Indiana could move state workers' retiree health funds to retirement plans

Indiana will end covered workers' retiree health account memberships and send contributions tied to their balances to retirement plans. This covers current participants except retirees, their spouses and dependents, and participants eligible for an extra retiree health contribution. Federal tax law must allow the switch. During open enrollment, workers may make a one-time, final choice to join a successor health account by December 1, 2026. The account switch applies after December 31, 2026.

The state will match employees' contributions to its deferred compensation savings plan in a separate retirement plan. This covers state employees who contribute to the deferred compensation savings plan. The match is capped at $28 per paycheck and at the budgeted funds the state finds available. The budget agency may pause payments during extraordinary financial circumstances. The matching rule applies after December 31, 2026.

The retirement system will use the higher of two five-year pay averages to calculate covered workers' pensions. The five-year calculation covers nonteacher public employees who retire after 2027; the high-pay exclusion also covers qualifying teachers. Each counted year must be 12 months long and include at least six months of credited service. Pay received during the worker's last year of service and after that year is excluded if it exceeds 120% of pay in the year before the last year and the worker served that entire earlier year. These rules apply to members who retire after December 31, 2027.

Eligible teachers may choose the teachers' pension fund, and participating public employers may let eligible workers choose the public pension fund. Workers must have earned full rights to the employer-funded part of their contribution plan. The retirement board sets the time and process for choosing. Choosing to switch, or deciding to stay, is final. These election rules take effect July 1, 2026.

Teachers in both retirement plans may buy pension credit for years in the contribution plan. A teacher must have at least one year of pension credit and ten combined years in the two plans before claiming the purchased credit. Required contributions and interest must be paid before retirement. An employer may pay all or part; if it does, the full-payment-before-use rule does not apply. The retirement board may deny a purchase that exceeds federal tax limits. The purchase rule takes effect July 1, 2026; required contributions are due before retirement.