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The IPERS plan is a defined benefit plan. Defined benefit plans are sometimes called traditional pension plans. |
401(k) and 403(b) plans are types of defined contribution plans. The amount contributed to the plan is defined, but your benefit at retirement is not. The sponsor of the plan may or may not contribute to your account balance. |
Guaranteed
Benefit |
Yes. You receive a guaranteed lifetime benefit. You can’t outlive your benefit. |
No. The amount of your benefit can fluctuate—up and down—depending on how much you’ve contributed, the performance of the investments you select, and whether you take out a loan or withdraw some of your money. When your account balance reaches $0, you will no longer have any benefits under the plan. |
Benefit
Amount |
You receive a predictable benefit, calculated using a set formula. |
Your benefit is based on your contributions, any employer contributions, and any investment earnings or losses on those contributions (minus any withdrawals or loans received). |
Who
Takes on
Investment
Risk |
IPERS takes on all the investment risk. The amount of your benefit is not affected by fluctuations in the investment marketplace. |
You, the employee, take on the risk. You (or the plan in some cases) are responsible for deciding how to invest your money and monitoring ongoing investment performance. |
Withdrawals
and Loans |
IPERS does not allow you to borrow against your account, and only terminated members may withdraw money. Keep in mind that taking a refund of your money from the plan may not be in your best interest because you are forfeiting your membership rights. |
Many defined contribution plans allow for withdrawals and loans. Keep in mind that if you withdraw or borrow money, you may reduce your available income at retirement. |
Vesting
(Entitlement
to Benefits) |
You are always 100 percent vested in your contributions. After 4 years of service or when you reach age 55 while in IPERS-covered employment, you become vested in a portion of the employer contributions made on your behalf. Vesting also entitles you to additional benefits. |
You are always 100 percent vested in your contributions. Vesting in your employer’s contributions varies by the plan sponsor (for example, you may become 20 percent vested in employer contributions for each year of service until you are fully vested). |
Portability
if You
Change
Jobs |
If you change jobs or employers, but continue working in an IPERS-covered position, your participation under IPERS continues. If you leave public employment, you may roll the value of your account over to another qualified plan, take a refund, or leave your money in IPERS. |
Your vested account balance is portable. You may roll it over to another qualified plan. |
Disability
Benefits |
IPERS provides disability benefits. To qualify for disability benefits, you must have ended all IPERS-covered employment, be vested, be receiving federal social security or railroad retirement disability benefits, and apply for benefits (you must indicate on your application for IPERS retirement benefits that you are retiring because of a disability). |
Typically, defined contribution plans do not provide disability benefits. |
Death
Benefits |
IPERS provides pre- and postretirement death benefits. The methods of payment, such as a lump sum or monthly benefit, differ depending on whether you die before or after retirement, the payment option you choose at retirement, and the number and type of beneficiary(ies) you designate. |
When you die, your account balance is transferred to your beneficiary(ies). Your beneficiary may then decide how the value of the account is paid out to him or her. |
Administrative
Expenses |
The Iowa Legislature oversees IPERS' expenses to ensure they are reasonable. Since a formula is used to calculate your benefit, what IPERS pays out in expenses does not affect the amount of your benefit. |
Fees are typically higher with a defined contribution plan. Administrative and investment management expenses are distributed across accounts or taken directly from individual balances based on investment options; therefore, fees affect the amount of your retirement benefits. |
