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Unions: State Shouldn’t Privatize Public Employees’ Pensions

Teacher Janet Craig helps students identify colors during at pre-kindergarten camp at Maple Elementary in Avon, Ind. Public school teachers would be affected by the changes to the pension fund.

The Indiana Public Retirement System Board plans to hand over control of a part of the state’s public employees’ pension system to a private company.

Officials with The Public Retirement System, INPRS, voted in July to privatize annuity savings accounts offered to public employees and teachers. Under INPRS management, the accounts earned a fixed interest rate of seven and a half percent, which is a number some suggest could be unsustainable.

With a private company, the accounts would accrue interest at market rates, considerably lower than the fixed rate.

The Indiana State Teachers Union says moving to a private company could cost teacher retirees as much as $43,000 over 20 years, and public retirees $18,000 over 20 years.

AFL-CIO Indiana President Nancy Guyott says adjusting to market conditions through privatization means public employees will lose more than they need to.

“Because that privatized firm to going to take out profit and, quite frankly, they’re also going to take out higher operating costs to support the kinds of salaries one sees at Wall Street which are quite different than the kind of salaries one sees at INPRS,” she says.

INPRS Chief Counsel Tony Green says the way in which a private company and the state will manage the accounts has not been determined.

“Based on the information that we have right now, a third party provider will have the expertise that we don’t currently have within INPRS,” he says.  “Now, how that’s structured, how that risk is shared – that, we don’t know.”

The privatization would take effect in July. A legislative panel will decide in the next few weeks whether to recommend INPRS halt privatization, allowing more time for debate on the issue.

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