Concerning benefits relating to members of the public safety peace officers’ retirement, accident, and disability system, and the municipal fire and police retirement system

Description

House File 2482 expands the definition of “cancer” in Iowa Code chapters 97A and 411 to include all types of cancer. “Cancer,” as defined in the Bill, means a group of diseases involving abnormal cell growth with the potential to invade or spread to other parts of the body. The Bill makes changes to the requirements for cities providing hospitalization and medical attention for members of the Municipal Fire and Police Retirement System of Iowa (MFPRSI). Background — Municipal Fire and Police Retirement System of Iowa Effective July 1, 1992, 87 local fire and police retirement systems in 49 cities were consolidated into a single statewide system, commonly referred to as either the 411 System or the MFPRSI. The MFPRSI is governed by a nine-member Board of Trustees and four legislative members as required by Iowa Code section 411.36. The voting members of the Board include two fire and two police representatives, four city representatives, and a private citizen. Based on the July 1, 2023, actuarial valuation, the MFPRSI covers approximately 4,168 active members, 1,206 disabled members, 3,227 retired members and beneficiaries, and 465 vested, terminated members. The current funded ratio is 84.57%. The current actuarial accrued liability is $3.802 billion, the actuarial value of assets is $3.215 billion, and the unfunded actuarial liability is $586.8 million.

For FY 2025, MFPRSI’s members’ estimated contributions at the current rate of 9.40% total $35.2 million, and the cities’ estimated contributions at 22.66% total $84.7 million. Total covered payroll is $374.8 million.

Background — Peace Officers’ Retirement, Accident, and Disability System Based on the July 1, 2023, actuarial valuation, the Peace Officers’ Retirement, Accident, and Disability System (PORS) covers approximately 588 active members; 679 retired members, beneficiaries, and disabled members; 44 inactive vested members; and 10 inactive nonvested members. The current funded ratio is 77.92%. The current actuarial accrued liability is $935.2 million, the actuarial value of assets is $728.7 million, and the unfunded actuarial liability is $206.5 million.

For FY 2025, PORS members’ estimated contributions at the current rate of 11.40% total $6.0 million, and the State’s estimated contributions at 37.00% total $18.7 million. In addition to the employer contribution for the PORS, there is also an annual $5.0 million standing limited appropriation from the General Fund.

Figure 1 below shows the contribution rates for FY 2021 to FY 2025.

Figure 1 — Contribution Rates by System, FY 2021 – FY 2025 Per Iowa Code section 411.8, the MFPRSI member contribution rate will be increased for any statutory changes, if the increase cannot be absorbed within the current contribution rates, to a maximum of 11.35%. Costs would then be applied 60/40 between the employer and employee. Cities are responsible for the payment of all medical costs related to MFPRSI claims under Iowa Code section 411.15. Cities cannot use workers’ compensation to cover short-term indemnity or medical cost exposure. Iowa Code section 85.1(4) states that workers’ compensation does not apply to “persons entitled to benefits pursuant to Iowa Code chapters 410 and 411.” Since adoption of the MFPRSI’s current definition of “cancer” on July 1, 2009, there have been three ordinary disabilities and one ordinary death that would qualify as an accidental disability or accidental death under this Bill.

Iowa Code section 97A.8(1)(e)(8)(vi) states that cancer is presumed to have been contracted while on active duty as a result of that duty. Payment of medical costs related to PORS claims is derived from the PORS Fund. Therefore, medical costs related to the expanded definition of “cancer” provided would be covered by this Bill.

Assumptions

• Expanding the number of disabilities eligible for an accidental disability will reduce the funded ratio of the Fire and Police Retirement Fund by 0.01%, from 84.57% to 84.56%, and may reduce the funded ratio of the PORS Fund, but the degree to which the reduction will occur cannot be determined at this time.
• Based on the most recent MFPRSI actuarial valuation report as of July 1, 2023, no increase in costs can be absorbed within the existing contribution rates for FY 2025. The FY 2025 employee contribution rate would need to increase from 9.40% to 9.41%, an increase of 0.01%.
• All other actuarial assumptions going forward will be met.
• The MFPRSI does not expect to see an increase in administrative costs related to medical exams.
• Expanding the definition of “cancer” may result in additional medical and administrative costs and short-term wages being covered by city employers.
• It is not known how many ordinary disabilities or deaths will qualify as accidental disability or death for the PORS under this Bill.FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Employer Contribution Rate 25.31% 26.18% 23.90% 22.98% 22.66%

Employee Contribution Rate 9.40% 9.40% 9.40% 9.40% 9.40% Total 34.71% 35.58% 33.30% 32.38% 32.06% FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Employer Contribution Rate 37.00% 37.00% 37.00% 37.00% 37.00% Employee Contribution Rate 11.40% 11.40% 11.40% 11.40% 11.40% Total 48.40% 48.40% 48.40% 48.40% 48.40% 411 Retirement System Contribution Rates Peace Officer Retirement System Contribution Rates

• The PORS will require an actuarial study to determine the impact of the Bill on the members of the PORS and the PORS Fund.
• The Iowa Public Employees’ Retirement System (IPERS) Public Protection and Sheriffs and Deputies membership groups may increase costs for the Iowa Public Employees’ Retirement Fund or medical costs for the employers of the membership groups. Fiscal Impact — Municipal Fire and Police Retirement System of Iowa

The unfunded actuarial accrued liability of the Municipal Fire and Police Retirement Fund is estimated to increase in FY 2025 by approximately $552,000, and the funded ratio would decrease from 84.57% to 84.56%.

The FY 2025 cost for increasing the members’ contribution rate from 9.40% to 9.41% is approximately $37,000, or $9 per employee. In subsequent fiscal years, this cost may increase based on covered payroll.

Cities under the MFPRSI are required to provide hospital, nursing, and medical attention for members of the police and fire departments. The fiscal impact of HF 2482 on cities for additional medical costs and short-term wages cannot be determined at this time, but may be significant.

Fiscal Impact — Peace Officers’ Retirement, Accident, and Disability System House File 2482 may increase the unfunded actuarial accrued liability of the PORS Fund and may increase the members’ contribution rate, but any fiscal impact cannot be estimated at this time.

Fiscal Impact — Iowa Public Employees’ Retirement System House File 2482 may increase the IPERS Protection Occupation and Sheriffs and Deputies membership groups’ costs to the Iowa Public Employees’ Retirement Fund or the cost for medical expenses for the groups’ employers, but any increase is estimated to be minimal.

Sources

• Municipal Fire and Police Retirement System of Iowa Actuarial Valuation Report
• Municipal Fire and Police Retirement System of Iowa
• Department of Public Safety
• Peace Officers’ Retirement, Accident, and Disability System Actuarial Valuation Report
• League of Cities
• Legislative Services Agency analysis