Overview &
Benefit Options
Presented by Jan Hawkins
Senior Retirement Benefits Officer
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, & other
• Approximately 340,000 members
• 2,000 employers
• 108,000 retirees
• $1.8 billion in benefit payments paid
annually
2
What Is IPERS?
• 401(a) (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
• Highest average salary
3
DB vs. DC: What’s the Difference?
IPERS
(Defined Benefit Plan)
401(k), 403(b), etc.
(Defined Contribution Plan)
Guaranteed
Benefit
Investment
Risk
YES. Monthly benefit is guaranteed
for life.
NO. Benefit fluctuates with market
performance.
Pooled investments.
IPERS takes on all the risk.
YOU take on all the risk.
Withdrawals
& Loans
Vesting
Portability
Death Benefits
Disability
Benefits
NOT AVAILABLE
TYPICALLY AVAILABLE
100% in your contributions.
100% in your contributions.
YES
YES
YES
YES
YES. IPERS provides disability
benefits depending on certain
qualifications.
INCLUDED
NO. Defined contribution plans do
not usually provide disability
benefits.
TYPICALLY HIGH
Fees & Expenses
4
How Does It Work?
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.
5
What’s My Part?
• Contributions + interest
– Contributions based on gross wages
– Current Regular class contribution rate:
•5.95% from you, the member
•8.93% from your employer
IPERS can adjust the total contribution rate by no more
than 1.0 percentage point up or down, following an
actuarial valuation.
6
What’s My Part?
• Contributions + interest
– Protection class contribution rate:
• 6.56% from you, the member
• 9.84% from your employer
– Sheriffs/Deputies contribution rate:
• 9.88% from you, the member
• 9.88% from your employer
7
IPERS Annual Interest Rate
1.99% - 2015
1.65% - 2014
1.28% - 2013
1.34% - 2012
2.03% - 2011
2.64% - 2010
3.61% - 2009
5.33% - 2008
5.79% - 2007
8
What Is “Vesting”?
Vested status is obtained after:
• 28 quarters (7 years) of reported
wages,
or
• When wages are reported in the
same calendar year age 65 or older
is attained
9
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
10
Benefit Formula
• Monthly benefits are calculated using:
– Years of Service
– Age
– Highest Average Salary
11
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.
12
Normal Retirement Age
(No Age Reduction)
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
13
Early Retirement Age
Reduction
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)
As of July 1, 2012
Reduce 6% a year thereafter
• From age 65
14
Example: Early retirement
Retire age 61 with 26.5 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
3%
2.5
2%
6%
65
4 yr
24%
Example: Early retirement
24 yrs
2.5 yrs
Reduce 3%/year for 1 year
Reduce 6%/year for 4 yrs
Earned before 7/1/12:
24 x 2% = 48% multiplier
$54,000 x 48% = $25,920
Earned starting 7/1/12:
2.5 x 2% = 5% multiplier
$54,000 x 5% = $2,700
Early retirement reduction:
$25,920 x 3% = $777.60
Early retirement reduction:
$2,700 x 24% = $648
$25,920 – $777.60 = $25,142.40 $2,700 - $648 = $2,052
Annual benefit = $27,194.40
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%
3
2%
0%
0 yr
0%
0 yr
0%
Rule of 88
Rule of 88
Example: work 6 more months
24 yrs
3 yrs
Rule of 88
Rule of 88
Earned before 7/1/12:
24 x 2% = 48% multiplier
$54,000 x 48% = $25,920
Earned starting 7/1/12:
3 x 2% = 6% multiplier
$54,000 x 6% = $3,240
Early retirement reduction:
$25,920 x 0% = $0
Early retirement reduction:
$2,700 x 0% = $0
$25,920
$3,240
Annual benefit = $29,160.00
Value of working the additional
6 months
Annual Pension with Reduction
Annual Pension with Rule of 88
$27,194.40
$29,160.00
Increase of $163.80 per month for lifetime
for working an additional 6 months
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
20
Service Purchases
Beginning 01/01/16: Purchasing will
take place only during the retirement
process.
• Increased accuracy of cost
• Reduced risk of under- or overpaying
Request an official cost quote when
you apply for retirement benefits.
• Application for Service Purchase
21
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/leave of absence time not
eligible for free credit
• Nonqualified service (air time)
5-year limit
• IPERS buy-up credit conversion
• Buy-back with cost credit
22
How Much Will It Cost?
• Submit an Application for Service Purchase
(available at www.ipers.org).
• Your service purchase cost will be calculated.
– Official cost quotes generated only after your
Application for Retirement Benefits is on file.
– You will receive the cost per quarter and the entire
purchase cost.
• Cost quotes are valid for six months.
Remember, completing the Application for Service
Purchase does not obligate you to purchase service.
23
Saving Up for a Purchase
• Request a basic cost estimate anytime before
retirement.
– Application for Service Purchase
• Save money in a separate retirement account
that can eventually be rolled over to IPERS for
your service purchase.
24
Retirement Estimates
• Request benefit estimates from IPERS
before deciding on a retirement date.
For detailed information on your account:
– Call toll-free 1-800-622-3849 or locally at 515-281-0020. Phones are answered by
Retirement Benefit Officers from 7:30 am to 5:00 pm Monday through Friday,
excluding holidays.
• Working a little longer could increase
benefits significantly.
• May be eligible to retire earlier!
25
Sample Estimate
26
Monthly Benefit
• Six monthly payment options
– Always lifetime to member
– Different death benefit provisions
IMPORTANT!
• Option choice cannot be changed
once benefits are paid.
27
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
28
Pre-Retirement Death Benefits
• Designated sole beneficiary of vested member can elect
lump sum payment or lifetime monthly benefit
(provided monthly benefit is $50 or more). If member
not vested at death, beneficiary only eligible for lump
sum payment.
• If designated beneficiary is more than one individual or
entity, death benefit can only be paid in lump sum
payment. Federal law now allows multiple beneficiaries
to rollover lump sum payments.
• If no beneficiary has been designated, lump sum
payment made to the estate.
29
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.
30
Getting Monthly Benefits Started
• Must terminate employment unless age 70
• Must be age 55 or older
– Unless vested and eligible for IPERS disability
benefits, first month of entitlement is month
following the month you terminate
employment
• Must submit completed application
• Benefits paid the last business day of
month
31
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
32
Reemployment
• Must have a bona fide retirement.
• It’s your responsibility to contact IPERS if
you are returning to an IPERS-covered
position.
– It’s possible that returning to an IPERScovered position will affect your benefit.
• Know the Social Security earning limits
33
Bona Fide Retirement
To qualify for a bona fide retirement, you must:
• End all service with covered employers,
including non-covered service.
• File an IPERS benefit application.
• Stay out of all employment with a covered
employer for one month.
• Stay out of all employment in an IPERS-covered
position for an additional three months.
34
Reemployment Guidelines
Applies to IPERS-covered employment only
• $30,000 earnings limit under age 65
(benefits reduced 50 cents for each dollar
earned over the limit)
• No earnings limit after age 65
• Benefits recomputed upon termination
35
Online Access 24/7
36
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
37
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 1-800-622-3849 or locally at 515-281-0020 Phones
are answered by Retirement Benefit Officers from 7:30 am to
5:00 pm Monday through Friday, excluding holidays.
• Website: www.ipers.org
• E-mail requests: info@ipers.org
• Retirement calculators
• Handbook
• Newsletters
• Other important information
38
Thank You!
Presented by Jan Hawkins
Senior Retirement Benefits Officer