CHAPTER 15
DIVIDENDS
[Prior to 11/24/04, see 581—Ch 21]
495—15.1(97B) Dividend payments for beneficiaries of members retiring prior to July 1, 1990, who chose joint and survivor annuity options.
	15.1(1) November dividend adjustment.  Effective July 1, 2008, in order to determine whether the adjustment to dividend payments is payable under Iowa Code section 97B.49F(1)“b” as amended by 2008 Iowa Acts, Senate File 2424, section 34, an IPERS actuary shall compare the actuarially required contribution rate for the fiscal year of the dividend adjustment to the statutory contribution rate for that same fiscal year and certify the results to IPERS. If the actuarially required contribution rate exceeds the statutory contribution rate for that same fiscal year, the applicable percentage used to calculate dividend adjustments shall be zero.
	15.1(2) General. The dividend payable to the beneficiary of a pre-July 1, 1990, retired member who selected a joint and survivor annuity option, except for the year of the member’s death and the next year, is calculated in the same manner as for retired members.
For a member who lives into November of the year in which the member dies, the dividend will be payable to the member’s account.
	15.1(3) Dividend for the years in which member’s death occurs. For a member who does not live into November of the year in which the member dies, the dividend payable for the year in which the member dies is calculated the same as it would have been calculated for the deceased retired member. The dividend amount that would have been payable to the deceased retired member is then multiplied by the survivor annuity percentage selected for the contingent annuitant (CA) in the member’s retirement application.
	15.1(4) Dividend for the year following the year of the retired member’s death. For a member who does not live into November of the year in which the member dies, the dividend payable in the year following the year of the member’s death is calculated as follows. The sum of the survivor’s monthly benefit payments received for the year in which the member’s death occurs is divided by the number of survivor benefit payments for that year, and that amount is multiplied by 12. That amount plus the member’s survivor’s prior dividend is then multiplied by the dividend rate for the year following the year of the member’s death, which equals the dividend adjustment for the year following the year of the member’s death. This dividend adjustment plus the prior year’s dividend produces the dividend amount for the year following the year of the member’s death.
	15.1(5) Examples.
	a. 	Dividend for the year of the member’s death. The following assumptions are made. The member retired in 1989 and selected a joint and 50 percent to survivor annuity. The retired member received a monthly payment of $1,000, and died in June 2002. The member received $12,000 in monthly benefits for January through December 2001. The member received a dividend of $500 in 2001, and the dividend rate is 3 percent for 2002.

2001 total monthly benefits	 	2001 dividend amount	 	2002 dividend rate	 	2002 dividend adjustment	 	2001 dividend amount	 	Dividend payable amount	 	CA%	 	CA 2002 dividend	
$12,000.00	+	$500.00	×	3%	=	$375.00	+	$500.00	=	$875.00	×	50%	=	$437.50	
	b. 	Dividend for the year following the year of the member’s death. The following assumptions are made. The member retired in 1989 and selected a joint and 50 percent to survivor annuity. The retired member received a monthly payment of $1,000, and died in June 2002. The survivor received $500 each month for July through December of 2002 for a total of $3,000. The survivor received a dividend of $437.50 in 2002, and the dividend rate is 3 percent for 2003.

2002 total monthly benefits for CA	 	Total of payments for CA 2002	 	Twelve months for 2002	 	2002 dividend amount	 	2003 dividend rate	 	2003 dividend adjustment	 	2002 dividend amount	 	Dividend payable to CA for 2003	
$3,000.00	÷	6 months	×	12 months	+	$437.50	×	3%	=	$193.13	+	$437.50	=	$630.63	
495—15.2(97B) Favorable experience dividend (FED) under Iowa Code section 97B.49F(2). For members retiring on and after July 1, 1990, dividends are payable as follows.
	15.2(1) Allocation of favorable experience. The system shall, following the first annual actuarial evaluation in which IPERS is found to be fully funded, determine by rule the allocation of the system’s favorable actuarial experience, if any, between the reserve account created under Iowa Code section 97B.49F(2) and the remainder of the retirement fund.
Effective July 1, 2006, IPERS shall in no event credit amounts attributable to favorable experience to the FED reserve account, unless IPERS is fully funded and will remain fully funded after such amounts are credited to the FED reserve account. “Fully funded” means that the funded ratio as determined under Iowa Code section 97B.1A(11A) remains at least 100 percent following the allocation of favorable experience to the FED reserve account.
	15.2(2) Determination of applicable percentage. The system shall have sole discretion to determine the applicable percentages that will be used in calculating favorable experience dividends payable under this rule, if any, subject to the actuary’s certification that the resulting favorable experience dividends meet the requirements of Iowa Code section 97B.49F(2) and this rule.
	a. 	The system’s annual applicable percentage target for calculating dividends under Iowa Code section 97B.49F(2) shall be equal to the applicable percentage used in calculating dividends payable to retired members under Iowa Code section 97B.49F(1). Notwithstanding the foregoing, the system may set a greater or lesser applicable percentage for calculating dividends under this rule depending on the funding adequacy of the reserve account. In no event shall the applicable percentage exceed 3 percent.
	b. 	In determining the annual applicable percentage, the system shall consider, but not be limited to, the value of the reserve account, distributions made from the reserve account in previous years, and the likelihood of future credits to and distributions from the reserve account. The system shall make its annual applicable percentage decisions using at least a rolling five-year period.
	c. 	If for any year the system cannot afford an applicable percentage equal to that payable to retired members under Iowa Code section 97B.49F(1), the system may use applicable percentages in succeeding years that are higher than those used in calculating dividends for retired members under Iowa Code section 97B.49F(1) (but not in excess of 3 percent).
	d. 	An applicable percentage in excess of the applicable percentage declared under Iowa Code section 97B.49F(1) made for catch-up purposes shall not reduce the funding of the reserve account below the amount the system’s actuary determines is necessary to pay the maximum favorable experience dividend for each of the next five years, based on reasonable actuarial assumptions.
	15.2(3) Calculation of FED for individual members and beneficiaries. A member must be retired for one full year to qualify for a favorable experience dividend. In determining whether a member has been retired one full year, the system shall count the member’s first month of entitlement as the first month of the one-year period. The month in which the favorable experience dividend is payable shall be included in determining whether a member meets the eligibility requirements.
An eligible member’s favorable experience dividend shall be calculated by multiplying the retirement allowance payable to the retired member, beneficiary, or contingent annuitant for the previous December, or such other month as determined by the system, by 12, and then multiplying that amount by the number of complete years the member has been retired or would have been retired if living on the date the dividend is payable, and by the applicable percentage set by the system. The number of complete years the member has been retired shall be determined by rounding down to the nearest whole year.
For otherwise eligible retired reemployed members who chose to suspend their monthly allowance under 495—paragraph 12.8(2)“c,” the suspension shall have no effect on the calculation of FED.
	15.2(4) FED for eligible members and beneficiaries who die before the January distribution date. If a member or beneficiary receiving monthly payments would have been eligible for a FED distribution in the following January but dies prior to the January distribution date, IPERS will pay a FED to the member’s or beneficiary’s account for the calendar year in which the death occurred. The FED shall be calculated using the monthly payments received in the calendar year the death occurred. A lump sum death benefit shall not constitute a monthly payment for purposes of determining FED eligibility or in making FED calculations.
The FED percentage applied to the monthly payments received in the calendar year of death shall be the most recently declared FED percentage in effect at the time of the FED payment to the member or beneficiary. This subrule shall not be construed to permit a FED distribution to a member where the total monthly benefits received by the member, counting the month of death, is less than 12, even if a period of 12 months has elapsed between the first payment of monthly benefits to the member and the January distribution date.
Notwithstanding the foregoing, if IPERS determines in January of a given year that, based on reasonable actuarial assumptions, there is a reasonable likelihood that a FED will not be declared for the next following January, IPERS may defer paying FED distributions under this subrule until the determination is made. If IPERS subsequently determines that no FED will be declared for a given year, no FED will be payable to a person whose death occurs during the applicable calendar year.
Effective July 1, 2000, a retired member or beneficiary eligible for a FED payment must, in addition to all other applicable requirements, be living on January 1 in order to receive a FED payment otherwise payable in that January.
	15.2(5) Limit on transfers of favorable experience. Rescinded IAB 11/22/06, effective 12/27/06.
These rules are intended to implement Iowa Code sections 97B.1A(11A), 97B.49F and 97B.70.
[Filed 11/5/04, Notice 9/15/04—published 11/24/04, effective 12/29/04]
[Filed 4/7/06, Notice 3/1/06—published 4/26/06, effective 5/31/06]
[Filed 11/3/06, Notice 9/27/06—published 11/22/06, effective 12/27/06]
[Filed emergency 6/25/08—published 7/16/08, effective 6/25/08]