If you are an NAU employee within a few years of retirement, you have probably started asking questions that did not feel urgent on your first day. Back then, somewhere in the onboarding paperwork, was a retirement plan election form. You had 30 days to choose between ASRS and the ORP. Most people filled it out quickly, or missed the window and defaulted into ASRS, and moved on. Either way, that decision is permanent and cannot be changed.
What is ahead of you now is more complex. The annuity election, survivor benefits, Medicare, healthcare coverage, and how to sequence income to minimize taxes over a long retirement — none of these come with an instruction manual. This article covers what the plan documents say and how to think through each decision before it becomes irrevocable.
No. Neither ASRS nor the ORP permits in-service withdrawals while actively employed at NAU or any Arizona University System institution. No loans are available from either plan. The only option for accessing ASRS funds before retirement is to leave employment entirely.
The 457(b) supplemental plan is separate. While in-service withdrawals are not permitted, distributions from the 457 are available immediately upon separation at any age with no early withdrawal penalty — a meaningful advantage over the 403(b) and most other retirement accounts.
For members hired before July 1, 2011, normal retirement requires 80 points (age plus years of service), age 62 with 10 years of service, or age 65. For members hired on or after July 1, 2011, the thresholds are age 55 with 30 years, age 60 with 25 years, age 62 with 10 years, or age 65. Early retirement is available at age 50 with 5 years of service, but the benefit is permanently reduced.
Every additional year worked increases the benefit through the graded multiplier. For employees close to a milestone, the value of one more year is often worth modeling before making the decision.
Annuity selections are made at the time of retirement and are in most cases irrevocable. Married members are required to elect a Joint and Survivor option and designate their spouse as primary beneficiary to receive at least 50% of the benefit, unless the spouse signs a notarized waiver.
ASRS Members can utilize the benefit estimator to model each option based on their actual multiplier, age, average compensation, and their beneficiary's date of birth. The best choice will vary based on personal situation, including marital status, the beneficiary's independent income, the age gap, whether life insurance or other assets could support a surviving spouse, and the health of both.
If a Joint and Survivor beneficiary pre-deceases the retiree, the retiree can either rescind the election and receive the higher Straight Life Annuity, or name a new beneficiary. It is the member's responsibility to notify ASRS when a beneficiary has passed away. If no new election is made, survivor benefits will not be payable. This right is also codified in Arizona Revised Statutes §38-760. Divorce automatically nullifies a previously named spouse as beneficiary. See ASRS Survivor Benefits for full details.
At retirement, eligible ASRS members can elect to receive up to 36 months of pension payments as a lump sum. This permanently reduces the monthly benefit, but the lump sum can be rolled to an IRA tax-free. It is particularly useful for members with limited savings outside of ASRS, those concerned about inflation on a fixed benefit with no cost of living adjustments, or those who want assets that can pass to a beneficiary.
Separately, members electing a Joint and Survivor or Term Certain annuity have a one-time opportunity at retirement to elect a reduced premium benefit that continues to a beneficiary after the retiree's death to assist with ASRS insurance premium costs. This Optional Premium Benefit is not available with the Straight Life Annuity.
ORP members must initiate a recurring distribution from their state-sponsored retirement plan to qualify for retiree benefits, including the RASL sick leave payout. Once retired, vested balances can be rolled to an IRA or transferred to another plan. Because a recurring income stream is required for benefits, members should consult a professional before rolling funds to an IRA.
ORP members are not eligible for the ASRS health insurance premium subsidy; however, both ASRS retirees and ORP retirees taking a recurring distribution can enroll in retiree coverage through ASRS or ADOA. ORP members pay the full premium without an offset.
New NAU retirees can enroll in retiree medical, dental, and vision coverage through either ADOA or ASRS, or by continuing coverage through the NAU BCBS plan. Enrolling in at least medical or dental through ADOA at retirement is important, because failing to do so may permanently eliminate the right to enroll in ADOA plans in the future. The same restriction does not apply to ASRS plans, as members may elect into benefits during open enrollment each year, or via a Qualifying Life Event. Members over 65 may also choose to decline healthcare coverage and shop for a Medigap (also known as Medicare Supplement) plan independently.
At age 65, retired members must enroll in Medicare Parts A and B. ASRS offers two Group Medicare Advantage plans through UnitedHealthcare — an HMO with an Arizona network and a PPO available nationwide. These are custom group plans built exclusively for ASRS members, different from individual Medicare Advantage plans available to the public. The PPO has a specific arrangement with Mayo Clinic Arizona, which does not generally accept individual Medicare Advantage plans. ASRS does not offer Medigap supplement plans.
The federal 12-month trial right — which allows penalty-free switching from Medicare Advantage to Medigap without underwriting — applies to individuals who enrolled in an individual Medicare Advantage plan when first eligible at 65. It does not apply to group retiree plans such as the ASRS plans. An ASRS retiree who enrolls in the group plan at 65 and later wants Medigap will likely face medical underwriting with no guaranteed issue protection under federal or Arizona law. Arizona does not offer state-level birthday rule or open enrollment protections beyond the federal standard.
Moving from Medigap into the ASRS group Medicare Advantage plan is generally straightforward. Moving back out voluntarily is not — and health history can become a permanent barrier. The decision made at 65 is effectively one-way for most people.
This article is for educational purposes only and does not constitute personalized investment, tax, or legal advice. Plan terms and benefit provisions are subject to change. Sources include NAU Human Resources, the Arizona State Retirement System, Medicare.gov, and KFF as of the date of publication. The opinions contained herein are subject to change without notice.
