 IPERS Member Handbook
TAXES AND LEGAL RIGHTS AND RESPONSIBILITIES
This section of the handbook addresses taxes on your benefits and information about IPERS and IPERS members’ legal rights and responsibilities, as well as your right to appeal when you disagree with a decision made by IPERS.
A. Taxation
1. Monthly Benefits
Most IPERS benefits are taxable for federal and state income tax purposes.
IPERS benefits are partially exempt from Iowa income tax ($6,000 or $12,000 per year depending on filing status). IPERS will not withhold Iowa income tax for retirees who are not Iowa residents. IPERS must withhold Iowa income tax if the retiree elects federal withholding, is an Iowa resident, and if the benefit is more than $6,000 per year ($12,000 per year for married persons).
2. Lump-Sum Distributions
All taxable amounts are subject to mandatory 20 percent federal withholding tax if not directly rolled over to an eligible retirement plan. If the member is a resident of Iowa and the taxable portion is more than $6,000 per year, then IPERS will also withhold 5 percent of the taxable portion for Iowa income tax purposes. (Nonresidents may request Iowa withholding from a refund.)
If a member dies and the member’s spouse receives a lump-sum death benefit, the same federal and state withholding rules apply. Other beneficiaries may be able to exempt a portion from Iowa income taxes. Contact the Iowa Department of Revenue for more information.
All IPERS applications for lump-sum distribution include IPERS’ Special Tax Notice Regarding Plan Payments. Like all IPERS publications and forms, paper copies of the lump-sum distribution forms and the Special Tax Notice by itself are available from IPERS for free.
B. Processing Fee for Paper Checks
IPERS charges a processing fee of $1.00 each month to cover the administrative costs of issuing paper benefit checks. There is no charge for direct deposit of monthly benefit payments.
C. Overpayment of Benefits
An overpayment is any payment of money by IPERS that results in a higher payment than the recipient is entitled to receive under Iowa Code Chapter 97B and the administrative rules thereunder. If an overpayment is not repaid to IPERS in full within 30 days after notice, interest at an annual rate of 5 percent (7.5 percent for fraud cases) will be charged until the overpayment is repaid. Legal action may be brought to collect the overpayment and interest if IPERS is unable to secure acceptable repayment arrangements. After your death, your estate and your beneficiaries may become liable to repay overpayments on your account.
D. Appeal Rights
Members and other payees (collectively, appellants) may appeal any IPERS decision that affects their rights. To appeal, the appellant must submit a notice of appeal to IPERS within 30 days after notification of the decision is mailed to the appellant. The notice must state the decision to be appealed and the reasons for the appeal along with all documentation. All relevant written evidence should be submitted with the notice. For further information on the appeal process, contact IPERS.
E. Confidentiality of Records
As a member, your requests for information about your account will be honored if the request is in writing and includes your signature and member identification number or if the request is made by phone and IPERS has your current address and other verification information on file. IPERS will accept a faxed request that includes such information. Examples when this information might be needed include:
- If verification of income is needed when requesting government assistance.
- During income tax preparation.
- When working with a financial planner.
- In dissolutions of marriage.
Furthermore, IPERS is permitted to release information (otherwise described as confidential) to the legislative fiscal bureau, the department of management, the department of administrative services, and other IPERS-covered employers for use in the performance of their official duties. Recipients of confidential information are required to maintain the confidentiality of any confidential information provided by IPERS.
F. Identification of Agents
If a member or beneficiary is physically, mentally, or legally incapable of applying for benefits, IPERS may accept an application for a retirement allowance, refund, or death benefit completed by a person having the authority to sign on behalf of the incapacitated applicant. This person may also file a designation of beneficiary form. Documentation of the appointment as conservator, guardian, attorney-in-fact, or social security representative payee must accompany the application or request for information. A representative payee must also sign an IPERS representative payee agreement before IPERS will accept that person as a member’s or beneficiary’s agent. Contact IPERS if you need a copy of the representative payee agreement.
G. Increased Monitoring of Wage Manipulation
IPERS is stepping up efforts to identify when wages are being manipulated to increase a member’s benefits above what they should be eligible for. Wage manipulation hurts all members and employers who fairly report wages.
A change in the schedule of when wages are paid or an increase in wages of 10 percent or more between any two consecutive years may trigger a review. IPERS may require wage adjustments or refer cases of wage manipulation to the state auditor and to law enforcement authority for prosecution.
H. Attachment and Garnishment of IPERS Payments
Retirement benefits, refunds, and death benefits payable to IPERS members and their beneficiaries are subject to attachment or garnishment for tax, spousal, child, or medical support obligations. Payments from IPERS also are subject to marital property orders that are accepted by IPERS as Qualified Domestic Relations Orders (QDROs). For more information on this topic, see "If You Divorce," in this handbook, or the "Divorce and IPERS Benefits" brochure. Otherwise, contact IPERS’ QDRO administrator in writing or by phone.
I. Errors Involving a Member’s Account If IPERS determines that any type of error has been made with regard to a member’s account, IPERS will make an adjustment to the account. An adjustment will be made whether the error was made by any of the member’s former IPERS-covered employers, the member, or by IPERS. If the adjustment results in an underpayment of benefits, IPERS will pay the amount of the underpayment to the member or beneficiary. If the adjustment results in an overpayment of benefits, the member or the member’s beneficiary will be responsible for returning the overpayment to IPERS with interest if the overpayment is not repaid in 30 days. IPERS may deduct a certain amount from a member’s or beneficiary’s monthly benefit to repay the amount owed to IPERS. In cases involving a fraudulent practice, or if a member or beneficiary makes any false statement or representation for the purpose of causing an increase in benefits, IPERS may suspend all payments to the person. In addition, IPERS may refer the case to the Iowa Auditor of State or appropriate law enforcement authority for investigation and possible prosecution. | 
