INDIANAPOLIS | State pension officials have rejected a legislative recommendation that they reconsider privatizing retirement annuity payments for state and local government employees, including teachers.
The trustees of the Indiana Public Retirement System voted 7-0 earlier this month to tell legislators that INPRS will continue taking steps in 2014 to transfer the annuity program to an outside provider, unless the Legislature passes a law prohibiting the move.
"The board has a fiduciary obligation to prudently manage the plan in a manner that ensures assets are available to pay promised benefits," the board said in a letter to lawmakers. "If kept in-house, there is a chance of creating unfunded liabilities."
Retired INPRS members receive a modest monthly pension payment that can be supplemented by converting their retirement savings account into an INPRS-administered annuity that pays a 7.5 percent interest rate, well above current market rates.
The savings account also can be taken as a lump sum or put into other privately administered investments.
In July, INPRS trustees decided to eliminate the state-managed annuity option for new retirees starting in late 2014, and require them to turn over their savings account to a private insurance company if they want the additional lifetime monthly benefit an annuity provides.
"The insurance company option maintains the same level of benefit to the member, while also immunizing the funds from additional unfunded liabilities," the trustees said.
However, state lawmakers, led in part by state Sen. Karen Tallian, D-Ogden Dunes, have sharply criticized INPRS' plan to farm out the annuity program, warning that poor service and higher fees will follow privatization.
The General Assembly's Pension Management Oversight Commission unanimously recommended in October that INPRS keep the program in-house, but use market rates to set the annuity interest rate.
Tallian said the December decision by INPRS trustees to reject that suggestion was unexpected.
"I thought it was a little bold for them to take that stance," Tallian said. "This is a body that is legislatively created ... and they're doing this in the face of a bipartisan, both-chambers, unanimous vote."
She expects legislation will be filed in both the House and Senate when the General Assembly convenes Jan. 6 that would halt INPRS' annuity privatization effort.