State of Arizona Retirement FAQs
As an Arizona state employee, the Arizona State Retirement System (ASRS) is one of the most valuable parts of your compensation package. In this guide, we’ll answer the most common questions Arizona state employees have about their retirement benefits, from basic eligibility to complex pension decisions.
ASRS Membership
How do I know if I'm an ASRS member?
If you work for an ASRS-covered employer, you're automatically enrolled in the ASRS once you meet the membership criteria. This includes most Arizona state agencies, counties, municipalities, and educational institutions.
For state employees, membership begins on the first day of the pay period following a six-month (approximately 183 days) waiting period. This includes:
State agencies, departments, boards or commissions
Universities under the Arizona Board of Regents
The judicial branch (with salary paid through the Department of Administration)
The Arizona Corporation Commission
The state legislature
For all other ASRS employers (counties, municipalities, school districts, etc.), there is no waiting period. Contributions begin with your first paycheck.
Exception: If you were hired before July 20, 2011, or if you have an existing ASRS account with money on deposit, your membership begins immediately, regardless of employer type.
How much am I contributing to ASRS?
For the current fiscal year 2025-26 (July 1, 2025 through June 30, 2026), the total contribution rate is 12.00% of your salary, split equally between you and your employer. Each contributes 6.00%.
Your contribution actually consists of two parts:
Pension and Health Insurance Benefit rate: 11.85% (5.925% from you, 5.925% from your employer).
Long Term Disability Income Plan rate: 0.15% (0.075% from you, 0.075% from your employer).
On your paystub, you'll see "ASRSRET" for the pension contribution and "ASRS LTD" for the disability contribution.
Can I opt out of ASRS?
ASRS membership is mandatory for all employees who meet the membership criteria. The only exception is for employees who are 65 or older when first hired, have no prior ASRS service, and are not receiving ASRS long-term disability benefits.
If you meet those standards, you must submit a written election to opt out within 30 days of their first day of employment. Once made, this decision is irrevocable.
Can I borrow money from my ASRS account?
Arizona law does not authorize loans from ASRS pension accounts. Active and inactive members cannot borrow against or take partial withdrawals from their accounts while employed. Your only option for accessing funds is to leave ASRS-covered employment and request a refund of your contributions.
Retirement Eligibility
When can I retire with full ASRS benefits?
Your retirement age depends on when you became an ASRS member. For members hired before July 1, 2011, you are eligible for retirement with full pension benefits if you are:
65 years old
62 years old with at least 10 years of service
Any age when your age plus years of service equals 80 (the "rule of 80")
For members hired on or after July 1, 2011, you are eligible for retirement with full pension benefits if you are:
65 years old
62 years old with at least 10 years of service
60 years old with at least 25 years of service
55 years old with at least 30 years of service
Can I retire early?
You can retire with a reduced benefit as early as age 50 if you have at least 5 years of credited service. However, your benefit will be permanently reduced based on how far you are from your normal retirement age. The reduction is calculated using a statutory formula based on the number of years you're retiring early.
How is my pension calculated?
Your ASRS pension uses a simple formula: Average Monthly Compensation × Total Service Credit × Graded Multiplier = Monthly Pension
Average Monthly Compensation (AMC): Your highest consecutive 36 months of earnings (if you became a member before July 1, 2011) or highest consecutive 60 months (if you became a member on or after July 1, 2011).
Total Service Credit: The number of years and months of credited service you've earned.
Graded Multiplier: A percentage based on your years of service:
0-19.99 years: 2.10%
20-24.99 years: 2.15%
25-29.99 years: 2.20%
30+ years: 2.30%
For example, if you have 25 years of service and your average monthly compensation is $5,000, your monthly pension would be: $5,000 × 25 × 2.20% = $2,750 per month.
Does my pension include cost-of-living adjustments?
The ASRS does not guarantee annual cost-of-living adjustments. Instead, there's a Permanent Benefit Increase (PBI) program that may provide increases when the system has excess investment earnings. These increases are not guaranteed and depend on investment performance. The PBI is only available to members who joined before September 13, 2013.
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Pension Payment Options
How will I receive my pension?
When you retire, you'll choose from three categories of annuity options.
Straight Life Annuity: Provides the highest monthly payment but no guaranteed benefits to survivors after your death. Most members recoup their contributions within 6-8 years, meaning there may be little to nothing remaining for beneficiaries.
Joint and Survivor Annuities: Provides a reduced monthly benefit to you, with continued payments to your designated beneficiary after your death. For example, you can choose 50% Joint and Survivor, where your beneficiary receives half of your benefit. (The higher the percentage to your beneficiary, the more your monthly benefit is reduced.)
Term Certain Annuities: You receive a reduced monthly benefit for a specific period (5, 10, or 15 years). If you die before the term ends, payments continue to your beneficiary for the remainder of the term. After the term ends, you automatically convert to a Straight Life Annuity with an increased payment.
Can I change my pension option after I retire?
Generally, no. Your annuity selection is irrevocable once you retire and begin receiving payments. However, if you choose a Joint and Survivor option and your beneficiary dies before you, you have two options:
"Pop up" to the Straight Life Annuity, which increases your monthly benefit
Name a new beneficiary under the same Joint and Survivor option
You must notify ASRS when your beneficiary dies. The increase is not retroactive.
What if I'm married? Do I have to choose a certain option?
Yes. Arizona law requires married members to designate their spouse as a primary beneficiary entitled to at least 50% of their pension and to elect a Joint and Survivor annuity option. This protects your spouse's financial security.
Your spouse can waive this right by providing a notarized signature, but you should carefully consider the implications before making that decision.
Leaving State Employment Before Retirement
What happens to my ASRS benefits if I leave state employment before retirement?
When leaving state employment, you have several options:
Leave your contributions on deposit: Your account remains with ASRS, and you can retire in the future once you meet eligibility requirements. This is often the best option if you plan to return to state employment or if you're close to retirement age.
Request a refund: You can withdraw your employee contributions plus accumulated interest. However, this forfeits your right to a pension, and you'll lose employer contributions (subject to vesting).
Roll over to another qualified plan: You can roll your contributions to an IRA or another qualified retirement plan.
There must be a 21-day gap between your last day with one ASRS employer and starting with another before ASRS considers you "terminated" for refund purposes.
What are the vesting rules?
You are always 100% vested in your own contributions. Employer contribution vesting depends on your hire date. If you are hired before July 1, 2011:
Employer contributions are partially vested after 5 years of service (25% of employer contributions)
Vesting increases by 15% for each additional year
Contributions are fully vested after 10 years of service (100%)
If you are hired on or after July 1, 2011, employer contributions do not vest unless you separate due to an involuntary reduction in force or position elimination. If you leave state employment on your own, you will forfeit all employer contributions.
Should I take a refund or leave my money in ASRS?
This is a critical decision. If you take a refund, you forfeit your right to an ASRS pension, which could be worth far more than your account balance over a lifetime of retirement. Consider:
How close you are to retirement eligibility
Whether you might return to ASRS-covered employment
Your other retirement savings
The value of a guaranteed lifetime pension vs. a lump sum
Before making this decision, consider consulting with a financial advisor who specializes in public employee retirement.
Working After Retirement
Can I work after I retire from ASRS?
Yes, but there are important restrictions if you return to work for an ASRS-covered employer.
The 20/20 Rule: To continue receiving your pension while working for an ASRS employer, you must work less than 20 hours per week for fewer than 20 weeks per fiscal year. If you exceed these limits, your pension will be suspended and you'll return to active ASRS membership.
365-Day Waiting Period for Normal Retirees: If you retire at normal retirement (not early retirement) and terminate employment, you must wait 365 days from your termination date before returning to work in a position that meets the 20/20 criteria for an ASRS employer. During these 365 days, you can still work for an ASRS employer but must stay below the 20/20 criteria.
Early Retirees Cannot Return to 20/20 Employment: If you take early retirement (before reaching normal retirement age), you cannot return to work in a 20/20 position for an ASRS employer until you reach normal retirement age, even after 365 days have passed. You must work below the 20/20 criteria until you naturally age into normal retirement eligibility.
Alternate Contribution Rate (ACR): If you return to work for an ASRS employer while collecting your pension, your employer must pay an Alternate Contribution Rate to ASRS (currently around 30% of your salary). This is not deducted from your pay but may affect whether an employer wants to hire a retired ASRS member.
What if I return to work for a non-ASRS employer?
There are no restrictions. You can work as much as you want for private employers or organizations not covered by ASRS without affecting your pension.
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Healthcare Benefits
What health insurance options are available when I retire?
ASRS offers medical and dental insurance plans for retirees and their qualified dependents. You have 31 days from your retirement date to enroll in ASRS health insurance. If you miss this window, you'll have to wait until the next qualifying life event or annual open enrollment (November 1-30) to enroll.
Coverage falls into two categories:
Non-Medicare plans (for retirees under 65)
Medicare plans (for retirees 65 and older)
What is the Premium Benefit?
If you have at least 5 years of credited service, you're eligible for the Premium Benefit, which is a monthly subsidy toward your health insurance premium. The amount of the subsidy depends on your years of service. This benefit significantly reduces your out-of-pocket health insurance costs in retirement.
You can also elect to receive an actuarially reduced Premium Benefit that continues to your beneficiary after your death if you choose a Joint and Survivor annuity option.
Service Purchases
Can I purchase additional service credit?
Yes. Active ASRS members can purchase certain types of service credit to increase their pension or qualify for retirement earlier. Eligible service includes:
Military service (active duty, reserves, or National Guard)
Other public service (service with another retirement system)
Leave of absence
Previously forfeited ASRS service
Service not credited due to contributions not being withheld
Post-2011 members are limited to purchasing no more than 5 years of total service credit.
How much does a service purchase cost?
The cost varies depending on the type of service and when you purchase it. Generally, you'll pay both the employee and employer contributions plus interest. You can pay via lump sum, payroll deduction, or partial lump sum with payroll deduction for the remainder.
ASRS provides a cost estimate before you commit to the purchase. Service purchase must be completed before you retire.
Social Security
Do Arizona state employees pay into Social Security?
Yes. ASRS members participate in Social Security and pay Social Security taxes. This means your ASRS pension does not reduce your Social Security benefits. You'll be eligible for both your ASRS pension and Social Security retirement benefits (assuming you meet Social Security's eligibility requirements).
Does the Windfall Elimination Provision (WEP) apply to my ASRS pension?
The Windfall Elimination Provision does not apply to ASRS members because ASRS is Social Security-covered employment. WEP only affects people who have pension income from employment where they didn't pay Social Security taxes (such as some out-of-state government positions).
If you worked in a non-Social Security covered position in another state, WEP might apply to that portion of your benefits, but not to your ASRS pension.
Beneficiaries and Survivor Benefits
What happens to my ASRS benefits if I die before retirement?
If you pass away before retiring, your designated beneficiary receives a survivor benefit equal to two times your account balance plus accumulated interest (if you had at least 5 years of service). If you had less than 5 years of service, your beneficiary receives a refund of your contributions plus interest.
What happens to my pension if I die after retirement?
This depends on the annuity option you selected at retirement:
Straight Life Annuity: Payments stop at your death. Any remaining account balance is paid to your beneficiary (though most members deplete their balance within 6-8 years).
Joint and Survivor: Payments continue to your beneficiary for their lifetime at the percentage you selected.
Term Certain: If you die before the term ends, payments continue to your beneficiary until the term is complete.
How do I update my beneficiary designation?
You can update your beneficiary designation at any time through your myASRS account. It's important to keep this information current, especially after major life events like marriage, divorce, or the birth of a child.
Note: Divorce automatically nullifies your former spouse as beneficiary unless you re-designate them after the divorce is final.
Managing Your ASRS Account
How do I access information about my ASRS account?
Create or log into your myASRS account at azasrs.gov. Through your secure account, you can:
View your account balance and service credit
Generate retirement benefit estimates
Update your beneficiary designations
Request service purchase estimates
Submit your retirement application
View and update contact information
Access retirement planning resources
How often should I check my retirement estimate?
It's a good idea to run a retirement estimate at least annually, and more frequently as you approach retirement. Your estimate will change as you earn more service credit and as your salary changes. Running estimates with different retirement dates can help you understand how working longer affects your pension.
When should I start planning for retirement?
The earlier, the better, but you should definitely start serious planning three to five years before your target retirement date.
Tax Considerations
Are my ASRS contributions tax-deductible?
Your pension contributions are made on a pre-tax basis, meaning they reduce your taxable income in the year you make them. This provides an immediate tax benefit. However, your pension payments will be subject to federal and Arizona state income tax when you retire (if you remain an Arizona resident).
The Long Term Disability contribution is made with after-tax funds.
How are my pension payments taxed?
Your ASRS pension is fully taxable as ordinary income at both the federal and state level (if you remain an Arizona resident). You can adjust your tax withholding through your myASRS account to avoid owing taxes at year-end.
If you move to another state in retirement, that state's tax laws will apply. Some states don't tax pension income, which could provide significant tax savings.
What if I need my pension to start before age 59½?
ASRS pension payments are not subject to the 10% early withdrawal penalty that applies to most retirement account distributions before age 59½. This is because ASRS is a qualified governmental plan. You'll pay ordinary income tax on your pension regardless of your age, but no additional penalty.
Should I work with a financial advisor?
While ASRS provides education about your pension, they cannot provide personalized financial advice about how your ASRS benefits fit into your overall retirement plan. This is where working with a qualified financial advisor becomes valuable, especially when:
Coordinating your ASRS pension with Social Security timing decisions
Developing a tax-efficient withdrawal strategy from supplemental savings accounts (457, 403(b), IRAs)
Determining your optimal retirement date based on your complete financial picture
Planning for healthcare costs and Medicare
Creating an estate plan that protects your family
Working With TrueWealth Financial Partners
At TrueWealth Financial Partners, we specialize in helping Arizona state employees make the most of their retirement benefits. We understand the complexities of the ASRS system and can help you navigate critical decisions like:
When to retire for maximum financial benefit
Which pension option makes sense for your situation
How to coordinate ASRS with Social Security
Tax-efficient distribution strategies
Healthcare planning before and after Medicare eligibility
As a fee-only fiduciary, we're legally and ethically obligated to act in your best interests. We don't earn commissions on products, so our advice is always objective and aligned with your goals.
If you're within 5 years of retirement or already retired and want to maximize your retirement income, we'd be happy to discuss your situation.
Ready to optimize your Arizona state employee retirement benefits? Schedule a free consultation with TrueWealth Financial Partners, and we’ll be happy to answer all your questions.
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