*SB0275.1*
January 26, 2024
SENATE BILL No. 275
_____
DIGEST OF SB 275 (Updated January 24, 2024 10:43 am - DI 140)
Citations Affected: IC 5-10; IC 5-10.2; IC 5-10.5; IC 5-11; IC 36-8.
Synopsis: Pension matters. Removes a provision that sets a maximum
employer surcharge for the legislators' defined benefit plan, state excise
police, gaming agent, gaming control officer, and conservation
enforcement officers' retirement plan, public employees' retirement
fund, and Indiana state teachers' retirement fund (fund). Requires the
board of trustees of the Indiana public retirement system (board) to
develop the technological and administrative capabilities sufficient to
categorize fund members into separate groups in which: (1) certain
members receive a service based thirteenth check; and (2) certain
members receive a cost of living adjustment. Requires the board to set
the surcharge rates at a level to actuarially prefund: (1) annual indexed
thirteenth checks for all current retired members and beneficiaries
retired before a date to be determined by the general assembly; and (2)
1% annual cost of living adjustments to future in-payment members
(Continued next page)
Effective: Upon passage; July 1, 2024.
Buchanan, Rogers, Niezgodski,
Walker G
January 11, 2024, read first time and referred to Committee on Pensions and Labor.
January 25, 2024, reported favorably — Do Pass; reassigned to Committee on
Appropriations.
SB 275—LS 6960/DI 144 Digest Continued
and beneficiaries retired after a date to be determined by the general
assembly. Provides that the board shall not reduce the surcharge rates
from the prior year. Allows the board to increase the surcharge rates by
not more than 0.1% of payroll from the prior year. Increases the
maximum date that a member or participant of certain retirement funds
can participate in the deferred retirement option plan from 36 to 60
months. Requires the member or participant to notify their employer if
the member or participant elects to enter or extend the deferred
retirement option plan. Requires certain political subdivisions to
present to the interim study committee on pension management
oversight regarding a delinquent employee retirement plan offered by
the political subdivision.
SB 275—LS 6960/DI 144SB 275—LS 6960/DI 144 January 26, 2024
Second Regular Session of the 123rd General Assembly (2024)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
Constitution) is being amended, the text of the existing provision will appear in this style type,
additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional
provision adopted), the text of the new provision will appear in this style type. Also, the
word NEW will appear in that style type in the introductory clause of each SECTION that adds
a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
between statutes enacted by the 2023 Regular Session of the General Assembly.
SENATE BILL No. 275
A BILL FOR AN ACT to amend the Indiana Code concerning
pensions.
Be it enacted by the General Assembly of the State of Indiana:
1 SECTION 1. IC 5-10-5.5-22, AS AMENDED BY P.L.145-2020,
2 SECTION 2, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
3 JULY 1, 2024]: Sec. 22. (a) As used in this section, "DROP" refers to
4 a deferred retirement option plan established under this section.
5 (b) As used in this section, "DROP entry date" means the date that
6 a participant's election to enter a DROP becomes effective.
7 (c) As used in this section, "DROP frozen benefit" refers to an
8 annual retirement allowance computed under section 10 of this chapter
9 based on a participant's:
10 (1) average annual salary; and
11 (2) years of creditable service;
12 on the date the participant enters the DROP.
13 (d) As used in this section, "DROP retirement date" means the
14 future retirement date selected by a participant at the time the
15 participant elects to enter the DROP.
16 (e) Only a participant who is eligible to receive an unreduced annual
17 retirement allowance immediately upon termination of employment
SB 275—LS 6960/DI 144 2
1 may elect to enter a DROP. A participant who elects to enter the DROP
2 must shall do the following:
3 (1) Agree to the following:
4 (1) (A) The participant shall execute an irrevocable election to
5 retire on the DROP retirement date and must remain in active
6 service until that date.
7 (2) (B) While in the DROP, the participant shall continue to
8 make contributions under section 8 of this chapter.
9 (3) (C) The participant shall select a DROP retirement date not
10 less than twelve (12) months and not more than:
11 (i) thirty-six (36) months after the participant's DROP entry
12 date, for a participant who executes an election described
13 in clause (A) before July 1, 2024; or
14 (ii) sixty (60) months after the participant's DROP entry
15 date, for a participant who executes an election
16 described in clause (A) after June 30, 2024.
17 (4) (D) The participant may not remain in the DROP after the
18 date the participant reaches the mandatory retirement age
19 under section 9 of this chapter.
20 (5) (E) The participant may make an election to enter the
21 DROP only once in the participant's lifetime.
22 (2) Notify the participant's employer of the DROP election
23 within thirty (30) days of the election.
24 (f) Notwithstanding subsection (e), a participant that entered the
25 DROP before July 1, 2024 and that has not exited the DROP may
26 elect to extend the participant's DROP retirement date up to sixty
27 (60) months after the participant's DROP entry date.
28 (g) A participant that makes the election described in subsection
29 (f) shall notify the participant's employer within thirty (30) days of
30 the election.
31 (f) (h) Contributions or payments provided by the general assembly
32 under section 4(b)(4) of this chapter continue for a participant while
33 the participant is in the DROP.
34 (g) (i) A participant shall exit the DROP on the earliest of the
35 following:
36 (1) The participant's DROP retirement date.
37 (2) Either:
38 (A) thirty-six (36) months after the participant's DROP entry
39 date, if the participant:
40 (i) executes an election described in subsection (e) before
41 July 1, 2024; and
42 (ii) does not execute an extension described in subsection
SB 275—LS 6960/DI 144 3
1 (f); or
2 (B) sixty (60) months after the participant's DROP entry
3 date, if the participant:
4 (i) executes an election described in subsection (e) after
5 June 30, 2024; or
6 (ii) executes an extension described in subsection (f).
7 (3) The participant's mandatory retirement age.
8 (4) The date the participant retires because of a disability as
9 provided by subsection (k). (m).
10 (h) (j) A participant who retires on the participant's DROP
11 retirement date or on the date the participant retires because of a
12 disability as provided by subsection (k) (m) may elect to receive an
13 annual retirement allowance:
14 (1) computed under section 10 of this chapter as if the participant
15 had never entered the DROP; or
16 (2) consisting of:
17 (A) the DROP frozen benefit; plus
18 (B) an additional amount, paid as the participant elects under
19 subsection (i), (k), determined by multiplying:
20 (i) the DROP frozen benefit; by
21 (ii) the number of months the participant was in the DROP.
22 (i) (k) The participant shall elect, at the participant's retirement, to
23 receive the additional amount calculated under subsection (h)(2)(B)
24 (j)(2)(B) in one (1) of the following ways:
25 (1) A lump sum paid on:
26 (A) the participant's DROP retirement date; or
27 (B) the date the participant retires because of a disability as
28 provided by subsection (k). (m).
29 (2) Three (3) equal annual payments:
30 (A) commencing on:
31 (i) the participant's DROP retirement date; or
32 (ii) the date the participant retires because of a disability as
33 provided by subsection (k); (m); and
34 (B) thereafter paid on:
35 (i) the anniversary of the participant's DROP retirement
36 date; or
37 (ii) the date the participant retires because of a disability as
38 provided by subsection (k). (m).
39 (j) (l) A cost of living increase determined under section 21(c) of
40 this chapter does not apply to the additional amount calculated under
41 subsection (h)(2)(B) (j)(2)(B) at the participant's DROP retirement date
42 or the date the participant retires because of a disability as provided by
SB 275—LS 6960/DI 144 4
1 subsection (k). (m). No cost of living increase is applied to a DROP
2 frozen benefit while the participant is in the DROP. After the
3 participant's DROP retirement date or the date the participant retires
4 because of a disability as provided by subsection (k), (m), cost of living
5 increases determined under section 21(c) of this chapter apply to the
6 participant's annual retirement allowance computed under this section.
7 (k) (m) If a participant becomes disabled, in the line of duty or other
8 than in the line of duty while in the DROP, the participant's annual
9 retirement allowance is computed as follows:
10 (1) If the participant retires because of a disability less than
11 twelve (12) months after the date the participant enters the DROP,
12 the participant's annual retirement allowance is calculated as if
13 the participant had never entered the DROP.
14 (2) If the participant retires because of a disability at least twelve
15 (12) months after the date the participant enters the DROP, the
16 participant's annual retirement allowance is calculated under this
17 section, and the participant's retirement date is the date the
18 member retires because of a disability rather than the participant's
19 DROP retirement date.
20 (l) (n) If, before payment of the participant's annual retirement
21 allowance begins, the participant dies in the line of duty or other than
22 in the line of duty, death benefits are payable to the participant's
23 surviving spouse. If there is no surviving spouse, the death benefits
24 must be divided equally among the participant's surviving children. If
25 there are no surviving children, the death benefits are paid to the
26 participant's parents. If there are no surviving parents, the death
27 benefits are paid to the participant's estate. The death benefits are
28 determined as follows:
29 (1) If the participant dies less than twelve (12) months after the
30 date the participant enters the DROP, the death benefits are
31 calculated as if the participant had never entered the DROP.
32 (2) If the participant dies at least twelve (12) months after the date
33 the participant enters the DROP, the death benefits consist of both
34 of the following:
35 (A) At the election of the survivor or survivors to whom the
36 benefit is payable, the benefit calculated under subsection
37 (h)(2)(B) (j)(2)(B) is paid in either:
38 (i) a lump sum; or
39 (ii) three (3) equal annual payments, the first as soon as
40 practicable after the date of the participant's death, the
41 second on the first anniversary of the participant's death, and
42 the third on the second anniversary of the participant's death.
SB 275—LS 6960/DI 144 5
1 (B) A benefit is paid on the DROP frozen benefit under the
2 terms of the retirement plan created by this chapter.
3 (m) (o) Except as provided under subsections (k) (m) and (l), (n),
4 the annual retirement allowance for a participant who exits the DROP
5 for any reason other than retirement on the participant's DROP
6 retirement date is calculated as if the participant had never entered the
7 DROP.
8 SECTION 2. IC 5-10.2-12-3, AS ADDED BY P.L.127-2018,
9 SECTION 9, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
10 UPON PASSAGE]: Sec. 3. (a) For 2019 and each year thereafter, the
11 contribution rate established by the board for each employer shall
12 include a surcharge determined by the board
13 (1) that is paid to the supplemental allowance reserve account of
14 the applicable fund or plan. and
15 (2) that does not exceed one percent (1%) of the employer's
16 payroll that is attributable to employees who are:
17 (A) members of the public employees' retirement fund;
18 (B) members of the 1996 account of the Indiana state teachers'
19 retirement fund; and
20 (C) participants in the state excise police, gaming agent,
21 gaming control officer, and conservation enforcement officers'
22 retirement plan.
23 The board shall determine an equivalent amount to be included in the
24 general fund appropriations for the supplemental allowance reserve
25 accounts of the legislators' defined benefit plan and, subject to
26 IC 5-10.4-2-5, the pre-1996 account of the Indiana state teachers'
27 retirement fund.
28 (b) The surcharge described in subsection (a) shall be paid in the
29 same manner as other employer contributions required under
30 IC 5-10-5.5-4, IC 5-10.2-2-12.5, IC 5-10.3-7-12.5, and IC 5-10.4-7-6.
31 SECTION 3. IC 5-10.5-4-7 IS ADDED TO THE INDIANA CODE
32 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
33 UPON PASSAGE]: Sec. 7. (a) For purposes of this section, "fund"
34 means the public employees' retirement fund, Indiana state
35 teachers' retirement fund, legislators' defined benefit plan, and
36 state excise police, gaming agent, gaming control officer, and
37 conservation enforcement officers' retirement plan.
38 (b) The board shall develop the technological and administrative
39 capabilities sufficient to categorize fund members into separate
40 groups in which:
41 (1) certain members receive a service based thirteenth check;
42 and
SB 275—LS 6960/DI 144 6
1 (2) certain members receive a cost of living adjustment.
2 SECTION 4. IC 5-10.5-4-8 IS ADDED TO THE INDIANA CODE
3 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
4 UPON PASSAGE]: Sec. 8. (a) The board shall set the surcharge
5 rates under IC 5-10.2-12-3 at a level to actuarially prefund:
6 (1) annual indexed thirteenth checks for all current retired
7 members and beneficiaries retired before a date to be
8 determined by the general assembly; and
9 (2) one percent (1%) annual cost of living adjustments to
10 future in-payment members and beneficiaries retired after at
11 a date to be determined by the general assembly.
12 (b) The board shall not reduce the surcharge rates under
13 IC 5-10.2-12-3 from the prior year.
14 (c) The board may increase the surcharge rates under
15 IC 5-10.2-12-3 by not more than one-tenth percent (0.1%) of
16 payroll from the prior year.
17 (d) This section expires December 31, 2029.
18 SECTION 5. IC 5-11-20-1.5 IS ADDED TO THE INDIANA CODE
19 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
20 UPON PASSAGE]: Sec. 1.5. As used in this chapter, "delinquent
21 political subdivision" means a political subdivision offering an
22 employee retirement plan described in section 3(b) of this chapter
23 that:
24 (1) received less than ninety-five percent (95%) of the
25 actuarially determined contribution for the immediately
26 preceding fiscal year, as determined by the system or its
27 agent; or
28 (2) was less than fifty percent (50%) funded at any time
29 during the immediately preceding fiscal year, as determined
30 by the system or its agent.
31 SECTION 6. IC 5-11-20-2.5 IS ADDED TO THE INDIANA CODE
32 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
33 UPON PASSAGE]: Sec. 2.5. As used in this chapter, "system"
34 refers to the Indiana public retirement system established by
35 IC 5-10.5-2-1.
36 SECTION 7. IC 5-11-20-6 IS ADDED TO THE INDIANA CODE
37 AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE
38 UPON PASSAGE]: Sec. 6. (a) On June 15 of each year, the system
39 shall send a delinquency notice to a delinquent political
40 subdivision. The delinquency notice must inform the delinquent
41 political subdivision that:
42 (1) an employee retirement plan offered by the delinquent
SB 275—LS 6960/DI 144 7
1 political subdivision:
2 (A) received less than ninety-five percent (95%) of the
3 actuarially determined contribution for the immediately
4 preceding fiscal year, as determined by the system or its
5 agent; or
6 (B) was less than fifty percent (50%) funded at any time
7 during the immediately preceding fiscal year, as
8 determined by the system or its agent; and
9 (2) the delinquent political subdivision must take the steps
10 described in subsection (b).
11 (b) After receiving the notice described in subsection (a), a
12 political subdivision shall make a presentation that includes a
13 remediation plan to the interim study committee on pension
14 management oversight (established by IC 2-5-1.3-4) regarding the
15 delinquent employee retirement plan described in subsection (a).
16 SECTION 8. IC 36-8-8.5-10 IS AMENDED TO READ AS
17 FOLLOWS [EFFECTIVE JULY 1, 2024]: Sec. 10. A member who
18 elects to enter the DROP shall do the following:
19 (1) Agree to the following:
20 (1) (A) The member shall execute an irrevocable election to
21 retire on the DROP retirement date and shall remain in active
22 service until that date.
23 (2) (B) While in the DROP, the member shall continue to
24 make contributions to the applicable fund under the provisions
25 of that fund.
26 (3) (C) The member shall elect a DROP retirement date not
27 less than twelve (12) months and not more than:
28 (i) thirty-six (36) months after the member's DROP entry
29 date, for a member who executes an election described in
30 clause (A) before July 1, 2024; or
31 (ii) sixty (60) months after the member's DROP entry
32 date, for a member who executes an election described in
33 clause (A) after June 30, 2024.
34 (4) (D) The member may not remain in the DROP after the
35 date the member reaches any mandatory retirement age that
36 may apply to the member.
37 (5) (E) The member may make an election to enter the DROP
38 only once in the member's lifetime.
39 (2) Notify the member's employer of the DROP election
40 within thirty (30) days of the election.
41 SECTION 9. IC 36-8-8.5-10.5 IS ADDED TO THE INDIANA
42 CODE AS A NEW SECTION TO READ AS FOLLOWS
SB 275—LS 6960/DI 144 8
1 [EFFECTIVE JULY 1, 2024]: Sec. 10.5. (a) Notwithstanding section
2 10 of this chapter, a member that entered the DROP before July 1,
3 2024 and that has not exited the DROP may elect to extend the
4 member's DROP retirement date up to sixty (60) months after the
5 member's DROP entry date.
6 (b) A member that makes the election described in subsection
7 (a) shall notify the member's employer within thirty (30) days of
8 the election.
9 SECTION 10. IC 36-8-8.5-14, AS AMENDED BY P.L.156-2020,
10 SECTION 147, IS AMENDED TO READ AS FOLLOWS
11 [EFFECTIVE JULY 1, 2024]: Sec. 14. (a) Subject to subsection (b), a
12 member who enters the DROP established by this chapter shall exit the
13 DROP at the earliest of:
14 (1) the member's DROP retirement date;
15 (2) either:
16 (A) thirty-six (36) months after the member's DROP entry
17 date, if the member:
18 (i) executes an election described in section 10 of this
19 chapter before July 1, 2024; and
20 (ii) does not execute an extension described in section
21 10.5 of this chapter; or
22 (B) sixty (60) months after the member's DROP entry date,
23 if the member:
24 (i) executes an election described in section 10 of this
25 chapter after June 30, 2024; or
26 (ii) executes an extension described in section 10.5 of this
27 chapter;
28 (3) the mandatory retirement age applicable to the member, if
29 any; or
30 (4) the date the member retires because of a disability as provided
31 under section 16.5(d) of this chapter.
32 (b) A member of the 1925 fund, the 1937 fund, or the 1953 fund
33 who enters the DROP established by this chapter must exit the DROP
34 on the date the authority of the board of trustees of the Indiana public
35 retirement system to distribute from the pension relief fund established
36 under IC 5-10.3-11-1 to units of local government (described in
37 IC 5-10.3-11-3) amounts determined under IC 5-10.3-11-4.7 expires.
38 SECTION 11. An emergency is declared for this act.
SB 275—LS 6960/DI 144 9
COMMITTEE REPORT
Madam President: The Senate Committee on Pensions and Labor,
to which was referred Senate Bill No. 275, has had the same under
consideration and begs leave to report the same back to the Senate with
the recommendation that said bill DO PASS and be reassigned to the
Senate Committee on Appropriations.
(Reference is to SB 275 as introduced.)
ROGERS, Chairperson
Committee Vote: Yeas 10, Nays 0
SB 275—LS 6960/DI 144