Governance. Legislature Plan Sponsor. Governor Plan Sponsor. IPERS Administration. Investment Board Fund Trustee. Benefits Advisory Committee

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2 IPERS Vision IPERS is a sustainable and affordable retirement plan that is valued by all Iowans and provides members with secure income, supports self-sufficiency in retirement, and contributes to local economies. 2

3 Governance Legislature Plan Sponsor Governor Plan Sponsor Benefits Advisory Committee IPERS Administration Investment Board Fund Trustee 3

4 IPERS is The largest public retirement system in Iowa 2,100 employers public schools, cities, counties, state government, state universities, State Board of Regents Over 343,000 total members Regular members Sheriffs & Deputies Protection Occupations 4

5 343,000 Members Over 104,000 retirees and beneficiaries $1.7 billion paid in benefits $1.5 billion paid in Iowa 89% of those payments made in Iowa 5

6 IPERS is a Defined Benefit Plan Paid as a lifetime, monthly annuity Amount is based on a formula Contributions from employee and employer Pooled contributions are invested by professional investment managers 6 6

7 Prefund Not Pay-as-you-go Contributions + Investments = Benefits + Expenses Guaranteed lifetime annuity. 7

8 What is an Actuarial Valuation? Annual snapshot as of June 30 th Evaluates funded status Evaluates asset and liability measures Determines annual required contributions 8

9 2013 Key Indicators IPERS is a strong pension system Funded ratio of 81% Decrease of $129 million in UAL UAL is amortized at 27 years $25 billion Trust Fund Positive gains from investments FY2013 investment performance of 10.12% Beats the 7.5% actuarial assumed investment return 9

10 Investment Returns For periods ended June 30, 2013 *Actuarial investment return assumption: : 6.50% : 6.75% 1996 present: 7.50% 10

11 Years Amortization Period 140 NA NA NA NA NA NA NA NA June 30 11

12 Contribution Rates vs. Required 12

13 Funded Ratio 100% Funded Ratio 95% 90% 85% 80% 75% June 30 13

14 Cost-of-Living Adjustments November Dividend Guaranteed Approximately $8.3 million to an estimated 9,400 retirees The FED Payment Approximately $121.6 million to an estimated 93,000 retirees Payments will cease with the January 2014 benefit 14

15 What Is GASB? GASB stands for Governmental Accounting Standards Board To learn more about GASB, go to the GASB website at 15

16 GASB Statements 67 & 68 Currently The employer s financial statements report on payment of contractually required contributions The new standards Require employers to report a portion of IPERS net pension liability (similar to UAL) on their financial statements 16

17 What s the Bottom Line? Employers will report this amount on their financials. It will be a large number and will change annually. Remember, this amount is not due immediately. Like a mortgage, it s paid over time. Payment on this debt is already included in the annual contribution rate. No separate funding is needed. 17

18 Other Systems in the News Detroit/San Jose/San Diego/ Illinois Common theme: underfunding Why? Didn t make the actuarially required contributions Rich benefits, such as a 1-year final average salary and COLAs Other contributors to the problem, not just pension debt Diverting pension assets to pay for retiree health care 18

19 IPERS Benefits More moderate than many Reform started 4 years ago Contribution rates tied to actuarial rate Investment Board adopted funding policy Benefit reductions taken by current, active members No separate tier for new hires 19

20 How Do We Stack Up? IPERS Public Fund Average Steady funding level; currently over 80% Median funding level is 73.1% * Investment return assumption of 7.5% Investment return assumption of 7.9%* 30-year investment return is 9.57% ** Large public fund median is 9.42% Iowa is *The survey is sponsored by the National Association of State Retirement Administrators and the National Council on Teacher Retirement **Annualized actual return as of June 30, 2013 Trust Universe Comparison Service (TUCS) Public Funds with Total Market Value Greater than $1 billion. second-best in the management of its tax-supported debt and unfunded public employee pensions. Barron s Financial Weekly 10/17/13 20

21 IPERS Mission Administer a cost-efficient retirement plan that provides lifetime pension payments to public employees and serves to attract and retain a quality workforce. 21