Iowa GOP legislative leaders ‘have no interest’ in changes to IPERS

Republican House Speaker Pat Grassley and other statehouse leaders say they have no interest in pursuing changes to the state-run retirement program for public employees despite a proposal from a state government efficiency panel.

The Iowa DOGE task force met last week to discuss dozens of proposals to present to Gov. Kim Reynolds and lawmakers ahead of a Sept. 29 deadline. Among the 45 recommendations discussed was replacing the Iowa Public Employees’ Retirement System (IPERS) with a defined contribution system, similar to a 401(k).

Terry Lutz, chairman of McClure Engineering Co. and former mayor of Fort Dodge, said Iowa’s retirement and health care compensation programs are “way out of whack with the private sector.” Lutz, who leads the Iowa DOGE task force “return on investment” work group, said public employees in Iowa contribute roughly 30 percent to their state pension plan, while the state contributes 70 percent.

“In the private sector, these percentages would almost be the opposite of that,” he said during last week’s meeting.

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He also said health care deductibles for state government employees are significantly lower than private sector employees.

To address the large liabilities pension benefits create for the state, Lutz said the work group suggests “doing away with the current defined benefits program and going to a defined contribution program, like so many other states have done.”

The work group also recommended the state conduct a comprehensive study to explore aligning state employees’ compensation more closely with the private sector to further cost savings for Iowa taxpayers.

Under a defined benefits plan, the employer manages the investments and is responsible for ensuring there are sufficient funds available to pay the guaranteed retirement benefits, which are calculated based on an employee’s salary and years of service.

Under a defined contribution plan, like a 401(k), the employee manages the investments and is responsible for the risk. Defined contribution plans do not promise any specific amount of benefits at retirement. Instead, benefits are based largely on contributions from the worker and how well investments perform.

Lutz suggested the changes, if enacted, apply only to new employees and exempt existing public employees already paying into IPERS.

The proposal has been met with bipartisan opposition, and public unions have decried the possibility.

“This proposal would strip away the retirement security public employees have earned through decades of service,” staff with AFSCME Local 61 wrote in a social media post.

About one in 10 Iowans rely on IPERS as part of their retirement income. The IPERS' Trust Fund hovers around $43 billion and paid $2.6 billion in annual benefits for the budget year that ended June 30, 2024, the majority of which (70 percent) was covered through investment income.

Created in 1953 to attract and retain quality public employees, IPERS has more than 400,000 members, including current, former and retired employees of the state, cities, counties and school districts.

"Iowans expect us to keep making government more efficient. While I recognize concerns about IPERS, I want to reassure Iowans that I have no interest in making changes to it,“ Iowa House Speaker Pat Grassley, R-New Hartford, said in a statement. ”We'll continue to find other ways to cut waste and ensure government works efficiently for Iowans."

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Iowa Senate Majority Leader Jack Whitver, R-Grimes, similarly said he does not expect the idea to grain traction in the 2026 legislative session.

“The point of the DOGE Task Force is for people, mostly outside of the public sector, to look at government and try to find ways to make it more efficient,” Whitver said in a statement. “The ideas discussed in these meetings are not bills or legislative proposals, they are just simply ideas. … There is not a legislative proposal, and anyone saying major changes are happening to public retirement systems are … spreading misinformation and misleading Iowans. While we are still waiting on a final proposal from the DOGE task force, no caucus members have come to me asking to make changes to IPERS, and I do not expect changes to this system.”

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Gov. Kim Reynolds created the Iowa DOGE task force through executive order in February. The 15-member group is comprised of business and industry leaders from across the state, who are tasked with finding ways to make the state government more efficient and produce recommendations for Reynolds and lawmakers to consider.

The task force is named similarly to the federal Department of Government Efficiency organization created by President Donald Trump and formerly headed by tech billionaire Elon Musk.

A spokesperson for Reynolds’ office referred requests for comment to task force chair Emily Schmitt, chief administrative officer and general counsel of Sukup Manufacturing.

Schmitt said the task force still is compiling its final report for the governor’s consideration, and that discussion of possible changes to IPERS were among 45 recommendations that are all "preliminary“ and have yet to be finalized.

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The Iowa DOGE Task Force is set to meet again Sept. 15. Final recommendations are expected to be delivered to Gov. Reynolds by Sept. 29.

“The return on investment work group identified the state’s retirement and health benefits systems as an area to conduct a comprehensive study to explore potential closer alignment with private sector benefit offerings and to further cost-saving methods for Iowa taxpayers,” Schmitt said in a statement to The Gazette. “The remarks by the task force also indicated an exemption for existing public employees paying into IPERS to ensure any potential future changes to IPERS would not impact existing employees.”

State Auditor Rob Sand, a Democrat who’s running for governor, told reporters Wednesday the task force should drop the idea of changing the pension system for public employees.

“Look, these are teachers, they’re fire fighters, they’re plow drivers, they’re police officers,” Sand said to reporters covering one of his stops at the Iowa State Fair. “We have made this deal with them and, to me, when you make a deal, you made a deal and you stick with it.”

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Sand said many public workers have accepted lower pay in exchange for better pensions, and criticized the lack of specific proposals to raise their wages.

“A big piece of this, to me, that I think everyone’s missing is they’re saying, ‘Oh, these are generous pensions,’ but their paychecks are lower,” Sand said.

Even if the public employee benefit packages are accounted for, Iowa’s public-sector workers still earn less than those in the private sector, according to a 2011 study by the Iowa Policy Project.

“So to me, this isn't a question about efficiency. It's just wanting to go after public workers,” Sand said. “But if you tell people, ‘OK, this is a low wage job and there's not much of a pension,’ then how are we going to get people to do the work that taxpayers need to have done for them?”

Union reps: Cuts would hurt ability to attract, retain workers

Todd Copley, president of AFSCME Council 61, which represents public sector workers in Iowa, said in an interview Iowa's current public retirement system is a model for efficiency and cost-effectiveness for other states.

As of December, IPERS was more than 90 percent funded — meaning for every dollar of promised lifetime income benefits to retirees, the plan has 90 cents in assets to cover them — better than most states.

IPERS’ investment program earned a 9 percent return in FY2024, exceeding its 7 percent assumption. The better-than-expected performance created an actuarial gain of $245 million.

Copley said changing the system would harm recruitment and retention efforts, contributing to worker shortages in a number of fields, including reaching, law enforcement and corrections.

“The one thing that people want to work for is at the end of the rainbow — is that benefit of a good, stable retirement,” he said. “You want to take that away now?”

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Copley and Iowa Democrats point out that Reynolds in her 2018 campaign for her first full term as governor, told reporters she would keep IPERS solvent and "honor the commitments that have been made,“ calling claims otherwise a “scare tactic.”

Copley said he remained cautious of the prospect that GOP legislative leaders won’t make changes to IPERS.

“I hope they're sincere when they say that,” he said. “But you know, time and time again, we have heard similar things from the House and Senate Republicans. In 2017 we heard that they were going to ‘tweak’ (collective bargaining rights for public employees). Well, we all seen how that tragically ended. And basically, public employees have lost all rights whatsoever as far as to negotiate a contract.”

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Melissa Peterson, a lobbyist for the Iowa State Education Association, said moving to a defined contribution system for incoming employees would make the current IPERS system unsustainable.

“It sounded like the recommendation was to essentially grandfather in everyone who's currently under the defined benefit system,” Peterson said. “The problem is, if you don't have new employees contributing to that defined benefit system, that reduces the benefit for those that are already in the program. So moving to a defined contribution is not only incredibly expensive, it also has a direct adverse impact on our ability to retain and recruit quality education professionals and all public employees for that matter.”

Peterson also criticized a preliminary task force recommendation that would base K-12 teacher compensation on student outcomes.

She said pay-for-performance does not account for differences in grade levels, content areas or individual student needs, and did not result in improved student outcomes or enhanced teacher collaboration when tried in Iowa or other states.

Democrats: Cuts would be ‘devastating blow’ to economy, workforce

Iowa House Minority Leader Brian Meyer, D-Des Moines, said in a statement “eliminating IPERS and other public pensions would be a devastating blow to Iowa’s workforce and economy.”

"For decades, these pensions have provided a secure retirement for public servants, including teachers, police officers, firefighters, nurses and social workers, who dedicate their lives to serving our communities,“ Meyer said. ”Gutting this system would break yet another promise to workers and further damage Iowa’s already struggling economy, which is ranked dead last in the nation."

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Senate Minority Leader Janice Weiner, D-Iowa City, said in a statement public servants deserve to have security in their retirement planning.

“Like other public employee pension programs, it is a critical workforce recruitment and retention tool,” Weiner said. “… Brain drain among younger Iowans presents a significant obstacle as we work to turn around our shrinking economy. To grow our workforce, we must make the prospect of living, working and retiring in Iowa more attractive. The task force’s recommendations, especially with regard to public employee benefits and compensation, and with no input from those public servants, do the opposite.”

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Lee Des Moines Bureau Chief Maya Marchel Hoff contributed to this report.

Comments: (319) 398-8499; tom.barton@thegazette.com