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Bill would limit subcontracting by state public pension recipients

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PHOENIX – State law forbids those in Arizona’s public pension systems from returning to jobs covered by those systems for at least a year after retiring. But it doesn’t prevent them from coming back as subcontractors.

Saying that violates the spirit of the law, a state lawmaker wants to expand the 12-month ban that now applies to the Arizona State Retirement System and pension systems for elected officials, police officers and firefighters and for corrections officers.

“It shows intention of truly retiring, and that’s what you want,” Allen said,” Rep. John Allen, R-Scottsdale, said of retirees returning as subcontractors.

He authored HB 2552, which covers the Arizona State Retirement System, Public Safety Personnel Retirement System, Corrections Officer Retirement Plan and Elected Officials’ Retirement Plan.

It would apply to a retired employee who is receiving benefits and wishes to work as a subcontractor for a public employer that is part of his or pension system.

The bill received a hearing Tuesday, Feb. 11, from the House Insurance and Retirement Committee, which held it without a vote.

Pensions for employees covered by the Arizona State Retirement System, by far the largest of Arizona’s public pension funds, are determined by a formula that includes years of service and salary. However, the years of service that can apply toward that calculation is capped at 30.

In addition to contributions by agencies, state employees contribute a portion of their pay to the retirement system.

Kevin DeMenna, a lobbyist for Smart Schools Plus Arizona, argued that the bill is unfair to employees who have reached 30 years of service and are entitled retirement benefits. Those employees have no financial benefit to continuing to work and to contribute to the state retirement system.

“When you satisfy that contract, you are entitled to that annuity,” DeMenna said. “Anything, any attempt to derail that entitlement, I think is widely understood as patently unconstitutional.”

David Livingston, R-Peoria, said if pensions continued to grow after 30 years employees may not retire and choose to return to work as subcontractors.

“If somebody has over 30 years experience we should probably continue to give them an incentive to stay on the job,” he said.

“We need to keep the most qualified, trained, employees working if they want to,” he added.

Rep. Bob Robson, R-Chandler, questioned the bill’s restrictions on allowing qualified employees to return to work, especially in the case of teachers who are in high demand in Arizona.

“I’m totally confused as to what the country’s all about at this point then,” he said. “If I have a marketable skill and you’re precluding me from using that skill for a year, even if I retire, retirement is just a time and purpose.”

Mike Colletto, director of legislative affairs for the Professional Firefighters of Arizona, said the bill would prevent firefighters who retire from a position with a large fire district from joining a department in a smaller fire district that could benefit from an experienced firefighter’s employment.

These department openings can be time-sensitive, he said, making the one-year requirement an obstacle.

“That just doesn’t work for us,” he said.

Allen said his bill would restore the original intent of the law by closing the loophole created by state employees returning to work as subcontractors.

“I’m not changing the law.” he said, “I’m just making it easier to enforce.”