Arizona CORP Retirement: Options, Refund, Survivors, DROP

Updated October 16, 2026. Quick answer: The Arizona Corrections Officer Retirement Plan (CORP) handbook describes no choice among payment options at retirement. A retired member’s surviving spouse receives a pension based on 80% of the member’s pension if married at least two consecutive years, and an active member’s spouse receives the greater of 40% of average monthly salary and four-fifths of the pension the member would have been paid on the date of death had the member retired (A.R.S. 38-888(A)). The one irrevocable election is Reverse DROP, a lump sum for up to 60 months that lowers the monthly pension. Leaving early means leaving contributions, rolling them over, or taking a refund that forfeits future CORP benefits; the annual report says benefits generally vest after five years.

What this page covers and what it does not

This page works from two documents: the Corrections Officer Retirement Plan Member Handbook (August 2024) and the Public Safety Personnel Retirement System annual comprehensive financial report for the year ended June 30, 2025. The handbook describes CORP as “a special retirement system created by the state legislature for certain full time correctional officers, probation officers, and dispatchers in the state of Arizona”, and it warns that it “does not quote the official wording used in the Arizona Revised Statutes”, so the statutes decide any difference.

The page prices Tier 1 (members who joined before January 1, 2012) and Tier 2 (the annual report’s “Employees who became a member after December 31, 2011 but before July 1, 2018”). Tier 3 members joined on or after July 1, 2018, and the annual report says “The legislation closed CORP to new members for corrections and detention positions”. Tier 3 benefits, disability pensions, the cancer insurance program and health insurance subsidies are outside this page.

On size, the annual report’s active member summary for all tiers says “there were 6,734 active members in the Plan as of June 30, 2025”, compared to 7,312 for the prior year. Its Note 1 lists CORP active members at 5,020 and CORP-AOC (the plan for Administrative Office of the Courts probation officers) at 1,714, which add to a computed 6,734. The report states no cause for the decline.

How the pension is figured, by tier

CORP is a formula plan: the handbook says “pensions are determined by a formula, versus the amount of money in the member’s account”. Tier 1 uses the highest 36 consecutive months of salary within the last 10 years of credited service, and Tier 2 uses the highest 60 consecutive months, as the annual report states. The percentages below also appear in the handbook’s tables.

The statute behind the Tier 1 rows, A.R.S. 38-885(B), makes a member who joined before January 1, 2012 eligible on any one of its tests, including “The sum of the member’s age and years of credited service equals at least eighty.” and “Has twenty or more years of service or, in the case of a dispatcher, twenty-five or more years of service.” That text sets no membership date for the points test, and the 8/9/01 date in the handbook table does not appear in any of the A.R.S. 38-881 to 38-924 sections archived for this page (a search for 2001 returns no file). Under 38-885(G) “In no case shall the amount of a member’s pension exceed eighty percent of the member’s average monthly salary. Such limitation does not preclude cost-of-living increases granted by the legislature.”

The Tier 2 wording is “62.5% of the member’s average monthly salary plus 2.5% of the average monthly salary for each year of credited service over 25 (include fractional years) with a maximum of 80%”.

A computed example from an assumed $5,000 average monthly salary, not a CORP figure: a Tier 1 member with 25 years of credited service gets 50% plus 2.5% times (25 minus 20) years, which is 62.5% of salary, or $3,125 a month. A Tier 2 member with 27 years of credited service gets 62.5% plus 2.5% times (27 minus 25) years, which is 67.5% of salary, or $3,375 a month. Neither figure applies the leave without pay or salary definition rules an official estimate uses.

Survivors: automatic pensions, not an election

The handbook pages read describe no choice between a single-life and a joint-and-survivor pension, and print no survivor reduction factor. Survivors instead receive a set benefit. For a retired member, “If married for at least two (2) consecutive years at the time of the member’s death, the surviving spouse of a retired member will receive a spouse’s pension each month for lifetime based on 80% of the member’s pension benefit”. For an active member, “The spouse’s pension is 40% of the member’s average monthly salary”, and “If the member was killed in the line of duty, the spouse will receive 100% of the member’s average monthly salary”. For systems that do offer an election, see single-life versus joint-and-survivor pension.

A computed example from an assumed $5,000 average monthly salary, not a CORP figure: for the Tier 1 retiree above with a $3,125 monthly pension, 80% is $2,500 a month for a qualifying spouse. For an active member with that salary, 40% is $2,000 (computed) a month. The child benefit is a guardian benefit paid “until each child turns 18, or under 23 years of age only during any period that the (unmarried) child is a full-time student”.

The statute adds what the handbook table leaves out. For an active member, A.R.S. 38-888(A) provides: “The amount of a surviving spouse’s pension is forty percent of the deceased member’s average monthly salary or four-fifths of what the deceased member’s pension would have been on the date of death had the member been retired, whichever is greater.” A surviving spouse of a retired member also needs the pension to be claimed: “The surviving spouse shall file a written application with the plan in order to receive the survivor benefit.”

For a line-of-duty death, A.R.S. 38-888(B) provides: “The surviving spouse of a deceased member who is killed in the line of duty or dies from injuries suffered in the line of duty is entitled to receive a monthly amount equal to the deceased member’s average monthly benefit compensation.” It defines the phrase: “For the purposes of this subsection, ‘killed in the line of duty’ means the decedent’s death was the direct and proximate result of physical injuries incurred in the performance of the decedent’s public safety duties and does not include suicide.” The statute names the amount average monthly benefit compensation, not average monthly salary as the handbook table does, and that term is not defined in the definitions section, 38-881 (a search for benefit compensation finds only 38-888).

A.R.S. 38-904(B) provides: “The amount of the pension of each eligible child is an equal share of the amount of the surviving spouse’s pension.” It also provides: “A child’s pension terminates if the child is adopted.” The definition of an eligible child in 38-881 includes an unmarried child who: “Is under a disability that began before the child attained twenty-three years of age and remains a dependent of the surviving spouse or guardian.”

Beneficiary paperwork still matters. The handbook says “Members must designate at least one primary beneficiary”, and the named beneficiary is used when no survivor pension is payable. The Beneficiary Designation Form (Form 8) is how changes are made. The handbook’s deferred-benefit text mentions “survivor benefit options”, but the pages read describe no election or reduction table behind that phrase.

What becomes fixed, and the timing that matters

The handbook says “Your retirement is considered effective the first day of the month following your termination of employment”, and that “Pensions are always payable the last business day of the month”. The retirement packet has a deadline: “Retirement packets must be received by the tenth of the month in which pension payments are to be made”. Because the effective date follows the termination date, the last day worked is the practical decision. The handbook’s example is a member who leaves on May 15, becomes a June effective retiree, and is first paid on the last business day in June.

Reverse DROP: the lump sum, the cost and the irreversibility

CORP has a Reverse DROP rather than a forward DROP account. It is open to corrections, detention, probation and surveillance officers who meet the service and age requirements for a normal pension, who can “set their date of retirement back to the date of their retirement eligibility or a date not more than sixty (60) consecutive months prior to their reverse DROP election date”. In return they receive “a lump sum payment of the pension benefits they would have accumulated since that retroactive date, plus interest”.

The election is final: “the member must voluntarily and irrevocably elect to terminate employment and receive a normal retirement (pension) upon participation in the reverse DROP”. The handbook states the cost plainly: “choosing reverse DROP results in lower monthly pension payments after retirement”. The lump sum goes to “a defined contribution account offered by Nationwide Retirement Solutions”. There is a floor: “Reverse DROP service requirements cannot fall under 24 years for corrections officers and below 25 years for dispatchers”. The annual report adds “The maximum number of months that a member could elect to reverse is 60 months (5 years)”. The option is not open to anyone applying for or already awarded accidental, ordinary, or total and permanent disability benefits.

The handbook’s example: a corrections officer with 25 years of service “can elect a reverse DROP lump sum payment for 1 to 12 months to ensure they meet the minimum 24 years of credited service for retirement”, and then “the monthly retirement benefit and lump sum payment will be calculated based on the service and salary at 24 years”.

A computed example from an assumed $5,000 average monthly salary, not a CORP figure, for a Tier 1 corrections officer with 25 years who elects 12 months: the pension is figured at 24 years, which is 50% plus 2% times (24 minus 20) years, or 58% of salary, $2,900 a month. At 25 years the same salary gives $3,125, so the election lowers the monthly pension by a computed $225 for life. The lump sum is twelve monthly payments at the 24-year amount, 12 times $2,900, or $34,800 before interest. The example holds salary constant, assumes the 20-to-25 year bracket applies to a Tier 1 member at 24 years, and ignores the 80 point rule.

The statute sections archived for this page, A.R.S. 38-881 to 38-924, contain no Reverse DROP provision (searches for reverse and retroactive return no file), so the sixty-month look-back, the irrevocable election, the service floors and the interest rate rest on the handbook alone here. The statute does fix the timing of any retirement: “Ceases to be an employee before the date of retirement.” Section 38-890(A) provides: “A normal retirement pension, an accidental disability pension, a total and permanent disability pension or an ordinary disability pension commences on the first day of the calendar month next following the member’s date of retirement.”

On interest, the handbook says “The interest rate applied to reverse DROP payments is equal to the rate of the 5-year treasury bill rate, as set by the Federal Reserve Board”. The pages read do not describe how the Nationwide account is taxed or rolled over, so confirm that with the plan before electing. General rollover rules are in the IRS section below and at 20% withholding on a pension lump sum.

Leaving before retirement: leave it, roll it over or take a refund

The handbook gives three paths on leaving: “Leave your contributions on account with CORP and retain rights to future CORP benefits”; “Request a refund of your employee contributions plus interest and forfeit rights to future CORP benefits”; or “Rollover your account to another qualified retirement program and forfeit rights to future CORP benefits”. A withdrawal means you “waive any and all rights to CORP membership benefits”, including the pension benefit, the disability benefit, the health insurance premium benefit and survivor benefits. A refund needs a completed application, and the handbook says the payment is made “minus any benefit payments or any amount you may owe the system”.

On vesting the annual report says “Generally, all benefits vest after five years of credited service”. The handbook states tier specific rules instead, below.

For Tier 2, “Members receive a lump sum payment of their accumulated contributions plus interest at a rate determined by the Board of Trustees as of the date of termination”. A computed example from an assumed $30,000 of Tier 1 employee contributions, not a CORP figure: under 5 years the refund is $30,000; at 8 years it is 100% plus 70%, or $51,000; at 10 or more years it is 100% plus 100%, or $60,000. The general comparison is at pension refund versus leaving it.

Staying has a different shape by tier. A Tier 1 member who is inactive with at least ten years of credited service “may elect to receive a deferred annuity at the age of sixty-two (62)”, which is “actuarially equivalent to the member’s accumulated contributions in the plan plus an equal amount paid by the employer”. But “annuitants are not entitled to survivor benefits, benefit increases, or participation in the group health insurance to include subsidy”. The statute lists the exclusions by section: “The deferred annuity is not a retirement benefit and annuitants are not entitled to receive any amount prescribed by section 38-887, 38-888, 38-904 or 38-906.” It also provides that “except that if the person withdraws the person’s accumulated contributions from the plan, all rights to a deferred annuity are forfeited.” Tier 2 members “are not eligible to receive the deferred annuity”; those who reach the service requirement without the age “may elect to leave their contributions on account until reaching the age requirement”, and the handbook says the resulting retirement benefit includes cost of living increases, survivor benefit options and the health insurance subsidy. The handbook pages read do not say whether a spouse must consent to a refund. The statute that sets refunds, A.R.S. 38-884(C) to (F), contains no spousal consent step, and a search of all the archived sections 38-881 to 38-924 for consent finds only 38-891 (payroll deduction) and 38-902 (a dispatcher’s agreement to opt out).

For a member who joined before January 1, 2012, A.R.S. 38-884(D) adds interest for money left on account: “If a member who becomes a member of the plan before January 1, 2012 has more than ten years of credited service with the plan, leaves the monies prescribed in subsection C of this section on account with the plan for more than thirty days after termination of employment and after that time period requests a refund of those monies, the member is entitled to receive the amount prescribed in subsection C of this section plus interest at a rate determined by the board for each year computed from and after the member’s termination of employment.” On the other side, “Credited service is forfeited if the amounts prescribed in subsection C, D or E of this section are paid or are transferred in accordance with this section.”

A refund can be undone in two ways. If the member is rehired by the same employer within two years, the member must apply to restore forfeited credited service within ninety days of becoming an employee again. Under 38-884(L), “The retirement fund is paid the total amount previously withdrawn pursuant to subsection C, D or E of this section plus compound interest from the date of withdrawal to the dates of repayment. Interest shall be computed at the rate of nine percent for each year compounded each year from the date of withdrawal to the date of repayment.” Also, “The required payment is completed within one year after returning to employee status.”

A member rehired by the same employer two years or more after leaving, or rehired by another employer, has a second route under 38-884(M): “A present active member of the plan who received a refund of accumulated contributions from the plan pursuant to subsection C, D or E of this section, forfeited credited service pursuant to subsection K of this section and becomes reemployed with the same employer two years or more after the member’s termination date or becomes reemployed with another employer may elect to redeem any part of that forfeited credited service by paying into the plan any amounts required pursuant to this subsection.” The price is the refund previously paid plus an amount computed by the plan’s actuary to equal the increase in the actuarial present value of projected benefits.

Buying service credit

The handbook says “Purchasing service has a direct impact on your calculated retirement benefit amount”, and prices it as “your current annual salary multiplied by the Actuarial Present Value of the added benefit”. The quote expires, typically within 90 days. The annual report limits prior government or military service: members with at least five years of credited service “may elect to purchase up to 60 months of any part of the prior service if the prior service is not on account with any other retirement system”. Lump sum purchases “are subject to IRC section 415(c) limits”. See the pension buyback calculator and get the official quote before paying.

The statute sets the price and the limits differently from the handbook’s wording. A.R.S. 38-909(A) lets a member redeem up to sixty months of prior service that is not on account with any other retirement system, and for members who joined before January 1, 2012 “An active member who became a member of the plan before January 1, 2012 may redeem any amount of eligible prior service as specified in subsection A of this section without having to have accrued any minimum amount of credited service.” The amount is the earlier refund with accumulated interest plus an additional amount computed by the plan’s actuary to equal the increase in the actuarial present value of projected benefits (38-909(C)). Prior active military service has its own section: 38-907(A)(2) provides “The period of military service for which the member receives credited service does not exceed sixty months.”

Cost of living increases

The statute article for this plan, A.R.S. 38-881 to 38-924, has no cost-of-living formula. Its only cost-of-living text is the last sentence of 38-885(G): “Such limitation does not preclude cost-of-living increases granted by the legislature.” A search of the archived sections for consumer price returns no file. The CPI-linked increase and the Tier 3 funding schedule below are therefore the handbook’s words, and this page has not confirmed them against statute.

The handbook states “Contingent on the CPI, up to 2% may be paid as a COLA”, prorated in the first year of retirement. For Tier 3 DB members only, it adds that the increase is payable after 7 years of retirement or at age 60, whichever is first, and depends on the funding level of CORP.

What the IRS adds on tax

A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of CORP’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. The handbook lists rollover as one of the three choices on leaving, and a direct rollover avoids the mandatory withholding on the rolled-over part. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.

On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan”, provided the employee separated from service during or after the year in which they attained age 50 or 25 years of service under the plan, whichever is earlier. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.

What a refund looks like after withholding

A computed example from the assumed $51,000 Tier 1 refund above, treated as fully taxable and paid to the member, not a CORP figure: 20% is $10,200 withheld for federal tax, leaving $40,800 (computed) in cash before any further tax or penalty. State treatment is at Arizona retirement taxes and does Arizona tax pensions; the statewide public safety plan is at Arizona PSPRS retirement decisions.

Where the sources disagree

Cost of living increases. The annual report says the increases “are payable after 7 years of retirement, or at age 60, whichever is first” and follow a funding level schedule, in the paragraph about correction officer retirees generally, while the handbook lists that wait and schedule as an additional requirement for Tier 3 DB members. A Tier 1 or Tier 2 retiree should confirm with the plan which rule applies.

Reverse DROP interest. The handbook calls the rate the 5-year treasury bill rate, while the annual report describes “the yield on a five (5) year Treasury note as of the first day of the month as published by the Federal Reserve Board”. The documents do not say whether these differ in practice.

Vesting. The annual report uses the word vest after five years of credited service, while the handbook pages read give the Tier 1 refund schedule and a Tier 1 deferred annuity that needs ten years. A member near the five year mark should ask the plan what vests.

What this page could not settle

• The handbook pages read describe no election among single-life, joint-and-survivor or other payment options, and print no survivor reduction factor.
• The pages read do not say what a survivor receives when a retired member was married less than two consecutive years, beyond the child and beneficiary rules above.
• The pages read do not say whether a spouse must consent to a refund, a rollover or a Reverse DROP.
• The pages read do not state how the Reverse DROP lump sum in the Nationwide account is taxed or rolled over.
• The pages read do not give an interest rate for the Tier 1 refund or the Reverse DROP; the rates are set by the Board of Trustees or by Treasury yields.
• Tier 3 benefits, disability pensions, health insurance subsidies and divorce orders were not worked through. Return to work: A.R.S. 38-884(N) provides “A retired member may become employed by the employer from which the employee retired in a designated position and continue to receive a pension if the employment occurs at least six months after retirement.” If the employment starts sooner, “Payment of the retired member’s pension shall be suspended until the retired member again ceases to be an employee.”
• The handbook says it does not quote the statutes and that the statutes prevail. The retirement formulas, survivor pensions, refunds, deferred annuity, service purchase and return to work above were compared with A.R.S. 38-881 to 38-924 (azleg.gov, 37 sections archived); Reverse DROP, the cost-of-living increase, disability, health insurance and divorce orders were not confirmed against statute.

Common mistakes

• Looking for a single-life versus joint-and-survivor election that the handbook pages read do not describe, and missing the automatic 80% retiree and 40% active spouse pensions and the two-year marriage test.
• Electing Reverse DROP without weighing that it is voluntary and irrevocable and lowers the monthly pension for life.
• Taking a refund without weighing that it forfeits the pension, disability, health insurance premium and survivor rights.
• Assuming a Tier 1 deferred annuity carries survivor benefits or increases when the handbook says it does not.
• Taking a taxable refund instead of a direct rollover and receiving 20% less in cash up front.

Related on this site: Arizona retirement taxes, does Arizona tax pensions, Arizona PSPRS retirement decisions, single-life versus joint-and-survivor pension, pension refund versus leaving it, 20% withholding on a pension lump sum and public pension retirement decisions by system.

Sources

• Arizona Public Safety Personnel Retirement System, Corrections Officer Retirement Plan Member Handbook (August 2024): https://www.psprs.com/wp-content/uploads/2024/01/CORP-Member-Handbook-Rev-08-2024.pdf
• Arizona Public Safety Personnel Retirement System, Annual Comprehensive Financial Report for the fiscal year ended June 30, 2025: https://www.psprs.com/wp-content/uploads/2025/11/PSPRS-FY2025-ACFR.pdf
• IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
• IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558

Sources: the primary documents linked above, read on October 16, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.