IPERS Update
Submitted by Dr. Gaylord Tryon, SAI IPERS representative
January 17, 2007

A. Reminder of some changes that will be going into effect on July 1, 2007

1. Contribution rate increases:                                                                                                     

	Current	July 1 2007	July 1 2008	July 1 2009	July 1 2010
Employee Rate	3.70 %	3.90 %	4.10 %	4.30 %	4.50 %
Employer Rate	5.75 %	6.05 %	6.35 %	6.65 %	6.95 %
Combined Rate	9.45 %	9.95 %	10.45 %	10.95 %	11.45 %

2. Requires system to be fully funded or a contribution rate increase be enacted before approving any future benefit enhancements.

3. Restricts transfers into Favorable Experience Dividend (FED) Reserve Account to only when the System is fully funded and only when the transfer will not bring the System below fully funded status.

4. Two new “anti-spiking” provisions:  

a.  High three-year Final Average Salary (FAS) cannot exceed 121 % of your fourth highest year’s salary.  For example:           

Salary year one	$75,000
Salary year two	$104,000
Salary year three	$108,000
Salary year four	$112,000
High three-year FAS	$108,000
1.21 x fourth highest year 1.21 x $75,000	$90,750

(New law permits an annual increase in salary of approximately 10 percent each of your last three years and still be under 121 % of your fourth highest year.)              

b. Second anti-spiking will now include employer deferrals to defined contribution and deferred compensation plans in the definition of remuneration as applied to the retired, re-hired employed salary limitation/offset of $30,000.

B. IPERS Key Measurements:

                  Funded Ratio                          June 30, 2005                  88.7 % ($2,289b)

                                                                 June 30, 2006                  88.4 % ($2,507b)

 

                  IPERS MVA Assets                  June 30, 2005                  $18,224,000,000

                                                                 June 30, 2006                  $19,848,000,000

C. Currently, the number of years to “catch up” and be fully funded is infinite—no end in sight.  “With the increased contribution rates and with investment returns averaging 7.5 percent in the future, the 11.45 percent contribution rate should mean the shortfall can be amortized to less than a 30-year period within the next decade,” according to comments made recently by the IPERS actuary.