Indiana public pensions

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Indiana public pensions include eight different pension systems. Public school teachers participate in the Indiana State Teachers Retirement Fund. Other state employees participate in the Public Employees Retirement Fund.

Indiana has 116,572 total public employees as of 2010.^[1] In Fiscal Year 2010, the state has a total of 290,630 active and inactive pension fund members, with 116,187 receiving periodic benefit payments. ^[2]

A recent study by economists Joshua Rauh of the Kellogg School of Management at Northwestern University and Robert Novy-Marx of the University of Chicago Booth School of Business concluded that the Indiana pension fund will run out of money in 2020.^[3] Should the pension fund run out of money then, the cost the following year would be $3.6 billion, which would be 17% of state revenue.^[4]

In 2011 Indiana faced $14 billion in unfunded pension liabilities. Indiana's public retirement system paid out more than $2.3 billion in benefits to nearly 120,000 Hoosiers in FY2011.^[5]

According to the United States Census Bureau, the state has 64 locally-administered pension systems.^[6]

Average Pension

According to INPRS actuarial reports, the average payout from Indiana’s seven pension funds is approximately $24,000 per year. ^[7]

• The average public pensioner receives $19,533 per year.
• The average retired public school teacher in Indiana receives $17,292 annually.
• PERF employees (city, county and state employees and university employees) receive approximately $7,470 annually.
• Retired legislators receive an average of $6,846 per year.
• Police officers, prosecutors and firefighters, receive an average pension between $21,000-$24,000 annually.
• Retired judges receive an average of $66,180 in annual pension benefits.

Pension plans

Teachers' Retirement Fund

The Indiana General Assembly created the Indiana State Teachers' Retirement Fund in 1921.

Members are eligible at age 65 or older with at least 10 years of service credit, or between ages 60 and 64 with at least 15 years of service credit, or between ages 55 and 59 if age and service credit total at least 85. There is no mandatory retirement age.

The Indiana State Teachers’ Retirement Fund is funded on a pay as you go basis for employees hired prior to July 1, 1995, and who have maintained continuous employment with the same school corporation or covered institution since that date. For employees hired on or after July 1, 1995; or hired before July 1, 1995, and prior to June 30, 2005, the individual employer will make annual contributions. These contributions are set as a percentage of the employee’s salary at a rate recommended by the Fund’s actuaries.

The average retired public school teacher in Indiana gets a $17,292 annual pension.^[5]

Public Employees' Retirement Fund

The Public Employees Retirement Fund includes several pension plans including the 1977 Police Officers’ and Firefighters’ Pension and Disability Fund, Judges’ Retirement System, State Excise Police, Gaming Agent, Gaming Control Officer and Conservation Enforcement Officers’ Retirement Plan, Prosecuting Attorneys’ Retirement Fund and Legislators’ Retirement System.

PERF also administers two special death benefit funds for public safety offi cers and state employees who die in the line of duty. In addition, PERF manages the Pension Relief Fund, which was created by the Indiana General Assembly to address the unfunded pension obligations of the police officers’ and firefighters’ pension systems of Indiana’s cities and towns.

Members contribute 6 percent of first-class salary for the term of their employment up to 32 years.

Those enrolled in the Public Employee Retirement Fund (PERF)—from city and county workers to university professors and state employees--get an average of $7,470 per year.^[5]

Judges Retirement Fund

Judges who serve in eligible courts and receive a state salary participate in this retirement benefit plan. Only judges who served prior to October 1, 1985, can be members of the 1977 provisions of this system.

Participating members contribute 6 percent of the statutory wage for a maximum period of twenty-two years. The State of Indiana is responsible for paying all of the benefits provided by the plan. Currently, annual appropriations are combined with court docket fees to cover actual benefit payments.

Legislators Retirement System

Legislators elected or appointed after April 30, 1989, participate in the Legislators’ Defined Contribution Plan. As a member of this plan, you and your employer are required by statute to contribute a specified amount to your Legislators’ Retirement System (LRS) account. You must contribute 5 percent of your salary for your service after June 30, 1989.

Prosecuting Attorneys Retirement Fund

If you are a prosecuting attorney or chief deputy prosecuting attorney, you must contribute 6 percent of the state paid portion of your salary. This 6 percent contribution will be withheld by the Auditor of the State.

In addition to the state paid portion of your salary, you may receive a salary from the county. Contributions are not required on any salary you receive from the county. The county paid portion of your salary is not used in the benefit calculation.

Funding levels

The state's pension liabilities can be calculated in a variety of ways, which yield different numbers. Below are the numbers as calculated by to the Pew Center on the States^[12], the American Enterprise Institute^[13] and Professors Robert Novy-Marx of the University of Chicago and Joshua Rauh of Northwestern University, Kellogg Graduate School of Management.^[14]

Other information from the Pew Center on the States Feb. 2010 publication "The Trillion Dollar Gap":

This data is based on projected data from 2008 census data.^[16] In 2008, $1.94 trillion was set aside for pensions, but it is estimated that states have $5.17 trillion in unfunded liabilities.

Rate of return

Indiana presumes a 7.50% return rate on its pension investments.^[15]

In 2011 Indiana's public pensions collected 1 percent interest on average last year, rather than the 7 percent the Indiana Public Retirement System originally expected. The low return caused Indiana's unfunded pension liability to increase from $3.5 billion to $4.9 billion. ^[17]

Contribution rates

As of July 1, 2010, the TRF employer contribution rate rose from 7% to 7.5%.^[18]

Eligibility

A TRS member may become eligible for normal (unreduced) retirement^[19]:

• at age 65 with at least 10 years of creditable service;
• at age 60 with at least 15 years of creditable service; or
• at age 55 if age and creditable service total at least 85, which is age plus service (This scenario is referred to as the "Rule of 85")

Pension reforms

Double Dipping

The Indiana Legislature passed a bill to end supplemental benefits for public pensioners in their second careers. The Public Employees Retirement Fund said the move would save about $5.5 million annually and reduce contribution rates.There are 531 PERF retirees continuing to accumulate benefits. [20]

State budget-writers plan to increase the amount the state sets aside for public workers’ pensions from $835 million this year to $952 million, an increase of 14 percent. ^[21] The increase comes partly as a result of the state taking on local police and firefighters’ pensions as a result of the property tax overhaul passed three years ago.

At the heart of the issue are pension payments for those who became public school teachers before 1996. Those retirements were guaranteed, but no money was deducted from their schools or their paychecks and set aside. Therefore, lawmakers have to set aside money to do that in the budget. ^[21]

In the meantime lawmakers believe the increase in pension payments will crowd out other budget items - for many years to come. ^[21] According to projections by the state pension fund director, payouts for teachers in the pre-1996 plan will peak in 2027 at a little more than $1.2 billion per year.^[21]

The state’s future costs for the pre-1996 teachers’ fund are predictable. Indiana is increasing by 3 percent the amount it pays into the fund, and also using $30 million in lottery revenue. The Public Employees’ Retirement Fund, meanwhile, makes up much of the rest of the state’s unfunded liabilities. Indiana is now on a “pay as you go” plan, which means state, municipal and public safety workers pay a portion of their salaries, and the agencies that employ them pay, as well. ^[21]

Collaboration between the Indiana public employees’ and teachers’ retirement plans will save $8.5 million this year and perhaps more than $100 million in years to come, lawmakers are hoping. They expect the collaboration could lead to lower employer contribution rates in the future. ^[22]

Lawmakers' pensions

Lawmakers taking office after April 1989 receive individual retirement accounts into which they contribute 5% of their salary. They do not participate in the state's traditional pension plan. taxpayers make a contribution that is a percentage of a legislator's salary. Lawmakers broadened the definition of salary to include roughly $5 million a year they get in per diem allowances, expense payments and leadership stipends.^[23] Retired legislators receive an average of $6,846 per year.^[5]

Double dipping

A "loophole" in the pension system is that in many of the systems, employees can retire one day, be retired for a one day, and return to work at full pay and a year later start collecting retirement benefits and salary. This is known as "double dipping." At least 190 elected officials in state, county and municipal governments are double dipping in Indiana every year, receiving an average of nearly $13,000 in retirement benefits each.^[5]

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has 64 locally-administered pension systems.^[6]

Transparency

Main articles: Public pension disclosure and Governmental Accounting Standards Board

Data availability

Names of pension recipients are available. Individual participant records and amounts disbursed are not available. State law makes available only a participant's name and years of service.^[24]

A 2004 Indiana law, similar to laws in 16 other states, protects public employees from having their private information used by criminals. But, it also prohibits tracking benefits paid out from the state’s publicly funded retirement system every year. ^[25]

Fund performance data

Investment performance data is posted in annual reports for PERF^[26] and TRF^[26].

Rate of return

The funds' 7.0% assumed rate of returns is posted in actuarial valuation reports.^[27]

Unfunded liabilities

Each fund's actuarial liability is noted in actuarial valuation reports.^[27]

Oversight

Pension managers are required to file regular asset disclosure forms by law. Investment influence is regulated by rules on gifts and exchanges involving board members and managers.^[28]

Independent auditor's reports are included in each fund's annual report.^[26]

See also

• Indiana state budget
• Indiana state government salary

External Links

• Indiana State Teachers Retirement Fund
• Indiana State Pension Fund Management - State Integrity Investigation

References

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