(September 25, 2013) –The Indiana Public Retirement System (INPRS) board has approved a novel approach to providing benefits—private annuities—but a number of state lawmakers are balking at the idea.
The board told the state Pension Management Oversight Commission that it adopted the resolution “after a thorough review of all options.” Effective July 1, 2014, annuity provision will be outsourced to a private third-party, and provided at market-based rates.
INPRS staff have argued that the fund does not have sufficient internal expertise or capacity to provide annuities to its members.
The change “will allow INPRS to leverage its purchasing power to negotiate more annuity options and the best available rates for members,” according to the fund. “By using an outside provider, INPRS avoids financial risk to the system’s future stability while providing the best possible market rate for members who wish to annuitize via INPRS.”
However, legislators serving on the commission have voiced their skepticism at the plan. Democratic state Senator Karen Tallian pointed out at a recent meeting that “managing pension funds for state employees is the whole reason for INPRS's existence,” according to local radio station WIBC.
Some retirees still have the option of a traditional pension, but others are enrolled in the annuity savings account program.
At the time of retirement, members can either accept a lump sum payout of money accrued in this account or convert it into an annuity. Roughly half choose to annuitize, according to INPRS documents.
INPRS issued a request for proposals for this contract in March, but has not yet announced the winning firm.
The state commission plans to take up the annuity outsourcing issue at its next meeting.
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