Tuesday, September 24, 2013
Ind. Gov't. - More on "State board cuts public pensions"
Updating this expansive ILB post from August 30th, which included this quote from a FWJG story:
The state’s top pension official on Tuesday stood behind a move to cut Indiana public employees’ retirement benefits despite concern from affected employees and several Democratic lawmakers.Yesterday the Pension Management Oversight Committee held its second meeting of the interim. From a story by Dan Carden of the NWI Times:
Legislators briefly considered a similar change to the Annuity Savings Account program on the last day of the session, when it was inserted in a final draft of the budget.
But after last-minute negotiations, House Speaker Brian Bosma removed the provision, saying there wasn’t adequate discussion about it beforehand and it needed to be considered in future public meetings.
Instead, the Indiana Public Retirement System used its authority in July to unilaterally alter the system without consulting the Pension Management Oversight Commission.
“This is a big decision that affects a lot of people,” said Sen. Karen Tallian, D-Portage, a member of the legislative oversight panel. “I don’t know what the fiscal impact is. I thought (the Pension Management Oversight Commission) would vet it.”
Niki Kelly of the Fort Wayne Journal Gazette has an entirely different look at the meeting in this long story today - some quotes:
INDIANAPOLIS | A plan to privatize a portion of state and local government employee retirement benefits got a skeptical second look Monday by the General Assembly's Pension Management Oversight Committee.
Trustees of the Indiana Public Retirement System, also known as INPRS, agreed in July to eliminate by July 1, 2014, the state-managed retirement annuity option for new retirees, and require them to turn over their lump-sum annuity savings account to a private financial company if they want an additional lifetime monthly benefit.
INPRS believes longer life expectancies and a promised 7.5 percent interest rate makes the state-managed annuity unsustainable in the long run. The change does not affect the modest defined benefit also paid to retired public employees.
State Sen. Karen Tallian, D-Ogden Dunes, said there's no need to privatize the annuity option.
She said INPRS should just adjust the state-run annuity program to ensure solvency and avoid putting retirees at the mercy of for-profit financial companies that are liable to charge higher fees while reducing payments to beneficiaries.
"We don't see any reason or necessity why we need to privatize this," Tallian said. "We have other options."
Tallian said she will recommend the committee's final report to the Legislature and urge INPRS to reconsider its privatization decision.
She hinted if INPRS stands by its plan, the General Assembly could override that decision before it takes effect with new laws during the 2014 legislative session that begins in January.
A legislative pension oversight panel was on the verge Monday of approving a nonbinding recommendation to the state pension system to back off plans to privatize annuity savings accounts.Here is the webpage for the Pension Management Oversight Commission. A webcast of its August meeting is archived, so one may expect the same for yesterday's meeting in a few days.
A member made a motion, it was seconded and there was ample discussion on the topic. Sentiment on the committee appeared to favor the recommendation.
Then just before calling for a vote, a Senate staffer whispered in the ear of Sen. Phil Boots’ – chairman of the Pension Management Oversight Commission – and he quickly announced he would hold the vote until the next meeting.
At issue is a contentious pension cut for soon-to-be retired teachers and public employees.
In Indiana, members of the Public Employees’ Retirement Fund and Teachers’ Retirement Fund have a hybrid system that consists of a defined benefit plan and an Annuity Savings Account component.
When someone retires, the person can take the money built up in the savings account and cash out for a lump sum or annuitize it with the Indiana Public Retirement System to receive monthly annuity payments calculated with an automatic 7.5 percent interest rate.
About 50 percent of retirees take the annuity option.
The topic arose during the last few days of the legislative session in April, but the provision was removed from the budget [to allow an opportunity] for public vetting.
In July, the Indiana Public Retirement System used its authority to unilaterally alter the system without consulting the Pension Management Oversight Commission.
The board making the change said it didn’t make sense to have a guaranteed interest rate on annuity payments that is higher than the rate of return for the fund’s assets.
But instead of modestly dropping the rate, the panel decided to privatize the annuity system with a third-party vendor using market-based rates. This reduces the risk for the state and public employers and places the risk on employees.
According to state pension staff, the current market rate would be in the range of 4.0 percent to 4.5 percent.
Posted by Marcia Oddi on September 24, 2013 09:19 AM
Posted to Indiana Government