Jeff Hutson, a spokesman for INPRS, said the current 7.5 percent payout is unsustainable and it threatens the viability of the pension programs. He also said the pension board would conduct a rigorous selection process for the outside provider, and would still closely monitor how those annuities are being managed.
“This is about how we can best protect the pension funds, those who fund it, and the members who depend on it being well funded, from the risk of what the market might do to that money,” Hutson said.
At the September meeting of the pension oversight commission, Nancy Guyott, president of the Indiana State AFL-CIO, said the changes being implemented by the state will cause unneeded reduction in returns on what she said were already modest retirement incomes.
The savings plan annuity is part of the two-part retirement system provided by the Public Employees’ Retirement Fund and Teachers’ Retirement Fund, which INPRS now administers for the funds’ 215,000-plus members.
The second part is the traditional defined benefit plan, which remains unchanged. On retirement, the employee can take the savings account as a lump sum or convert it to an annuity to spread its benefits over the length of retirement. About half of the 6,000 to 7,000 pension funds’ members opt for the annuity.
Tallian wants the Pension Management Oversight Commission to make a recommendation at its Oct. 21 meeting that the pension board keep the annuity management in-house. She wants the recommendation to be part of the commission’s final report issued before the end of the year. The commission doesn’t have the power to make INPRS roll back its decision to go with an outside vendor, but it could influence legislation that impacts the state pension board.
Both the American Federation of Teachers and the Indiana State Teachers Association have expressed their opposition to changes made by INPRS to the annuity management; they worry that reducing benefits makes it harder for public schools to attract good teachers. They’ve also pushed for INPRS to push back the date that the new annuity management plan takes effect.
There is more information about the changes in retirement benefits, and a list of upcoming pre-retirement workshops for public employees, on Indiana Public Retirement System website at www.in.gov/inprs.