Update on INPRS; HB 1075
01/26/2014
The House Ways and Means committee has passed out HB 1075, Rep. Burton's bill to address the Annuity Savings Account (ASA) levels for workers on the verge of retirement.
As passed out of the House Pensions and Labor committee, the bill would have prohibited INPRS from contracting with an outside contractor to manage members' annuity accounts. The rate an outside contractor would use would be significantly lower than the rate INPRS has been using (4.5% at best compared to the current 7.5%).
Additionally, the bill stated that INPRS could use a rate not less than their actual rate of return realized, calculated once a year. Meaning, INPRS could use a rate that would cause a retiree to possibly lose money.
This preferred version of the bill passed out of the House Pensions and Labor committee unanimously and was recommitted to the House Ways and Means committee.
However, the House Ways & Means committee has amended HB 1075 that will create a different and more unfavorable method of calculating the return rate. The rate will now calculate quarterly instead of annually.
Calculating the rate quarterly will make it harder for those wanting to retire knowing the rate will be changing frequently. Using a very short term metric to measure long-term obligations may cause unintended consequences both at the member level and the state's level.
Ways and Means also changed the rate so that it is a blend of both market rates (average daily interest rate on a 10-year US Treasury bills) and actual plan returns. If the general assembly rests on a blending of market rates and plan returns, there are many possible alternatives.
Please know that even with these proposals, INPRS is continuing on its original quest to find an outside vendor to take over all of this work. INPRS' Request for Proposal (RFP) to do this work went public last week.
Clearly, unless the General Assembly buttons this thing up completely, INPRS is bent on contracting things out and in the end, costing members' tens of thousands of dollars over the course of retirement.
The fact that the House has taken this entire issue up as a bona fide issue and is keeping the issue moving is very positive and indicative of the fact that your communications to them have made an impact.
Please thank the members of House Pensions and Labor and the members of Ways and Means for keeping this issue alive--even as we know additional work may be needed.