SB 492 passes out of Senate Appropriations in good form
02/05/2015
SB 492, a bill that was recommitted to Senate Finance, was heard and passed out unanimously Thursday. Unlike HB 1481 (Rep. Burton; R-Whiteland), SB 492 does not include the optional Teachers Retirement Fund defined contribution (DC) plan for new hires.
The Senate Appropriations committee also agreed to amend the bill by returning the current PERF defined benefit (DB) plan for new hires back to its “default” status (Senate Pensions and Labor made the optional PERF DC plan the state’s default and new hires would have to opt-in). Sen. Karen Tallian (D-Portage) worked with Sen. Phil Boots (R-Crawfordsville) and Sen. Luke Kenley (R-Noblesville) to make these positive changes to the bill.
SB 492 is left to solve an important issue with PERF—when an employer elects to withdraw participating for its new hires (i.e., it freezes its involvement with PERF for those currently employed and comes up with a new retirement plan (likely a DC plan), resulting in an increase for the unfunded liability of PERF because new hires help fund the existing system. Indiana University, Purdue University, Ivy Tech and the University of Southern Indiana have already moved away from PERF for its new hires. The net value of these unfunded liabilities moves is $73 million to PERF. SB 492 sets up a framework for these employers to pay PERF back what is owed, likely over an extended period of time. SB 492 also requires that in the future, when a PERF employer makes the election to withdraw from PERF for new hires, it must notify the Indiana Public Retirement System so that these issues do not happen again.
Sen. Waltz raised an excellent point in committee with regard to the optional PERF DC plan. He believes the existence of the optional PERF DC plan has the same effect on PERF’s unfunded liability that the big university employers’ withdrawal from PERF DB plan makes. When each new hire is encouraged to go to the optional DC plan (over the DB plan), that employee causes an increase in the unfunded liability in PERF—albeit on a much smaller level—but when, approximately, 5,000 individual employees make that election, they collectively have the same effect on PERF unfunded liability as a large employer.
ISTA testified in favor of SB 492 (as amended) as did Nancy Tolson, from the Indiana Retired Teachers Association. She spoke on behalf of the Public Employee Pension Coalition, where ISTA is a member.
ACTION: Please email the members of the Senate Appropriations to thank them for keeping SB 492 clean and allowing it to address a genuine funding issue for PERF. Especially thank Sen. Tallian for working with both Sens. Boots and Kenley on the positive amendment to put back the PERF DB plan as the state’s default option for new hires.