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IPERS Pension Reform

Effective July 1, 2012

The changes described here are the result of IPERS' pension reform bill (House File 2518, passed in 2010), which was designed to put IPERS on track to close the shortfall. These changes affect Regular members only. The majority of IPERS members, 95 percent, are Regular members. The other 5 percent are Special Service members (police, firefighters, etc.).

Contributions

IPERS can adjust contribution rates up or down each year, by no more than 1.0 percentage point. (Previously, the Iowa Legislature set the contribution rates and they could not change by more than 0.5 percentage point.)

Vesting

A member becomes vested after seven years of service, or upon reaching age 65 while in IPERS-covered employment, whichever comes first. (Previously, a member became vested after four years of service, or upon reaching age 55 while in IPERS-covered employment, whichever came first.)

Benefit Calculation: Average Salary

The wages used to calculate benefit amounts will be the average over the five years the employee earned the most. IPERS will continue to use a control year outside of the “high five” years to test for wage spiking that inflates benefits. (Previously, the wages used to calculate benefit amounts were the average over the three years the employee earned the most.)

Benefit Calculation: Early-Retirement Reduction

The amount lifetime monthly benefits are reduced for early retirement increases to 6% times the number of years the member receives benefits before age 65. The 6% reduction for early retirement will affect only people who retire before reaching normal retirement age. (Previously, the reduction was 3% for every year a member retired before that member’s closest normal retirement age.)

Further Reading on IPERS Pension Reform:

Q&A: 2010-2012 IPERS Law Changes
Summary of 2010-2012 IPERS Law Changes

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