AZ HB2038

Amends Arizona Revised Statutes section 38-727 to add a new exemption from mandatory Arizona State Retirement System (ASRS) participation for employees of cities or towns with a population of less than 7,000 persons hired on or after June 30, 2012.

Allows eligible employees of qualifying small cities or towns to participate in a defined contribution plan established by their municipality under Internal Revenue Code section 401(a) instead of ASRS, provided they can demonstrate eligibility.

Grandfathers the exemption so that if a city or town's population exceeds 7,000 persons in a subsequent census, employees hired under this provision retain the right to remain in the municipal defined contribution plan rather than being required to join ASRS.

Applies only to new employees hired from June 30, 2012 forward and requires employees to demonstrate eligibility to participate in the city or town's qualified governmental plan.