House committee passes bill through blocking privatization plan
The House Employment, Labor and Pensions Committee has passed HB 1075 – “PERF and TRF Annuities.”
ISTA and other public employee advocacy groups testified in favor of the bill. It passed 13-0. It now goes to the full House for approval.
The bill, authored by Rep. Woody Burton (R-Whiteland) and co-authored by Rep. David Niezgodski (D-South Bend) prevents the Indiana Public Retirement System (INPRS) from privatizing the annuity system before October 1, 2019. This will provide members nearing retirement age some time to decide whether to do so before major changes are made to the amount of annuity payments they receive.
The bill goes further to allow INPRS to set the annuitization rate once a year at a rate not less than the rate of return on the retirement allowance account (the assumed rate = 6.75%) for the prior 12 months.
If allowed to be privatized on October 1, 2014 as contemplated by INPRS, the annuity system would begin using market-based rates estimated by INPRS to be 4-4.5%. Since the current rate is set at 7.5%, the 3+% loss would equate to about a 25% loss in ASA member benefit each year of retirement if the member chose to annuitize under this provision. For the average teacher and assuming at least a 20-year post retirement lifespan, this would have resulted in a total cut of over $40,000 in benefits.
This is not the last word but a good start by the legislature in addressing this issue. We will also be watching SB 108 (Sen. Ed Charbonneau; R-Valparaiso) which also deals with the administration of annuity accounts.
ISTA hosted more than 30 workshops around the state when the INPRS board announced its decision to privatize the annuity system. The feedback to legislators offered by members following these workshops is making a meaningful impact.
Please, if you haven’t before, thank Representatives Woody Burton and David Niezgodski for carrying this bill in the House and to the entire House Employment, Labor and Pensions Committee for approving it unanimously and sending it to the floor.