Concerning retirement and employment benefits associated with cancer, and making appropriations

Description

House File 969 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 expands the availability of accidental disability and death benefits to members of the Peace Officers’ Retirement, Accident, and Disability System (PORS); the Municipal Fire and Police Retirement System of Iowa (MFPRSI), also called the 411 System; and the Iowa Public Employees’ Retirement System (IPERS) who are Protection Occupation or Sheriffs and Deputy Sheriff members who have a cancer diagnosis.

House File 969 permits the IPERS to adopt emergency administrative rules to implement the changes in contribution rates as required by the Bill. The rules are to be effective immediately upon filing unless otherwise specified. The section of the Bill authorizing the IPERS to adopt emergency administrative rules takes effect upon enactment.

The Bill increases the 411 System’s maximum employee contribution rate from 11.350% to 11.475%, a 0.125% increase, beginning July 1, 2025. The Bill adjusts the contribution rate for affected members of the retirement systems as shown in Figure 1.

Figure 1 — FY 2026 Contribution Rates by Retirement System,

Current Law, Proposed Law, and Difference

*Note: In addition to the employer contribution for the PORS, there is also an annual $5.0 million standing limited appropriation from the General Fund established in Iowa Code section 97A.11A.Current Proposed Difference Employer Contribution Rate 22.680% 22.555% -0.125% Employee Contribution Rate 9.550% 9.675% 0.125% Total 32.230% 32.230% 0.000%

Current Proposed Difference

Employer Contribution Rate 37.000% 36.875% -0.125% Employee Contribution Rate 11.400% 11.525% 0.125% Total* 48.400% 48.400% 0.000%

Current Proposed Difference

Employer Contribution Rate 9.310% 9.185% -0.125% Employee Contribution Rate 6.210% 6.335% 0.125% Total 15.520% 15.520% 0.000%

Current Proposed Difference

Employer Contribution Rate 12.090% 11.965% -0.125% Employee Contribution Rate 12.090% 12.215% 0.125% Total 24.180% 24.180% 0.000% 411 System

PORS

IPERS,

Protection

Occupation

IPERS,

Sheriffs and

Deputy Sheriffs

Background — Municipal Fire and Police Retirement System of Iowa (411 System) 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, 2024, actuarial valuation, the MFPRSI covers approximately 4,253 active members, 1,236 disabled members, 3,276 retired members and beneficiaries, and 485 vested terminated members. The current funded ratio is 84.47%. The current actuarial accrued liability is $3.972 billion, the actuarial value of assets is $3.355 billion, and the unfunded actuarial accrued liability (UAAL) is $616.9 million.

For FY 2026, the MFPRSI’s members’ estimated contributions at the current rate of 9.550% total $37.3 million, and the cities’ estimated contributions at 22.680% total $88.6 million. Total covered payroll is an estimated $390.7 million.

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 current maximum of 11.350%. Costs would then be applied in a 60.0% to 40.0% distribution 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.” As of July 1, 2023, and 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.

Background — Peace Officers’ Retirement, Accident, and Disability System (PORS) Peace Officers in the Divisions of the Iowa State Patrol, Criminal Investigation, Narcotics Enforcement, Capitol Police, and the State Fire Marshal are members of the PORS, except as provided in Iowa Code section 97A.3.

Based on the July 1, 2024, actuarial valuation, the PORS covers approximately 583 active members; 687 retired members, beneficiaries, and disabled members; 44 inactive vested members; and 12 inactive nonvested members. The current funded ratio is 77.70%. The current actuarial accrued liability is $989.0 million, the actuarial value of assets is $768.4 million, and the UAAL is $220.6 million.

For FY 2026, PORS members’ estimated contributions at the current rate of 11.40% total $6.7 million, and the employer’s estimated contributions at 37.00% total $21.8 million, not including the annual $5.0 million standing limited appropriation from the General Fund. Total covered payroll is an estimated $58.9 million.

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 the PORS Fund.

Background — Iowa Public Employees’ Retirement System (IPERS) — Protection

Occupation

The Protection Occupation membership group of the IPERS is comprised of a range of occupations, including fire fighters and police officers not covered by Iowa Code chapter 411, correctional officers, conservation officers, county attorney investigators, emergency medical service (EMS) providers, high-risk unit officers, insurance fraud investigators, and, dependent on their years of service, select Department of Transportation (DOT) peace officers. Iowa Code section 97B.50A(2) refers to the definition of cancer established in Iowa Code section 411.1. House File 969 expands the definition of cancer as used in Iowa Code section 97B.50A for purposes of in-service disability retirement allowance for special service members under the IPERS.

Based on the June 30, 2024, actuarial valuation, the IPERS Protection Occupation membership group covers approximately 7,822 active members and 4,184 retired members. The current funded ratio is 103.65%. The current actuarial accrued liability is $2.262 billion, the actuarial value of assets is $2.344 billion, and the UAAL is $-82.5 million.

For FY 2026, the IPERS Protection Occupation membership group’s estimated contributions at the current rate of 15.520% of payroll total $79.8 million, split 60.0% for the employer and 40.0% for the members.

In the past five years and for the IPERS Special Service members (Protection Occupation and Sheriffs and Deputies), there have been two ordinary disabilities that would qualify as an accidental disability under this Bill.

Background — IPERS — Sheriffs and Deputy Sheriffs The Sheriffs and Deputy Sheriffs membership group of the IPERS is comprised of county sheriffs and deputy sheriffs.

Iowa Code section 97B.50A(2) refers to the definition of cancer established in Iowa Code section 411.1. House File 969 expands the definition of cancer as used in Iowa Code section 97B.50A for purposes of in-service disability retirement allowance for special service members under the IPERS.

Based on the June 30, 2024, actuarial valuation, the IPERS Sheriffs and Deputy Sheriffs membership group covers approximately 1,738 active members and 1,272 retired members. The current funded ratio is 91.81%. The current actuarial accrued liability is $1.072 billion, the actuarial value of assets is $984.3 million, and the UAAL is $87.8 million. For FY 2026, the IPERS Sheriffs and Deputy Sheriffs membership group’s estimated contributions at the current law rate of 24.180% of payroll total $40.0 million, split 50.0% for the employer and 50.0% for the members.

Figure 2 shows the contribution rates for FY 2022 through FY 2026.

Figure 2 — Contribution Rates Under Current Law by System, FY 2022 – FY 2026 *Note: In addition to the employer contribution for the PORS, there is also an annual $5.0 million standing limited appropriation from the General Fund established in Iowa Code section 97A.11A.

Assumptions

• According to the actuarial cost study commissioned by the MFPRSI using the FY 2023 valuation report, expanding the number of disabilities eligible for an accidental disability would have increased the UAAL by approximately $552,000.
• While the results of the actuarial cost study cannot be directly applied to the FY 2024 valuation report to arrive at an updated fiscal impact, the cost study can be broadly applied to anticipate a similar impact.
• Based on the most recent MFPRSI actuarial valuation report as of July 1, 2024, no increase in costs can be absorbed within the existing contribution rates for FY 2026. The FY 2026 employee contribution rate would need to increase from 9.55% to 9.56%, an increase of 0.01%, to pay for the expanded definition of cancer.
• FY 2026 payroll levels are assumed to stay the same as the most recent fiscal year’s payroll projection provided in the actuarial report for each system.
• 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.FY 2022 FY 2023 FY 2024 FY 2025 FY 2026

Employer Contribution Rate 26.18% 23.90% 22.98% 22.66% 22.68% Employee Contribution Rate 9.40% 9.40% 9.40% 9.55% 9.55% Total 35.58% 33.30% 32.38% 32.21% 32.23% FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 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% FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 Employer Contribution Rate 9.31% 9.31% 9.31% 9.31% 9.31% Employee Contribution Rate 6.21% 6.21% 6.21% 6.21% 6.21% Total 15.52% 15.52% 15.52% 15.52% 15.52% FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 Employer Contribution Rate 9.01% 8.76% 8.51% 8.51% 12.09% Employee Contribution Rate 9.01% 8.76% 8.51% 8.51% 12.09% Total 18.02% 17.52% 17.02% 17.02% 24.18% 411 Retirement System

Peace Officer Retirement System

Iowa Public Employees' Retirement System,

Protection Occupation

Iowa Public Employees' Retirement System,

Sheriffs and Deputy Sheriffs

• Expanding the definition of cancer may result in additional medical and administrative costs and short-term wages being covered by public employers.
• The PORS will require an actuarial study to determine the impact of the Bill on the members of the PORS and the PORS Fund. It is estimated that expanding the number of disabilities eligible for an accidental disability would increase the UAAL.
• It is not known how many ordinary disabilities or deaths would qualify as an accidental disability or death for the PORS under the Bill.
• The IPERS Protection Occupation and Sheriffs and Deputy Sheriffs membership groups may increase costs to the IPERS Trust Fund or medical costs for the employers of the membership groups.

Fiscal Impact — Municipal Fire and Police Retirement System of Iowa The actuarial cost study used to estimate the costs associated with the cancer presumption provisions of HF 969 provided the following estimates and used the FY 2023 valuation report:

• An estimated $552,000 increase in the UAAL
• A decrease in the funded ratio of 0.01%
• An increase in the employee contribution rate of 0.01% for the MFPRSI. It is estimated that a 25-year amortization of the increased accrued liability would cost $46,000 annually.

According to the FY 2024 valuation report, the UAAL was $616.9 million, the funded ratio was 84.47%, and the contribution rate was 32.230% (split 22.680% employer and 9.550% employee) for the MFPRSI.

A $46,000 increase to the employee contribution rate would cost approximately $11 per employee. In subsequent fiscal years, this cost may increase based on covered payroll. Figure 3 shows the fiscal impact for 411 System employers and employees under HF 969. Figure 3 — 411 System Fiscal Impact of Contribution Rate Change for

Employers and Employees

Cities under the MFPRSI are required to provide hospital care, nursing care, and medical attention for members of the police and fire departments. The fiscal impact of HF 969 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 969 may increase the UAAL of the PORS Fund and may increase the contribution rates, but any fiscal impact associated with the cancer presumption cannot be estimated at this time.Change Cost Cost Per Member Employer Contribution Rate -0.125% -488,000$ -115$ Employee Contribution Rate 0.125% 488,000 115 Total 0.000% 0$ 0$ 411 System Figure 4 shows the fiscal impact for PORS employers and employees under HF 969. Figure 4 — PORS Fiscal Impact of Contribution Rate Change for

Employers and Employees

Fiscal Impact — Iowa Public Employees’ Retirement System House File 969 may increase the IPERS Protection Occupation and Sheriffs and Deputy Sheriffs membership groups’ costs to the IPERS Trust Fund or the cost for medical expenses for the groups’ employers, but any increase is estimated to be minimal. Figure 5 shows the fiscal impact of HF 969 for IPERS employers and employees by membership group.

Figure 5 — Fiscal Impact of Contribution Rate Change for Employers and Employees,

By IPERS Membership Group

Sources

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