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Pension Board Asks Lawmakers For Clarity On Interest Rates

After a legislative panel directed the Indiana Public Retirement System Board not to privatize some savings accounts, it's unclear how the board will set rates.

Pension Fund Distribution Poster

Photo: Brandon Smith / IPBS

Members of state agencies receiving pension funds allocations stand in front of a poster showing how the state's $271 million surplus is being distributed.

The Indiana Public Retirement System Board is asking for clarification from lawmakers after a legislative panel urged the board not to privatize a part of the public employee pension system.

The INPRS Board voted in July to privatize annuity savings accounts offered to public employees and teachers because it was concerned the interest rate established under its management was unsustainable. A private company would use market rates, which are typically lower. But teachers unions say the move would cost retirees thousands of dollars.

The Pension Management Oversight Commission voted Monday to recommend INPRS reverse its decision and set new, more sustainable interest rates. But INPRS Executive Director Steve Russo says the commission’s recommendation seems to contradict itself — asking the board to both resume control of the annuities and eliminate risk.

“The only option that we’re aware of that does not take on any risk is the outsourcing approach,” says Russo. “Even if the board were to bring this back in house and peg it to a Treasury rate, that still has an element of risk. It’s not zero risk.”

But Sen. Karen Tallian, D-Portage, who drafted the recommendation, says the panel was very clear and isn’t asking INPRS to eliminate risk entirely:

“We wanted them to adjust the interest rates on some reasonable basis, whether it’s quarterly or twice a year, whatever, just to make sure that our interest rates are in accord with the general market,” says Tallian.

Tallian says she’s not sure why INPRS is resistant to implementing the legislative panel’s recommendation. She says if the legislature needs to pass a bill to ensure the recommendation is followed, it will.

Brandon Smith, IPBS

Brandon Smith, IPBS has previously worked as a reporter and anchor for KBIA Radio in Columbia, MO, and at WSPY Radio in Plano, IL as a show host, reporter, producer and anchor. Brandon graduated from the University of Missouri-Columbia with a Bachelor of Journalism in 2010, with minors in political science and history. He was born and raised in Chicago.

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