LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6751 NOTE PREPARED: Feb 20, 2025
BILL NUMBER: SB 388 BILL AMENDED: Feb 17, 2025
SUBJECT: 1977 Pension and Disability Fund.
FIRST AUTHOR: Sen. Rogers BILL STATUS: As Passed Senate
FIRST SPONSOR: Rep. VanNatter
FUNDS AFFECTED: GENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: ‘77 Fund Benefit: The bill increases the basic monthly pension benefit payable
to a member of the 1977 Police Officers' and Firefighters' Pension and Disability Fund (‘77 Fund) who retires
after June 30, 2025, with 20 years of service. It also increases the contribution rate of fund members.
Fund Membership: The bill provides that a municipality, a unit, an airport authority, a school corporation,
or a charter school may require certain members of the Public Employees Retirement Fund (PERF) to
continue as members of that fund instead of the ‘77 Fund.
Effective Date: Upon passage; July 1, 2025.
Explanation of State Expenditures: Indiana Public Retirement System (INPRS): INPRS administers the
‘77 Fund and would have increased workload to make administrative changes to provide for increased
benefits to members. The administrative costs of the ‘77 Fund are paid from the fund.
Explanation of State Revenues:
Explanation of Local Expenditures: ‘77 Fund Benefit: Increasing the basic monthly benefit for members
of the ‘77 Fund who retire after July 1, 2025 would increase expenditures from the ‘77 Fund for pension
benefits. The proposal would increase the present value of future benefits for the ‘77 Fund by an estimated
$99.3 M. This would increase the unfunded liability of the ‘77 Fund by $64.4 M and would reduce the
funded status of the ‘77 Fund by 0.6 percentage points from 89.7% funded to 89.1% funded.
The bill would also increase expenditures for local employers. The bill would increase the employer
contribution rate by an estimated 0.3% of salary—likely beginning in calendar year 2027 since the INPRS
board has already set the employer contribution rate for calendar years 2025 and 2026.
Fund Membership: Under the bill, a municipality, unit, airport authority, school corporation, or charter
school may elect to require certain officers who are members of PERF to remain in PERF rather than become
members of the ‘77 Fund. Under current law, the employee has the choice of funds. The impact on local
SB 388 1 units’ employee contributions for PERF and the ‘77 Fund is indeterminate and will depend on local employer
decisions.
Additional Information - The bill increases the basic monthly benefit for a member of the ‘77 Fund who
retires after July 1, 2025. Under current law, the benefit calculation equals 52% of the monthly salary of a
first class patrolman or firefighter plus 1% for every additional six months served beyond 20 years of service
up to 12 additional years. The bill would increase the basic monthly benefit to 53% of the monthly salary
of a first class patrolman or firefighter plus 1% for each additional six months served past 20 years for
service up to an additional 12 years.
The estimate was done using the data, methods, assumptions and provisions used in June 30, 2024 actuarial
valuations for the ‘77 Fund. The fund impact would differ from what is estimated if members delay
retirement or if members who are currently in the deferred retirement option plan (DROP) decide to exit the
DROP to take advantage of higher benefit accruals under the bill. In addition, some retirees may retire earlier
than they would under current law because they would be able to receive the same retirement amount sooner
than they could under current law.
The employer contribution rate is set as a percentage of salary sufficient to cover the actuarially determined
contribution rate determined by fund actuaries. Actuaries do this by computing the present value of future
benefits. This is the amount required to fund the normal cost (the cost for new service and new pay earned
in the current year) as well as an amount to cover any unfunded liability of the fund. The unfunded liability
is paid for (amortized) over 20 years. The employer contribution rate for the ‘77 Fund is set at 19.1% for
calendar year 2024, and 20.3% for calendar year 2025, and 23.3% for calendar year 2026. The ‘77 Fund is
89.7% funded as of June 30, 2024.
Explanation of Local Revenues: ‘77 Fund Benefit: The bill would increase revenue to the ‘77 Fund from
employee and employer contributions. The employee contribution rate would increase from 6% to 6.5% of
salary for active members with up to 32 years of service beginning July 1, 2025. The bill would increase the
employer contribution rate by an estimated 0.3% of salary—likely beginning in calendar year 2027 since the
INPRS board has already set the employer contribution rate for calendar years 2025 and 2026.
Fund Membership: Under the bill, local units may elect to require certain officers who are members of PERF
to remain in PERF rather than become members of the ‘77 Fund. Under current law, the employee has the
choice of funds. The impact on fund revenue for PERF and the ‘77 Fund is indeterminate and will depend
on local employer decisions.
State Agencies Affected: Indiana Public Retirement System.
Local Agencies Affected: Local units with police and fire departments with members in the ‘77 Fund,
airport authorities, school corporations, and charter schools.
Information Sources: CavMac Actuarial Consulting Services, LLC. (2025, January 27.) SB 388 - 1977
Police Officers’ and Firefighters’ Retirement Fund Accrual Rates.
Fiscal Analyst: Camille Tesch, 317-232-5293.
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