In 2019, we explored the history of public pension systems in Kentucky, Oklahoma, and Kansas. These plans were fraught with years of underfunding and legislative tax breaks and subsidies to corporations. In recent years, lawmakers in these states have tried to right their wrongs. Iowa, though, continues to have one of the best-funded pension systems in the nation, but lawmakers and outside groups have continuously threatened attacks.
Part four of our historical guide series takes a look at the Hawkeye State and its history with public employee pensions.
Background on Iowa Pension Systems
Created in 1953, the Iowa Public Employee Retirement System (IPERS) is the pension fund for most of Iowa’s public employees. A second system called the Municipal Fire and Police Retirement System of Iowa (MFPRSI) was created in 1990 by the Iowa legislature to provide a pension for police and firefighters across the state. According to the National Association of State Retirement Administrators, IPERS and MFPRSI have a combined $35,985,290 in assets, 175,146 members, and 126,165 annuitants.
In 2019, IPERS, the larger of the two plans, had a funded status of 82.68% – one of the best-funded pension plans in the nation.
2017 and 2018 Attempted Reforms
In 2017, Senator Brad Zaun introduced Senate File 45 – a bill that would have looked into moving newly hired Iowa public employees into a defined contribution 401(k)-style retirement system. Although the bill never made it to the Senate floor for a vote, Zaun’s bill was a direct attack on the retirement security of future public employees.
The attacks on IPERS didn’t stop there. In 2017, Governor Kim Reynolds pushed the idea of changing IPERS for future employees by switching them to a hybrid-style retirement system.
In 2018, Senate President, Charles Schneider, invited the anti-pension libertarian think-tank The Reason Foundation to “study” Iowa’s public pension system. The Reason Foundation is known to produce flawed data and advocates for pension systems to be closed – a move that research shows costs states more money in the long-term.
2019: Senate File 634
Although the threat of a defined contribution plan dissipated due to strong activism by public employees across the state, the legislature indirectly attacked the state’s pension systems through Senate File 634. The bill caps local budgets growth at two percent and would take a supermajority (two-thirds) vote of the local boards to go over two percent. While the legislation did not affect the legal requirement cities and counties have to make their IPERS payments, these capped budgets include accounts that fund employee health insurance and pension payments which can sometimes grow by more than two percent a year, pitting employees against essential services. Iowa House Democrats offered an amendment to exempt IPERS payments to the two percent cap, but it was voted down on a 51 – 49 vote, with two Republicans joining the Democrats to support the amendment.
At the start of the legislative session, Iowa’s lawmakers have promised public employees that they have no intention of attacking IPERS this year. That being said, public employee groups across the state are warning that attacks could happen again.