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Indiana lawmakers mull 5-year delay in annuity program privatization

A bill before the Indiana House of Representatives would bar the Indiana Public Retirement System, Indianapolis, from privatizing its $5.6 billion Annuity Savings Account for five years.

The board of the retirement system, which oversees $28.6 billion, wants to shift management of the account to a third-party manager that would use a market-based rate of return that now would be 4% to 4.5%; currently the ASA is managed in-house with an assumed 7.5% fixed rate of return. System officials have said maintaining internal management with the higher rate of return would increase the retirement system's liabilities.

Under the House bill, authored by state Rep. Woody Burton, the retirement system's board can set the annuity interest rate annually for the next five years, but not lower than the rate of return for the overall retirement system in the previous fiscal year, according to the Indiana General Assembly's website. The system's overall rate of return in the 12 months ended June 30 was about 6%.

The bill was unanimously approved by the state House Employment, Labor and Pensions Committee on Tuesday.

“INPRS is neutral on the bill, but we are engaged in providing information as needed on this and other pension-related legislation,” said Jeff Hutson, retirement system spokesman, in an e-mail. INPRS was not involved in any negotiations on the bill, he added.

The retirement system still plans to issue an RFP for an annuity service provider next week, Mr. Hutson said. Callan Associates, hired in October to help the retirement system develop an operational model for the ASA, continues to work for the system.

All participants in the two pension funds overseen by INPRS — Indiana Public Employees Retirement Fund and Teachers Retirement Fund — also have ASA accounts; more than half of participants annuitize their assets upon retirement, while the remainder take lump sums.