall have not less than five years of administrative management experience. D. The following persons are not eligible for membership on the board: 1. A person who is a stockbroker or bond broker and who is actively engaged in the profession of a stockbroker or bond broker. 2. A person who holds a real estate license pursuant to title 32, chapter 20. E. A member may be reappointed. Vacancies occurring other than by expiration of a term shall be filled for the balance of the term in the same manner as for initial appointment. On the expiration of any term, the governor shall appoint a successor for a full term of three years that expires on the third Monday in January of the appropriate year. F. Board members are eligible to receive compensation for performing their duties in an amount of fifty dollars a day, but not more than one thousand dollars in any one fiscal year, and are eligible for reimbursement of expenses pursuant to chapter 4, article 2 of this title. 38-714. Powers and duties of ASRS and board A. ASRS shall have the powers and privileges of a corporation, shall have an official seal and shall transact all business in the name "Arizona state retirement system", and in that name may sue and be sued. B. The board is responsible for supervising the administration of this article by the director of ASRS. C. The board is responsible for the performance of fiduciary duties and other responsibilities required to preserve and protect the retirement trust fund established by section 38-712. D. The board shall not advocate for or against legislation providing for benefit modifications, except that the board shall provide technical and administrative information regarding the impact of benefit modification legislation. E. The board may: 1. Determine the rights, benefits or obligations of any person under this article and any member under articles 2.1 and 7 of this chapter and afford any person dissatisfied with a determination a hearing on the determination. The board may delegate the duty and authority to act on the board's behalf to a committee of the board for the purposes of this paragraph and title 41, chapter 6, article 10 relating to any decision made under this paragraph by that committee of the board. 2. Determine the amount, manner and time of payment of any benefits under this article. 3. Recommend amendments to this article and articles 2.1 and 7 of this chapter that are required for efficient and effective administration. 4. Adopt, amend or repeal rules for the administration of the plan, this article and articles 2.1 and 7 of this chapter. F. Beginning June 30, 2016, the board shall determine which of the generally accepted actuarial cost methods shall be used in the annual actuarial valuation of the plan. G. The board and ASRS are not subject to title 41, chapter 6, except title 41, chapter 6, article 10, for actuarial assumptions and calculations, investment strategy and decisions and accounting methodology. H. The board shall submit to the governor and legislature for each fiscal year not later than eight months after the close of the fiscal year a report of its operations and the operations of ASRS. The report shall follow generally accepted accounting principles and generally accepted financial reporting standards and shall include: 1. A report on an actuarial valuation of ASRS assets and liabilities. 2. Any other statistical and financial data that may be necessary for the proper understanding of the financial condition of ASRS and the results of board operations. 3. On request of the governor or the legislature, a list of investments owned. This list shall be provided in an electronic format. 4. An estimate of the aggregate fees paid for private equity investments, including management fees and performance fees. I. The board shall: 1. Prepare and publish a synopsis of the annual report for the information of ASRS members. 2. Contract for a study of the mortality, disability, service and other experiences of the members and employers participating in ASRS. The study shall be conducted for fiscal year 1990-1991 and for at least every fifth fiscal year thereafter. A report of the study shall be completed within eight months after the close of the applicable fiscal year and shall be submitted to the governor and the legislature. 3. Conduct an annual actuarial valuation of ASRS assets and liabilities. J. The auditor general may make an annual audit of ASRS and transmit the results to the governor and the legislature. K. In determining the past service funding period, the board shall seek to improve the funded status whenever the trust fund established by section 38-712 is less than one hundred percent funded. 38-715. Director; powers and duties A. The board shall appoint a director. The director shall serve at the pleasure of the board. B. The director shall appoint a deputy director and assistant directors with the approval of the board. C. The director, under the supervision of the board, shall: 1. Administer this article. 2. Be responsible for the recruitment, hiring and day-to-day management of employees. 3. Prescribe procedures to be followed by members and their beneficiaries in filing applications for benefits. 4. Prescribe procedures to be followed by employers for remitting data and monies to ASRS and for receiving data and monies from ASRS. 5. Be responsible for: (a) Income and the collection of income and the accuracy of all expenditures. (b) Maintaining books and maintaining and processing records of ASRS. (c) Providing continuing education programs for the board to keep the board members informed of current issues and information needed to carry out their duties. 6. Perform additional powers and duties as may be prescribed by the board and delegated to the director. D. The director, under the supervision and approval of the board, may: 1. Delegate duties and responsibilities to such state departments as the director deems feasible and desirable to administer this article. 2. Appoint a custodian for the safekeeping of all investments owned by ASRS and register stocks, bonds and other investments in the name of a nominee. 3. Establish one or more reserve holding accounts, into which the board shall close periodically the account balances of inactive accounts. If any person files a claim and furnishes proof of ownership of any amounts in any inactive account, the claim shall be paid from the reserve holding account on the same basis as if no action had been taken under this paragraph. Interest and supplemental credits shall be allocated to each reserve holding account on June 30 of each year, as determined by the board. For the purposes of this paragraph, "inactive account" means an account to which contributions have not been paid for six months or more. 4. Make retirement under this article effective retroactively to on or after the day following the date employment is terminated if the member was unable to apply before the retroactive effective date through no fault of the member. E. For current or prospective employees of ASRS, the director, under the supervision of the board, may: 1. Conduct criminal records checks. The director may require a current or prospective employee to submit a full set of fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. 2. Conduct credit checks for accounting, investment and other finance-related positions. The director shall establish a policy for conducting credit checks on a current employee that includes the method for determining when a credit check may be conducted, retaining records relating to the reason for the credit check and notifying an employee of the credit check and the result of the credit check. F. The director and all persons employed by the director are subject to section 38-611 and title 41, chapter 4, article 4. G. In consultation with the director of the department of administration, the board may enter into employment agreements and establish the terms of those agreements with persons holding any of the following ASRS positions: 1. Director. 2. Deputy director. 3. Chief investment officer. 4. Fiduciary or investment counsel. 38-716. Employers' responsibilities under the system In addition to any other requirements of this article or article 2.1, 7 or 8 of this chapter, an employer of a member shall: 1. Cooperate and collaborate with ASRS and follow all ASRS procedures to ensure the proper enrollment of members in the system. 2. Submit any reports, data, paperwork or materials that are requested by ASRS and that are necessary to make eligibility determinations and for the proper administration of the plan. 3. Attend the ASRS annual training conference. 38-717. Liability insurance and immunity for the board A. The department of administration shall provide coverage pursuant to title 41, chapter 3.1, article 1 against all liability for acts or omissions of any nature by members of the board while acting in an authorized governmental or proprietary capacity and within the course and scope of their employment or authority. B. Notwithstanding any other law, a member of the board is immune from civil liability and is not subject to suit directly or by way of contribution for any act or omission resulting in any damage or injury if the member was acting in good faith and within the scope of the member's official capacity, unless the damage or injury was caused by wilful and wanton or grossly negligent conduct of the member. For the purposes of this subsection, "official capacity" means any decision or act taken by a member of the board to further the purpose for which the board is established. 38-718. Investment managers; general powers and duties; investment of monies; limitations A. A financial institution serving as an investment manager does not have a conflict of interest because it is also a depository in which ASRS monies are deposited. B. The board shall appoint and may remove multiple investment managers to invest and reinvest the assets of ASRS. The board may authorize the director to retain and manage staff to make investments as an investment manager. C. An investment manager shall be qualified to make the type of investments for which the investment manager is appointed. D. The board shall: 1. Prescribe investment goals and policies that are consistent with the purposes of this article and the limitations and standard of care prescribed in this section. 2. Allocate assets and use investment strategies to meet the investment goals and policies ASRS prescribes. 3. Adopt specific directives for the guidance of investment managers. 4. Review the performance of each investment manager at least annually or at the request of a board member. 5. Prescribe investment diversification programs and assign investment manager responsibilities regarding those programs as it deems appropriate to achieve its investment goals, objectives and policies. E. An investment manager shall discharge the duties of the position with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with the same matters would use in the conduct of an enterprise of a like character and with like aims as that of ASRS. F. An investment manager may invest and reinvest in the name of ASRS all ASRS monies assigned to the investment manager and shall purchase and sell in the name of ASRS any of the securities and investments held by ASRS under this article. An investment manager may hold, purchase, sell, assign, loan, borrow, transfer and dispose of any of the securities and investments in which any of its account monies are invested, subject to the specific directives determined by ASRS. An investment manager shall redeposit the proceeds of sales, maturities and calls in the ASRS depository. G. The director may enter into security loan agreements with one or more security lending entities. H. No more than eighty per cent of ASRS assets may be invested at any given time in equities, measured at market value. I. No more than forty per cent of ASRS assets may be invested in non-United States public investments, measured at market value. J. No more than sixty per cent of ASRS assets may be invested internally, measured at market value. K. No more than five per cent of ASRS assets may be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of or fully guaranteed by the United States government or mortgage backed securities and agency debentures issued by federal agencies, measured at market value. L. No more than ten per cent of ASRS assets may be invested in bonds or other evidences of indebtedness of those multinational development banks in which the United States is a member nation, including the international bank for reconstruction and development, the African development bank, the Asian development bank and the inter-American development bank, measured at market value. M. If a limitation in subsection H, I, J, K or L of this section is reached, ASRS is not required to sell assets, but shall not make any further investments of that type until the limit is no longer exceeded. N. Notwithstanding any other law, an investment manager is not required to invest in any type of investment that is intended to fund economic development projects, public works or social programs but may consider such economically targeted investments pursuant to its fiduciary responsibility. O. For the purpose of exercising the investment responsibilities prescribed in this section, the board may enter into contracts to receive market data and other market information from securities, commodities, options and monetary exchanges. These contracts may be interpreted and enforced under the laws of a jurisdiction other than this state and are not subject to section 35-214 or 38-511 or title 41, chapter 23. P. Proprietary commercial information that is provided to the board, director, investment manager, employees of the director and attorneys of the board or the director relating to investments in which an investment manager has invested or has considered for investment is confidential and not a public record if the information is information that customarily would not be released to the public by the person or entity from whom the information was obtained. 38-719. Interest paid to members and employers ASRS may not pay interest on any amount paid to a member, an alternate payee or an employer pursuant to this article unless specifically authorized by this article. 38-720. ASRS depository A. Exclusively for the purposes of this article, the board shall establish an ASRS depository that is separate and apart from all other public monies or funds of this state. The ASRS depository shall be a bank in which ASRS monies are deposited and collateralized as provided by law. The ASRS depository consists of subsidiary accounts for administration, retirement and investment. ASRS shall place all monies that come into its custody from any source in the ASRS depository. B. Any monies not currently needed in the administration account or the retirement account may be invested to provide the maximum income. 38-721. Administration account A. ASRS shall maintain an administration account consisting of all monies for administrative purposes. The following monies shall be deposited in the administration account: 1. All monies appropriated by the legislature to pay administrative expenses of ASRS. 2. All monies received for proportionate shares of administrative expenses from departments that pay the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund. 3. All monies received for proportionate shares of administrative expenses from political subdivisions paying employer contributions. 4. Monies that the director transfers from the investment account and that are necessary for the payment of expenditures made pursuant to subsections C and D of this section. B. Except as provided in subsection C of this section, expenditures from the administration account shall be made in accordance with board directives, subject to legislative appropriation. C. Expenditures for the following are continuously appropriated and shall be paid from the administration account in the amount deemed necessary by the board: 1. Investment management fees and related consulting fees necessary to meet the board's investment objectives. 2. Rent. 3. Actuarial consulting fees. 4. Retiree payroll. D. With the approval of the board, the director: 1. May expend monies from the administration account for staff, expenses and related consulting fees necessary to implement section 38-714, subsection E, paragraph 1 and subsection I, paragraphs 2 and 3, section 38-718, subsection D, paragraph 5 and sections 38-755 and 38-756. 2. Shall pay from the administration account the costs for administering the health insurance program for retired members pursuant to section 38-782, the cost of continuing education programs for the board and the cost of legal counsel. 38-722. Abandoned monies; disposition A. Except as otherwise provided in this section, the trust fund established by section 38-712 is exempt from title 44, chapter 3. B. Monies in the ASRS trust fund and the LTD trust fund established by section 38-797.02 are presumed abandoned if the apparent owner, as defined in section 44-301, has not communicated in writing with ASRS and has not otherwise indicated an interest in the monies for the three year period following the required beginning date of distributions pursuant to section 38-775. C. At the time monies are presumed abandoned pursuant to subsection B of this section, any other property right accrued or accruing to the owner as a result of the interest in those monies, and not previously presumed abandoned, is also presumed abandoned. D. Interest ceases to accrue on the monies on the date the monies are presumed abandoned. E. Before monies are presumed abandoned, ASRS shall attempt to contact the apparent owner in writing. If the apparent owner is a member, beginning five years before the apparent owner's required beginning date of distributions pursuant to section 38-775 and for three years after that date, ASRS shall annually send a notice to the apparent owner notifying the apparent owner of the owner's eligibility for a retirement benefit. If the apparent owner is a beneficiary, beginning in the calendar year containing the fifth anniversary of the member’s death and for three years, ASRS shall annually send a notice to the apparent owner notifying the apparent owner of the owner’s eligibility for a survivor benefit. If this notice is returned by the postal authority as undeliverable, ASRS shall make a good faith attempt to locate the apparent owner, including contacting any known beneficiary on record with ASRS, searching public databases to identify the address of the apparent owner or using the services of a third-party address verification service. If the good faith attempt to locate the apparent owner fails and the base amount of the unclaimed monies is three hundred dollars or more, ASRS may use the services of a people search service. A fee imposed by the people search service shall not be deducted from the member's benefit and these expenditures are continuously appropriated and shall be paid from the administration account established pursuant to section 38-721 in the amount deemed necessary by the board. F. If at any time an owner, as defined in section 44-301, establishes an entitlement in the monies, ASRS shall withdraw the monies from either the ASRS trust fund or the LTD trust fund, whichever is applicable, and pay the owner the monies or benefit to which the owner is entitled pursuant to this article or article 2.1 of this chapter, including interest at a rate determined by ASRS, if applicable. 38-723. Recovery of collection costs; levy and distraint; definitions A. A debtor who fails to pay any monies owed to ASRS is liable for all costs and expenses incurred by ASRS to collect the monies owed. ASRS may collect these expenses and costs at the time of collecting the monies owed to ASRS. B. If a debtor neglects or refuses to pay a debt owed to ASRS after ASRS has made at least two separate attempts to collect the debt and not fewer than thirty days after ASRS determines a debt is owed, ASRS may collect the debt and such other sums as are sufficient to cover the expenses of the levy, by levy on: 1. Cash and cash equivalent property at financial institutions. 2. The accrued salary or wages of the debtor, by serving notice of levy on the chief disbursing officer of the debtor's employer. C. The financial institution or the chief disbursing officer of the debtor's employer shall notify the debtor of the levy within five business days of the levy. The debtor may appeal the levy to ASRS. D. The effect of a levy on salary or wages payable to or received by a debtor is continuous from the date the levy is first made until the liability out of which the levy arose is satisfied or becomes unenforceable. ASRS shall promptly release the levy when the liability out of which the levy arose is satisfied or becomes unenforceable and shall promptly notify the debtor on whom the levy was made that the levy has been released. E. If a levy has been made or is about to be made, any person having custody or control of any books or records containing evidence or statements relating to the property subject to levy, on request from ASRS, shall exhibit the books or records to ASRS. F. Except as otherwise provided in subsection D of this section, a levy extends only to property possessed and obligations existing at the time of the levy or within thirty days after the date of the levy. In any case in which ASRS may levy on property, ASRS may seize the cash property and may seize and convert cash equivalent property to cash. G. For the purposes of this section: 1. "Financial institutions" means state and federally chartered banks, trust companies, federal and state savings and loan associations, federal and state credit unions, consumer lenders, international banking facilities and financial institution holding companies, insurance companies, benefit associations, safe deposit companies, money market mutual funds and similar institutions authorized to do business in this state and any party affiliated with these financial institutions. 2. "Levy" includes the power of distraint and seizure by any means. 38-724. Surrender of property subject to levy; authority to release levy and return property; definitions A. Any person in possession of, or obligated with respect to, property subject to levy on which a levy has been made, on request of ASRS, shall surrender the property or discharge the obligation to ASRS, except the part of the property that is, at the time of the request, subject to an attachment or execution under any judicial process. B. A person who fails or refuses to surrender any property subject to levy, on request by ASRS, is liable in person and estate to this state in a sum equal to the value of the property not so surrendered, but not exceeding the amount of debt for the collection of which the levy has been made, with costs and interest on the sum at the interest rate determined by the board from the date of the levy or, in the case of a levy described in section 38-723, subsection E, from the date the person would otherwise have been obligated to pay the amounts to the debtor. Any amount, other than costs, recovered under this subsection shall be credited against the debt for the collection of which the levy was made. C. A person in possession of or obligated with respect to property subject to levy on which a levy has been made who, on request by ASRS, surrenders the property or discharges the obligation to ASRS is discharged from any obligation or liability to the debtor with respect to the property arising from the surrender or payment. D. ASRS may release a levy on all or part of property levied on. The release shall not operate to prevent any subsequent levy. E. If ASRS determines that property has been wrongfully levied on, ASRS shall return the specific property levied on or an amount of money equal to the value of the property levied on. F. For the purposes of this section: 1. "Levy" includes the power of distraint and seizure by any means. 2. "Person" includes an officer or employee of a corporation, an officer, employee or elected official of this state or its political subdivisions, or any agency or instrumentality of this state or its political subdivisions, or a member or employee of a partnership, who as such officer, employee, elected official or member is under a duty to surrender the property or rights to property or to discharge the obligation. 38-725. Financial institutions data match; prohibited disclosure; fee; definition A. ASRS may enter into agreements with financial institutions that conduct business in this state to develop and operate a data match system to assist ASRS in the collection of monies owed. The data match system shall use automated data exchange procedures to the maximum extent possible. B. The data exchanges shall include the name, address of record, social security number and any other identifying information for each person who maintains an account at the institution and who owes money as identified by ASRS by name and social security number. C. ASRS or its agent may disclose a debtor's financial record under this section only in order to enforce the collection of the money the debtor owes to ASRS. D. ASRS may pay a reasonable fee to a financial institution for conducting a data match. The fee shall not exceed the actual costs incurred by the financial institution. E. For the purposes of this section "financial institutions" means state and federally chartered banks, trust companies, federal and state savings and loan associations, federal and state credit unions, consumer lenders, international banking facilities and financial institution holding companies, insurance companies, benefit associations, safe deposit companies, money market mutual funds and similar institutions authorized to do business in this state and any party affiliated with these financial institutions. 38-727. Eligibility; options A. The following provisions apply to all employees hired on or after the effective date: 1. All employees and officers of this state and all officers and employees of political subdivisions establishing a retirement plan administered by the board pursuant to this article are subject to this article, except that membership is not mandatory: (a) On the part of any employee who is eligible and who elects to participate in the optional retirement programs established by the Arizona board of regents pursuant to the authority conferred by section 15-1628 or by a community college district board pursuant to authority conferred by section 15-1451. (b) For a state elected official who is subject to term limits, who is elected or appointed before January 1, 2014, who is eligible for participation in ASRS because the state elected official elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A and who elects not to participate in ASRS as provided in paragraph 7 of this subsection. (c) On the part of any employee or officer who is eligible to participate and who participates in the elected officials' retirement plan pursuant to article 3 of this chapter, the elected officials' defined contribution retirement system pursuant to article 3.1 of this chapter, the public safety personnel retirement system pursuant to article 4 of this chapter or the corrections officer retirement plan pursuant to article 6 of this chapter. 2. All employees and officers of political subdivisions whose compensation is provided wholly or in part from state monies and who are declared to be state employees and officers by the legislature for retirement purposes are subject, on legislative enactment, to this article and are members of ASRS. 3. Any member whose service terminates other than by death or withdrawal from membership is deemed to be a member of ASRS until the member's death benefit is paid. 4. Employees and officers shall not become members of ASRS and, if they are members immediately before becoming employed as provided by this section, shall have their membership status suspended while they are employed by state departments paying the salaries of their officers and employees wholly or in part from monies received from sources other than appropriations from the state general fund for the period or periods payment of the employer contributions is not made by or on behalf of the departments. 5. Notwithstanding other provisions of this section, a temporary employee of the legislature whose projected term of employment is for not more than six months is ineligible for membership in ASRS. If the employment continues beyond six successive months, the employee may elect to either: (a) Receive credit for service for the first six months of employment and establish membership in ASRS as of the beginning of the current term of employment if, within forty-five days after the first six months of employment, both the employer and the employee contribute to ASRS the amount that would have been required to be contributed to ASRS during the first six months of employment as if the employee had been a member of ASRS during those six months. (b) Establish membership in ASRS as of the day following the completion of six months of employment. 6. A person who is employed in postgraduate training in an approved medical residency training program of an employer or a postdoctoral scholar who is employed by a university under the jurisdiction of the Arizona board of regents is ineligible for membership in ASRS. 7. A state elected official who is subject to term limits, who is elected or appointed before January 1, 2014 and who is eligible for participation in ASRS because the state elected official elected not to participate in the elected officials' retirement plan as provided in section 38-804, subsection A may elect not to participate in ASRS. The election not to participate is specific for that term of office. The state elected official who is subject to term limits shall make the election in writing and file the election with ASRS within thirty days after the elected official's retirement plan mails the notice to the state elected official of the state elected official's eligibility to participate in ASRS. The election is effective on the first day of the state elected official's eligibility. If a state elected official who is subject to term limits fails to make an election as provided in this paragraph, the state elected official is deemed to have elected to participate in ASRS. The election not to participate in ASRS is irrevocable and constitutes a waiver of all benefits provided by ASRS for the state elected official's entire term, except for any benefits accrued by the state elected official in ASRS for periods of participation before being elected to an office subject to term limits or any benefits expressly provided by law. 8. A person may elect not to participate in ASRS if the person becomes eligible to participate