Letter to the Editor

BY DI READERS | APRIL 06, 2012 6:30 AM

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IPERS has solid future

Advocacy groups have highlighted the highest payouts of pension benefits to public employees in Iowa, using these examples to start a discussion about the need for fundamental pension reform in the state.

While that data might stand out to some, there are also data to support the health and sustainability of Iowa's state pension system, which was bolstered by a package of reforms passed in 2010 and is likely headed toward sustainability for the future.

According to census data, the percentage of state and local spending on pensions in Iowa has remained around 1.7 percent. Additionally, as a result of the 2008 economic downturn, the Iowa Public Employees' Retirement System (IPERS) began to suffer from investment losses that affected the ratio of assets to liabilities (funding ratio). This was not unique to IPERS, as data produced by the Center for Retirement Research show that the collective funding ratio of most state pension plans dropped from 84 percent in 2008 to 78 percent in 2009.

In 2010, IPERS staff and advisers began to formulate a plan for pension reform, which was the product of years of research into the issue. That same year a package was passed by the state Legislature, which is the fiscal plan sponsor of IPERS. The reforms included: an incremental increase in employee and employer contribution rates; an increase in the number of years required to vest; and an increase in the number of years used to calculate final average salary.

Critics of defined benefit plans can point to funding ratios below 100 percent to support their case that pensions are unsustainable, but this number alone doesn't tell the whole story. IPERS staff and state elected officials have worked together to ensure sustainability of pension benefits for public employees in Iowa in a fiscally challenging environment.

Alex Brown
research and policy analyst

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