Update on the 2013 changes to TRF/PERF Retirement Benefits
ETA is committed to keeping members informed about issues that impact them and their profession. The 2013 changes to teachers' retirement benefits made by the Indiana Public Retirement System (INPRS) board raised many questions and concerns among members. The legislature, urged by ISTA and member contacts, addressed these concerns in HB1075. The final update on HB1075 was reported on the ISTA blog, and is copied below.
HB 1075 (INPRS ASA CALCULATION AND PRIVATIZATION)--As reported yesterday, the value of your lobbying work all fall and during this session came to the fore with an improved interest rate calculation focused in on those most near to retirement. If there was a doubt as to whether your voice was heard this session, that was erased when the Speaker chose to call HB 1075 as the very last bill tonight before sine die adjournment. All along, this was a bi-partisan issue and tonight's votes in the House and Senate reflect that: 89-0 in the House and 42-5 in the Senate.
Word in the hallways was that the Speaker himself (State Rep. Brian Bosma; R-Indianapolis) spearheaded the renewed interest in finding an improved calculation and ISTA certainly thanks him for that. According to the floor discussion, he worked with Minority House LeaderScott Pelath (D-Michigan City) to revive the discussion. The improvements would not have been possible without the mutual support of the President (State Senator David Long; R-Fort Wayne) and Minority Senate LeaderTim Lanane (D; Anderson).
As you may remember from last week's blog, a conference committee was convened to announce a formula calculation that would begin this fall at the 10-year US Treasury note rate plus 1.5%. Using current rates as a guide, this would have amounted to 4.16% (from the current 7.5% rate used). As presented last week, conferees believed that based upon the Governor's stance, no further changes would be acceptable. ISTA advocated for a better formula and asked our legislative champions to keep working on this bill--and then we asked you to take a moment during last weekend to make one final push with legislators and the Governor. ISTA cannot remember the last time that a bill as inherently complicated as this one had such universal understanding and awareness by rank and file legislators. That is all to your credit for telling your stories.
Under the enacted version of this bill:
The annuity discount rate will be 7.5% through September 30, 2014.
Beginning October 1, 2014 through September 30, 2015, the rate will be 5.75% (which is the highest proposed rate we've seen since early in the session when the House passed the bill out).
Beginning October 1, 2015 through December 31, 2016, the rate will be the greater of the interest rate for similar annuities being purchased in the private market as determined by INPRS or 4.5%.
Beginning January 1, 2017, INPRS will be permitted to outsource this work--which gives us all time to work this issue into the deeper future.
We all knew going into the session that the 7.5% was never going to be maintained. The goal was to get the best rate possible for as long as possible. The enacted version gives some degree of breathing room for those most on the bubble to retirement. Most importantly, the uncertainty over the terms for the immediate future is now over and if interest rates rise in the longer run, so too will the monthly annuity benefit payment rise. Every potential retiree will have to crunch his/her own numbers to determine what course of action is best. Everyone's story will be different.
ACTION ITEM: There are a number of legislators to thank besides the leaders listed above--and we know we will miss some, so please forgive. But clearly, State Representatives Woody Burton (R-Whiteland) and David Niezgodski (D-South Bend) and State Senators Phil Boots (R-Crawfordsville) and Karen Tallian (D-Portage) were working on this from the very beginning (last summer). And Sen. Luke Kenley(R-Noblesville) became a conferee on the bill just this week. His support became invaluable. Finally, and this is the absolute truth: Please thank your own state representative and senator for taking the time to understand this issue and for caring enough about it to repeatedly go to their legislative leaders to call for more work.