IPERS not in need of fundamental reform

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 also is data to support the health and sustainability of Iowa's state pension system, which was bolstered by reforms passed in 2010 and suggests it is likely headed toward sustainability for the future.

As a result of the 2008 economic downturn, IPERS began to sustain investment losses that affected the ratio of assets to liabilities (funding ratio). This was not unique to IPERS, as data show that the collective funding ratio of state pension plans dropped sharply during the same time period. In 2010, a package was passed by the Iowa 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 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.

See this report: http://slge.org/publications/strengthening-state-and-local-government-

finances-lessons-for-

negotiating-public-

pension-plan-reforms.

Alex Brown

Analyst, Center for State and Local

Government Excellence

Washington, D.C.