INPRS set to add new administrative fees for PERF and TRF members
The Indiana Public Retirement System (INPRS) is set to make further changes to the administration of the Teachers' Retirement Fund (TRF) and Public Employees' Retirement Fund (PERF) in 2017.
The INPRS board has indicated that it will vote Friday to require members of TRF and PERF to pay new annual administrative fees to INPRS.
These fees are separate from financial management fees that are paid to the management company, which INPRS outsourced to MetLife that began in January. The Annuity Savings Account (ASA) portion of members’ benefits are now managed by the third-party vendor, and there is no longer a guaranteed floor rate. The rate is now based on market fluctuation.
INPRS estimates that the additional annual administrative fees will be around $36 per year, per member, and that this fee will be reviewed annually by the board. The new proposed administrative fees will be charged to members’ accounts to cover INPRS staff and recordkeeping costs. This proposal was originally initiated in 2013, but the legislature did not take action. This March, however, the decision will be made by the INPRS board and not the legislature.
INPRS’ rationale for adding fees goes back to changes that have been made over decades to the TRF and PERF plans. INPRS states that these fees are required to comply with federal IRS code. However, several pension experts at the National Education Association have reviewed the language and indicated there is no compelling requirement that these fees be transferred onto member accounts.
The language states, “All administrative costs of each alternative program shall be paid from the earnings on that program or as may be determined by the rules of the board.”
It is clear that the board has discretion to pay these fees instead of shifting these costs on a member-by-member basis. The statute does not require reimbursement for INPRS staff time.
There have been numerous changes made by INPRS over the past several years to retirement benefits for TRF and PERF members, including the gradual step down in annuity rates and, most recently, the privatization of the ASA. As a result, members have seen a reduction in annuity benefits based upon what they would have received had the step-down not occurred.
These changes have not affected the pension portion of members’ plans, only the individual’s ASA contribution portion. TRF and PERF members face challenges each year in the legislature with proposals to alter retirement benefits, such as this year’s HB 1463, which would establish a voluntary defined contribution (DC) only plan for future members. DC-only plans are very likely to offer diminished benefits over the course of a full career and certainly shift all the risk onto the employee as opposed to the current shared risk among the state and employees.
TRF or PERF members that are concerned about these new administrative fees should email INPRS Executive Director Steve Russo, or call 888-286-3544.