IPERS Status Overview & Update - Iowa Association of School Boards

IPERS Status
Overview & Update
Presented by Kevin Wenndt
Iowa Public Employees’ Retirement System
October 7, 2011

Did You Know?
One in ten Iowans is an IPERS member.
– IPERS is the state’s largest public employees’ retirement system,
covering roughly 325,000 members and retirees from public school
districts and city, county, and state governments.
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Large Membership Pool
Membership Status
Inactive nonvested
33,215
10%
Inactive vested
32,869
10%
Active Members Grouped
by Major Employers
County
26,144
16%
Retired reemployed
8,320
2%
Retired
98,533
29%
Active
164,467
49%
Schools
83,941
51%
Other
5542
3%
City
24,005
15%
State
24,445
15%
As of June 30, 2011 (unaudited)
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Benefits Feed Our Economy
$234,200
Outside the United States
$148,444,926
Outside Iowa
$1,129,876,718
Benefits paid in Iowa
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Governance
Legislature
Plan Sponsor
Governor
Plan Sponsor
Benefits Advisory
Committee
IPERS
Administration
Investment Board
Fund Trustee
What is the role of the Plan Sponsor?
Creates plan
Determines participation
Establishes funding Determines benefits
Monitors performance against plan goals
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Purpose: Help Employers
• Attract and retain
good employees
• Fill critical positions
• Benefit grows with
length of
employment
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Purpose: Secure Income
• Care for self in
retirement
• Core benefit
• Lifetime monthly
payment
• Disability & death
benefits
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DB vs. DC: What’s the difference?
Defined
Guaranteed
Benefit
Investment
Risk
IPERS
(Benefit at retirement)
YES – Monthly benefit is
guaranteed for life.
Pooled investments.
IPERS takes on all the risk.
401(k), 403(b), etc.
(Contribution during career)
NO – Benefit fluctuates with market
performance.
YOU take on all the risk.
Withdrawals
& Loans
NOT AVAILABLE
TYPICALLY AVAILABLE
Vesting 100% in your contributions. 100% in your contributions.
Portability YES, somewhat YES
Death Benefits YES YES
Disability
Benefits
YES – IPERS provides disability
benefits depending on certain
qualifications.
Fees & Expenses INCLUDED TYPICALLY HIGH
NO – Defined contribution plans do
not usually provide disability
benefits.
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IPERS – Defined Benefit Plan
IPERS is designed to work with
Social Security and personal savings.
• Benefits based on formula
• Multiplier (based on years of service) X Average of highest wages
• Helps retain employees
• Maximum possible wage replacement: up to 65% or 72%
• Average benefit replaces about 44%
• Disability and death benefits
• Lifetime annuity benefit
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Prefund, Not Pay-As-You Go
Contributions
from Active
Members and
Employers
are paid in.
The IPERS Trust Fund
Lifetime Retirement
Benefits, Disability
Benefits, Death
Benefits and Refunds
are paid out.
The IPERS Trust Fund must be used for the
exclusive benefit of members and their beneficiaries.
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Key Measurements of Funding
Actuarial Funding Equation:
Contributions + Investments = Benefits + Expenses
(Actuarial Assets) (Actuarial Liabilities)
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Key Measurements of Funding
Funding Measures from the Actuarial Valuation
($Millions)
Regular
Membership
Special
Service 1
Special
Service 2
Total*
Actuarial Liability $25,081 $448 $940 $26,468
Actuarial Value of Assets 20,261 389 888 21,537
Unfunded Actuarial
Liability (UAL)
4,820 59 52 4,931
Funded Ratio 80.8% 86.8% 94.4% 81.4%
*Totals may not add due to rounding. Period ended June 30, 2010
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IPERS’ UAL is Amortized at 34 Years
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Healthy Funded Ratio
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Investment Performance Summary
For periods ended June 30
FY2011 FY2010 FY2009 3 Year 5 Year 10 Year 20 Year
IPERS Portfolio* 19.91% 13.82% -16.27% 4.55% 5.57% 6.40% 8.77%
Policy Benchmark† 20.15% 16.98% -14.50% 5.83% 6.03% 5.40% 8.35%
Large Public Fund
Median‡
21.46% 13.09% -18.76% 4.26% 5.05% 5.93% 8.71%
*Net of fees.
†A benchmark composed of market indices with weightings reflective of IPERS’ asset allocation targets.
‡ Trust Universe Comparison Service (TUCS) Public Funds with Total Market Value Greater than $1 billion.
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Annual Return
Investment Returns 1982–2011
50%
40%
30%
Current Actuarial Investment
Return Assumption = 7.50%*
20%
30 Year Annualized Return = 10.78%
10%
0%
-10%
-20%
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Fiscal Year
Periods ended June 30

Diversified Portfolio
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Trust Fund Value
IPERS’ trust fund market value as of
6/30/11(unaudited), is $23.2 billion
up from $19.9 billion as of 6/30/10.
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Consistent Low Cost
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Workforce Planning
• National Trends
– Baby boomers delaying retirement due to
recession
• IPERS Trends
– Public employees’ retirements increased over
the past two years due to incentive programs
• FY 2009 = 4,880 FY2010 = 6,385 FY2011 = 7,361
– Retired reemployed steady
• FY 2009 = 8,451 FY2010 = 8,363 FY2011 = 8,321
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Recent Plan Changes
HF 2518
• Affects
everyone…
•
• Except…
County sheriffs
and deputies
Protection
occupations
(correctional
officers, jailors,
firefighters,
police officers,
and others)
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Summary of Changes
7/2011
• Change in Contribution Rates
7/2012
• Change in Vesting Rules
• Change to High 5 Average
• Change in Early Retirement Reduction
Percentage
• New reduction rules apply only to service
earned 7/1/12 and later
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Vesting Rule Change
Now through
6/30/2012
On July 1, 2012
Vesting after 4
years
(or active member age 55)
Vesting after 7
years
(or active member age 65)
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High 5 Average Change
Now through
6/30/2012
High 3 year
average
Starting July 1, 2012
High 5 year
average
or high 3 as of 6/30/2012
(whichever is higher)
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Normal retirement age
(No early retirement reduction) – No Change
Age 65
Rule of 62/20
Rule of 88
Regardless of service
At least age 62 with
20 or more years of service
Age + Years of service
= 88 or greater
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Early retirement age reduction
Current
Reduce 3% a year for portion of service through
06/30/12
From nearest eligibility
(Rule of 88; rule of 62/20 or age 65)
July 1, 2012
Time earned after July 1, 2012, without meeting
normal retirement age, benefits will be reduced 6%
per year from age 65.
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Cost-of-Living Adjustments
• November Dividend
– Paid with the November benefit
– Base guaranteed; paid from the
Trust Fund
– No increase since 2001
– Affects only retirees who started
receiving monthly benefits
before July 1, 1990
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Favorable Experience Dividend
• The FED Payment
– Paid with the January benefit
– Not guaranteed
– Will run out in the next 2-3 years
– Paid from a separate account, established by a
transfer from the Trust Fund
– By law, cannot replenish until Trust Fund is 100%
funded
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Contact Us
The purpose of this presentation is to provide a brief
overview of IPERS. For additional information,
contact us or visit our website at www.ipers.org
E-mail: info@ipers.org
Phone: 515-281-0070
Toll-free: 800-622-3849
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