A new asset allocation and target rate of return adopted by the INPRS board on May 7 is designed to meet the system’s obligations to plan members, achieve fully funded status within 20 years, and control employer contribution rates.
The target return was lowered to 6.25% from 6.75%, which was previously set in 2012 and reaffirmed in 2015. The Board approved the changes following an asset-liability study. INPRS completes these studies approximately every five years.
The Board concluded the new target return is more achievable based on INPRS’s analysis of expected returns in the future.
While the target return is lower, it does not impact the benefit calculation used to determine pension benefits for members. INPRS members will continue to be paid the benefits they've earned at the same rate.
The INPRS system remains solid. The total actuarial funded status of INPRS' seven pre-funded defined benefit plans was 90.6% in the fiscal year ending June 30, 2020.
Employer contribution rates
The INPRS board will not set any new contribution rates until the fall of 2021. However, INPRS’s investment returns above the 6.25% rate can mitigate any upward pressure on contribution rates. INPRS’s defined benefit portfolio has returned 14.73% fiscal year-to-date and 9.01% annualized over the past five years.
Public Employees” Retirement Fund: The new return assumption is not expected to change the Public Employees Retirement Fund (PERF) employer contribution rates.
Teachers’ Retirement Fund (TRF) pre-1996 account: The TRF ‘96 contribution rates are expected to rise to 6.5% by the fiscal year 2026.
1977 Police Officers’ and Firefighters’ Retirement Fund (‘77 Fund): The ‘77 Fund has an expected increase in contribution rate from 17.5% to 21.1% by the fiscal year 2026.
The new 6.25% target rate of return is among the lowest in the nation, according to research from the National Association of State Retirement Administrators (NASRA). Among the 130 plans measured by NASRA’s Public Funds Survey, 101 (78%) have reduced their assumed rate of return since the fiscal year 2017, and all but five plans (96%) have done so since the fiscal year 2010. These reductions have resulted in a decline in the median return assumption from 7.53% in FY 2017 to 7.18% in FY 2021.
What’s next?
There’s nothing employers need to do now. Later this year, the INPRS Board will discuss and approve contribution rates for FY 22-23. When those new rates are approved, INPRS will communicate that information to you.
Are your employees at risk?
Thank you to those that have successfully cleaned up their user security roles and contact types within ERM! Because of this cleanup, your employees' information is in the right hands.
As a reminder, ERM does not automatically remove past employees from the system. If you do not disable your employee's access within ERM when they leave your workplace, they still have access to your dashboard based on their current administrative role. So, what are the risks? Here's an example:
Grace Smith works for a school system and is assigned as a Wage and Contribution Administrator within ERM. Grace announces she is leaving in two weeks to work for another school system in Indiana. Once she leaves, Grace is removed from her previous work's email and mailing system but isn't removed from the ERM. Out of curiosity, Grace updates her password and logs into her old account. In the system, Grace still has permission to:
· Bulk upload wage and contribution entries and adjustments,
· Submit online wage and contribution entries and adjustments,
· View wage and contribution reports,
· View employees' Social Security Numbers,
· Resolve wage and contribution transactions sent to the Exception Queue,
· Add/verify payroll calendar information upon initial login,
· And submit PERF Employer Enrollment forms.
Access to this information not only puts your employees' data at risk but your organization's security as well. To prevent this example from becoming a reality, please be sure to update your security roles and contact types within ERM.
To review each security role ranked from most access to least access to personal employee information in ERM, click here.
To review the contact types and definitions within ERM, click here.
If you have questions, please contact our Employer Advocate Team at (888) 876-2707.
Update LDIP’s before summer
Many INPRS members choose to move on to new career opportunities at the end of the school year, and it’s important to make sure that any recently departed employees’ last day in pay (LDIP) is updated in ERM. If this important date isn’t noted, INPRS cannot accurately account for their years of service, which may negatively impact them when they go to retire someday.
While updating last day in pay into ERM, please be sure to also reply to our Employer Advocate team stating if your members will receive a contract payout. This step helps our benefit team to identify why there are high wages in ERM, which ultimately speeds up processing for your member.
Encourage Your Employees to Register for our Webinar Presentations
Do your employees want to learn more about their investment options, how their plan works, or ways to budget? We can help! INPRS offers online webinars covering topics important to your employees, including:
*Understanding Your PERF/TRF Plan
*Positive Money Habits
*PERF/TRF Retirement Benefits
*Asset Allocation & Investment Basics Education
*1977 Police and Fire Fund webinar
Let your employees know about these education opportunities by sending them this information in your next all-staff email. Have them visit here to register for a webinar.