IPERS Member Handbook

AFTER RETIREMENT

This section of the handbook describes what happens after you retire and begin receiving IPERS benefits. It explains dividend payments, returning to work, and death benefits.

A. Dividends

1. November Dividend

A November dividend is required under Iowa Code Section 97B.49F(1) for members who retired June 30, 1990, or earlier. This dividend is intended to help offset the negative effects of postretirement inflation. It is:

• A base payment guaranteed by law.
• Paid once a year.
• Based on a formula that applies a multiplier to the base payment (the multiplier is not applied unless IPERS’ actuary certifies that the increase can be supported by current contribution rates).

2. Favorable Experience Dividend (FED)

For members who retired after June 30, 1990, a Favorable Experience Dividend (FED) Reserve Account has been established under Iowa Code Section 97B.49F(2). The FED payment is not guaranteed by law. Like the November dividend, the FED is intended to help offset the negative effects of postretirement inflation. All members and beneficiaries receiving monthly benefit payments qualify for FEDs. Each November, IPERS will determine if a FED payment should be paid the following January subject to the following conditions:

• The member must be retired one full calendar year.
• The FED rate cannot exceed 3 percent.

The formula is as follows:

EXAMPLE: $1,000 X 12 X 1.07% X 2 = $256.80

B. Returning to Work After Retirement

Retired IPERS members may at some time decide to return to work. It’s important to understand how your retirement benefits may be affected, based on:

• Your age.
• The type of employer you work for.
• How much you earn.

If you are considering reemployment after retirement, review this section carefully. If you have questions, contact IPERS for more information before accepting any position with a covered employer.

1. Time Restrictions

a. If You Work for a Non-IPERS-Covered Employer

If you retire and return to work with an employer that is not covered by IPERS, there are no time restrictions on reemployment. You can work as soon after retirement as you want, with no effect on your IPERS benefit, regardless of your age.

b. If You Work for an IPERS-Covered Employer

Age 70 or Older

You may return to work at anytime. However, you must end all employment with covered employers for at least 30 days in order to have your retirement benefit recalculated.

Age 55 up to Age 70

You must complete a bona fide retirement (see below) before returning to work with any IPERS-covered employer.

c. Bona Fide Retirement

A bona fide retirement is a period during which you end IPERS-covered employment, complete the application for retirement benefits, and demonstrate that you are entitled to retirement benefits. To qualify for a bona fide retirement, you must:

• End all service with covered employers, including noncovered service.
• File an IPERS retirement 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 3 months.

The qualification period begins with your first month of entitlement for retirement benefits as approved by IPERS.

You cannot enter into reemployment agreements, either written or verbal, before you have received at least one benefit check from IPERS. You may accept temporary employment after your first month of entitlement in your previous position. However, reemployment in your previous position cannot be used as a means of evading the bona fide retirement rules.

If IPERS learns you were hired as a temporary employee during the bona fide retirement period, and then, for whatever reason, your employer treats you as a covered employee immediately following the bona fide retirement period, IPERS will audit the employment. If IPERS learns that your employer did not make reasonable efforts to fill the vacancy you left when you retired with a new permanent employee, IPERS will revoke your benefits due to a violation of the bona fide retirement rules. See the Bona Fide Retirement Calculator that follows.

Exceptions:

• Licensed health care professionals may return to IPERS-covered employment in some public hospitals after one month of separation rather than the four months currently required for a bona fide retirement. This provision is effective until June 30, 2010.
• Part-time elective officials may retire and retain their office without violation of the bona fide retirement rules if the employee notifies IPERS in writing of the intent to retire and terminates all other covered employment. The elected official must have a bona fide termination of all other employment covered under this chapter (other than as an elected official).

If you violate these provisions, your application for retirement benefits will be canceled and you will be required to repay all funds received to date plus interest.

2. Earnings Restrictions

a. Non-IPERS-Covered Employer

If you retire and return to work for a non-IPERS-covered employer, there are no restrictions on earnings. Your earnings do not affect your IPERS benefits. However, keep in mind that Social Security has certain income limitations that apply to your social security benefit.

b. IPERS-Covered Employer

If you retire and return to work for an IPERS-covered employer, the following rules apply:

Age 65 or Older

There is no limit on the amount you can earn; your benefit is not affected by your earnings.

Age 55 up to Age 65

If you return to covered employment after completing a bona fide retirement, your earnings will be subject to an annual earnings limitation. Currently, this annual earnings limitation is $30,000 of IPERS-covered wages per calendar year or the annual Social Security wage limit, whichever is higher. These wage limits may change each year. You may review these at www.ssa.gov.

If you exceed the annual earnings limit, your monthly retirement benefit for the remainder of the calendar year will be reduced by 50 cents for each dollar of IPERS-covered wages you earn over the earnings limitation.

Beginning July 1, 2007, employer contributions made to defined contribution or deferred compensation retirement plans will be counted as wages earned when determining the earnings limitation, even though they will not be treated as IPERS-covered wages.

3. Returning to Work While Receiving Disability Benefits

If you are receiving IPERS disability benefits and return to IPERS- covered employment after completing a bona fide retirement, there will be an impact on your benefits. These impacts are described in the following paragraphs.

a. Regular Members

If you retire with disability benefits, complete a bona fide retirement, and return to covered employment, your benefits will be reduced or suspended. If you are under 55 years of age, the entire benefit will be suspended. If you are 55 years of age or older, the benefit amount will be reduced to the amount that you would have drawn without disability being applied. If you return to employment with a covered employer before completing a bona fide retirement, your retirement will be canceled.

b. Special Service Members

If you retire with Special Service disability benefits, complete a bona fide retirement, and return to covered employment, your benefits will cease immediately. If you return to noncovered employment, your Special Service disability benefits will be limited according to the reemployment comparison amount formula.

C. Reretirement and Recomputation

When you are ready to retire again after returning to work with an IPERS-covered employer, contact IPERS to have your retirement benefits recalculated to include any additional benefits you earned during your reemployment. Your reemployment period (the period you work after you retire) is considered a separate period of service. The recomputation formula will be adjusted so that no more than 30 years of service are used in the calculation. Any benefits you receive for reemployment will be calculated separately—even though they may be treated as part of your original benefit for income tax purposes. You may have the second benefit added to the initial monthly payment or receive a one-time lump-sum payment. If you end reemployment and do not request a monthly payment or lump-sum payment within a year, a lump-sum payment will be paid to you automatically. If your reemployment period is less than four years, the formula used to recalculate your additional benefits is different from the standard formula. Your benefits will be determined using a money purchase formula that is based on the amount of contributions you made while reemployed.

If you began receiving monthly pension payments at the age of 70 without terminating your employment, you can have IPERS recompute your initial monthly payment when you actually retire from your IPERS-covered position. IPERS uses the standard benefit formula, calculating all of your years of service as part of the original benefit, to recompute your monthly payment. Be sure to contact IPERS when you terminate your IPERS-covered employment.

Death Before Recomputation

If you are retired, have become reemployed, and die before benefits are recomputed because of reemployment, your designated beneficiary will be eligible for additional death benefits based on your reemployment wages.

D. If You Die After Retirement

When you selected a payment option at retirement, you decided what kind of death benefits your beneficiary(ies) would receive. However, benefits are not paid automatically upon your death. The paragraphs below stress the importance of keeping beneficiary information up to date so that when you die, IPERS can pay benefits to your beneficiary without delay.

1. Applying for Death Benefits

To receive death benefits, your beneficiary(ies) must file an application with IPERS and provide the necessary supporting paperwork.

Generally, your designated beneficiary(ies) must apply for the death benefit within five years from the date of your death or the benefit is forfeited. A longer period may apply if your spouse is your designated beneficiary. A shorter claim period also may apply, depending on the application of the IRS’ minimum distribution rules to your situation.

If you die after living into your first month of entitlement to benefits, the amount (if any) of the death benefit to your beneficiary(ies) depends upon the benefit payment option you selected at the time of retirement. To understand the various payment options, refer to “Retirement.”

If you die before your first month of entitlement to benefits, your retirement application is canceled and a preretirement death benefit is payable to your beneficiary.

Members: Discuss IPERS death benefits with your beneficiaries. Stress the importance of notifying IPERS as soon as possible of your death and making a claim for remaining death benefits if applicable.

2. Payments to Minors

As you learned in “Membership in IPERS” in this handbook, IPERS cannot make payments directly to minors. If the amount to be paid to the minor is under $10,000, payment may be made to an adult as custodian for the minor. If the amount is $10,000 or more, the amount must be paid to a court-established conservator. Alternatively, if the minor will turn 18 within the applicable time period for making a distribution, the minor can wait and apply upon reaching age 18. Be sure to contact IPERS to ensure that waiting to claim a death benefit will not cause the death benefit to be forfeited.

3. Amounts Payable to Beneficiaries Who Fail to File Claims

If you have multiple beneficiaries or heirs, it is possible that some may not apply for benefits within the required claim period. If this happens, IPERS divides the shares that would have gone to the beneficiaries or heirs who did not file a timely claim among those who did file on time. Those beneficiaries receive a percentage of the additional payment equal to the percentage of the total payment they were to receive originally.

4. Rollovers

Federal law permits a member’s spouse to roll over the pretax portion of a lump-sum death benefit to a traditional IRA or an eligible retirement plan, which includes plans qualified under Section 401(a) of the Internal Revenue Code. If acceptable to the recipient plan, after-tax amounts are also eligible for rollover transfers. Rolling the taxable portion to another retirement plan or an IRA allows the funds to continue to grow on a tax-deferred basis until the spouse is ready to retire. Effective for distributions made on or after January 1, 2007, nonspouse beneficiaries have the same rollover rights as spouses, except their rollovers can only be made to IRAs.

Remember to keep your IPERS Enrollment/Beneficiary Designation form current. If your beneficiary dies before you and you do not name a new beneficiary, or if you have not designated a beneficiary, your estate may become your beneficiary.