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State pension board change cuts retiree payouts

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Indiana lawmakers grilled the head of the state's pension system Tuesday on a decision to push future retirees into a market-based system that could almost halve the amount they earn from annuity plans.

The Indiana Public Retirement System voted unanimously last month to change how much new retirees earn from their annuity savings accounts, or ASAs. The state currently allows retirees to return a lump-sum amount earned over their time working for the government to the pension fund, in return for guaranteed monthly payouts based on 7.5 percent of that lump sum.

More than half of the roughly 425,000 retirees enrolled in Indiana's major pension plans, the public employee retirement fund and the teacher's retirement fund are enrolled in the annuity plan. But employees who retire after July 1, 2014, would have to look to market-based rates and a sharp drop in that guaranteed money.

INPRS Executive Director Steve Russo told the panel the new payout would likely drop from 7.5 percent to a figure equaling the 10-year Treasury Note rates plus another 1.5 percentage points. The 10-year Treasury yield on Tuesday was listed at 2.75 percent, making the new payout likely 4.25 percent.

The pension board's July vote followed a last-minute push by the Senate's lead budget-writer, Luke Kenley, to end the annuity payouts over concerns the state could not afford them. But lawmakers, including House Speaker Brian Bosma, R-Indianapolis, said the decision needed a public vetting and pulled it from the state budget.

Democrats on the panel said they were caught off guard by the changes.

"This is a big decision that affects a lot of people," said Sen. Karen Tallian, D-Portage. "Frankly, I had expected that this was something that would be vetted before PMOC, at one or two meetings, rather than have you just come back and say, 'Well, this is what we did.'"

But Russo pointed out the pension board's meetings are open to the public and they have been discussing the change for more than a year.

"I have no doubt in my mind there was complete and utter transparency," he said.

Russo said the board was concerned about the long-term viability of paying out 7.5 percent on the annuity plans when the state's pension funds are only expected to earn 6.75-percent interest. However, according to the General Assembly's legislative analysts, they are 100-percent funded.

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  • It is wrong
    It is not right to take from a few state employees and not all of them. Like the senators, legislators, mayor and even the governor. Just do the right thing. It is not right to take anybodies money
  • Title error
    Sorry; should have omitted the word "not" in my title, and did not realize that my comment would be above the others.
  • Few of Our State Workers not Pulling Down 6 Figures
    I know many loyal state workers who pull down much smaller salaries than if they worked in the private sector, and none of them make the salaries quoted above in other comments. Per Mr. Russo's comment that the pension meetings are open to the public: good luck finding anything about a meeting date for September or minutes of any of this year's meetings. Their boast on their website that they are paying the least of any of 126 similar entities is somewhat chilling.
    • Pensions
      Does anyone know if legislators are included in this proposal or do they have their own separate, richer taxpayer paid pension? I don't mean to beat a dead horse, but it does seem that legislators believe nothing is too good for them even as they cut budgets for others.
    • Wall Street Benefits
      The main beneficiary of the push for privately funded pensions is Wall Street. The same firms the taxpayer bailed out. The current governor is a potential candidate for President. CEOs of the major Wall Street firms can talk to the President and he will listen. Need I say anything more?
    • Real Facts
      Your comparing apples to oranges to peaches. The Congressional Budget Office reports compare Federal Employees to Private-Sector employees. The article is talking about State and local employees. The "Average" salary numbers you give are actually average salary AND benefits. The average salaries for Federal workers with a Bachelor's degree or higher are actually lower than those in the private sector. Federal workers benefits are higher than the private sector. But you also need to look at the makeup of the Federal workforce - 52% have a Bachelor's degree or higher compared to 32% of the private sector. Also, 14% of the Federal workforce is in the Washington, D.C. area, one of the highest cost of living areas in the country. This is what inflates those salary numbers. Indiana State employee average salaries are considerably lower and Marion County workers make even less. Most State and local employees must work 10 years to be be vested in the retirement plan. I would be surprised if the average Marion County employee wage and benefit is over $50k. So why shouldn't they have a pension? What you should be concerned about are the elected officials who have sweetheart pension plans - those State reps and Senators who I believe only have to serve one term and they receive life-time benefits. And they can even "work" at another public institution and draw an additional pension from there. http://www.cbo.gov/sites/default/files/cbofiles/attachments/01-30-FedPay.pdf
    • facts
      How about some facts. The CBOs report on compensation (including salary and benefits) in 2011 found that the average private sector salary was $87,804 and the government $114,436. These unfunded promises made by politicians to the various government employees are now bankrupting city after city across the US. How can one justify the fairness of a guaranteed pension when its on the backs of taxpayers who make less and have no guarantee with their investments and retirement?
      • wondering about the intent
        Probably I shouldn't read so many blogs and comments because they upset me, but in doing so I have detected among some a theme that government workers at all levels are leeches, but especially there is animosity at the state level. I am not sure why people rant against those who do things on their behalf. I wouldn't want to ride an elevator with frayed lines or drink water that had parasites in it, etc. There are some risks I choose to take but there are some the government should protect me from and those are the ones encountered by all in just living our lives, going about our business. And why those who do this work on behalf of others somehow deserve less benefits -- and they are less -- is beyond me. It can't be exciting work, and the pay grades are capped, so now the retirement benefits have to be curtailed as well.

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