Update on HB 1075: ASA Annuity; Conference Committee Report Set to be Finalized. Governor Pence weighs in.
CONFEREES: Rep. Woody Burton; Rep. David Niezgodski; Sen. Greg Walker; Sen. Karen Tallian.
The conference committee on HB 1075 met to discuss the result of negotiations entered into on the INPRS Annuity Savings Account (ASA) and to present a proposed conference committee report.
ACTION ITEM: Please contact the Governor's office to urge him to be open to more negotiations and a more favorable interest rate calculation, particularly for those public servants (including teachers) who are most near to retirement and who will not have a chance to make up for the potential losses should interest rates not rise between now and September 1, 2014.
Synopsis: This is the bill to prohibit the contracting out of annuity work by the Indiana Public Retirement System (INPRS) and to set a calculation that INPRS must use to annuitize TRF and PERF members' funds.
The proposed conference committee report (which ISTA reports will likely not change due to the fact that the Governor has indicated to the conferees that he would veto anything else) provides that INPRS may not, before October 1, 2017, enter into an agreement with a 3rd party provider to provide annuities to retiring and retired members of PERF and TRF. This ensure that INPRS will continue to do this work in-house for at least 3 years, giving advocacy groups some time to offer more input.
The second part of HB 1075 concerns the actual annuity rate calculation and the proposed conference committee report does not materially change the formula that passed in the Senate:
1. The current system and rate calculation for annuitization will remain the same until October 1, 2014 (7.5).
2. Requires INPRS to establish on October 1 and April 1 each year, the interest rate used to determine the annuity amount pruchasable by a member of PERF or TRF who elects to receive an annuity using the member's ASA, and provides that the interest rate is equal to the interst rate on 10-year US Treasury notes as of the immediately preceding September 1 or March 1, respectively, plus 1.5%. This is strictly a market-based formula. FYI, by recent standards, the actual rate would hover in the mid-4% range--but it is anyone's guess where rates will be in the next coming months.
3. Provides that regardless of the calculation in item 2 above, the interest rate may not be less than 2% nor more than 10%.
ISTA testified urging the conferees to continue to work and find a route to an improved calculation, particularly for those members most near to retirement--and who would not have the years to make up the difference should interset rates not rise between now and September 1, 2014.
While the conferees (most of whom sit on the Pension Management Oversight Commission and who have been working on this issue for months) understand the kind of "landing pad" we all have been trying to construct, it became evident that the person who most clearly would not yield to further negotiations is the Governor.