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Indiana Public Retirement System

Indiana Public Retirement System (INPRS) > My Fund > Public Employees > PERF ASA Only Plan FAQs > What is the difference between a pension and an Annuity Savings Account? What is the difference between a pension and an Annuity Savings Account?

There are two plans currently offered by PERF. One is a two-part benefit, the traditional Hybrid plan available to all PERF-covered employees. This plan includes the Annuity Savings Account (ASA) portion, and the defined pension benefit.

The second plan option is the ASA Only. This option is only available to first-time, full-time employees of the state of Indiana. State employees have 60 days from their hire date to either join the Hybrid or ASA Only plan. Employees who do not elect the ASA Only plan within that timeframe are automatically enrolled in the Hybrid plan.

The two benefits in the Hybrid plan are different in how they are funded, how they are paid after you retire, and what you may take with you if you leave PERF-covered employment before you retire. With both benefits, however, the longer you work for an employer who participates in the Fund, the greater your retirement benefit will be. As long as you are working for a PERF-covered employer, you cannot receive payments from either benefit.

The pension benefit is paid only to those who are eligible because they have accumulated at least 10 years of covered service and have reached an eligible retirement age. Pensions are paid in equal monthly amounts for life.

The ASA is a tax-deferred account administered by PERF in an employee’s name. The account increases through mandatory, and possibly voluntary, contributions. The ASA belongs to the employee, and may be paid out as part of a retirement, as a distribution if the employee leaves service, or may be left invested with PERF.

State law requires that 3 percent of your gross wages must be contributed to fund the ASA Only. There is also an employer contribution subaccount which receives an annual variable rate determined by the board of trustees. In order to receive contributions and earnings from this subaccount, you must meet the vesting requirements below:

Vesting schedule is as follows:

  • One year of participation = 20 percent
  • Two years of participation = 40 percent
  • Three years of participation = 60 percent
  • Four years of participation = 80 percent
  • Five years of participation = 100 percent

You can only withdraw funds from your ASA Only as a distribution when you separate from covered employment or at retirement. You are not eligible for a distribution if you are an active member in PERF or TRF. If you are no longer in a PERF- or TRF-covered position but are still employed with the same employer, you are not eligible to take a distribution until you have a bonafide separation from service with your employer.

Important terms to remember:

  • Tax-deferred account means income taxes are not owed on funds in the account to the state or federal government until funds are removed from the account. Payouts before age 60 will result in a penalty payable to the Internal Revenue Service in addition to income taxes that may be owed on the funds.

Under the Hybrid plan:

  • A PERF-covered position is any job for which an employer participates in the Public Employees' Retirement Fund and pays the defined benefit pension for that particular position.
  • Creditable service is each period of continuous employment in a covered position. In addition, you may be entitled to service credit during military service and certain types of leave. Creditable service determines your qualification for benefits.
  • Vested means the right to receive a benefit from a retirement fund at a future date when you become age eligible.

Under the ASA Only plan:

  • Years of participation are each full year of employment in a PERF-covered position. Years of participation help in determining your qualification for vesting.
  • Vesting/vested is the minimum amount of time you have to work (full years of participation) in one or more covered positions to qualify for the variable annual rate contributions (employer share) and earnings of the ASA Only plan.