IPERS Status Overview & Update - Iowa League of Cities

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IPERS Status Overview & Update - Iowa League of Cities

Benefits Feed Our Economy$234,200Outside the United States$148,444,926Outside Iowa$1,129,876,718Benefits paid in Iowa4GovernanceLegislaturePlan SponsorGovernorPlan SponsorBenefits AdvisoryCommitteeIPERSAdministrationInvestment BoardFund TrusteeWhat is the role of the Plan Sponsor?Creates planDetermines participationEstablishes funding Determines benefitsMonitors performance against plan goals5Purpose: Help Employers• Attract and retaingood employees• Fill critical i positionsi• Benefit grows withlength ofemployment62


Investment Returns 1982–201150%40%30%Current Actuarial InvestmentReturn Assumption = 7.50%*Annual Re eturn20%10%30 Year Annualized Return = 10.78%0%-10%-20%16Fiscal YearPeriods ended June 30Diversified Portfolio17Trust Fund ValueIPERS’ trust fund market value as of6/30/11(unaudited), is $23.2 2 billionup from $19.9 billion as of 6/30/10.186


Consistent Low Cost19Workforce Planning• National Trends– Baby boomers delaying retirement due torecession• IPERS Trends– Public employees’ retirements increased overthe past two years due to incentive programs• FY 2009 = 4,880 FY2010 = 6,385 FY2011 = 7,361– Retired reemployed steady• FY 2009 = 8,451 FY2010 = 8,363 FY2011 = 8,32120Recent Plan ChangesHF 2518• Affectseveryone…••Except…County sheriffsand deputiesProtectionoccupations(correctionalofficers, jailors,firefighters,police officers,and others)217


Summary of Changes7/2011• Change in Contribution Rates7/2012• Change in Vesting Rules• Change to High 5 Average• Change in Early Retirement ReductionPercentage• New reduction rules apply only to serviceearned 7/1/12 and later22Vesting Rule ChangeNow through6/30/2012 On July 1, 2012Vesting after 4years(or active member age 55)Vesting after 7years(or active member age 65)23High 5 Average ChangeNow through Starting July 1, 20126/30/2012High 3 yearHigh 5 yearaverageaverageor high 3 as of 6/30/2012(whichever is higher)248


Normal retirement age(No early retirement reduction) – No ChangeAge 65Rule of 62/20Rule of 88Regardless of serviceAt least age 62 with20 or more years of serviceAge + Years of service= 88 or greater25Early retirement age reductionCurrentReduce 3% a year for portion of service through06/30/12From nearest eligibility(Rule of 88; rule of 62/20 or age 65)July 1, 2012Time earned after July 1, 2012, without meetingnormal retirement age, benefits will be reduced 6%per year from age 65.26GASB Exposure DraftsGASB = Governmental Accounting Standards Board• Issues statements of standards for financial reportsissued by governmental entities; including standardsrelating to the reporting and calculation of pension costsand obligations.GASB 27 –the standard for governmental employers’ accountingand financial reporting of their pension obligationsGASB 25 –the financial reporting standards for pension plans(i.e. IPERS)279


GASB Exposure Drafts, continued• Breaks the link between actuarial funding andfinancial accounting.• Currently funding measurement reported onfinancial reports.• Employer’s balance sheet and income statementreports on payment of actuarially requiredcontributions.28GASB Exposure Drafts, continued• Proposal requires reporting a share of plan’s netpension liability (similar to unfunded actuarialliability) on the employer’s balance sheet, and• A share of the collective pension expense on theincome/expense statement.• Questions remain as to allocation of liability forcost-sharing multiple employer plans like IPERS.29Key Implications• New and large balance sheet liability• Larger pension expense (or pension income)• Large variations in financial statements year toyear• Contributions will not match GASB expense3010


What’s the Timeline?September 30• Deadline for field testing and comments toGASBOctober 2011• Public hearings and user forumsJune 2012• Final statement adoptedFiscal Year beginning after June 15, 2013 – potential implementationdate for IPERS and its employers.31Cost-of-Living Adjustments•November Dividend– Paid with the November benefit– Base guaranteed; paid from theTrust Fund– No increase since 2001– Affects only retirees who startedreceiving monthly benefitsbefore July 1, 199032Favorable Experience Dividend• The FED Payment– Paid with the January benefit– Not guaranteed– Will run out in the next 2-3 years– Paid from a separate account, established by atransfer from the Trust Fund– By law, cannot replenish until Trust Fund is 100%funded3311


Contact UsThe purpose of this presentation is to provide a briefoverview of IPERS. For additional information,contact us or visit our website at www.ipers.orgE-mail: ceo@ipers.orgPhone: 515-281-0070Toll-free: 800-622-38493412

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