UPDATE: Indiana Public Retirement System Privatizing Annuities
07/28/2016
At its meeting late last month, the INPRS board voted unanimously to outsource member Annuity Savings Accounts (ASA annuities) to a third party vendor, contracting with MetLife, which will result in some changes in expectations for Public Employees’ Retirement Fund (PERF) and Teachers’ Retirement Fund (TRF) members regarding their annuity benefit.
Beginning January 2017, annuities will no longer be managed in-house. This decision was based on a legislative mandate originating in HEA 1075 from the 2014 General Assembly. The enacted bill provided a gradual step-down in interest rates over several years to lessen the immediate blow to members in PERF and TRF. As a reminder, there was a spike in retirements after that bill passed.
The initial outsourced annuity rate is still pending. When it begins, it will be calculated quarterly.
As a reminder, according to HEA 1075, the rate from July 1, 2016 to Dec. 31, 2016 is the market rate or 4.5 percent (whichever is greater) and after Dec. 31, 2016 (when the outsourcing takes effect), the interest rate will be market rate (without a guaranteed 4.5 percent)
Market rates are determined as follows:
- 1.5 percent plus a calculated average of the 10-year treasury yield (which is the average of the last five business days of the two preceding quarters).
- If current circumstances exist on Jan. 1, 2017, the strict market rate calculation (without the 4.5 percent guarantee) will result in a rate that is lower than 4.5 percent.
Especially to ISTA members who are planning to retire this year, if you haven’t already, contact INPRS and schedule a time to discuss your personal situation as soon as possible. Because the annuitization changes are occurring mid-school year, you need to crunch some numbers and determine the retirement date that best works for you.
INPRS offers several ways to discuss your situation:
- One on one appointments with an INPRS specialist
- Webinars; You will receive the same information and be able to ask questions as you would in a normal retirement workshop.
- PERF/TRF Workshops: To obtain information about workshops scheduled in your area, you may also call TRF at (888) 286-3544.
It is our understanding that INPRS will be outreaching to fund members in the coming days. Please watch for this information.
Finally, please understand that the above update applies to you only if you choose to annuitize your annuity funds within INPRS and then combine them with your pension upon your retirement—which is just one of several options available to you.
You get one chance to make these decisions and the timing of the annuitization and your actual retirement could be consequential.
We will continue to update you as more information is forthcoming.