1. IPERS Overview & Benefit Options
Presented by Ronda Onken
Senior Retirement Benefits Officer
Summer 2012

2. What is IPERS? The largest public retirement system in Iowa
Members include employees of:
public schools, cities, counties, state government, state universities, State Board of Regents
Approximately 330,000 members
2,200 employers
100,000 retirees
$1.3 billion in benefit payments paid annually
Some positions are exempt from coverage or have optional coverage. Most full and part time employees are covered. Temporary employees, those who work less than six months, are not covered.
A 401A plan is a qualified retirement plan under IRS codes.

3. What is IPERS? 401A (defined benefit plan) under IRS codes:
Lifetime benefits are paid based on a formula not on the amount of contributions.
Formula factors
Age
Years of service
The average of your highest three years of salary

4. How does it work?
Lifetime Retirement Benefits,
Disability Benefits,
Death Benefits and
Refunds are
paid out.
Contributions from
Active Members
and Employers are paid in.
The IPERS Trust Fund
The IPERS Trust Fund must be used for the exclusive benefit of members and their beneficiaries.

5. What’s My Part? Contributions + interest
Contributions based on gross wages
Current Regular class contribution rate:
5.78% from you, the member
8.67% from your employer
Interest is credited quarterly
Regular class members contribute at a rate of 3.7%. The employer contributes 5.75%. Deductions for deferred compensation, TSA’s and other qualified tax deferred plans do not reduce the amount of wages reported to IPERS,
Special class members include police officers of small towns, Sheriffs and deputies, airport fire fighters and other protection occupation positions. These members and their employers pay a higher contribution determined by the actuaries.
The interest rate for 2004 is 2.67%.

6. What is “vesting”? Vesting status is obtained after:
16 quarters (4 years) of reported wages, or
When wages are reported in the same calendar year age 55 or older is attained
Only one quarter is credited regardless of the number of employer’s reporting.
Effective July 2005, inactive members with less than 16 quarters of credit will not attain a vested status by reaching age 55. An account becomes inactive when a member hasn’t had wages reported in a calendar year.

7. Vesting Entitles the member to:
Monthly retirement or disability benefit
A portion of employer’s investment if refund is taken
and
Is required for a service purchase
Members under age 55 must be vested to receive a monthly benefit payment under the disability provisions.
A vested member who takes a refund will receive a portion of the employer’s investment based on the number of years they have contributed. For example, a member with 10 years of service will receive 1/3 of the employer’s investment.
In order to pay back an IPERS refund or make any other service purchase, a member must be vested.

8. Monthly Benefit Six monthly payment options IMPORTANT!
Always lifetime to member
Different death benefit provisions
IMPORTANT!
Option choice cannot be changed once benefits are paid.

9. Benefit Formula Monthly benefits are calculated using:
Years of Service
Age
Highest Three Years of Salary (Average)

10. Benefit Formula – Years of Service
Each year worked earns 2% of the 60% payable for the first 30 years.
1% for a maximum total of 65% payable for each additional year after 30.
Early retirement reduction if before normal retirement.

11. Maximizing Years of Service
Free credit
Leaves of absence
Granted prior to July 1998
Requires verification from employer
Active military duty
Entered military as an IPERS covered employee and returned to IPERS employment within one year of discharge
Submission of DD214 form required
Credit for missing quarters due to leaves of absences granted before July 1998 can be added to an account. An affadavit completed by the employer along with documentation from personal records, board minutes, etc. must be submitted.
Submission of a DD214 is required to add quarters of credit for active military duty. Free credit is given only if you entered active duty from an IPERS covered position and returned within 12 months after discharge.

12. Service Purchase Options
Refunded IPERS service
IPERS employment not previously covered
Other public system(s) (if not eligible to draw pension from the other system)
Active duty military time not eligible for free credit
Nonqualified Service year limit
Time not qualified (private employment)
Public employment (eligible to draw pension from other system)
“Air time”
You can buy back the time, not the wages, you took as a refund from previous IPERS covered employment.
Non-covered time includes employment with wages of less than $300 per quarter prior to July 1992 and substitute teaching time.
Other public employment includes employment in another state, in Iowa (TIAA-CREF for example), federal government for which you will not receive a benefit.
Private sector includes any employment with wages paid into social security and doesn’t fall into the other public category.
The cost for service purchase is based on the highest calendar year of wages, the increase in benefits and how soon unreduced benefits will be paid if a purchase is made.

13. Benefit Formula - Age What is considered “normal retirement”? Age 65
Age 62 with 20 or more years of service
Rule of 88 (years of service + age)
Receiving social security disability or railroad disability
Must be vested if applying for disability benefits under the age of 55
Any age reduction is 3% per year or .25% per month from:
age 65 with less than 20 years of service credits
age 62 with at least 20 years of service
the month you will reach the 88 rule if you have at least 27 years of service
Any age reduction will be eliminated for members receiving social security disability or railroad disability payments.
Regular class members with less than 30 years of service
will always have a reduction to benefits.
The formula for Special class members is based on 22 years of service and 55 years of age.

14. Early Retirement Reduction
Less than 20 years of service
3% per year for each year under age 65
20 or more years of service
3% per year for each year under age 62
At least 27 years of service and not reaching the Rule of 88
3% per year for each year under 88.
Years of service are based on quarters of wages reported to IPERS not employment dates.

15. Computed Year Example HIGH 3 CALENDAR YEAR WAGES
CURRENT YEAR SALARY (2012)
1st $11,000
2nd $13,000
3rd $ 8,875
4th $ 8,875
Computed year salary $41,750
Computed year High 3 Average = $40,583.33
*The computed year salary cannot be more than 103% of the highest calendar year wage (2011).
**The computed year average cannot be more than 121% of the 4th highest salary year not being used in the calculation (2009).
2011 $42, $38, $35,500 High 3 Average = $38,500
÷ 4 = $8,875
The final high three average used will result in the highest monthly pension payment payable to the member.

16. Important Facts to Remember!
Working any time in a month makes you ineligible for benefits that month.
You can get a paycheck in the same month you start IPERS payments.

17. Retirement Estimates
Request estimates from IPERS before deciding on a retirement date.
Working a little longer could increase benefits significantly.
May be eligible to retire earlier.

18. Option Summary Always lifetime to member!
OPTION 1 Guaranteed death benefit in $1,000 increments OPTION 2 Death benefit only if balance of investment remains OPTION 3 No death benefit OPTION 4 Dual life annuity OPTION 5 Guaranteed 10 year monthly benefit payments OPTION 6 Dual life annuity with pop-up feature for member

19. Getting Monthly Benefits Started
Must terminate employment unless age 70
Must be age 55 or older
Unless vested and eligible for IPERS disability benefits
Must make application

20. Taxes Benefit payments are subject to federal and state income tax
You can request that the tax can be withheld from monthly benefit payment
1099R mailed each January
For detailed tax information, contact the IRS for publication 575 or consult a tax advisor

21. Bona Fide Retirement
No employment with an IPERS-covered employer for one calendar month
No IPERS covered employment for an additional three months for a total of four calendar months
Months are counted by number of pension payments qualified for and received

22. When to Contact IPERS 3-5 years from possible retirement for estimates
5-6 months from retirement to obtain application packet
At termination, if before age 55 for additional options
If a disability occurs

23. Presented by Ronda Onken Senior Retirement Benefits Officer
Changes to IPERS
Presented by Ronda Onken
Senior Retirement Benefits Officer

24. Summary of Changes 7/2012 Change in Vesting Rules
Change to High 5 Average
Change in Early Retirement Reduction Percentage
Contribution rates increase 1%
New reduction rules apply only to service earned 7/1/12 and later

25. Contribution Rate Change
7/2011
Contribution rate %
7/2012
Contribution rate
14.45%
Split 60/40
Employee 5.78%
Employer 8.67%
Possible change
+/–1.0% annually
Split 60/40
Employee 5.38%
Employer 8.07%
Possible change
+/–1.0% annually
The contribution rate would have been 11.95% on July 1, 2011 without a law change.
The limit on the yearly change would have been 0.5 percent point up or down each year, although projections show the direction likely would have been up for decades.
Increasing the limit on how much the contribution rate each year is important because the rate is still below where it should be. The faster the rate nears the needed rate, the less it will cost in the long run. It is like getting behind on a credit card payment. You pay more interest when you aren’t paying what you should each month.
A salary of $45,000 per year will see $180 per year increase of contributions in 2012.

26. Vesting Rule Change Now through 6/30/2012 On July 1, 2012
Vesting after 4 years
On July 1, 2012
Vesting after 7 years
Later in the presentation I will address how these benefit will apply to new employees and those who have been working a while.

27. Vesting Changes Vested on 6/30/12; remain vested
At least 4 years of service OR
Year age 55 or older and contributing
Not vested on 6/30/12; vest at 7 years
Vested members gain certain membership rights, such as a right to a lifetime benefit and the right to purchase service.
At least 7 years of service OR
Month age 65 or older and contributing

28. High 5 Average Change Now through 6/30/2012 On July 1, 2012
High 3 year average
On July 1, 2012
High 5 year average

29. Compare and use higher of:
High 5 Average
Compare and use higher of:
Snapshot of High 3 on 06/30/12
High 5 at retirement

30. Example 1: High 5 Snapshot of High 3 High 5 at Retirement 06/30/12
Member retiring December 2014 with pay raise each year.
Snapshot of High 3
06/30/12
$45,000
47,000
$139,000 ÷ 3
$ 46,333
High 5 at Retirement
$45,000
47,000
49,000
50,000
$238,000 ÷ 5
$ 47,600

31. Example 2: High 5 High 5 at Retirement Snapshot of High 3 06/30/12
Member retiring December 2014 with decrease in pay.
Snapshot of High 3
06/30/12
$45,000
47,000
$139,000 ÷ 3
$ 46,333
High 5 at Retirement
$45,000
47,000
40,000
43,000
$222,000 ÷ 5
$44,400

32. Spiking control still applies
$ 37,000
38,000
40,000
41,000
45,000
47,000
52,000
71,000
93,000
$310,000 ÷ 5
$45,000
x %
= $60,300
6th highest
Spiking does not have to be an intentional act to inflate a pension. Any spike, regardless of reason, means the usual employer-employee contributions often have not been paid for the amount of the spike in lifetime benefits. The increased cost must be spread among all employees in the retirement system.
High 5
= $62,000

33. Early retirement age reduction
Current
Reduce 3% a year for portion of service through 06/30/12
From nearest normal retirement eligibility
(Rule of 88; rule of 62/20; age 65)
Beginning July 1, 2012
Reduce 6% a year thereafter
From age 65

34. Benefit multiplier – No change
2% a year for 30 years
1% a year in years 31–35
Maximum 65%
Benefit Formula: Average Salary X Multiplier

35. Normal retirement age Age 65 Rule of 62/20 Rule of 88
(No early retirement reduction) – No Change
Age 65
Regardless of service
Rule of 62/20
At least age 62 with
20 or more years of service
Rule of 88
Age Years of service = 88 or greater

36. Example: Early retirement
Retire age 61 with years of service
June 30, 2012
Total years 26.5
Annual multiplier
Adjustment factor
Adjusted to
How long
Reduction 24 2% 3%
62/20
1 yr
2.5 2% 6% 65
4 yr
24%

37. Example: Early retirement
24 yrs
2.5 yrs
Reduce 3%/year for 1 year
Earned before 7/1/12:
24 x 2% = 48% multiplier
$54,000 x 48% = $25,920
Early retirement reduction:
$25,920 x 3% = $777.60
$25,920 – $ = $25,142.40
Reduce 6%/year for 4 yrs
Earned starting 7/1/12:
2.5 x 2% = 5% multiplier
$54,000 x 5% = $2,700
Early retirement reduction:
$2,700 x 24% = $648
$2,700 - $648 = $2,052
Annual benefit = $27,194.40

38. Example: Work 6 more months
Retire age 61 with 27 years of service
June 30, 2012
Total years 27
Annual multiplier
Adjustment factor
Adjusted to
How long
Reduction 24 2% 0%
Rule of 88
0 yr 3 2% 0%
Rule of 88
0 yr

39. Example: work 6 more months
24 yrs
3 yrs
Rule of 88
Earned before 7/1/12:
24 x 2% = 48% multiplier
$54,000 x 48% = $25,920
Early retirement reduction:
$25,920 x 0% = $0
$25,920
Rule of 88
Earned starting 7/1/12:
3 x 2% = 6% multiplier
$54,000 x 6% = $3,240
Early retirement reduction:
$2,700 x 0% = $0
$3,240
Annual benefit = $29,160.00

40. Value of working the additional 6 months
Annual Pension with Reduction $27,194.40
Annual Pension with Rule of 88 $29,160.00
Increase of $ per month for lifetime for working an additional 6 months

41. Contact us:
The purpose of this presentation is to give you a brief overview of IPERS and upcoming law changes.
For detailed information on your account:
Call toll free or locally at Phones are answered by Retirement Benefit Officers from 7:30 am to 5:00 pm Monday through Friday, excluding holidays.
Website:
requests:
Retirement calculators
Handbook
Newsletters
Other important information

42. Thank You! Presented by Ronda Onken Senior Retirement Benefits Officer
Phone: (515)