How do I earn an Annuity Savings Account?
You begin receiving contributions to a defined contribution account, called an Annuity Savings Account (ASA), from your first day in PERF-covered employment. Your ASA is funded by a different contribution than funds the defined pension benefit portion of the PERF Hybrid plan, and these funds belong to you no matter how long you work in a PERF-covered position.
Mandatory Contributions
State law requires that 3 percent of your gross wages (regular and overtime pay) be contributed to PERF to fund your Annuity Savings Account. As employers, local units of government, public schools, and universities are given the option of paying their employees' 3 percent contributions as part of a wage adjustment; however, not all employers do so. Each employer has a governing body that makes decisions related to its participation in PERF, including whether or not the employer will pay the 3 percent contributions on behalf of its employees. Indiana law requires the state of Indiana to pay the 3 percent contributions for state employees.
Regardless of whether you make the 3 percent contribution or your employer does on your behalf, those contributions are considered member contributions and are sent to PERF for deposit in your individual Annuity Savings Account. These contributions and accumulated interest credits are refundable to you should you leave employment prior to becoming eligible for the Defined Benefit Pension. While you are actively employed in a position covered by the Fund, you are not permitted to withdraw funds from your Annuity Savings Account for any reason.
Post-Tax Voluntary Contributions
In addition to the 3 percent mandatory contribution, you may contribute up to an additional 10 percent of your compensation out of your after tax wages if your employer participates in the voluntary contributions program.
Like the mandatory 3 percent contributions, interest and earnings on additional voluntary contributions held in your PERF ASA account will be tax deferred until you either take a distribution of your account at retirement or take a distribution. Again, these voluntary contributions will be withheld from your paycheck on a post-tax basis.
Your employer administers this program through the payroll process. If you are interested in participating, please contact your payroll supervisor for further information.
Pre-tax Voluntary Contributions
The Internal Revenue Service has given its approval for the Public Employees' Retirement Fund to begin accepting voluntary contributions from active members on a pre-tax basis subject to certain conditions:
- Your employer must have elected to participate in this program;
- You must choose to make a voluntary pre-tax contribution of not more than 10 percent of your gross wages within two years after August 31st after you have reached five years of PERF-covered service; and
- The percentage of each pay period's wages which you choose to contribute CANNOT be changed as long as you work for the same employer in any PERF-covered position. If you leave employment and return to the same employer, your pre-tax contribution will be reinstated. If you work for a different employer, and have not taken an ASA distribution, you will be able to make a new pre-tax contribution decision.
Members are urged to consider all the conditions and consequences of pre-tax contributions carefully because of the restrictions about later changes. Consulting with an expert on tax planning is advised. Further details on this option are available at: Voluntary Pre-tax FAQ
This option is open only to active members.
