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Economic woes hit IPERS, too


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In his latest newsletter, an Iowa banker points out that the Iowa Public Employees’ Retirement System (IPERS) is taking a financial pounding along with the rest of us.

Michel Nelson, a senior vice president at Iowa Savings Bank in Carroll, notes that he was writing about this problem three years ago when the U.S. economy was doing fine. “A serious discussion of transitioning public employee pensions from defined benefit to defined contribution does not appear to be on the Iowa legislative agenda,” he wrote in January 2006. “Deferring this issue until a funding crisis is understandable … however, it is wrong …”

IPERS is designed to pay retirement benefits to a broad range of government employees. Specific payment amounts are designated for each individual based on years of service and pay level.

It’s frustrating enough that teachers are flocking out of our schools at a relatively early age to start drawing retirement benefits. Now we have to figure out if IPERS is going to need its very own “bailout” from the taxpayers.

“The IPERS funds have taken huge hits in 2008,” Nelson writes in his newsletter. “From the actuarially determined 97 percent funding at the time my 2006 commentary was written, we have deteriorated to funding that is probably in the 75 percent range.”

According to the IPERS Web site, in fiscal year 2007, the system held $23 billion in assets and paid out $1.05 billion in benefits and refunds.

Apart from the predictions and the math, Nelson emphasizes a larger point: “It is fundamentally wrong that defined benefit plans are provided for government employees while nearly everyone else is in a defined contribution plan or nothing at all.”

This is a worthy but sensitive topic as the economy staggers. It’s easy to rail against the privileges enjoyed by members of the U.S. Congress, but what about the nice second-grade teacher next door who’s retiring at the age of 55?

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