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Lawmakers ask pension board to keep annuity plan in-house

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A legislative commission recommended Monday that pension officials scrap a proposal to privatize one part of the state retirement benefit system but lawmakers didn’t address plans to cut the rate of return on annuity payments.

The Pension Management Oversight Commission can’t tell the administrators of public employee and teacher retirement accounts what to do. But the group did vote to ask them to keep the administration of annuities – which lets retired workers turn lump sum payouts into monthly benefit checks – in house.

The Indiana Public Retirement System Board of Trustees is likely to take up the recommendation at a meeting on Friday, said Jeff Hutson, a spokesman for the pensions agency.

“I think the board will take it very seriously. They’ll look at the recommendation,” Hutson said. “They’ll consider it, but I don’t know what they’ll do about it.”

The annuity is one of a two-part retirement system administered by the Public Employees’ Retirement Fund and Teachers’ Retirement Fund. The system includes a defined benefit plan, which is funded by government and schools for its employees, and a savings account that can be funded by employees or employers.

Upon retirement, the worker can take the savings account as a lump sum, roll it into a different retirement account, or convert it to an annuity to spread its benefits over the length of retirement.

Currently, retirees who opt to annuitize their savings can do so with a 7.5-percent interest rate, which is well above market rates and the amount the state is earning off the money that’s invested. The gap creates an unfunded liability that retirement board members decided was no longer acceptable.

So the group voted in July to use market rates for the annuities – and hire an outside vendor to establish the rates and administer the program.

That drew criticism from retirees and the groups that represent them, and lawmakers spent hours last month taking testimony on the issue. The change is expected to reduce annuity payouts to future retirees by an average of $900 to $2,100 annually.

But Sen. Phil Boots, a Republican and the chairman of the Pension Management Oversight Commission, said the 7.5-percent interest rates “can’t be justified by actuarial tables.”

“The interest rates people are earning today aren’t anywhere close to market rates,” he said.

So the oversight commission opted not to recommend a specific interest rate. Instead, lawmakers zoomed in on the privatization issue.

“This is very, very important to thousands of people within these programs,” said Rep. David Niezgodski, D-South Bend.

“We’re just recommending this come in house,” he said. “It will be in the best interest of the members.”

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  • Sweetheart deal
    Thankfully we have a legislature not beholden to the unions and thus will rid us taxpayers of these ridiculous and unfair pensions that the dems "negotiated" with the unions. And gee Joe, if the pension annuity is such a burden to the teachers and gov workers then lets just discontinue the pensions and you only do a 401k -- welcome to the real world.
  • Enough?
    Connie: While I can see part of your point, what you fail to realize is that public employees are unable to realize the tax benefits from an IRA (401k) (including employer matching contributions) that everyone else is entitled to. While some employers pay the money as part of the compensation package, a lot of employees across the state pay this 3% out of their salaries and the account currently earns .26% interest.
  • Enough is Enough
    Not only have public employees and teachers had the benefit of a defined benefit plan, but they have also been able to rob the taxpayers for decades with the extra annuity savings accounts. This bleeding of the taxpayers must be stopped NOW! Those employees need to get over it and realize they have had it too good for too many years and accept that they still have it better than everyone else with their defined benefit plans. Their extra annuity savings accounts that I have been forced to contribute to through taxation should never have been earning interest higher than market rates and should have always been in the open market. Their push to keep it in house has one goal and that is to keep the opportunity to force the taxpayers into paying higher than market interest rates to guarantee their very generous retirements. They should not be treated as if they are better or more important than the rest of the citizens of Indiana.
  • Don't Make Retired Folks Mad
    A smart politician quickly learns that it is never wise to make retirees mad.

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