During the Dec. 7 meeting, the Queen Creek Town Council unanimously approved fully funding the town’s police pension plan in the Arizona PSPRS system, providing savings to the town and police officers in Tier 2.
“This is yet another example of the town’s commitment to fiscal responsibility and public safety,” said Queen Creek Vice Mayor Jeff Brown. “In 2015, Town Council adopted a pension funding policy – one of the most robust in the state. Over the past seven years, the council has taken strategic action resulting in Queen Creek being one of the first municipalities to have fully funded pensions. We appreciate the hard work of our finance team in bringing forth these options and we will continue to evaluate policy decisions that further strengthen our financial position.”
As part of the 2015 policy, the town paid off its unfunded liability for the fire department – a recurring annual savings of $135,000. That policy was expanded in 2018 to create an internal police pension reserve to fund the town’s portion of the Maricopa County Sheriff’s Office (MCSO) unfunded pension liability, with both fire and MCSO’s pension liabilities fully funded in 2019. In 2021, the town fully funded its ASRS pension reserve.
With the launch of the Queen Creek Police Department, the town is transitioning from an internal police pension reserve to fully funding the PSPRS police plan. The transition includes a payment of $7 million to PSPRS from the town’s $26.3 million internal police pension reserve.
“This is significant as it will save the town approximately $450,000 annually through contribution reductions,” shared Queen Creek Finance Director Scott McCarty. “In addition, the $7 million is expected to earn higher investment returns with PSPRS than if it remained with the town. Due to restrictions on the types of investments the town can make, and the size and sophistication of the PSPRS investments, having the money in PSPRS is anticipated to make approximately $250,000 more annually."
Public safety pensions are administered by the Arizona Public Safety Personnel Retirement System (PSPRS). Each employer who is a member of PSPRS has their own plan, with varying funding. The town has two plans, one for fire and one for police. The PSPRS contribution rates for employees and employers is set annually and includes three tiers based on when an employee is hired. Contribution rates are impacted by how well the pension plan is funded. Plans that are fully funded have the lowest employee contribution rate.
The PSPRS Board of Directors recently changed how contribution rates for Tier 2 employees are set, correcting an error that had previously set Tier 2 contribution rates too high (Tier 2 employees were hired between Jan. 1, 2012 and July 1, 2017). The impact to the Fire Tier 2 employees was immediate because that plan had been fully funded since 2015 – Fire Tier 2 employee contributions were reduced by four percentage points, from 11.65% to 7.65% of their pay, effective July 1, 2022. This was a 34% reduction of an employee’s contribution. With the Dec. 7 Town Council action fully funding the PSPRS police plan, police Tier 2 employees will also have their contributions reduced by four percentage points, from 11.65% to 7.65% of their pay, effective Dec. 10.
“The council’s action to fully fund public safety pensions not only saves the town money, it also saves money for our Tier 2 public safety employees,” said Queen Creek Town Manager John Kross. “With a combined average annual reduction of about $167,000 for all Tier 2 public safety employees, this serves as an important retention measure. Both police and fire Tier 2 employees will have the same 7.65% contribution rate. As we look to expand our public safety operation with lateral positions, it will also serve as a critical recruitment tool.”
The estimated annual reduction to Tier 2 fire employees is about $87,000, with an average annual reduction of $3,778 per employee. The savings to the town’s Tier 2 police employees is estimated to be about $80,000, with an average annual reduction of $2,463 per employee.
For more information about the town’s budget, visit QueenCreekAZ.gov/budget. Report non-emergency issues by visiting QueenCreekAZ.gov/SeeClickFix.
