April 4, 2014
PERF benefit changes finalized
During the most recent legislative session, the Indiana General Assembly passed House Bill 1075, which affects the Public Employees' Retirement Fund (PERF) Annuity Savings Account (ASA). Clerical, service and operations/technical staff hired before Sept. 9, 2013, participate in PERF, and this change affects those who retire after Aug. 31, 2014.
There are two parts to PERF's retirement benefits: the monthly pension benefit and the ASA. PERF provides a monthly pension benefit for the life of the retiree based on a formula that includes years of service, high five years of salary and age at retirement. The ASA is an individual account where funds are invested throughout an employee's working years, and the employee chooses how to use those funds upon retirement. The funds can be rolled over to another investment vehicle, taken in cash, or converted to purchase an annuity. The latter choice uses the ASA funds to increase the monthly benefit amount for life.
After Sept. 30, 2014, PERF will change the interest rate used to calculate the monthly benefit for those who choose to annuitize their ASA funds from the current 7.5 percent to 5.75 percent. The interest rate will change again in October 2015 to the greater of 4.5 percent or the interest rate of similar annuities purchased in the private market.
No third-party management or privatization of the ASA annuity program will be allowed until after Jan. 1, 2017. Earlier announcements from PERF indicated plans to move administration of the program to an outside vendor, but the new legislation has delayed that action.
"This change has been deemed necessary by the state to ensure the funding of the PERF pension program," says Eva Nodine, director of benefits.
Many states that sponsor pension programs have faced funding issues as life spans of retirees have increased, and years of recession have limited investment returns. Indiana's PERF program is ranked above most other states when it comes to having funds on hand to handle projected costs, but the goal is to secure the future of all retirees by making adjustments to improve the program's funding status.
PERF's website provides a summary of the changes as well as an opportunity to sign up for updates. A calculator is in development that will help determine specific impact for individuals. To learn more about these changes, visit www.in.gov/inprs/2817.htm.
"Purdue is partnering with PERF to reach out directly to participants who are vested and may wish to review the impact of these changes to their plan for retirement," Nodine says.A representative from PERF will be on-site on April 28 to assist employees who may wish to complete applications for retiring. Additional dates and times will be offered. Questions can be directed to Human Resources at 49-42222.