Indiana Public Retirement System, Indianapolis, on Friday asked a legislative committee for clarification on its recommendation against privatizing management of the retirement system's $5.5 billion annuity savings account, said Jeff Hutson, system spokesman.
The state Legislature's Pension Management Oversight Commission on Monday recommended to the board, which oversees $28.3 billion in retirement assets, that a search for lifetime annuity providers to run the ASA be halted and that the account continue to be managed internally.
Board members were concerned that running the annuity account internally would put the retirement system at risk for liabilities, which the commission wanted to guard against. An outside provider would be responsible for those liabilities, Mr. Hutson said.
“We want to make sure we understand how (the commission) wants us to do this without creating a liability,” he said.
No date for a meeting with the commission had been set, Mr. Hutson said, but the issue of outsourcing management will be on the board's agenda at its next meeting on Dec. 13.
Meanwhile, the board is continuing its plans to reissue an RFP for an external provider, assisted by Callan Associates, which was hired earlier this month. The RFP is expected to be issued in early 2014, Mr. Hutson said.
“The RFP process is continuing until we decide we won't be using an outside provider,” Mr. Hutson said.
Along with the hiring a lifetime annuity provider, the board wants to change the ASA's rate of return to one based on market rates vs. the current fixed 7.5%. The legislative commission did not suggest the board reconsider changing the rate of return, which according to staff at INPRS would be in the 4% to 4.5% range if the rate were market-based.
The retirement system could outsource management of the ASA without commission approval but would be bound by any legislation passed by the Indiana General Assembly concerning ASA management.
All participants in the two pension funds overseen by INPRS — the Indiana Public Employees Retirement Fund and the Teachers Retirement Fund — also have ASA accounts; more than half of participants annuitize their assets upon retirement, while the remainder take lump sums.
Strategic Investment Solutions remains the retirement system's general investment consultant.
