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Indiana Public Retirement System Privatizes Annuities
06/24/2016

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The Indiana Public Retirement System (INPRS) board voted unanimously today to outsource ASA annuities to a third party vendor, contracting with MetLife, which will result in some changes for PERF and TRF members. Annuities will no longer be managed in-house.  

The decision was based on a legislative mandate originating in HEA 1075 from the 2014 General Assembly. The enacted bill provides a gradual step down in rates over several years to lessen the immediate blow to members in PERF and TRF. There was a spike in retirements after bill passage.

Today’s decision came as no surprise. This process has been in the works for a couple of years. MetLife will still provide all of the various annuity options that INPRS currently offers. INRPS has set guidelines in the contract with MetLife to ensure transparency and a best price for the guaranteed floor on ASA rates.

The annuity rate is still pending but will be somewhere around the 10-year treasury rate plus 1.5 or 1.25 percent, putting the rate around 4.25 – 4.5 percent. However, this rate could be lower and fluctuate over time even with a guaranteed floor. MetLife will reassess rates annually.

Additionally, PERF and TRF members will not pay fees to MetLife or lose any of their monthly benefits; although, there will be a fixed price INPRS will have to pay for the outsourcing. In the process, INPRS will not hold the risk for liabilities.

On a positive note, INPRS may cancel the contract at any time with no penalty. INPRS could therefore elect to return annuities in-house should they determine that MetLife has failed to provide the best price on returns. 

The new rates will go into effect spring 2017. The decision to outsource was within INPRS’ authority, but the legislature required INPRS to set the rate at market level by statute. Either way, the rate would have decreased from the previous level. 

The Pension Management and Oversight Commission will meet during the interim before the legislature adjourns. The 2017 legislative session is a budget year.  Expect further developments on the horizon.