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Aug 12, 2012 IPFF Rebuttal to DSM Register Pension Article
Updated On: Feb 09, 2018

DAVE MOHLIS is president of the Iowa State Police Association. Contact: mohlisd @waterloo

On July 15, the Des Moines Sunday Register published an editorial and essay regarding firefighter and police officer pensions. Many items concerning our pension and disability system were left out of the article. Our members feel it is important that Iowa taxpayers get the facts.

Any analysis of public pensions in Iowa has to take into consideration that the Municipal Fire and Police System is not just a pension system. It is also a disability/workers compensation system. IPERS, the Iowa Public Employees Retirement System, is strictly a pension system.

Since the inception of the statewide system in 1992, the cities have paid the minimum rate of 17 percent for nine years while firefighter and police officer rates have tripled from 3.1 percent to 9.4 percent.

When the system was converted to a statewide system, after the actuaries were completed that showed what each city needed to put into the system to get started, many cities had an excess amount and the law allowed the cities to use the excess to either pay their portion of the contribution, the employees’ contribution or a combination of both.

To our knowledge, every city with an excess used it toward their contribution. As an example, Cedar Rapids had around $22 million in excess money, which they used until it was gone in fiscal year 2009. The city of Des Moines had a little over $13 million, which they used until it was gone in fiscal year 2000.

When this system was enacted by the Legislature and signed into law by Gov. Terry Branstad during his first term in office, it provided for the state to contribute to the system. That has since been phased out by the Legislature, leaving the cities to make up that difference by law.

Let’s take a quick look at the assumed investment return rate of the system. The Des Moines Register editorial said the 7.5 percent investment return rate was “unrealistic.” In the 21 years the system has been up and running, it has fallen below the 7.5 percent rate in only five years, with a couple of those years being during the recent stock market crash. Over the last three years, the investment return rate has averaged 14.71 percent. It was 23 percent in 2011, and since the inception of the system 21 years ago, the rate of return has averaged 7.59 percent, according to the Municipal Fire and Police System of Iowa.

The cities do not pay Social Security or workers compensation/disability for firefighters and police officers as they do for other employees under IPERS. Should they have to be required to pay these items, that would be an increase of approximately 36.6 percent (6.2 percent for Social Security and an average of 30.40 percent for workers compensation/disability).

If police and firefighters were in a plan like IPERS, the cities would pay about 46.55 percent of covered wages compared to their current 26.12 percent. And, firefighters and police officers pay into their workers compensation through their contribution to their pension and disability system, whereas private sector employees and IPERS-covered employees do not.

This system is very well funded (currently 85 percent) and running the way it was designed. In fact, the cities’ are financially benefiting from the pooling of their funds and the firefighter and police officer contributions to the system that effectively reduces the cities’ disability/workers compensation costs for these high-risk employees.

We would like to address the idea of paying for police officer and firefighter pensions with a 60/40 split in contributions between the city and the police officers and firefighters. This was raised by Gov. Branstad in a recent article.

Using an average pay of $48,992 per year for a firefighter in one of our cities, if you add the cities’ contribution rate of 26.12 percent ($12,796) and the employees’ rate of 9.4 percent ($4,605) it totals $17,401. Take 40 percent of that figure and you get $6,960, an increase of $2,355 taken out of the police officers’ and firefighters’ paychecks.

What policymakers have to remember is the fact that police officers and firefighters are tax-paying members of their communities, so they are not only paying their share of their pension contribution rate (9.4 percent) but their taxes also go toward the cities’ contribution. So they pay twice — out of their paychecks and in their property tax bills.

The solvency of the firefighter and police officer pension system is as important to our members as it is to anyone. Before any changes are considered, policymakers should look at all the facts and first determine if there really is a problem that needs to be fixed.

Pension systems are long-term instruments and the Municipal Fire and Police Retirement System of Iowa is working just as it was designed to by Gov. Branstad and the Legislature in 1992.

West Des Moines Professional Fire Fighters L-3586
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