State of Indiana Employee Benefits: Health, PERF, and Leave

State of Indiana employee benefits include health insurance through Anthem’s PPO network, a hybrid pension through the Public Employees’ Retirement Fund, mandatory and voluntary retirement savings, short- and long-term disability, basic and supplemental life insurance, and paid vacation and sick leave. Full-time employees — those working at least 30 hours per week — qualify for the full package. Part-time and temporary workers face significant restrictions.¹

Who Qualifies and When Coverage Starts

The 30-hour weekly threshold matches the Affordable Care Act’s definition of a full-time employee (30 hours per week or 130 hours per month).¹ If you’re hired into a benefits-eligible position, you must clear a 15-day waiting period starting on your hire date. Coverage then begins the first of the following month, or immediately if the 15th day falls on the first.²

Retirement eligibility works on a different clock. Employees hired after June 30, 1982, must hold a position that normally requires at least 1,000 hours of service per year to qualify for PERF membership. School corporation employees have a lower threshold of 600 hours and may elect participation if their position falls between 600 and 1,000 hours annually. Emergency hires, independent contractors, and fee-basis workers are excluded.³

Health Insurance Plans and Costs

Indiana does not offer traditional HMO plans. For 2026, the state offers three statewide medical plans, all using Anthem’s National PPO network with prescriptions through CVS Caremark: Consumer-Driven Health Plan 1, Consumer-Driven Health Plan 2, and the Traditional Plan.⁴ Each plan offers two in-network tiers, so choosing preferred providers lowers your out-of-pocket cost.

Premiums come out of your paycheck biweekly. For 2026, single coverage ranges from roughly $68 biweekly on the Traditional Plan to about $141 on CDHP 2. Family coverage runs from about $135 biweekly on the Traditional Plan to around $399 on CDHP 2. Participating in the non-tobacco-use incentive program shaves roughly $35 per pay period off single-coverage rates.⁵ Dental and vision coverage are available at minimal extra cost.

Health Savings Accounts

If you enroll in one of the state’s HSA-qualified plans (HSA 1 or HSA 2), you can open a Health Savings Account and contribute pre-tax dollars to cover medical expenses. You cannot pair an HSA with a general-purpose Flexible Spending Account, and enrollment in Medicare, Medicaid, or Tricare disqualifies you.⁶ Unused HSA funds roll over year to year and stay with you if you leave state employment.

PERF Hybrid Retirement

The Public Employees’ Retirement Fund has two parts: a defined benefit pension funded entirely by the employer, and a defined contribution account funded by a mandatory 3% contribution from gross wages.⁷

The Pension

Your pension formula is your five highest annual salaries, averaged, multiplied by your years of service, multiplied by 1.1%.⁸ An employee with 25 years of service and an average high-five salary of $60,000 would earn roughly $16,500 per year ($60,000 × 25 × 0.011), or about $1,375 per month. None of this comes out of your paycheck; the employer funds the pension entirely.

The pension vests at 10 years of service. Leave before then and you forfeit the pension entirely, though you keep your defined contribution account.⁹ Elected officials in the PERF Hybrid plan vest at eight years.

Once vested, you can draw full pension benefits at any of these milestones:⁸

Age 65 with at least 10 years of service
Age 60 with at least 15 years of service
Age 55 with at least 30 years of service
Rule of 85: your age plus years of service equal at least 85, and you are at least 55

The Defined Contribution Account

The mandatory 3% goes into an individual investment account. If you work for the state, a quasi-governmental agency, or a university, the employer pays this 3% for you as a pre-tax wage adjustment. Other public employers can choose to pay it, pass it to the employee through payroll deduction, or split it.¹⁰ Either way, the money counts as member contributions and vests immediately.⁹ You can add voluntary post-tax contributions above the 3% floor.

Hoosier S.T.A.R.T. Supplemental Savings

The Hoosier S.T.A.R.T. program adds a 457(b) deferred compensation plan and a 401(a) matching plan on top of PERF.¹¹ The 457(b) takes pre-tax contributions, lowering your current taxable income while the balance grows tax-deferred. Some participating local government employers offer a match through the 401(a).

For 2026, the 457(b) contribution limit is $24,500. If you are 50 or older, you can add another $8,000 in catch-up contributions. A SECURE 2.0 provision raises that catch-up to $11,250 if you are between ages 60 and 63. The 457(b) also has a special “last three years before retirement” catch-up that can double the standard limit to $49,000, but you cannot combine it with the age-based catch-up in the same year.¹²

A 457(b) has one feature the 401(k) doesn’t: withdrawals after separation from service are not subject to the 10% early withdrawal penalty, regardless of age. If you’re planning to retire before 59½, that flexibility matters.

Disability Insurance

Indiana’s disability program has a 30-day elimination period. You must be unable to perform your job duties for 30 consecutive calendar days before benefits begin.¹³ Accrued sick leave and vacation cover the gap.

Short-term disability starts on day 31 and pays 60% of your base biweekly gross wages before taxes and insurance deductions. It lasts up to six months from the date you became disabled, which works out to about five months of actual payments after the elimination period.¹³

If you remain disabled after six months, coverage transitions to long-term disability without a new application, though the state may ask for updated medical records. LTD pays 50% of base biweekly gross salary for the first two years, then drops to 40% for years three and four.¹³ That step-down at year three catches many people by surprise.

Life Insurance

Basic life insurance is provided at no cost. The state also offers four additional types you can add: supplemental life, voluntary accidental death and dismemberment, spouse or dependent life, and child life insurance.¹⁴ Supplemental coverage premiums come out of your paycheck.

Under IRC Section 79, the first $50,000 of employer-provided group term life insurance is excluded from your taxable income. If your coverage exceeds $50,000, the imputed cost of the excess is added to your gross income and is subject to Social Security and Medicare taxes.¹⁵ If you cross that threshold, you’ll see the imputed income on your W-2.

Vacation and Sick Leave

Full-time state employees earn vacation leave at 7.5 hours per month, roughly 12 days per year. The accrual rate steps up with service:¹⁶

After 5 years: an additional 22.5 hours annually (about 15 days total)
After 10 years: an additional 60 hours annually (about 20 days total)
After 20 years: an additional 97.5 hours annually (about 25 days total)

Part-time employees working at least half time earn vacation at 3.75 hours per month. Time spent in unpaid leave status (other than military service) is subtracted from your service time when calculating the tier bumps.¹⁶

Sick leave accrues at 7.5 hours for every two months of full-time employment, plus another 7.5 hours for every four months, roughly 67.5 hours (nine days) per year.¹⁷ Hourly, temporary, and intermittent employees do not accrue sick leave. You can’t cash out unused sick time when you leave, but if you retire, you may be able to convert it through the retiree leave conversion program.

FMLA Job and Benefit Protection

Indiana public employees are covered by the federal Family and Medical Leave Act, which provides up to 12 weeks of unpaid, job-protected leave per year. You qualify if you have worked for your employer at least 12 months, logged at least 1,250 hours in the past year, and work at a location where the employer has 50 or more employees within 75 miles.¹⁸

During FMLA leave, your employer must maintain your group health insurance on the same terms as if you were still working, including family coverage. You still pay your share of premiums, usually through the same payroll deduction method used when you’re using accrued leave concurrently.¹⁹ If you decline coverage during the leave, you’re entitled to reinstatement at the same levels when you return, with no new waiting periods or pre-existing condition exclusions.

When you come back, you must be restored to the same job or one that is virtually identical in pay, benefits, and working conditions. Life insurance, disability, pension accrual, and paid leave resume at the same level as when your leave began, unless a workforce-wide change hit everyone during your absence.¹⁹

Keeping Coverage After You Leave: COBRA

If you leave state employment or lose benefits eligibility, you can continue your group health coverage under COBRA. You have 60 days from the date your employer-sponsored benefits end to enroll. Coverage lasts 18 to 36 months depending on the qualifying event. Job loss and reduced hours generally trigger the 18-month window; events like divorce or a dependent aging out can extend coverage to 36 months.²⁰

The cost is steep. You pay the entire group-rate premium (both employer and employee shares) plus a 2% administrative fee.²⁰ The paycheck deduction you were used to reflected only your share, so plan for a substantial jump.

Social Security Coverage

Whether Indiana public employees pay into Social Security depends on whether their position is covered under a Section 218 agreement, a voluntary, irrevocable agreement between the state and the Social Security Administration. These agreements cover positions, not individuals. Any employee filling a covered position pays Social Security and Medicare taxes and earns the corresponding benefit credits.²¹

For years, public employees who also qualified for a government pension saw their Social Security benefits reduced by the Windfall Elimination Provision and Government Pension Offset. Both were permanently eliminated by the Social Security Fairness Act, signed into law on January 5, 2025. The repeal applies to benefits payable from January 2024 forward.²² Dual-eligible retirees are no longer losing hundreds of dollars per month to those offsets.

Dividing PERF Benefits in Divorce

PERF retirement benefits can be divided in a divorce through a court order similar to a Qualified Domestic Relations Order. A spouse or former spouse who receives a share of your retirement benefit reports the payments as their own income for tax purposes. The tax liability shifts to the recipient. If the distribution instead goes to a child or other dependent, the participant remains responsible for the taxes.²³ A former spouse can roll QDRO payments into their own retirement account tax-free. Errors in how the order is drafted can create tax problems for both parties that are expensive to fix later.

1
IN.gov. What Defines a Full Time Employee
2
Indiana State Personnel Department. Benefit Effective Dates
3
Indiana Public Retirement System. Employer Administration: Membership in PERF
4
Indiana State Personnel Department. Health Plan Options
5
Indiana State Personnel Department. 2026 State of Indiana Plan Rates
6
Indiana State Personnel Department. Open Enrollment: Health Savings Accounts
7
Indiana Public Retirement System. PERF Hybrid at a Glance
8
Indiana Public Retirement System. Public Employees
9
INPRS. When Will I Be Vested in PERF
10
Indiana Public Retirement System. PERF Hybrid Plan Member Handbook
11
Indiana State Comptroller. Hoosier START: Plan Participants
12
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
13
Indiana State Personnel Department. Medical Leaves
14
Indiana State Personnel Department. Benefits: Life Insurance
15
Internal Revenue Service. Group-Term Life Insurance
16
Cornell Law Institute. 31 IAC 5-8-2 – Vacation Leave
17
Cornell Law Institute. 31 IAC 5-8-3 – Sick Leave; Definition; Accrual
18
U.S. Department of Labor. Family and Medical Leave (FMLA)
19
U.S. Department of Labor. Fact Sheet 28A: Employee Protections Under the Family and Medical Leave Act
20
U.S. Department of Labor. COBRA Continuation Coverage
21
Social Security Administration. Section 218 Agreements
22
Social Security Administration. Social Security Fairness Act: WEP and GPO Update
23
Internal Revenue Service. Retirement Topics – QDRO: Qualified Domestic Relations Order