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January 2012 Policy Study, Number 12-1

   

Iowa's Privileged Class: Time for a Change!

    Iowa's Current Pension System and Status
   

 

The Iowa Public Employees’ Retirement System (IPERS) was originally set up in 1953 and is a traditional DB system. The amount an employee receives in retirement is based on “years of service, a multi-year average covered wage, and a multiplier.”[37] IPERS covers a wide range of government employees, including those working for public schools, state agencies, counties (99), cities, and townships.

 

As of 2010, there were 165,660 active, working members and 93,700 retired members. At that time there were almost $21.5 billion in assets.[38] Of all workers in the state of Iowa, approximately 13.5 percent are covered by IPERS as government workers.[39]

 

Within the broad employer types there are 20 individual employment category codes used for IPERS purposes. The codes are broadly grouped into three categories: Regular, Protection Occupations, and Sheriffs/Deputy Sheriffs. Ninety-five percent of IPERS members are in the “Regular” class.[40]

 

Categories of IPERS Employees

 

The required worker contributions, as well as state contributions, for each are different and range from 5.38 to 19.66 percent.[41] The average contribution by state government workers to the DB plan is 6.3 percent, similar to that required by Social Security until recently.[42]

 

The table below outlines current plan contributions.

 

Iowa Public Employees' Retirement System

 

The maximum wage covered by IPERS as of 2010 is $245,000.[43] A “Regular” category worker who makes $245,000 or more per year – of which there are many in Iowa’s government – would have $13,181 withheld from their paychecks and deposited to IPERS.

 

That same worker would have another $19,771 contributed directly by Iowa state government, for a total of almost $33,000 per year added to IPERS. Some examples of these workers include the administrators and doctors of the state Regent schools and associated medical facilities, as well as some county/city and K-12 administrators.

 

As of 1999, the employee contribution is done “pre-tax” for both Federal and state taxes, with no cutoff limit.44 While private-sector employees are limited in their IRA contributions by both actual contribution amount ($5,000 annually and $6,000 if over 50 years old) and by adjusted gross income level – this is not the case for Iowa government employees.

 

At this time the IPERS benefit for “Regular” class members is 65 percent of their highest salary. As we shall see, for some retirees this benefit is over $5,000 per month in retirement. For the Protection occupation and Sheriffs categories it is 72 percent.

 

Additionally, the Federal Social Security program also covers employees covered by IPERS. Contributions are made to this system by both the state government as the employer and the employee, as is done in the private sector.

 

An issue which resulted in some concern after former Governor Terry Branstad was re-elected Governor in 2010 is that of re-employment by those who have already retired and are drawing pensions.

 

After retiring, most Iowa government employees only have to wait four months before becoming eligible for re-hire. In the case of licensed health-care professionals, they only have to wait one month.45 This double dipping is looked upon unfavorably by many taxpayers. Some of the Legislative changes to IPERS in 2010 were intended to stop the practice.

 

   

 

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