Senate File 2196 - Introduced SENATE FILE BY DANIELSON Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act concerning the purchase of creditable service and 2 postretirement adjustments to benefits under the municipal 3 fire and police retirement system. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 5883SS 82 6 ec/sc/5 PAG LIN 1 1 Section 1. Section 411.6, subsection 12, paragraph d, Code 1 2 2007, is amended to read as follows: 1 3 d. A retired member eligible for benefits under subsection 1 4 1of this sectionis not eligible for the readjustment of 1 5 pensions provided in this subsection unless the member served 1 6 twenty=two years and attained the age of fifty=five years 1 7 prior to the member's termination of employment or the member 1 8 has made a purchase of the benefit provided under this 1 9 subsection pursuant to section 411.6D. 1 10 Sec. 2. NEW SECTION. 411.6D ANNUAL READJUSTMENT OF 1 11 PENSION BENEFIT PURCHASE. 1 12 1. An active member of the system who has been a member of 1 13 the retirement system four or more years may elect to purchase 1 14 eligibility to receive an annual readjustment of pension 1 15 provided by section 411.6, subsection 12, subject to the 1 16 requirements of this section. 1 17 2. A member seeking to purchase eligibility to receive an 1 18 annual readjustment of pension pursuant to this section shall 1 19 file a written application with the system requesting an 1 20 actuarial determination of the cost of the purchase and pay 1 21 the costs incurred by the system in determining the cost of 1 22 the purchase. Upon receipt of the cost estimate for the 1 23 purchase, the member has sixty days to sign a written 1 24 agreement to purchase eligibility to receive an annual 1 25 readjustment of pension and make contributions to the system 1 26 in an amount equal to the actuarial cost of the purchase of 1 27 eligibility. If a member retires within sixty days of the 1 28 member's receipt of the cost estimate, the member has ninety 1 29 days from the member's retirement date to purchase eligibility 1 30 to receive an annual readjustment of pension. 1 31 3. For purposes of this section, the actuarial cost of the 1 32 purchase of eligibility to receive an annual readjustment of 1 33 pension as provided by section 411.6, subsection 12, is an 1 34 amount determined by the system in accordance with actuarial 1 35 tables, as reported to the system by the system's actuary, 2 1 which reflects the actuarial cost necessary to fund an 2 2 increased retirement benefit resulting from the purchase. 2 3 Sec. 3. NEW SECTION. 411.10 PURCHASE OF SERVICE CREDIT. 2 4 1. An active member of the system who has been a member of 2 5 the retirement system four or more years may elect to purchase 2 6 up to three years of service credit that will be recognized by 2 7 the retirement system for purposes of calculating a member's 2 8 benefit, pursuant to Internal Revenue Code section 415(n) and 2 9 the requirements of this section. 2 10 2. a. A member seeking to purchase service credit 2 11 pursuant to this section shall file a written application with 2 12 the system requesting an actuarial determination of the cost 2 13 of a purchase of service credit and pay the costs incurred by 2 14 the system in determining the cost of the purchase of service. 2 15 Upon receipt of the cost estimate for the purchase of service 2 16 from the system, the member has sixty days to sign a written 2 17 agreement to purchase service credit, including the specific 2 18 number of months or years to be purchased, and make 2 19 contributions to the system in an amount equal to the 2 20 actuarial cost of the service credit purchase. If a member 2 21 retires within sixty days of the member's receipt of the cost 2 22 estimate, the member has ninety days from the member's 2 23 retirement date to purchase the service credit. 2 24 b. For purposes of this subsection, the actuarial cost of 2 25 the service credit purchase is an amount determined by the 2 26 system in accordance with actuarial tables, as reported to the 2 27 system by the system's actuary, which reflects the actuarial 2 28 cost necessary to fund an increased retirement allowance 2 29 resulting from the purchase of service credit. 2 30 3. The system shall ensure that the member, in exercising 2 31 an option provided in this section, does not exceed the amount 2 32 of annual additions to a member's account permitted pursuant 2 33 to section 415 of the federal Internal Revenue Code. 2 34 EXPLANATION 2 35 This bill makes changes to the municipal fire and police 3 1 retirement system of Iowa (MFPRSI) created in Code chapter 3 2 411. 3 3 New Code section 411.6D permits current members of MFPRSI 3 4 with at least four years of service to purchase eligibility to 3 5 receive an annual readjustment of their pension during 3 6 retirement if they would not otherwise be eligible to receive 3 7 this benefit. Under current law, only members who served 22 3 8 years and attained the age of 55 years prior to the member's 3 9 termination of employment are eligible for this readjustment 3 10 of their pension during retirement. The bill provides that a 3 11 member who wishes to purchase this benefit shall make 3 12 application to the system and pay the costs incurred by the 3 13 system in determining the actuarial cost of purchasing the 3 14 benefit. Upon receipt of the cost of purchasing this benefit, 3 15 the member has 60 days to agree to purchase the benefit and to 3 16 pay the actuarial cost of purchasing the benefit. If the 3 17 member retires within that 60=day period, the bill allows the 3 18 member 90 days from the date of retirement to purchase the 3 19 benefit. The actuarial cost of the purchase is defined as the 3 20 cost necessary to fund an increased retirement benefit 3 21 resulting from the purchase. 3 22 New Code section 411.10 permits current members of MFPRSI 3 23 with at least four years of service to purchase up to three 3 24 years of service credit under the system. The bill provides 3 25 that the member is required to pay the full actuarial cost of 3 26 the service purchase and must make application with the 3 27 retirement system for the purchase of service. The bill 3 28 provides that a member who wishes to purchase service credit 3 29 shall make application to the system and pay the costs 3 30 incurred by the system in determining the actuarial cost of 3 31 purchasing the service credit. Upon receipt of the cost of 3 32 purchasing service credit, the member has 60 days to agree to 3 33 purchase the service credit, or so much of the purchase as the 3 34 member designates, and to pay the actuarial cost of purchasing 3 35 the service credit. If the member retires within that 60=day 4 1 period, the bill allows the member 90 days from the date of 4 2 retirement to purchase the service credit. The actuarial cost 4 3 of the service purchase is defined as the cost necessary to 4 4 fund an increased retirement allowance resulting from the 4 5 purchase of the service credit. 4 6 LSB 5883SS 82 4 7 ec/sc/5