Thousands of Indiana public sector workers retiring early to avoid cuts in benefits

By month’s end, Indiana cities, counties and schools will see thousands of early retirements as some public employees avoid interest rate cuts to their retirement benefits.

In many offices, the losses won’t be massive, but statewide, the Indiana Public Retirement System expects 2,000 more retirements than last year, a 25 percent increase.

A law, passed by the General Assembly this spring, lowers the interest rate retirees will be paid if they choose to annuitize some of their retirement benefits, taking monthly payments for the rest of their lives rather than a lump sum.

For employees whose last day of work is before the end of August, the rate is 7.5 percent. It’ll drop to 5.75 percent thereafter and keep dropping until it’s tied to the market rate.

The change is supposed to prevent a changing world from bankrupting the system, according to INPRS documents. Concerns stem from longer life expectancies and the system’s return on investment, which is lower than the current interest rate.