Tens of thousands of Hoosier public retirees are guaranteed to receive pension bonuses each year — including a 13th check for everyone by October — under a final draft of legislation negotiated and headed to Gov. Eric Holcomb's office.
The compromise comes after weeks of debate over policy goals and years of differences in preferred methods for obtaining additional benefits.
“I'm thrilled that we'll be helping this many people,” Rep. Bob Cherry, R-Greenfield, told the Capital Chronicle. Cherry said two women approached him at church Sunday about the then-unconfirmed legislation to say they “really needed” the check.
He has long pushed for retiree assistance and this is his last session.
Last year, lawmakers did not approve any amendment, angering many government retirees. The bonuses supplement fixed retirement benefits that do not keep pace with inflation.
The House of Representatives approved it unanimously by a vote of 98 to zero, while the Senate approved it by a vote of 44 to 3. Republican Senators Eric Bassler, Aaron Freeman and Ryan Mishler voted in opposition. The latter two cited financial concerns.
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The House of Representatives has traditionally supported earmarked privileges, and has introduced legislation to that end. On the other hand, senators have long sought a permanent solution that would not require annual or biannual legislative action, and have proposed such a plan.
But both chambers appeared skeptical of each other's bills.
The House did not hear the Senate's long-range plan before the deadline, killing it. In response, the Senate added the House-allocated bonus to the committee calendar at the last minute — only to strip the text and insert the bill that had briefly expired in the Senate instead.
The House of Representatives did not approve these changes. Lawmakers from both chambers went to a conference committee to reach a compromise — and government retirees came out with both.
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House Bill 1004 now creates a hybrid mechanism that would provide 13th annual checks to public employees retiring before July 1, 2025. Retirees after that date would receive a 1% cost-of-living adjustment.
To pay for the plan, the legislation removes the previous cap on payroll-based surcharges of 1% and instead allows the Indiana Public Retirement System Board of Directors to raise surcharge rates annually at, at most, 0.1% of payroll from the previous year. The Council is prohibited from lowering interest rates.
But in order to support retirees until the long-term plan takes effect, the legislation also grants another dedicated check for this year. It is due by October 1, 2024.
Most retirees — public school teachers, state employees and others — will receive checks worth between $150 and $450, based on years of service. This will now include those between five and ten years of age, who were previously only eligible if they were receiving disability retirement benefits.
There is dedicated funding in reserve accounts to cover the cost. A financial analysis prepared for the original House version — which did not include those able-bodied retirees with less experience, narrowing the pool of recipients slightly — estimated it at $33 million.
State Police would be eligible for a 1% share of the maximum pension for troopers with certain years of service, paid from the budget-funded State Police Pension Trust Fund. This is expected to cost about $400,000, according to the financial analysis.
The legislation now also requires the Indiana State Treasurer to establish separate reserve accounts for the two state police retirement funds. Their allocated benefits will come from a trust fund this year.
Senate leaders have previously said they don't believe the state can afford both an ad hoc and long-term plan at the same time.
“We have to build the fund,” Mishler, who chairs the powerful Appropriations Committee, told reporters last week. “If you do the 13th scan, you'll prolong the permanent repair. That's the trade-off.”
He also feared that public sector employers would struggle to afford the higher surcharge rates needed to finance both in tandem.
Meanwhile, House leaders emphasized that both are possible.
The Indiana Public Retirement System (INPRS) confirmed via email last week that lawmakers could do both “if all actuarial assumptions are met,” but cautioned that it had not considered the risks Indiana would face if finances failed to meet those assumptions.
Proceeding with both approaches would increase INPRS's unfunded liabilities by $779 million, spokesman Dmitry Keyser wrote. It would also reduce the funding positions of the 1996 Teachers' Retirement Fund and the Public Employees' Retirement Fund by about 3% and 2%, respectively, he said.
Additionally, the legislation strengthens oversight of “delinquent” political subdivisions that do not adequately fund their employees’ retirement plans. It will require representatives from those subdivisions to present remedial plans to an interim committee focused on pensions.
