The Iowa Public Employees Retirement System, or IPERS, is known for its strong benefits and high funding rates compared to public pension systems in other states. But in recent months, the system’s future has been uncertain. 

Recommendations from the Iowa DOGE Task Force, created by Iowa Gov. Kim Reynolds in February and intended to find ways to increase efficiency within the state government, advised Reynolds to explore potentially switching new public employees off the IPERS system to a defined contribution plan.

IPERS, a defined benefit plan, was created in 1953 because the state government understood the need to provide benefits that would help attract and retain public employees in Iowa.

The task force is made up of leaders from “private sector businesses, education, and local government,” according to the state of Iowa website. Reynolds appointed all board members except Iowa Rep. Hans Wilz, R-Ottumwa, and Iowa Sen. Dan Dawson, R-Council Bluffs, who sit on the committee as ex-officio members. 

After statewide pushback from public employees and Democrats, the task force more indirectly suggested the change in its final report, released in October, and instead recommended the state explore changes through studies of the compensation and benefit plans in the state. 

Reynolds addressed concerns at a press conference following the release of the final report. 

“You can rest assured that IPERS will be there for your retirement, just as you’ve planned and we’ve promised,” Reynolds said. 

Committee members and financial experts emphasize the strength of the IPERS system compared to other public pension systems nationwide, along with the lack of desire for change among Iowans, even in the wake of
Reynolds’ assurances.

The strength of Iowa’s public pension system 

Melissa Peterson, legislative and policy director for the Iowa State Education Association, said the program is one of the most “revered” in the nation — chiefly because of the immense oversight of the system. 

Oversight includes the IPERS staff, the IPERS Investment Board, and the Benefit Advisory Committee. 

The advisory committee is made up of representatives from public employee interest groups who make recommendations about member benefits to the state legislature and IPERS itself. This includes Peterson, who is vice chair of the committee and provides guidance on behalf of teachers. 

University of Iowa economics professor Anne Villamil said the IPERS system is stronger than public pension systems in other states, such as Illinois. The funding ratio for IPERS, the ratio of its assets to its liabilities, was 90.75 percent in fiscal year 2024. 

According to a yearly report from Illinois’ public pension program, the State Employees’ Retirement System, the Illinois system had a 43.3 percent funding ratio in fiscal year 2024. 

UI finance and economics professor Richard Peter said funding health and the reliability of benefits make Iowa’s system stand out. He said a fully funded system — at 100 percent or higher — means the state has enough assets to pay the present value of all promised
assets, taking into account how the value of money changes over time. 

“The compensation [for public employees] is not as high as folks in the private sector,” Peterson, vice chair of the benefits advisory committee, said. “There needs to be other things that make it attractive for people to join public employment, and this is one of those offerings.”

Peterson has represented education professionals in Iowa at ISEA for nearly 15 years. This includes public employees of school districts and colleges, virtually all of which are eligible for IPERS. 

Sue Cave, who represents the State Police Officers Council on the Benefit Advisory Committee in Iowa, said the IPERS system also assists in recruiting law enforcement officers to the state. 

“If that system were to change and become less stable, it would likely negatively affect recruitment and retention [of officers],” Cave said in a statement. 

From defined benefit to defined contribution plans

Defined benefit plans are traditionally utilized by long-term public employees, Villamil said, and the plan provides a set, guaranteed income in retirement with payments for life — stability that isn’t offered with the alternative, a defined contribution plan. 

New IPERS retirees averaged $2,125 in monthly benefits during fiscal year 2024, according to an annual report from the system. 

Cave said stable, defined benefits are particularly important for law enforcement officers who risk their lives to serve the state. 

Defined contribution plans, such as 401(k)s, are more frequently seen in the private sector, Villamil said, and is self-managed. Retirement returns depend on personal investments, but plans are transferable between jobs. 

Peterson said the recommendation made by the DOGE Task Force to explore transferring future public employees to a defined contribution plan reflects the interests of private sector businesses, who predominantly rely on defined contribution plans.

“I can understand why a business leader might say, ‘Let’s get rid of the defined benefit system so that it levels the playing field from a retirement perspective with private industry,’” Peterson said. 

Peterson said the recommendation lacked a general understanding of the system. She said the task force did not speak to anybody from IPERS, the advisory committee, or the investment board before the release of the report. 

Peterson said the report alluded to the contribution of general funds from the state to the IPERS system, which she said is inaccurate. The IPERS system is solely made up of investment returns, along with employee and employer contributions, Villamil said. 

The employee contributes 6.29
percent, and the employer contributes 9.44 percent of covered wages to the system, which are then pooled into the IPERS Trust Fund and invested. Villamil said about 70 percent of user benefits come from investment returns. 

Peter, the UI finance and economics professor, said switching new employees over to defined contribution plans would negatively impact the financial health of IPERS because there would be less younger, working people paying into the system. He also said a transition of plans would be costly for the state. 

“From a cost-efficiency standpoint, shifting to a new system would introduce additional expenses and expose IPERS to transition risks that state and local governments would ultimately have to absorb,” Peter said. 

Peterson said the recommendations from IPERS are challenging in conjunction with other difficulties for the education system statewide, which she said include “inadequate funding” in recent years and the teacher shortage. 

“When someone makes a recommendation to change one of the fundamental components that is used to retain quality employees, it is where you see a lot of people get concerned,”  Peterson said.