IPERS considering in-house management of retirement funds

Officials say they believe move could save millions annually

IPERS logo

Iowa Public Employees' Retirement System
IPERS logo Iowa Public Employees’ Retirement System

DES MOINES — IPERS officials told Iowa lawmakers it likely will be next year before they ask for legislative changes to allow in-house management the $30 billion public employee retirement fund.

IPERS, Iowa Public Employee’s Retirement System, which paid out $2 billion in benefits last year, is in “preliminary discussion” of what they are calling internal investment management. Currently, IPERS contracts for outside management of its funds, but CEO Donna Mueller and Chief Investment Officer Karl Koch told the House State Government Committee Tuesday they believe millions of dollars could be saved annually through in-house management of investments.

However, they added, the change would require “significant” startup investment as well as trading, accounting and control infrastructure.

IPERS beneficiaries by county

Richard Pratt / The Gazette

Legislative changes would be needed, too. In order to attract the appropriate personnel, they explained, the state would have to compete with private management firms that typically offer managers bonuses that often are larger than their salaries.

Also, the IPERS 11-member Investment Board would need more authority and autonomy to hire and fire investment professionals, set compensation and oversee management tools and services, Mueller and Koch said. The Investment board includes the state treasurer and active and retired IPERS members as well as four non-voting legislators.

IPERS has 355,600 members with 51 percent paying into the system, 30 percent retired and receiving benefits, and 7 percent vested, but not yet receiving benefits. In fiscal 2017, IPERS paid $2 billion in benefits with $1.7 billion paid to Iowans, according to Mueller’s presentation.

Legislation pending in the Senate, Senate File 45,, would create a 401k-like defined contribution plans for future public employees. However, Rep. Dawn Pettengill, R-Mount Auburn, one of the legislative members of the IPERS board, opposes the plan and says she’s finding little support for it among her colleagues.

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