Citations Affected: IC 5-10.3; noncode.
Synopsis: Pension relief fund distributions. Provides that distributions
from the pension relief fund to local units of government shall be made
in a particular year based on estimates of pension liabilities in the
ensuing year. Provides that in 2001, units of local government will
receive pension relief fund distributions under both the current pension
relief fund law and under the amended law. Provides that an eligible
unit of government receiving a distribution from the pension relief fund
must spend from its local resources in 2001 through 2007 and sets forth
the minimum amounts of the required local spending. Provides that to
the extent that a distribution is paid in November 2001 or in 2002, that
distribution must be placed in trust or encumbered for future pension
payments. For each year through 2007, provides an additional annual
distribution from the pension relief fund. Provides that the additional
distribution is the amount necessary to ensure that at least 50% of each
unit's pension liability is paid from the pension relief fund. Requires the
PERF board of trustees to maintain separate accounts for each unit of
local government into which a unit may: (1) make deposits; and (2)
withdraw one time each year all or a portion of the unit's balance in the
account to pay pension benefits under the old police and firefighter
pension funds. Provides a one-time distribution from the pension relief
fund in 2001 in an amount sufficient to ensure that the pension relief
fund has paid at least 50% of each unit's pension liability for 1998
through 2000. (The introduced version of this bill was prepared by the
pension management oversight commission.)
Effective: Upon passage; July 1, 2001.
January 11, 2001, read first time and referred to Committee on Pensions and Labor.
January 29, 2001, reported favorably _ Do Pass.
February 5, 2001, read second time, amended, ordered engrossed.
A BILL FOR AN ACT to amend the Indiana Code concerning
pensions.
SECTION 1. IC 5-10.3-11-4 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 4. (a) Monies from
the pension relief fund shall be paid annually by the state board under
the procedures specified in this section.
(b) Before April 1 of each year, each unit of local government must
certify to the state board:
(1) the amount of payments made during the preceding year for
benefits under its pension funds covered by this chapter, referred
to in this section as "pension payments";
(2) the data determined necessary by the state board to perform an
actuarial valuation of the unit's pension funds covered by this
chapter; and
(3) the names required to prepare the list specified in subsection
(c).
A unit is ineligible to receive a distribution under this section if it does
not supply before April 1 of each year (i) the complete information
required by this subsection; or (ii) a substantial amount of the
information required if it is accompanied by an affidavit of the chief
executive officer of the unit detailing the steps which have been taken
to obtain the information and the reasons the complete information has
not been obtained. This subsection supersedes the reporting
requirement of IC 5-10-1.5 as it applies to pension funds covered by
this chapter.
(c) Before July 1 of each year, the state board shall prepare a list of
all police officers and firefighters, active, retired, and deceased if their
beneficiaries are eligible for benefits, who are members of a police or
fire pension fund that was established before May 1, 1977. The list may
not include police officers, firefighters, or their beneficiaries for whom
no future benefits will be paid. The state board shall then compute the
present value of the accrued liability to provide the pension and other
benefits to each person on the list.
(d) Before July 1 of each year, the state board shall determine the
total pension payments made by all units of local government for the
preceding year and shall estimate the total pension payments to be
made to all units in the calendar year in which the July 1 occurs and in
the following calendar year.
(e) Each calendar year, the state board shall, distribute to with
respect to the following calendar year, determine for each unit of
local government in two (2) equal installments on or before June 30
and on or before October 1, an amount (Dy). The state board shall, in
two (2) equal installments before July 1 and before October 2,
distribute to each eligible unit of local government the amount (Dy)
determined for the unit with respect to the following calendar year.
The amount (Dy) shall be determined by the following STEPS:
STEP ONE. Subtract the total distribution made to units (Dy-1) in the
preceding calendar year from the total pension payments made by units
(Py-1) in the preceding calendar year.
STEP TWO. Multiply the STEP ONE difference by (1+k) as (k) is
determined in STEP THREE.
STEP THREE. Determine the annual percentage increase (k) in the
STEP ONE difference which will allow the present value of all future
estimated distributions, as computed under STEP FOUR, from the
pension relief fund to equal the "k portion" of the pension relief fund
balance plus the present value of all future receipts to the "k portion"
of the fund, but which will not allow the "k portion" of the pension
relief fund balance to be negative. These present values shall be
determined based on the current long term actuarial assumptions. The
"k portion" of the pension relief fund balance is the total pension relief
fund balance less the "m portion" of the fund. The percentage increase
(k) shall be computed to the nearest one thousandth of one percent
(.001%). All years, after the year 2000, in which the receipts to the
fund plus the net pension payments by all the units equal or exceed the
total pension payments shall be ignored for the purposes of these
calculations.
STEP FOUR. Subtract the STEP TWO product from the estimated
total pension payments to be made by all units (Py) in the calendar year
in for which the distribution is to be made.
STEP FIVE. Multiply the STEP FOUR difference by one-half (1/2)
of the sum of two quotients, (1) the quotient of the unit's number of
police officers and firefighters on December 31 of the year before the
year of the distribution who are members of a pension fund established
before May 1, 1977, who are retired, and who are deceased if their
beneficiaries are eligible for benefits (unit) divided by the total number
of these police officers and firefighters (total units) on December 31 of
the year before the year of the distribution in all units plus (2) the
quotient of the unit's pension payments (payments) divided by the total
pension payments (total payments) by all units.
Expressed mathematically:
Dy = (Py - ((Py-1 - Dy-1) x (1 + k))) x 1/2
(unit/(total unit) + payment/(total payment)).
(f) If in any year the distribution made to a unit of local government
is larger than the unit's pension payments to its retirees and their
beneficiaries for that year, the excess may not be distributed to the unit
but must be transferred to the 1977 police officers' and firefighters'
pension and disability fund and the unit's contributions to that fund
shall be reduced for that year by the amount of the transfer.
(g) If in any year after 2000, the STEP FOUR difference under
subsection (e) is smaller than the revenue to the pension relief fund in
that year, then the revenue plus interest plus the fund balance in that
year shall be used in STEP FIVE of subsection (e) instead of the STEP
FOUR difference.
(h) The state board shall have its actuary report annually on the
appropriateness of the actuarial assumptions used in determining the
distribution amount under subsection (e). At least every five (5) years,
the state board shall have its actuary recompute the value of (k) under
STEP TWO of subsection (e).
(i) Each calendar year the state board shall determine the amounts
to be allocated to the "m portion" of the pension relief fund under the
following STEPS, which shall be completed before July 1 of each year:
STEP ONE. The state board shall determine the following:
(1) "Excess earnings", which are the state board's projection of
earnings for the calendar year from investments of the "k portion" of
the fund that exceed the amount of earnings that would have been
earned if the rate of earnings was the rate assumed by the actuary of the
state board in his calculation of (k) under STEP THREE of subsection
(e).
(2) "Prior deficit amount", which is:
(A) the amount of earnings that would have been earned under
the rate assumed by the actuary of the state board in his
calculation of (k) under STEP THREE of subsection (e);
minus
(B) the amount of earnings received;
for a calendar year after 1981 in which (B) is less than (A).
STEP TWO. The state board shall distribute to the "m portion" the
excess earnings less any prior deficit amounts.
(j) The "m portion" of the fund shall be any direct allocations plus:
(1) amounts allocated under subsection (i); and
(2) any earnings on the "m portion" less amounts previously
distributed under subsection (l).
(k) The state board shall determine, based on actual experience
and reasonable projections, the units eligible for distribution from the
"m portion" of the pension relief fund according to the following
STEPS:
STEP ONE. Determine the amount of pension payments to be paid
by the unit in the preceding calendar year, net of the amount of the
distribution to be received by the unit under subsection (e) in that year,
plus contributions to be made under IC 36-8-8 in that year.
STEP TWO. Divide the amount determined under STEP ONE by
the amount of the maximum permissible ad valorem property tax levy
for the unit as determined under IC 6-1.1-18.5 for the preceding
calendar year.
STEP THREE. If the quotient determined under STEP TWO is
equal to or greater than one-tenth (0.1), the unit shall receive a
distribution under subsection (l).
(l) For a calendar year, the state board shall, before July 1 of
each the year, the state board shall distribute from the "m portion" of
the pension relief fund to the extent there are assets in the "m portion"
to each eligible unit an amount, not less than zero (0), determined
according to the following STEPS:
STEP ONE. For the first of consecutive years that a unit is eligible
to receive a distribution under this subsection, determine the amount
of pension payments paid by the unit in the calendar year two (2) years
preceding the calendar year net of the amount of distributions received
by the unit under subsection (e) in the calendar year two (2) years
preceding the calendar year.
STEP TWO. For the first of consecutive years that a unit is eligible
to receive a distribution under this subsection, divide the amount
determined under STEP ONE by the amount of the maximum
permissible ad valorem property tax levy for the unit as determined
under IC 6-1.1-18.5 for the calendar year two (2) years preceding the
calendar year.
STEP THREE. For the first and all subsequent consecutive years
that a unit is eligible to receive a distribution under this subsection,
multiply the amount of the maximum permissible ad valorem property
tax levy for the unit as determined under IC 6-1.1-18.5 for the
preceding calendar year by the quotient determined under STEP TWO.
STEP FOUR. Subtract the amount determined under STEP THREE
from the amount of pension payments to be paid by the unit in the
preceding calendar year, net of distributions to be received under
subsection (e) for the preceding calendar year.
SECTION 2. IC 5-10.3-11-4.7 IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE UPON PASSAGE]: Sec. 4.7. (a) In addition to the
amounts distributed under sections 4 and 4.5 of this chapter, each
year the state board shall distribute from the pension relief fund to
each unit of local government an amount determined under the
following STEPS:
STEP ONE: Determine the amount of the total pension
payments to be made by the unit in the calendar year, as
estimated by the state board under section 4 of this chapter.
STEP TWO: Determine the result of:
(A) the STEP ONE result; multiplied by
(B) fifty percent (50%).
STEP THREE: Determine the amount to be distributed in the
current calendar year to the unit of local government under
section 4 of this chapter.
STEP FOUR: Determine the greater of zero (0) or the result
of:
(A) the STEP TWO result; minus
(B) the STEP THREE result.
(b) The state board shall make the distributions under
subsection (a) in two (2) equal installments before July 1 and
before October 2 of each year.
(c) This section expires January 1, 2008.
SECTION 3. IC 5-10.3-11-6 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2001]: Sec. 6. (a) The state board shall maintain separate
accounts for each unit of local government for purposes of this
section. The accounts:
(1) are separate and distinct accounts within the public
employees' retirement fund and the pension relief fund; and
(2) are not part of the "k portion" or "m portion" of the
pension relief fund.
(b) A unit of local government may do the following:
(1) Make deposits at any time to the separate account
established for the unit under this section.
(2) Withdraw once each year from the unit's separate account
all or a part of the balance in the account to pay pension
benefits under IC 36-8-6, IC 36-8-7, or IC 36-8-7.5.
SECTION 4. [EFFECTIVE UPON PASSAGE] (a) The definitions
set forth in IC 5-10.3-11 apply throughout this SECTION.
(b) Notwithstanding the amendments made to IC 5-10.3-11-4 by
this act, in calendar year 2001, the state board shall make
distributions from the pension relief fund to eligible units of local
government both under IC 5-10.3-11-4, as in effect before
amendment by this act, and under IC 5-10.3-11-4, as in effect after
amendment by this act. However, the distributions to be made
under IC 5-10.3-11-4, as in effect after amendment by this act, shall
be made in one (1) installment before December 1, 2001. To the
extent that a distribution under this SECTION is paid in November
2001 or in 2002, that distribution must be placed in the unit's
account established by IC 5-10.3-11-6, as added by this act.
Distributions made to an eligible unit and paid to the unit's account
established by IC 5-10.3-11-6, as added by this act, under this
SECTION:
(1) shall be treated as additional revenue for the purpose of
fixing the eligible unit's budget for the calendar year during
which an amount is paid to the eligible unit from its account
under IC 5-10.3-11-6, as added by this act; and
(2) may not be used as a reason to reduce the eligible unit's
maximum or actual property tax levy under IC 6-1.1-18.5.
(c) IC 5-10.3-11-4, as amended by this act, applies beginning
with distributions that are determined and made in 2001. To
comply with this subsection, the eligible unit must comply with all
of the following:
(1) If the eligible unit used county adjusted gross income tax
of county option income tax revenues in 1998 for total pension
payments, the eligible unit must expend at least the same
amount of county adjusted gross income tax of county option
income tax in each year after 2000 and before 2008 for total
pension payments.
(2) If the eligible unit used ad valorum property revenues in
1998 for total pension payments, the eligible unit must expend
at least the same amount of ad valorum property revenues in
each year after 2000 and before 2008 for total pension
payments.
(3) If the eligible unit used any other revenue in 1998 for total
pension payments, the eligible unit must expend at least the
same amount of other revenue in each year after 2000 and
before 2008 for total pension payments.
If in any year the sum of the total local revenue that an eligible unit
must expend under this subsection for total pension payments plus
the total state distribution for which the eligible unit is eligible
under section 4, 4.5 and 4.7 of this chapter exceed the eligible unit's
total pension payment obligation, the state board shall reduce the
distribution under section 4.7 of this chapter in the amount of the
excess.
SECTION 5. [EFFECTIVE UPON PASSAGE] (a) In addition to
any other distributions under IC 5-10.3-11, as amended by this act,
in 2001 the board of trustees of the public employees' retirement
fund shall distribute from the pension relief fund established by
IC 5-10.3-11 to each unit of local government any amount
determined under the following STEPS:
STEP ONE: Determine the amount of the total pension
payments made by the unit of local government for each year
after December 31, 1997, and before January 1, 2001, under
IC 5-10.3-11-4(d).
STEP TWO: Determine the result of:
(A) the STEP ONE result; multiplied by
(B) fifty percent (50%).
STEP THREE: Determine the amount distributed under
IC 5-10.3-11-4 for each year after December 31, 1997, and
before January 1, 2001, to the unit of local government.
STEP FOUR: For each year, determine the greater of zero (0)
or the result of:
(A) the STEP TWO result; minus
(B) the STEP THREE result.
(b) The state board shall make the distribution under subsection
(a) before January 1, 2002.
(c) This SECTION expires July 1, 2002.
SECTION 6. An emergency is declared for this act.