Region residents considering a career in state or local government, including public education, may want to begin working in the next few years or risk losing a guaranteed pension benefit at retirement.
A panel of state legislators spent more than three hours Tuesday reviewing the pros and cons of eliminating the state-managed defined benefit pension for new public employees and replacing it with a 401(k)-style defined contribution plan similar to the retirement offerings of many private employers.
State Sen. Phil Boots, R-Crawfordsville, said the Legislature’s Pension Management Oversight Committee won’t be recommending the change to the full General Assembly this year, but as local governments struggle to provide services on limited budgets it’s something lawmakers may consider down the road.
“I think we need to be futuristic and look now at what point can we no longer afford DB (defined benefit) plans, because they are becoming more expensive,” Boots said.
Government employers this year will pay 11.2 percent of participating employees’ salaries to the Indiana Public Retirement System for their future pensions. Schools pay 7.5 percent for teachers.
Public employees separately pay 3 percent of their salaries to a state-managed savings account that can be claimed as a lump sum or converted to an annuity on retirement for an extra monthly benefit.
State Sen. Karen Tallian, D-Ogden Dunes, said if local governments are having trouble meeting their pension obligations perhaps the Legislature should give them new revenue streams, instead of junking a well-run, well-funded, much-needed pension program.
“I’m trying to figure out why we’re looking for a fix for something that doesn’t seem to be broken,” Tallian said. “Maybe the answer is to figure out how to stop squeezing local government.”
Lawmakers also learned unwinding the existing pension program would be costly in the short-term.
INPRS attorney Tony Green said keeping most new hires out of the pension plan — as state Sen. Ed Charbonneau, R-Valparaiso, proposed earlier this year — would spread unfunded liabilities over fewer participants and could force the employer contribution rate to more than 20 percent.
Groups representing public employees, teachers and retired teachers strongly oppose any change. They prefer guaranteed lifetime pensions over the market volatility, high fees and chance of running out of money that comes with defined contribution programs.
“These aren’t Cadillac plans. These aren’t golden parachutes,” said John O’Neal of the Indiana State Teachers Association. “We feel after years of service our members deserve a modest pension.”
Source: NWI Times