INDIANAPOLIS | A legislative panel recommended Monday that state pension officials halt their plan to privatize annuity payments for retired state and local government employees.
The General Assembly's Pension Management Oversight Commission unanimously endorsed a proposal by state Sen. Karen Tallian, D-Ogden Dunes, to keep annuity payments under the control of the Indiana Public Retirement System, INPRS, though likely at a reduced interest rate.
INPRS trustees decided in July to eliminate next year the state-managed annuity option for new retirees, and require them to turn over their lump-sum annuity savings account to a private financial company if they want the additional lifetime monthly benefit.
Pension officials contend longer life expectancies and a promised 7.5 percent interest rate makes the state-managed annuity unsustainable. The change has no effect on the modest defined benefit also paid to retired public employees.
The committee recommendation does not officially undo the annuity privatization decision, but could serve as the basis for a law that would stop it if INPRS trustees do not reconsider off their plan.
"We're asking them to step back from the decision that they made and keep it in-house," said state Rep. David Niezgodski, D-South Bend. "The benefits members will receive will be better than if it is privatized."
Lawmakers said INPRS annuity administration produces better returns for participants, even if interest is reduced to market rates, because it offers lower fees compared to private management and is not seeking to earn a profit.
INPRS spokesman Jeff Hutson said he can't predict how the trustees, who are set to meet Friday, will respond, but he's confident they will carefully review the committee's recommendation.