Busting IPERS’ myths with facts

“Wait an hour before swimming, or you’ll drown." "Never shower in a thunderstorm.” “Sitting too close to the TV will ruin your eyes.”

Those were some of the mom myths I heard growing up. They might have been myths, but even now, I don’t shower in a storm.

But some myths aren’t harmless.

It’s time to bust some of those harmful myths surrounding the Iowa DOGE recommendation for the Iowa Public Employees' Retirement System (IPERS), which covers over 400,000 Iowans. Eliminating this system would not only hurt those covered but would devastate Iowa’s economy.

Myth 1: A 403(b) is like IPERS

A 401(k) is available for the private sector. A 403(b) is used for nonprofits and government employees. There’s certainly nothing wrong with using a 403(b) to save for retirement, but the systems aren’t the same. IPERS promises a specific monthly benefit to an employee upon retirement. Employees and employers contribute fixed amounts. Contributions are invested by IPERS.

A 403(b) is a defined contribution plan. A defined contribution plan is a plan where an employee and often an employer contribute a chosen amount to an individual retirement plan. The final amount at retirement is based on the contributions and the investments. An employee might need an investment adviser.

Myth 2: Changing IPERS will save money

IPERS is funded through a combination of investment earnings and employee and employer contributions. Investment returns fund approximately 70% of IPERS with employee/employer contributions funding the remainder. Actuaries consider IPERS one of the better funded pensions in the country

So, wouldn’t the state save big bucks by trading IPERS for a 403(b) system?

The short answer is no, unless the plan is for the state to never to contribute toward employee retirement. Without an employer’s contribution toward retirement, it would be extremely difficult to recruit employees.

Myth 3: IPERS is a free employee benefit

In most public sector bargains, the cost of IPERS is included. For example, If the bargain is a 3% total package, that package includes the cost of IPERS. For example, public school employees contribute 6.29% of their gross salary and the employer contributes 9.44% for a total contribution of 15.73%. The state, cities, and counties use similar employee/employer percentages.

Myth 4 It’s possible to change the system for new employees only

That change would underfund the system. IPERS funding is based on a large pool of employees/employers participating. If new employees are moved to another system, the funding will crash.

Myth 5 DOGE is looking at the whole picture

It’s not. DOGE wants to bring public sector worker retirement in line with the private sector. What it ignored is the wage gap between the public and private.

For example, according to the Economic Policy Institute, public schoolteachers earn an estimated 17.1% less than similarly degreed professionals.

IPERS is a self-funded pension system that does not receive money from the state general fund. It’s not broken.

Bruce Lear lives taught for 11 years and represented educators as an Iowa State Education Association Regional Director for 27 years until he retired. BruceLear2419@gmail.com