Senate Study Bill 1197




                                          SENATE FILE       
                                          BY  (PROPOSED COMMITTEE ON
                                               STATE GOVERNMENT BILL BY
                                               CO=CHAIRPERSON HORN)


       Passed Senate, Date               Passed House,  Date             
       Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                    Approved                            

                                         A BILL FOR

     1 An Act providing for employer and employee contributions to the
     2    Iowa public employees' retirement system.
     3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
     4 TLSB 1148SC 81
     5 ec/pj/5

PAG LIN



  1  1    Section 1.  Section 97B.11, Code 2005, is amended to read
  1  2 as follows:
  1  3    97B.11  CONTRIBUTIONS BY EMPLOYER AND EMPLOYEE.
  1  4    1.  a.  Each employer shall deduct from the wages of each
  1  5 member of the retirement system a contribution in the amount
  1  6 of three and seven=tenths percent the applicable employee
  1  7 percentage of the covered wages paid by the employer, until
  1  8 the member's termination from employment.  The contributions
  1  9 of the employer shall be in the amount of five and seventy=
  1 10 five hundredths percent the applicable employer percentage of
  1 11 the covered wages of the member.
  1 12    b.  For purposes of this section, the "applicable employee
  1 13 percentage" means the percentage rate equal to three and
  1 14 seven=tenths percent plus forty percent of the total
  1 15 additional required percentage and the "applicable employer
  1 16 percentage" means the percentage rate equal to five and
  1 17 seventy=five hundredths percent plus sixty percent of the
  1 18 total additional required percentage.
  1 19    2.  For purposes of this section, the "total additional
  1 20 required percentage" is as follows:
  1 21    a.  Beginning on or after July 1, 2005, but before July 1,
  1 22 2006, one percent.
  1 23    b.  Beginning on or after July 1, 2006, but before July 1,
  1 24 2007, two percent.
  1 25    c.  Beginning on or after July 1, 2007, but before July 1,
  1 26 2008, three percent.
  1 27    d.  Beginning on or after July 1, 2008, but before July 1,
  1 28 2009, four percent.
  1 29    e.  For each fiscal year beginning on or after July 1,
  1 30 2009, the total required percentage, as defined in subsection
  1 31 3, for that fiscal year minus nine and forty=five hundredths
  1 32 percent.
  1 33    3.  For purposes of this section, the "total required
  1 34 percentage" for a fiscal year means the percentage rate equal
  1 35 to the total of nine and forty=five hundredths percent and the
  2  1 total additional required percentage for the prior fiscal year
  2  2 unless any of the following applies:
  2  3    a.  If the system determines, based upon the most recent
  2  4 actuarial valuation of the retirement system, that the total
  2  5 required percentage for the prior fiscal year is insufficient
  2  6 to amortize the unfunded actuarial liability of the retirement
  2  7 system within thirty years, the total required percentage for
  2  8 the next fiscal year shall be the lesser, as determined by the
  2  9 system's actuary, of the percentage rate needed to amortize
  2 10 the unfunded actuarial liability of the retirement system in
  2 11 thirty years or a percentage rate equal to one percentage
  2 12 point greater than the total required percentage for the prior
  2 13 fiscal year.
  2 14    b.  If the system determines, based upon the most recent
  2 15 actuarial valuation of the retirement system, that the total
  2 16 required percentage for the prior fiscal year is sufficient to
  2 17 amortize the unfunded actuarial liability of the retirement
  2 18 system within ten years or less, the total required percentage
  2 19 for the next fiscal year shall be the greater, as determined
  2 20 by the system, of the following:
  2 21    (1)  One percentage point less than the total required
  2 22 percentage for the prior fiscal year.
  2 23    (2)  The percentage rate equal to the normal cost rate as
  2 24 certified by the system's actuary plus that percentage
  2 25 necessary, but in no event less than seventy=five hundredths
  2 26 of one percent, to amortize any unfunded actuarial liability
  2 27 of the retirement system within twenty years.
  2 28    4.  The determination of the total required percentage as
  2 29 provided by this section for a particular fiscal year shall be
  2 30 done by the system, by rule, following a determination by the
  2 31 system's actuary as to the total required percentage for that
  2 32 fiscal year based upon the most recent actuarial valuation of
  2 33 the retirement system by the system's actuary.
  2 34    Sec. 2.  Section 97B.49B, subsection 3, Code 2005, is
  2 35 amended to read as follows:
  3  1    3.  ADDITIONAL CONTRIBUTIONS.
  3  2    a.  Annually, the system shall actuarially determine the
  3  3 cost of the additional benefits provided for members covered
  3  4 under this section as a percentage of the covered wages of the
  3  5 employees covered by this section.  Sixty Notwithstanding any
  3  6 provision of section 97B.11 to the contrary, sixty percent of
  3  7 the cost shall be paid by the employers of employees covered
  3  8 under this section and forty percent of the cost shall be paid
  3  9 by the employees.  The employer and employee contributions
  3 10 required under this paragraph are in addition to the shall be
  3 11 treated as contributions paid under sections 97B.11 and
  3 12 97B.11A.
  3 13    b.  (1)  For the fiscal year commencing July 1, 1988, and
  3 14 each succeeding fiscal year, there is appropriated from the
  3 15 state fish and game protection fund to the system the amount
  3 16 necessary to pay the employer share of the cost of the
  3 17 additional benefits provided to employees covered under
  3 18 subsection 1, paragraph "e", subparagraph (1).
  3 19    (2)  Annually, during each fiscal year commencing with the
  3 20 fiscal year beginning July 1, 1988, each applicable city shall
  3 21 pay to the system the amount necessary to pay the employer
  3 22 share of the cost of the additional benefits provided to
  3 23 employees of that city covered under subsection 1, paragraph
  3 24 "e", subparagraphs (2) and (4).
  3 25    (3)  For the fiscal year commencing July 1, 1988, and each
  3 26 succeeding fiscal year, the department of corrections shall
  3 27 pay to the system from funds appropriated to the Iowa
  3 28 department of corrections, the amount necessary to pay the
  3 29 employer share of the cost of the additional benefits provided
  3 30 to employees covered under subsection 1, paragraph "e",
  3 31 subparagraph (3).
  3 32    (4)  For the fiscal year commencing July 1, 1990, and each
  3 33 succeeding fiscal year, the state department of transportation
  3 34 shall pay to the system, from funds appropriated to the state
  3 35 department of transportation from the road use tax fund and
  4  1 the primary road fund, the amount necessary to pay the
  4  2 employer share of the cost of the additional benefits provided
  4  3 to employees covered under subsection 1, paragraph "e",
  4  4 subparagraph (5).
  4  5    (5)  For the fiscal year commencing July 1, 1992, and each
  4  6 succeeding fiscal year, the department of public safety shall
  4  7 pay to the system from funds appropriated to the department of
  4  8 public safety, the amount necessary to pay the employer share
  4  9 of the cost of the additional benefits provided to a fire
  4 10 prevention inspector peace officer pursuant to subsection 1,
  4 11 paragraph "e", subparagraph (6).
  4 12    (6)  For the fiscal year commencing July 1, 1994, and each
  4 13 succeeding fiscal year through the fiscal year ending June 30,
  4 14 1998, each judicial district department of correctional
  4 15 services shall pay to the system from funds appropriated to
  4 16 that judicial district department of correctional services,
  4 17 the amount necessary to pay the employer share of the cost of
  4 18 the additional benefits provided to employees of a judicial
  4 19 district department of correctional services who are employed
  4 20 as a probation officer III or a parole officer III.
  4 21    (7)  For the fiscal year commencing July 1, 2004, and each
  4 22 succeeding fiscal year, there is appropriated from the general
  4 23 fund of the state to the system, from funds not otherwise
  4 24 appropriated, an amount necessary to pay the employer share of
  4 25 the cost of the additional benefits provided to airport fire
  4 26 fighters under this section.
  4 27    Sec. 3.  Section 97B.49C, subsection 3, paragraph a, Code
  4 28 2005, is amended to read as follows:
  4 29    a.  Annually, the system shall actuarially determine the
  4 30 cost of the benefits provided for members covered under this
  4 31 section as a percentage of the covered wages of the employees
  4 32 covered by this section.  Fifty Notwithstanding any provision
  4 33 of section 97B.11 to the contrary, fifty percent of the cost
  4 34 shall be paid by the employers of employees covered under this
  4 35 section and fifty percent of the cost shall be paid by the
  5  1 employees.  The employer and employee contributions required
  5  2 under this paragraph are in lieu of the shall be treated as
  5  3 contributions paid under sections 97B.11 and 97B.11A.
  5  4    Sec. 4.  Section 97B.50A, subsection 12, Code 2005, is
  5  5 amended to read as follows:
  5  6    12.  ADDITIONAL CONTRIBUTIONS.  The expenses incurred in
  5  7 the administration of this section by the system shall be paid
  5  8 through additional contributions as determined pursuant to
  5  9 section 97B.49B, subsection 3, or section 97B.49C, subsection
  5 10 3, as applicable.
  5 11                           EXPLANATION
  5 12    This bill makes changes to the Iowa public employees'
  5 13 retirement system (IPERS) relating to contributions made to
  5 14 the system by employers and employees.
  5 15    Code section 97B.11, governing contributions to the
  5 16 retirement fund, is amended.  Currently, the employer rate is
  5 17 5.75 percent and the employee rate is 3.7 percent of a
  5 18 member's covered wages.  The bill provides that the employer
  5 19 rate will equal 5.75 percent plus 60 percent of the total
  5 20 additional required percentage and the employee rate will
  5 21 equal 3.7 percent plus 40 percent of the total additional
  5 22 required percentage.  The bill provides that the total
  5 23 additional required percentage shall be 1 percentage point for
  5 24 the fiscal year beginning July 1, 2005, and this rate shall
  5 25 increase by 1 percentage point a year until reaching 4 percent
  5 26 for the fiscal year beginning July 1, 2008.  Beginning for
  5 27 each fiscal year on or after July 1, 2009, the total
  5 28 additional required percentage shall equal the total required
  5 29 percentage minus 9.45 percent.  The bill provides that the
  5 30 total required percentage for a fiscal year is the total
  5 31 additional required percentage for the prior year plus 9.45
  5 32 percent unless IPERS determines that this total rate should be
  5 33 modified.  The bill provides that if the total rate for the
  5 34 prior year is insufficient to amortize the system's unfunded
  5 35 actuarial liability within 30 years, the rate will increase to
  6  1 the lesser of the rate needed to amortize the unfunded
  6  2 actuarial liability in 30 years or 1 percentage point over the
  6  3 prior year's total rate.  On the other hand, the bill provides
  6  4 that if the total rate for the prior year is sufficient to
  6  5 amortize the system's unfunded actuarial liability in 10 years
  6  6 or less, the rate will decrease to the greater of 1 percentage
  6  7 point less than the prior year's total rate, or the rate equal
  6  8 to the normal cost rate plus the greater of an additional .75
  6  9 percent or such other percent as necessary to amortize any
  6 10 unfunded liability of the system over 20 years.
  6 11    The bill makes conforming changes to the Code sections
  6 12 providing for the contributions paid by special service
  6 13 members of IPERS to retain the current contribution rate
  6 14 calculation for these members.
  6 15 LSB 1148SC 81
  6 16 ec:rj/pj/5