Lawmakers move to phase out health-specific retirement benefit

A retirement benefit specific to medical costs — introduced almost two decades ago to slim down the state’s payroll — may be on its way out.

Lawmakers may instead bulk up Hoosier START, the state’s defined benefit plans. They say that would offer retirees and current staff greater flexibility.

Tony Green, the deputy executive director of the Indiana Public Retirement System, said the Retirement Medical Benefits Accounts were created in 2007, as then-Gov. Mitch Daniels’ administration was looking to cut costs.

Medical expense was a primary reason older employees were staying, Green told the Senate Pensions and Labor Committee on Wednesday.

RMBA was instituted to “enable or even incentivize” early retirement, he said. The balance can reimburse retirees, spouses, and dependent children for the cost of health insurance premiums.

But state needs have shifted toward recruitment and retention.

Senate Bill 10 would give current enrollees, through 2026, the choice to keep their RMBAs or have the money moved — via the General Fund — to Hoosier START. RMBAs wouldn’t be available to new hires beginning in 2027.

Staff may get more options than under the current setup, said Sen. Linda Rogers, chair of the committee.

“It sounded like a great tool, because if you retire at 60 and you don’t get Social Security until 65, you’ve got five years of insurance premiums you have to deal with,” Rogers, R-Granger, told the Capital Chronicle.

“… But if you look at today’s workforce, people entering it today are not staying like people did years ago.”

Turnover matters because all of the RMBA money — contributed by the state on employees’ behalf — is forfeited if they leave state employment before retirement age. That’s as opposed to Hoosier START accounts, which include employee contributions and a vesting state match.

The legislation would also increase the Hoosier START match from $15 per pay period to $28.

A pension-focused interim committee would consider making a recommendation to raise the match every odd-numbered year. The State Budge Agency could then follow through.

Another proposal heard Wednesday would offer public retirees a bonus benefit known as a 13th check, plus an additional $50 to certain retirement fund members.

“There is ample money” in dedicated supplemental reserve accounts to pay for the 13th check, said Sen. David Niezgodski, D-South Bend. He is the author of Senate Bill 63.

The 13th check is expected to cost about $34 million in fiscal year 2027, according to a cost analysis. The reserve accounts, meanwhile, had a collective balance of nearly $89 million at the end of fiscal year 2025, Niezgodski said. State fiscal years begin in July and go through the following June.

The extra $50, which would cost an estimated $4 million, would come from the General Fund. But it may not stay that way.

“If we keep that $50 (in the bill), then it should come out of the supplemental reserve accounts,” Rogers said. She planned to work with Niezgodski and the House Republican author of a similar bill, to “come to a mutual decision.”

The committee took only testimony. A vote is expected in January.

The panel also considered raising monthly pension benefits for retired police and firefighters — along with contribution rates for local government employers. Mixed testimony followed, but a vote wasn’t yet taken.

“Certainly, we all are in agreement that public safety is our No. 1 priority,” Rogers told the audience. “We have to match that with available funds.”

The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections