Interim pension committee discussions could hint at legislative changes
09/25/2015

 

This week, the Pension Management and Oversight Commission (PMOC) convened for its second of three meetings during this interim session. The final meeting will take place Oct. 14 when the commission will adopt its final report. They discussed several key issues that could have legislative implications for the 2016 General Assembly.

 

The American Federation of State, County & Municipal Employees (AFSCME) presented the commission with evidence that Defined Benefit (DB) retirement plans are more efficient and cost-effective to taxpayers than 401(k)-style Defined Contribution (DC) plans, as well as provide greater retirement security with higher returns and lower fees. Indiana currently has a hybrid DB plan including a pension and Annuity Savings Account.

The presentation prompted some reaction among commission members who questioned the accuracy of the evidence. Supporters of a potential shift to a DC plan in the future maintain their position that the cost to the state would be lower, despite evidence from several states where costs significantly increased – some states even reverted back to DB plans after the shift created billions in new debt. Legislators did say that any changes down the road would most likely affect new hires only and not existing members in the plan.

 

There were additional comments alluding to an alternative solution of raising the retirement age. On a positive note, talks are also continuing about the possibility of a Cost-of-Living Adjustment (COLA) for retirees to allow their purchasing power to keep up with inflation. ISTA continues to work on a true COLA, as one has not been provided since 2009.

 

While no action was taken at yesterday’s meeting, the conversations could point toward legislative changes next session. Threats to public pensions continue nationally. Indiana’s fund is by all accounts in great shape and used as an example for how to run a state pension system. It doesn’t need fixed.

 

ISTA will continue to monitor any further changes to PERF and TRF. It is important to stay engaged with legislators on pension issues so they know that public employees are watching closely as attempts to erode retirement benefits continue.

 

Important Update: Remember that beginning Oct. 1, 2015 through Dec. 31, 2016 the rate for your ASA accounts will move from 5.75 percent to a new rate, which will be the greater of the interest rate for similar annuities in the private market as INPRS determines or 4.5 percent.