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Indiana Public Retirement System

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Indiana Public Retirement System

Indiana Public Retirement System (INPRS) > My Fund > Annuity Information Annuity Information

Annuity Rate

Current: 4.5%
(through Dec 31, 2016)

INPRS selected MetLife as its future provider of member annuities. Read the full release here.

Rates are set quarterly and annuitizing your Annuity Savings Account (ASA) is optional. Attend one of our workshops to learn more.

Benefit estimate calculators with the current annuitization rate can be found here.

See: How is the rate set?

Annuitization Overview

Remember, you’re not required to annuitize ASA funds with us, and many PERF and TRF retirees do not. Before retirement you decide how to invest your ASA. At retirement, you may choose to annuitize your ASA funds, roll them over to another plan, or take the funds as a lump sum payment.

Quarterly annuity market rate changes won’t affect you if you don’t convert your ASA funds to an INPRS annuity, nor does it affect current retirees and benefit recipients who previously annuitized their ASA funds with us.

The Indiana General Assembly has set annuitization rates as noted below.

  • From Jan. 1, 2016 to June 30, 2016, annuities will be calculated with a 4.5 percent interest rate.
  • From July 1, 2016 to Dec. 31, 2016, annuities will be calculated at the market rate or 4.5 percent, whichever is greater.
  • After Dec. 31, 2016, the INPRS Board is expected to enter into an agreement with a third party annuity provider, the interest rate will be market rate.

UPDATE: Beginning Jan. 1, 2017, INPRS will use the same rate-setting methodology, but without the 4.5 percent floor. See: "Why the change?"

Questions and Answers

What company will provide future member annuities for INPRS?
MetLife will be the future provider of member annuities for INPRS.

When will this change become effective?
The change is expected to be effective April 1, 2017, with a contract finalized by Jan. 31, 2017.

How did this change come about?
In 2014, the Indiana General Assembly passed House Bill 1075 which set a glide path toward market rate annuities and allowed the INPRS board to move to a third party provider in January 2017.

How is this change beneficial to INPRS?
Employers and taxpayers are protected from the risks of managing the annuity program internally.

What do we know about MetLife?
MetLife serves over 3,000 public sector organizations across the country and has a deep understanding of the unique needs of the public sector. Over one-third of state governments across the U.S. offer MetLife group insurance or annuity benefits.

Will the use of an outside annuity provider impact the pension benefits of current or future retirees?
No. An outside annuity provider affects only retiring members who choose to annuitize the money they’ve saved in INPRS Annuity Savings Accounts (ASAs). TRF and PERF members are in the “hybrid” pension plan which includes both a pension and separate ASA.

What will MetLife’s annuity rate be?
MetLife will offer annuities at a group rate, which may often be better than the retail rate available elsewhere. Also, MetLife has certified that the group rate will be no lower than a “Guaranteed Floor” rate, which will be established yearly.

What will the new rate be beginning Jan. 1, 2017?
The Indiana General Assembly set an annuity rate to be calculated at the market rate or 4.5 percent, whichever is greater through Dec. 31, 2016. Beginning Jan. 1, INPRS will use the same rate-setting methodology, but without the 4.5 percent floor.

What is an annuity?
An INPRS annuity is a set amount of money paid to you if you convert your ASA account into a monthly benefit payment.

Am I required to convert my Annuity Savings Account into an annuity payment when I retire?
No. Converting ASA funds to an annuity from us is an option, not a requirement. The goal of annuities is to provide a steady stream of income during retirement.

How do we determine the market rate?
Each quarter we set the annuity rate as the market rate or 4.5 percent, whichever is larger.

The quarterly market rate equals 1.5 percent plus an average* of the 10-year U.S. Treasury yield, rounded to the nearest 100th percent.

Example:
Assuming a 10-year U.S. Treasury yield of 1.87 percent
Market Rate: 1.5 percent + 1.87 percent = 3.37 percent
Because this rate is lower than 4.5 percent, the annuity rate would be 4.5 percent.

*The average is determined using the last five business days of the two preceding quarters. You can get more details from our Dec. 12, 2014 board meeting minutes, here.

If I annuitize my ASA account, how do you calculate my monthly benefit?
Working with our actuary, we consider several factors, including:

  1. How long you and any other beneficiary may live.
  2. How much the annuitized funds are likely to earn when invested by us.
  3. The return we predict it can earn on these funds impacts your monthly benefit. The larger percent we predict we can earn, the larger your monthly benefit.

An outside provider will have a similar approach.

How can I estimate the future value of an annuity?
Predicting a future market rate for annuities is as difficult as forecasting next year’s mortgage or car loan interest rates. However, there are some helpful resources. Try our benefit estimate calculator if you’re near retirement. To learn more, see Information Regarding Annuities.

What is my last day at work if I want to annuitize at a particular market rate?
You probably consider your retirement day to be your last day in pay status, or the last day you work. We use a different date. Your retirement date is the first of the month following your last day in pay status.

Example: If your last day in pay status is in September, your retirement date will be Oct. 1.

Month of Last Day in Pay Status Retirement Date Market Rate Effective
January Feb. 1 January - March
February March 1 January - March
March April 1 April - June
April May 1 April - June
May June 1 April - June
June July 1 July - September
July Aug. 1 July - September
August Sept. 1 July - September
September Oct. 1 October - December
October Nov. 1 October - December
November Dec. 1 October - December
December Jan. 1 January - March

If I annuitize my ASA when I apply for benefits, what rate do I get? Is there an application deadline?
If we receive your benefit application with annuitization decision within six months of your effective retirement date, you’ll get the annuitization rate in effect as of that date.

Remember, your retirement date is the first day of the month after your last day in pay. Your last day in pay status is usually the date most people think of as their retirement day, including any specific days you are paid while not at work, such as vacation time.

If I defer annuitizing my ASA/RSA* until after I have started receiving benefits, what rate can I expect?
If you wait to annuitize your ASA/RSA, you’ll get the active rate on the date we get your election form.

To annuitize your ASA funds, complete the Election for Post Retirement Distribution form available on this website: PERF | TRF.

*RSA = Rollover Savings Account (money from another plan you have rolled into your PERF or TRF account)

If I roll funds over from a qualified plan and those funds arrive after my annuity payment has started, what annuity rate do I get?
If your rollover funds arrive after your annuity payment starts, your annuity will be recalculated based on the rate you already have. The rollover won’t change your rate. If you plan to annuitize rollover money as part of your retirement, you must tell us in writing as part of your retirement application.

The INPRS Annuity Rate "Floor" Expires in 2017

INPRS is changing the way it calculates annuities beginning Jan. 1, 2017. The legislatively mandated floor of 4.5 percent INPRS currently uses in its calculation will expire at the end of 2016. This means your monthly annuity amount could be lower if you annuitize Jan. 1, 2017 or later.

Without the floor, INPRS would currently be calculating annuities at 3.34 percent. The table below shows examples of what the difference in monthly annuity payments could be once the floor rate expires.

Total annuitized amount Approximate difference* in monthly benefit payment
$30,000 $18.26 lower
$90,000 $54.79 lower

*Approximate difference when calculating monthly annuity payment with the current 4.5% rate vs. the 3.34% rate noted above. Estimates are made for a single-life, immediate fixed annuity for a 65 year old annuitant with a 20-year life expectancy.

This change has no impact on the calculation of your pension benefit. It impacts only those members who wish to convert their Annuity Savings Account (ASA) funds to a monthly benefit, called an annuity, through INPRS. INPRS will continue to administer your ASA until you choose what to do with it: annuitize, roll it over into a qualified account, or withdraw your balance.

If you are retired from an INPRS covered position and still have an annuity savings account (ASA) with us or are planning on retiring soon, you should consider your annuity options. Here’s what you need to know:

  • From now until Sept. 30, 2016, members annuitizing with INPRS will receive the INPRS annuity rate (currently 3.34 percent) or the 4.5 percent legislative floor, whichever is greater.
  • The INPRS annuity rate which will be effective from Oct. 1-Dec. 31, 2016 is 3 percent. However, since the legislative floor is still in effect and it is greater than the INPRS annuity rate, annuities will be issued at 4.5 percent.
  • After Jan. 1, 2017, INPRS’ annuities will be offered only at the INPRS annuity rate. No legislative floor will be offered. If your annuity application is received after Dec. 30, 2016, you will receive the INPRS annuity rate.

If you are planning on retiring soon and wish to take advantage of the rates ending Dec. 31, 2016, your last day in pay must be Nov. 30, 2016 or earlier. You must also be retirement eligible by Dec. 1, 2016.

If you have already retired from INPRS and have not annuitized your ASA and would like to do so now, you must complete your application for post-retirement payment of your ASA balance. INPRS must receive your application before Dec. 30, 2016 for you to take advantage of the 4.5 percent legislative floor. You should submit this paperwork well in advance of this date in order to ensure you receive the rate you want.

As soon as April 1, 2017, INPRS will no longer provide annuities, but will work with MetLife to provide competitive fixed-rate annuities. This is good news for INPRS, taxpayers, and members alike. By partnering with MetLife, INPRS members will have the advantage of receiving MetLife’s “Best Price” on their fixed-rate annuity products and oftentimes a higher annuity rate than what is available on the retail market. MetLife will offer an additional protection through a “guaranteed floor” that will be established yearly. The payouts from MetLife’s “Best Price” model and INPRS’ Annuity Rate have been comparable through time, but have exhibited differences depending on the investing environment.

If you have questions, INPRS is here for you. If you’re ready to retire or annuitize, contact us at (888) 286-3544 or schedule a workshop or appointment with one of our retirement counselors. Please register for a workshop or appointment, here.

Remember, you are not required to purchase an annuity with your ASA funds; 60 percent of members do not. And, if you wish to annuitize, you may do so through the provider of your choice.