Iowa Gov. Kim Reynolds is considering changes to the $30 billion Iowa Public Employees’ Retirement System IPERS)—but cutting retirement benefits isn’t one of them.
After a Tuesday meeting with the State Executive Council, Reynolds, a Republican, was asked about the future of the local government worker and teachers’ pension fund, as Democratic leaders such as State Treasurer Michael Fitzgerald —who also serves on the fund’s board—have been leery of Republican proposals attempting to “break the promise” of retirees, reports The Des Moines Register.
Reynolds said her administration “will absolutely honor the commitments that have been made” to retirees and beneficiaries, and that she would “never do anything” that would take them away.
Reynolds said that if any changes are debated for Iowa’s public pension programs, her first priority would be “to make sure there are sufficient numbers and sufficient members in place to honor promises already made to individuals who have devoted their lives to public service.”
The governor, who assumed the role last year from Terry Branstad when he became US ambassador to China, is up for re-election in November.
Opponents are concerned Reynolds will turn the Iowa pension plan’s defined benefits system into a hybrid 401(k)-style plan.
“The governor even has said [that] she’d consider a hybrid plan, and if you look at hybrid plans like the one in Rhode Island, it’s awful for employees, and especially [awful] for future employees,” Fitzgerald told CIO. “Their idea of a hybrid plan is to push all the obligations onto future employees and cut their defined benefit plan.”
Fitzgerald has also spoken of GOP lawmakers “tweaking” the state’s collective bargaining law in last year’s legislative session, which resulted in a law that reduced public union rights.
“When they ran, they were going to make some adjustments to the labor union laws. Once they had the majority, they gutted the labor unions,” Fitzgerald said. “Also, they have a clear position of being against public employees. Besides gutting the labor unions, they have really cut back on what the state is paying on health insurance for state employees.”
Another Republican measure, sponsored by state Sen. Brad Zaun, was a 2017 bill forcing new public employees hired after July 1, 2019, into defined contribution programs. The measure did not pass.
Reynolds dismissed these as “scare tactics,” but Remi Yamamoto, a spokeswoman for Fred Hubbell, a Democrat running against Reynolds, points to the 2016 privatization of the state’s Medicaid program, when Reynolds was lieutenant governor.
Since Reynolds became governor last year, she says she has been fixing the issue, but still has faced criticism. If elected, Hubbell said he would get the program back under the state’s control immediately.
“The good news is that when it was privatized, there was no bill that went to the Legislature, so the governor has the authority—with an executive order—to reverse that process,” he told the Register. “And, frankly, I don’t think we want to wait for the Legislature to decide how to redo the process; we need to get started right away on day one.” Hubbell could not be reached for comment.
Fitzgerald said at 81% funded, Iowa’s public employee plan is in “pretty good shape” compared to other states, and that it plans to be fully funded in 27 years. The fund recently increased its state and employee contributions by 1%, to 15.73%. Contributions are determined via a 40/60 split, where employees pay 6.29% and employers pay 9.44%.
“But the Republicans…our Republican governor, who’s funded by the Koch brothers, …their top priority is to turn IPERs—a defined benefit plan—into a defined contribution plan, and employees should be aware of that,” the treasurer said.
IPERS has nearly $7 billion in unfunded liabilities. This year, it returned 8%, one point higher than its benchmark.