1. Arizona State Retirement System May 11, 2011 2011 Legislative Update

2. Arizona State Retirement System Statistics (June 30, 2010)  Approximate Plan Membership:  Active214,000  Inactive210,000  Retired & Survivors101,000  System 1,640  ER Contribution Rate (pre-tax):  FY 2011 – 9.01%  FY 2012 – 9.87% The System is included in the above results using Plan assumptions. 2 AssetsLiabilitiesFunded Status ActuarialMarketDiscounted at 8% ActuarialMarket $27.6 B$22.1 B$36.1 B76.4%61.4%

3. Arizona State Retirement System Distribution of ASRS Pensions as of June 30, 2010 3 Average Pension $19,840.10 Average Years of Service 36.7 37.3 34.9 33.8 33.5 32.3 28.5 15.1

4. Arizona State Retirement System Rates of return Defined Benefit Plan 4 Contribution Rates Projected Contribution Rates* * Excludes potential PBIs Based on June 30, 2010 Projections with constant Investment Returns and 0% Population Growth

5. Arizona State Retirement System 2011 Legislation SB 1614 – The Budget Bill SB 1609 – Pension Reform Bill HB 2024 – The ASRS Pension/LTD Bill 5

6. Arizona State Retirement System Significant 2011 Legislative Outcomes  Contribution Rate Split  From 50/50 to 53/47  State and education ERs to remit the difference to the General Fund (state, universities, public school districts and charter schools) (counties, cities & towns, special districts and community colleges do not transfer funds)  27-week Waiting Period for New State Employees for ASRS Membership 6

7. Arizona State Retirement System Significant 2011 Legislative Outcomes  Felony Forfeitures  Return to Work Alternate Contribution Rate  Service Purchase Program Limitations  Normal Retirement Age for New Hires (effective July 1, 2011)  Defined Contribution and Retirement Study Committee 7

8. Arizona State Retirement System 2011 Legislation Highlights  Return to Work (RTW) Violations  Clarify ASRS’ ability to suspend and recollect pensions from members who violate RTW statutes  Clarify charges against employers who hire such members  Employers  Allow ASRS to intercept other state payments for all monies due, not just contributions  Long-Term Disability (LTD) Program  12-Month Claim Deadline, “Good Cause” exception  Penalties for refusing to provide information  Administration  Member outreach via electronic means 8

9. Arizona State Retirement System 2011 Legislation Highlights  Distributions  Define “disabled” child for enhanced survivor benefit; eliminate “stepchild” and replace with “adopted” child  Remove $20 lump sum threshold and allow the Board to establish the amount  Terminate an alternate payee’s split under a Qualified Domestic Relations Order (QDRO) if the alternate payee pre-deceases the member  Service Purchase  Conform Military Service Purchase statutes to Federal Law  Clarify Leave of Absence statute requires a member to forfeit benefits the member may have accrued in another system if the member purchases the time with the ASRS  Clarify the salary calculation for purchases by a transferring in member who does not meet another statutory criteria  Technical and Federal Conforming Changes 9

10. Arizona State Retirement System 2011 Legislation Highlights  Return to Work (RTW) Alternate Contribution Rate (ACR)  Applies to all retirees returning to work in a position ordinarily filled by an employee of the employer  ACR begins on the date the retiree returns to employment (regardless of direct, leasing, or contracting status)  Retirees still must wait 365 days before returning to direct employment with the Employer  Calculated as the “deficit” portion of the Total ASRS Contribution Rate  Floor of 2%, Cap of ER portion of DB + LTD Total Rate  Starting July 1, 2012 10

11. Arizona State Retirement System Alternate Contribution Rate 11 Contribution Rates 8% Rate of Return

12. Arizona State Retirement System Questions? 12