LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6769 NOTE PREPARED: Feb 18, 2025
BILL NUMBER: SB 250 BILL AMENDED: Feb 13, 2025
SUBJECT: Pension Matters.
FIRST AUTHOR: Sen. Buchanan BILL STATUS: 2
nd
Reading - 1
st
House
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: The bill modifies the definition of "average of the annual compensation" for a
member of the Public Employees' Retirement Fund (PERF) who retires after December 31, 2026. It specifies
that compensation received in contemplation of retirement is excluded from the average of the annual
compensation for particular members of PERF and the Indiana State Teachers' Retirement Fund (TRF).
The bill repeals a provision requiring the board of trustees of the Indiana Public Retirement System (INPRS)
to maintain separate accounts for each unit of local government.
It provides that amounts forfeited under the Public Employees Defined Contribution Plan (PERF MyChoice)
must be used as determined by the board. (Current law requires these amounts to be used to reduce the
unfunded accrued liability of PERF.)
The bill specifies a process by which a fully vested member of PERF MyChoice or the Teachers' Defined
Contribution Plan (TRF MyChoice) may irrevocably elect to participate in PERF or TRF, as applicable.
The bill modifies the information that must be included in a delinquency notice to a delinquent political
subdivision.
It also makes conforming amendments.
(The introduced version of this bill was prepared by the Interim Study Committee on Pension Management
Oversight.)
Effective Date: Upon passage; July 1, 2025.
Explanation of State Expenditures: Summary - The bill makes changes that would on net have an offsetting
impact on the funded status of PERF. Changing the retirement calculation for PERF will reduce the cost of
future PERF benefits while the severance change would increase the cost of PERF benefits. The severance
change to TRF may have a minor negative impact on the funded status of TRF. The fund impacts will depend
SB 250 1 on future salary, retirement, and severance decisions. If future retiree benefit amounts differ from projections
made by fund actuaries due to these changes, any change to the fund would be amortized over 20 years and
would be taken into account when future employer contribution rates are set for PERF and the state General
Fund appropriations are made for the TRF Pre-‘96 Fund.
Giving the board discretion on what to do with forfeited amounts in the PERF MyChoice plan could allow
the board to credit the forfeited amounts back to employers and reduce what they would pay in employer
contributions for other employees, or the board could use the forfeited funds to reduce administrative fees
paid by PERF MyChoice members. Either use of forfeited funds are allowed under IRS requirements. If the
board chose to credit forfeited amounts back to employers, the state agencies as employers would have
reduced expenditures for employer contributions for employees who are members of PERF MyChoice. Under
IRS rules, forfeited funds have to remain in the PERF defined contribution trust and cannot be used to reduce
unfunded liability in the PERF defined benefit fund.
INPRS: INPRS would have to make administrative changes under the bill. The costs of administering the
pension funds are paid from the respective funds. Changing the PERF pension benefit calculation and
changing the calculation of severance pay for PERF and TRF will allow for increased automation of the
pension benefit process, decrease workload and administrative costs, and reduce the time that is necessary
for a retiree to begin receiving benefits following retirement. The change to allow individuals in PERF
MyChoice or TRF MyChoice to switch to the PERF or TRF hybrid plan would be a workload increase for
INPRS.
Additional Information - The bill changes the definition of PERF average earnings. The current law
calculation is based on the highest twenty quarters of an individual’s salary in groups of four consecutive
calendar quarters. This bill instead uses the five years where the member had the highest compensation.
Years are measured beginning on January 1 or July 1 of a year. Individual members may receive a slightly
smaller pension benefit under the change, and there would be a positive funding impact to the fund.
The bill also changes limits for the amount of severance pay that is included in the pension benefit
calculation for retirement in PERF and TRF from a severance amount capped at $2,000 to a cap in
pensionable earnings in the last year of service of 120% compared to the prior year. The impact to the funds
will depend on future employer salary and severance decisions. Individual members may result in having a
slightly larger pension benefit under the change, and there could be a negative impact to the fund.
Allowing PERF or TRF MyChoice members to switch to PERF and TRF respectively would have no fiscal
impact. Individuals who switch funds would be required to begin vesting anew in PERF and TRF or would
be required to purchase service credit.
Explanation of State Revenues:
Explanation of Local Expenditures: See Explanation of State Expenditures. If future retiree benefit
amounts differ from projections made by fund actuaries due to these changes, any change to the PERF or
TRF funds would be amortized over 20 years and would be taken into account when future employer
contribution rates are set for PERF and TRF ‘96.
If the board chose to credit forfeited amounts from PERF MyChoice back to employers, local units with
members in PERF MyChoice would experience a reduction in expenditures for employer contributions for
members of PERF MyChoice.
SB 250 2 Explanation of Local Revenues:
State Agencies Affected: Indiana Public Retirement System; state agencies as employers.
Local Agencies Affected: Local units with members in PERF, TRF, PERF MyChoice, and TRF MyChoice.
Information Sources: Tony Green. INPRS. Testimony to PMOC.
https://iga.in.gov/session/2024/video/committee_i_pension_management_oversight_interim_study_com
mittee_on/
INPRS. (September 23, 2024). INPRS Proposals.
https://iga.in.gov/pdf-documents/123/2024/universal/committees/interim/pension-management-oversight-
interim-study-committee/df1515c9-85de-4463-815b-78b08e3acac1/exhibits/attachment_5795.pdf
Fiscal Analyst: Camille Tesch, 317-232-5293.
SB 250 3