Thousands of Early Retirements Coming In Indiana As New Law Takes Effect

Early retirements in Indiana in wake of new pension tweak

A new law has pushed forward the retirement plans of thousands of Indiana workers, who may retire early to try and avoid lower interest rates on their monthly retirement benefits.

One state system, the Indiana Public Retirement System, said it expects 2,000 more retirements than last year, which amounts to a 25 percent increase. From the Lafayette Journal and Courier:

A law, passed by the General Assembly this spring, lowers the interest rate retirees will be paid if they choose to annuitize some of their retirement benefits, taking monthly payments for the rest of their lives rather than a lump sum.

For employees whose last day of work is before the end of August, the rate is 7.5 percent. It’ll drop to 5.75 percent thereafter and keep dropping until it’s tied to the market rate.

The change is supposed to prevent a changing world from bankrupting the system, according to INPRS documents. Concerns stem from longer life expectancies and the system’s return on investment, which is lower than the current interest rate.

While system administrators say the lower rates are necessary, the change has inspired government workers who were nearing retirement to move up their plans.

Of course, nobody knows for sure how many of those extra retirements were spurred specifically by the new law. From JC Online:

Local officials says it’s hard to judge the exact impact the new law has on retirees.

In the Lafayette School Corp. for example, 37 teachers retired this year, more than the typically 20 to 25 teachers, said assistant superintendent John Layton. But without asking each one point blank why they’re retiring, the reasons prompting that retirement aren’t always clear.

[…]

West Lafayette city human resources director Diane Foster said the change has had minimal impact on the city. The only retiree to cite that as a reason is soon-to-retire parks and recreation superintendent Joe Payne.

“Other than that I’m not aware of any other employees who have made that decision based on this,” Foster said. “It could be that if an employee is already considering retirement this may be just one more factor that could help them go ahead (and do it).”

It’s unclear how the change is impacting Lafayette. Human resources director Kim Meyer said retirement data wasn’t immediately available.

Rhondalyn Cornett, president of the Indianapolis Education Association, told the Lafayette Journal Courier that a retiree could see significantly less benefits under the new law—to the tune of $5,000 a year.

With that number in mind, it’d be surprising if the new law wasn’t at least a factor in most of these early retirements.

 

Photo by www.aag.com via Flickr CC License

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