Some Lawmakers Concerned Indiana Pension Privatization Delay is Too Short

May 19, 2014

Legislation passed this year required the Indiana Public Retirement System Board to delay privatizing a part of the public pension system.  But some lawmakers are concerned the delay isn’t long enough.

The INPRS Board voted last summer to privatize annuity savings accounts offered to public retirees in part because of what the board felt were unsustainable interest rates.  Under INPRS management, the accounts earned a fixed interest rate of seven and a half percent, while the rate would be considerably lower under private management, which uses market rates. 

Public unions said the difference could cost retirees thousands of dollars. 

Legislation approved last session lowers the rate over the next two years, and then allows INPRS to privatize annuity management. 

INPRS spokesman Jeff Hutson says even though the bill lowers the high interest rate, there are still benefits to privatization.

“The risk when a private provider does it is a risk that is taken on by the private provider,” Hutson said. “If the state continues to do it, then that continues to be a risk issue for the state.”

South Bend Democratic Representative David Niezgodski says public employees beginning to contemplate retirement need more time to plan than just two years.  He says the state could soon be faced with a rush of retirees.

“Is that what they’re really trying to do is have some of our best and longest term employees step away so we can bring new people in, apparently maybe for a lower cost at the beginning but with much less expertise?” Niezgodski said. “That’s what I think we’re really faced with.”

Hutson says attendance at the state’s retirement workshops is already up 30 percent this year.