Iowa Public Employees' Retirement System's contributions would rise and benefits lowered under a bill pending in the Iowa General Assembly.
The bill would reduce the present value of the unfunded actuarial liability by $750 million.
Officials at the Des Moines-based system, which has $20.16 billion in assets, support the bill to try to stem its deteriorating funding level, said spokeswoman Julie Economaki.
The proposal includes raising the combined annual contribution rate of employers and employees to 13.45% from 11.95%, starting next year. The new rate in 2012 would bring in an estimated $925.7 million, a 12.5% increase from the estimated amount under the current rate.
The new rate would collect an estimated $1.4 billion in contributions by 2016, up an estimated $281 million from the current rate. Employers generally pay 60% of the contributions and employees, 40%.
In the fiscal year ended June 30, the system received $686 million in contributions and paid $1.18 billion in benefits.
The proposal would reduce the present value of future benefits by $1.2 billion, according to a fiscal impact report by the Iowa Legislative Services Agency. It also would raise vesting to seven years from four or require that a participant reach age 65 instead of age 55, whichever came first.
The average wage used in the benefit formula would change to a member's highest five annual salaries from the highest three. The benefit changes would affect most employees covered by IPERS. The changes, effective in 2012, would not lower benefits current employees have already earned.
Under the terms of the bill, the funded ratio — 82%, or $4.5 billion, at the end of fiscal 2009 — would be projected to decline to a low of 72% in 2024, then rise to 79%, or $11.9 billion unfunded, in 2039, according to a report of the IPERS Benefits Advisory Committee.
The bill, House bill 2502, was introduced by the House Committee on State Government on Feb. 18 and was referred to the Appropriations Committee on Feb. 22.
The bill also includes several other state pension systems.
