Despite Good Returns, Iowa Public Pension’s Unfunded Liability Likely to Grow Slightly

Lack of contributions are the problem for IPERS, critic says.

Although solid investment returns have stabilized Iowa’s top public pension fund, the unfunded liabilities are little affected.

A report from the Des Moines Register predicts that the $32.3 billion Iowa Public Employees Retirement System’s $6.8 billion deficit will grow in dollar terms to $7 billion by 2023 before beginning a gradual shrinkage until 2046, when the debt is fully eliminated.

The retirement system returned 7.97% in fiscal 2018, nearly one percentage point above its 7% benchmark, and although its 82.4% funded status is solid, it only grew by one point over the 12-month period. The funding liability only shrank by about two points in the same time.

State Treasurer Michael Fitzgerald, who chairs the IPERS Investment Board, said Iowans “should feel very comfortable with the position that IPERS is in.”

However, Gretchen Tegeler, president of the Taxpayers Association of Central Iowa and a former director of the state’s Department of Management, said the “striking” factor in the report was the lack of progress on the unfunded liability, attributing the minimal change to a lack of contributions.

“This is because the extra payments being made to offset the unfunded obligation are not large enough to prevent the obligation from growing by an even greater amount,” she told the Register, adding that Iowans should hope there’s no downturn in the next five years.

“The system remains vulnerable to another downturn, and anyone who is relying on IPERS should have an interest in exploring alternatives for reducing risk,” Tegeler said.

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