Bill Summary – FastDemocracy

LEGISLATIVE SERVICES AGENCY
                OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
                                     200 W. Washington St., Suite 301
                                          Indianapolis, IN 46204
                                              (317) 233-0696
                                                 iga.in.gov
                                 FISCAL IMPACT STATEMENT
LS 6487                                                             NOTE PREPARED: Mar 4, 2020
BILL NUMBER: SB 406                                                 BILL AMENDED: Jan 30, 2020
SUBJECT: Survivor Benefits.
FIRST AUTHOR: Sen. Garten                                           BILL STATUS: Enrolled
FIRST SPONSOR: Rep. Bartels
FUNDS AFFECTED:            GENERAL                                  IMPACT: State & Local
                         X DEDICATED
                           FEDERAL
Summary of Legislation: The bill provides that if a public safety officer enters a Deferred Retirement
Option Plan (DROP) for the public safety officer's respective pension plan and the public safety officer dies
before the public safety officer's DROP exit date, the benefit options for the public safety officer's survivors
are made similar, as applicable, to the DROP disability benefit options in: (1) the DROP applicable to the
State Excise Police, Gaming Agent, Gaming Control Officer, and Conservation Enforcement Officers'
Retirement Plan (EG&C Fund); and (2) the DROP applicable to the 1925 Police Pension Fund (1925 Fund),
the 1937 Firefighters' Pension Fund (1937 Fund), the 1953 Police Pension Fund (1953 Fund), and the 1977
Police Officers' and Firefighters' Pension and Disability Fund (‘77 Fund).
Effective Date: July 1, 2020.
Explanation of State Expenditures: EG&C Fund: Any impact to the EG&C Fund is likely to be minimal.
Under this proposal, survivors of EG&C members who had been on DROP for less than 12 months when
they die would have benefits calculated as if the member had never entered the DROP. If the member had
been in DROP for more than 12 months when they died, the survivor would be eligible to receive a lump sum
DROP benefit in addition to a monthly pension benefit frozen at the time the member entered the DROP.
Under current law, survivors of a member who dies while in DROP would receive a lump sum benefit based
on the number of months the employee was a member of DROP in addition to a monthly pension benefit
frozen at the time the member entered the drop.
As of June 30, 2018, the EG&C Fund had 13 members who were active in the DROP. The EG&C Fund is
pre-funded through employer and employee contributions. This provision is unlikely to impact the employer
contribution rate. As of June 30, 2019, the fund was 92.3% funded.
SB 406                                                 1
1925 Fund, 1937 Fund, 1953 Fund (Pension Relief Fund):The 1925 Fund, 1937 Fund, and 1953 Fund are
funded on a pay-as-you-go basis. The Pension Relief Fund (PRF) was established to distribute revenues and
appropriations to the local municipalities to assist them in the cost of paying benefits and to cover the
unfunded liabilities of these funds. The PRF is funded by General Fund appropriations, lottery revenue,
cigarette taxes, alcohol taxes, and interest earned by the fund. Any impact to is likely to be minimal. Changes
to the way survivor benefits are calculated for members of these funds who die while participating in DROP
mirror the changes made to the ‘77 Fund. As of January 1, 2019, there were only 30 active members who
would be eligible to enter the DROP.
Indiana Public Retirement System (INPRS): INPRS administers the ‘77 Fund and the EG&C Fund. Typically,
administrative costs are absorbed by investment earnings from the respective pension fund.
Explanation of State Revenues:
Explanation of Local Expenditures: ‘77 Fund: The ‘77 Fund may experience a minor increase in
expenditures due to this provision. Under current law, if a member dies while in DROP, benefits for the
member’s survivors are calculated as if the member had never entered DROP. Under this proposal, survivors
of members who had been on DROP for less than 12 months when they die would have benefits calculated
as if the member had never entered the DROP. If the member had been in DROP for more than 12 months
when they died, the survivor would be eligible to receive a lump sum DROP benefit in addition to a monthly
pension benefit frozen at the time the member entered the DROP. As of June 30, 2018, the ‘77 Fund had 686
active members participating in DROP.
The ‘77 Fund is pre-funded through member and employer contributions. In FY 2020, employer contributions
to the fund equaled 17.5% of employee salary. As of June 30, 2019, the ‘77 Fund was 98.6% funded. This
provision is unlikely to impact the employer contribution rate.
Explanation of Local Revenues:
State Agencies Affected: Indiana Public Retirement System.
Local Agencies Affected: Units with members in the 1925 Fund, 1937 Fund, 1953 Fund, or ‘77 Fund.
Information Sources: Andy Blough, INPRS; 2018 Actuarial Valuations of the ‘77 Fund, EG&C Fund, and
Local Public Safety Pension Relief Fund, https://www.in.gov/inprs/actuarialvaluation.htm.
Fiscal Analyst: Camille Tesch, 317-232-5293.
SB 406                                                2
Statutes affected: 
1. Introduced Senate Bill (S): 5-10-5.5-0.1, 5-10-5.5-22, 36-8-8.5-14, 36-8-10-0.1, 36-8-10-12.2
2. Senate Bill (S): 5-10-5.5-0.1, 5-10-5.5-22, 36-8-8.5-14
3. Senate Bill (H): 5-10-5.5-0.1, 5-10-5.5-22, 36-8-8.5-14
4. Enrolled Senate Bill (S): 5-10-5.5-0.1, 5-10-5.5-22, 36-8-8.5-14
4. Engrossed Senate Bill (H): 5-10-5.5-0.1, 5-10-5.5-22, 36-8-8.5-14