Arizona PSPRS Tier 3 (Defined Benefit)
This page documents how FinZot models the Arizona PSPRS Tier 3 (Defined Benefit) defined benefit pension plan.
Who this plan covers: Public safety members of Arizona Public Safety Personnel Retirement System, on or after July 1, 2017: became a member of PSPRS (DB plan elected or defaulted).
Employee Contributions
Section titled “Employee Contributions”Employee contributions are the portion of salary that the employee pays into the pension fund.
| Field | Value |
|---|---|
| Contribution Rate | 8.68% of salary |
| Tax Treatment | Pre-tax (reduces taxable income) |
Vesting & Retirement Eligibility
Section titled “Vesting & Retirement Eligibility”Vesting
Section titled “Vesting”Vesting determines when an employee has earned the right to receive pension benefits. The following formula must evaluate to TRUE for the employee to be vested:
service_credits >= 15Retirement Eligibility
Section titled “Retirement Eligibility”Retirement eligibility determines when an employee can begin receiving pension payouts. The following formula must evaluate to TRUE:
service_credits >= 15 AND(commencement_age_months - 1) >= 55 * 12Formula Variables:
service_credits: Years of credited servicecommencement_age: Age when pension payments commence
Benefit Calculation
Section titled “Benefit Calculation”The annual pension benefit is calculated as:
Annual Benefit = Final Compensation × Benefit Factor × Service CreditsFinal Compensation
Section titled “Final Compensation”Final compensation is the salary figure used in the benefit calculation, typically an average of the employee’s highest-earning years.
| Field | Value |
|---|---|
| Method | Highest Consecutive Years |
| Years Averaged | 5 |
Benefit Factor
Section titled “Benefit Factor”The benefit factor is a percentage multiplier that typically varies based on retirement age. Higher ages generally yield higher factors.
IF(service_credits <= 0, 0, MIN(0.80 / service_credits, CASE WHEN service_credits >= 25 THEN 0.0250 WHEN service_credits >= 22 THEN 0.0225 WHEN service_credits >= 19 THEN 0.0200 WHEN service_credits >= 17 THEN 0.0175 WHEN service_credits >= 15 THEN 0.0150 ELSE 0.0END))Formula Variables:
commencement_age: Age when pension payments commenceservice_credits: Years of credited service
Cost-of-Living Adjustment (COLA)
Section titled “Cost-of-Living Adjustment (COLA)”The COLA formula determines how pension benefits grow over time after retirement to keep pace with inflation.
IF(OR(years_since_retirement >= 8, age >= 60), current_pension_benefit *(1 + MIN(0.02, MAX(0, inflation_rate))), current_pension_benefit)Formula Variables:
initial_pension_benefit: The annual benefit amount at retirementyears_since_retirement: Number of years since retirement began
Tax Treatment
Section titled “Tax Treatment”Pension payouts from this plan are taxable as ordinary income.
Social Security Coverage
Section titled “Social Security Coverage”Whether a Arizona PSPRS Tier 3 (Defined Benefit) employer participates in Social Security varies from employer to employer, so FinZot does not assume either way. Check a pay stub for a Social Security (OASDI) deduction and set it on the income stream.
Note: FinZot’s pension estimates are for planning purposes only and may not reflect all plan provisions. For official benefit estimates, contact your plan administrator.