The Benefits Advisory Committee (BAC) of the Iowa Public Employees Retirement System (IPERS) has agreed on recommendations to the Legislature to deal with the long-term funding concerns facing the system.
The committee’s recommendations to the Legislature include the following:
1. Increase the combined employer/employee contribution rate to 13.45% effective July 1, 2011. Under current law, the rate will be 11.45% on July 1, 2011.
2. Allow IPERS to “float” the contribution rate by 1% each year. Current law sets this at 0.5%.
3. Change the vesting requirement from the current four years to seven years.
4. Change the final average salary from the current high three years to five years.
5. Increase the early retirement reduction penalty from the current 3% to an average of 6% per year below age 65 for anyone retiring before they have earned the Rule of 88, or age 62 with 20 years of service or have reached age 65.
6. The benefit multiplier remains unchanged under this proposal. Currently, employees earn 2% per year for up to 30 years of employment resulting in a 60% multiplier. Once the employee has worked from 30 to 35 years, the benefit multiplier is 1% resulting in their final retirement benefit being the average of the highest three years salary times 65%.