Indiana Public Employees Retirement Fund: Hybrid vs. My Choice Plans

The Indiana Public Employees’ Retirement Fund, known as PERF, is the retirement plan for most full-time civilian state and local government workers in Indiana, and it is administered by the Indiana Public Retirement System (INPRS). New hires get 60 days to make one irrevocable choice — Hybrid plan or My Choice plan — and that choice, along with how long you stay, largely determines what you retire with.

Who PERF Covers

PERF covers full-time employees of the state, political subdivisions, and certain local government entities. Membership eligibility is defined under Indiana Code 5-10.3-7-1, and new full-time employees hired into a PERF-covered position begin participating on their date of hire unless excluded by law.¹ Elected officials and members of the general assembly may also opt into PERF under certain conditions.

Part-time work can qualify, but there is a floor. For employees at participating school corporations, a position must normally require more than 600 hours of work per year to be PERF-covered.² Temporary or intermittent positions generally do not qualify. If you are not sure, your HR office or INPRS can confirm your status.

The 60-Day Choice: Hybrid or My Choice

New employees have 60 days from their hire date to pick between the PERF Hybrid plan and the PERF My Choice plan. Do nothing and you default into whichever plan your employer has designated as its default; for state employees, that is the Hybrid plan. The choice is permanent.³

The Hybrid Plan

The Hybrid plan combines a traditional defined benefit pension with a defined contribution account. The pension side pays a guaranteed monthly benefit for life based on your salary and years of service. This plan tends to favor employees who expect to spend a long career in PERF-covered work and want a predictable retirement income they cannot outlive.⁴

The My Choice Plan

My Choice is a pure defined contribution plan. There is no guaranteed pension. Your retirement benefit depends entirely on how much goes into the account and how the investments perform. The tradeoff is flexibility: My Choice vests faster and may suit employees who do not plan to stay in a PERF-covered position until full retirement age. Normal retirement under My Choice is age 62 with five years of participation, and the employer’s share of the account vests at 20% per year, reaching 100% after five years.³

If you value portability and expect to move between public and private employment, My Choice is worth serious consideration. If you plan to stay in state service for decades and want a guaranteed income floor, the Hybrid plan is typically the stronger choice. Run the numbers for your own situation before the 60-day window closes.

What Goes Into Your Retirement

PERF has two contribution streams that fund different parts of your retirement.

The Pension Side

Your employer pays 100% of the cost to fund the defined benefit pension. You contribute nothing to this piece. The INPRS Board of Trustees sets the employer contribution rate annually based on actuarial valuations, and through June 30, 2027, the composite rate for PERF employers is 11.2% of payroll.⁵

The Defined Contribution Account

A separate mandatory contribution of 3% of your gross wages goes into your individual defined contribution account (historically called the Annuity Savings Account). Who pays that 3% depends on your employer: some cover it entirely, some pass it to the employee, and some split it.⁶ Check with payroll to know your arrangement.

Beyond the mandatory 3%, you can contribute up to an additional 10% of your compensation to your DC account on a post-tax basis. Your employer may match those voluntary contributions at 50%, though not all employers do. You can start, stop, or change voluntary contributions at any time.⁷ Because those contributions are post-tax, the principal will not be taxed again at withdrawal, but the investment earnings on them are taxable when distributed.

How the Hybrid Pension Is Calculated

The Hybrid plan’s pension formula is simple. INPRS takes the average of your five highest annual salaries (measured across 20 calendar quarters), multiplies that by your total years of creditable service, then multiplies the result by 1.1%. Divide by 12 for the estimated monthly payment.⁸

In concrete terms: an employee retiring with 25 years of service and a five-year average salary of $55,000 would calculate an annual pension of $55,000 × 25 × 0.011 = $15,125 per year, or about $1,260 per month. The 1.1% multiplier is set by the Indiana General Assembly and applies uniformly.

Because the formula rewards both higher salaries and longer service, the final years of a career carry outsized weight. Promotions, overtime patterns, and the timing of pay raises near retirement can shift the number. INPRS provides online calculators through the member portal at myINPRSretirement.org to model scenarios.

When You Can Retire

Vesting determines whether you keep your pension if you leave before retirement age. Under the Hybrid plan, you need 10 years of PERF or TRF-covered service to become fully vested. Once vested, the pension is yours even if you leave public employment and do not draw it for years.⁶ Under My Choice, the employer’s share of your DC account vests 20% per year and hits 100% after five. Leave before then and you forfeit the unvested employer portion.³

Full, Unreduced Retirement

Full Hybrid pension benefits are available under three paths:⁶

Age 65 with 10 years of service.
Age 60 with 15 years of service.
The Rule of 85: your age plus years of creditable service equal at least 85, and you are at least 55. A 57-year-old with 28 years of service (57 + 28 = 85) qualifies.

Early Retirement With a Permanent Reduction

With at least 15 years of creditable service but no full-retirement threshold yet met, you can retire as early as age 50 with a permanently reduced pension. The reduction lasts for life, even after you pass 65:⁹

Age 59: 89% of full benefit
Age 58: 84%
Age 57: 79%
Age 56: 74%
Age 55: 69%
Age 54: 64%
Age 53: 59%
Age 52: 54%
Age 51: 49%
Age 50: 44%

Retiring at 50 means keeping less than half your calculated pension for life. That price is why financial planners push PERF members toward the Rule of 85 or age 60 with 15 years when possible.

What You Get at Retirement

The Pension

The Hybrid pension is a guaranteed monthly payment for life. Once it starts, it does not stop, regardless of investment markets or longevity.⁸

The DC Account

Your DC account balance — the 3% mandatory contributions, any voluntary contributions, and investment earnings — belongs to you once vested. At retirement, you can take it as a lump sum, roll it into an IRA or another qualified plan, or convert it into an annuity that adds monthly income on top of the pension.⁶ INPRS offers a menu of investment options for the account, including Target Date Funds that automatically shift from stocks toward bonds as retirement approaches, which is a reasonable default if you do not want to actively manage investments.¹⁰

Survivor and Disability Benefits

PERF provides disability benefits for members who become unable to work while actively employed in a covered position; qualification generally requires approval for Social Security disability. If a member dies before retirement, eligible survivors may receive benefits based on the member’s service and contributions.¹¹ Whether your survivors actually get paid depends on INPRS having a current beneficiary designation on file.

13th Checks and COLAs

Indiana does not guarantee automatic annual cost-of-living increases the way Social Security does. Instead, the legislature has created two mechanisms funded by employer surcharges. Under HEA 1221 (2025), PERF members who retire before July 1, 2029, are eligible for actuarially pre-funded 13th checks — one-time annual supplemental payments on top of regular monthly pension payments. Recent amounts, based on years of service:¹²

5 to under 10 years: $143
10 to under 20 years: $261
20 to under 30 years: $356
30 or more years: $428

Members who retire on or after July 1, 2029, will instead receive annual 1% COLAs, also funded through the employer surcharge. The surcharge rate for PERF employers is 0.86% of payroll beginning January 1, 2026.¹² The General Assembly must authorize any 13th check or COLA, and INPRS can only grant fully funded supplemental payments.

Buying Additional Service Credit

You can boost your pension by purchasing service credit for qualifying employment that was not originally credited to your account. The two common categories are out-of-state public employment and military service.

For out-of-state service, you must have at least one year of Indiana creditable service before buying, and at least 10 years of Indiana service before receiving any benefit from the purchased credit. Cost is calculated using your current salary, an actuarial rate based on your age, and the years being purchased, plus accrued interest. Years that already qualify you for a pension in another state or federal retirement system cannot be purchased.¹³

Veterans may purchase up to two years of credit for active-duty military time with at least six months of active duty and an honorable discharge. Cost is actuarially calculated, and military time that qualifies you for a benefit in a military retirement system cannot be purchased.

Legal Edges: Divorce, Creditors, Early Withdrawals, Coming Back to Work

PERF benefits carry strong protection from creditors. Under Indiana Code 5-10.3-8-9, benefits, contribution refunds, and money held in the fund are exempt from garnishment, levy, attachment, and other legal process.¹⁴ The narrow exceptions are tax withholding, health insurance premium deductions, fund loan repayments, and payments to a former spouse under a qualified domestic relations order.

PERF benefits accumulated during marriage are marital property subject to division in divorce. Indiana courts start from a presumption of equal division.¹⁵ Dividing a PERF benefit requires a Qualified Domestic Relations Order (QDRO) directing INPRS to pay a portion to a former spouse. Drafting errors can delay or complicate the division; a professionally prepared QDRO typically costs from $500 to several thousand dollars depending on complexity.

Taking a distribution from your DC account before age 59½ generally triggers a 10% federal additional tax on top of ordinary income tax. An important exception applies if you separate from service during or after the year you turn 55. For qualified public safety employees of a state or political subdivision, that threshold drops to age 50.¹⁶ Rolling your DC balance into an IRA before taking distributions changes which rules apply, so consult a tax professional first.

If you retire under the Hybrid plan and return to a PERF or TRF-covered position within 30 days of your pension start date, INPRS will treat you as if you never retired. Pension payments stop, and contributions resume during the reemployment. An informal agreement to return to a covered position made before you officially retire will void your retirement application entirely.⁹

Keep Your Account Current

INPRS can only pay up to six months of retroactive pension benefits. If you become retirement-eligible and INPRS cannot reach you because your address is outdated, months of payments can be lost permanently. Death benefits go to the beneficiaries on file, not to whoever might seem the obvious choice. Log into your account at myINPRSretirement.org periodically to verify your address, beneficiary designations, and investment elections.⁶

1
Indiana Public Retirement System. INPRS Retirement Fund Eligibility Requirements (PERF Hybrid, TRF Hybrid, and 1977 Fund)
2
IN.gov. Public Employees’ Retirement Fund Hybrid Plan Member Handbook
3
IN.gov. PERF My Choice Plan Member Handbook for State of Indiana Employees
4
IN.gov. PERF Hybrid Plan or My Choice: Retirement Savings Plan? (Self-Scoring Quiz)
5
Indiana Public Retirement System. INPRS Employers
6
Indiana Public Retirement System (INPRS). PERF Hybrid At A Glance
7
IN.gov. Public Employees Retirement Fund My Choice Plan Member Handbook for Local Government Employees
8
Indiana Public Retirement System. Defined Benefit Information
9
Indiana Public Retirement System. Public Employees’ Retirement Fund Hybrid Plan Member Handbook
10
IN.gov. Investment Fund Options
11
Legal Information Institute (LII) / Cornell Law School. 35 IAC 1.2-5-9 – Survivor Benefits
12
IN.gov. COLAs and 13th Checks
13
Indiana General Assembly. Indiana Code 5-10.3-7-4.5 – Out-of-State Service Credit Purchase
14
Indiana General Assembly. Indiana Code 5-10.3-8-9 – Benefits Exempted From Legal Process
15
Indiana General Assembly. Indiana Code 31-15-7-5 – Presumption for Equal Division
16
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions