INPRS says teacher pre‑1996 fund reaches 68% funded; commissioners warn markets and salary growth may change trajectory

Steve Russo, executive director of the Indiana Public Retirement System (INPRS), briefed the State Budget Committee on the funding status of state and local public pension plans and potential risks the pension system faces going forward.

Key takeaways - Funding levels: Russo reported INPRS’s aggregate funding for all defined‑benefit plans rose to about 81% in the most recent reported period. The older teacher pre‑1996 plan — historically the largest unfunded liability — is funded at about 68%, up from much lower levels over the last decade. Russo said unfunded liabilities across the portfolio have fallen from roughly $11 billion to $4.3 billion. - Budgetary path: The teacher pre‑1996 plan has historically received annual appropriations that grew by roughly 3% year over year. The house budget version flatlines that appropriation at current fiscal levels, which the INPRS briefing estimated could reduce scheduled appropriations by about $97 million across the upcoming biennium relative to the governor’s submission. Russo said under a flat appropriation trajectory the plan’s final year inflows would need to be larger to reach full funding on the originally projected schedule. - Market and wage risks: Russo cautioned that because the plan now relies more on investment returns than on additional appropriations, short‑term market volatility can materially change funding projections. He also flagged larger‑than‑assumed salary increases (notably in public safety and in some districts) as a driver of rising actuarial liabilities: when wages grow faster than actuarial assumptions, contribution needs can rise for employers. - Employer impact and local relevance: Russo noted that many of the remaining funding stressors are held at the local level: a majority of public‑plan liabilities are now borne by local units rather than the state. He said local units may face upward pressure on their contribution rates in coming years and that INPRS will continue outreach to inform employers as they plan for collective bargaining and budgeting.

Context and next steps: Russo said INPRS will continue to engage the legislature, the governor’s office and local units to review policy options for managing funding risk as plans approach full funding. He said the board is preparing policy alternatives and anticipates a summer study process with the General Assembly staff and stakeholders.

Ending: The INPRS briefing underscored progress on pension funding while flagging post‑pandemic wage pressures and market volatility as risks that could translate into higher employer contributions, especially for locally funded plans.