INPRS adopts conservative 6.75% return assumption

The Indiana Public Retirement System (INPRS) has adopted what may be the most conservative public pension investment return assumption in the nation.

In June 2012, the system’s board reduced the rate to 6.75 percent from 7 percent. INPRS is now the lowest among the 126 public systems monitored by the annual Public Fund Survey. It is the only one below 7 percent.

“This is a prudent move by our board to recognize potential long-term global market realities,” said INPRS Executive Director Steve Russo. “The risks and consequences of assuming a too high rate of return justify a conservative approach to this and other actuarial assumptions.”

Since 2008, 45 public pension plans have reduced their return assumptions. Most now use 8 percent, and more than 90 percent assume 7.5 percent or more, according to the National Association of State Retirement Administrators (NASRA).

The overall strength of the INPRS system today contributed to the board’s ability to adopt the 6.75 percent assumed return, Russo noted. “While many states have struggled to make necessary contributions to their pension funds, Indiana is in an enviable position due to the strong financial discipline of state officials and lawmakers,” he said.

Indiana pension facts:

  • Indiana has the lowest burden per household to fully fund public pensions in the country.
  • Indiana has the second lowest combined pension and long-term debt liability as a percentage of GDP in the country.

For more info, download the Understanding INPRS whitepaper here.