H.F. 418 Section 1. Section 97B.1, subsection 1, Code 2011, is 1 amended to read as follows: 2 1. The “Iowa Public Employees’ Retirement System” is 3 established as an independent agency within the executive 4 branch of state government. The Iowa public employees’ 5 retirement system shall administer the retirement system 6 established under this chapter and the retirement plan 7 established under chapter 97E . 8 Sec. 2. Section 97B.1, subsection 2, Code 2011, is amended 9 by adding the following new paragraph: 10 NEW PARAGRAPH . 0d. “Defined contribution plan” means the 11 Iowa public employees’ defined contribution plan created in 12 chapter 97E. 13 Sec. 3. Section 97B.1A, unnumbered paragraph 1, Code 2011, 14 is amended to read as follows: 15 When used in this chapter and chapter 97E, unless the context 16 otherwise requires : 17 Sec. 4. Section 97B.42, Code 2011, is amended by adding the 18 following new subsections: 19 NEW SUBSECTION . 9. Notwithstanding any other provision 20 of this section, commencing July 1, 2013, a member in regular 21 service may elect coverage under the defined contribution plan 22 created in chapter 97E, in lieu of continuing contributions 23 to the Iowa public employees’ retirement system or in lieu 24 of opting out of coverage under this chapter pursuant to 25 section 97B.42A. However, the employer’s annual contribution 26 in dollars to the defined contribution plan shall not exceed 27 the annual contribution in dollars which the employer would 28 contribute if the employee had elected to remain an active 29 member under this chapter, as set forth in section 97B.11. A 30 member who elects coverage under the defined contribution plan 31 may withdraw the member’s accumulated contributions and the 32 member’s share of the accumulated employer contributions as 33 provided in section 97B.53, effective when coverage under the 34 defined contribution plan commences. A member who is employed 35 -1- LSB 2104YH (4) 84 aw/sc 1/ 11

H.F. 418 in a position as an employee in regular service and who is 1 covered under the system in this chapter on July 1, 2013, must 2 file an election for coverage under the defined contribution 3 described in chapter 97E, with the system and the member’s 4 employer within eighteen months of the first day on which 5 coverage commences under the defined contribution plan, or the 6 employee shall remain a member under this chapter and shall not 7 be eligible to elect to participate in the defined contribution 8 plan at a later date. A decision to elect out of coverage 9 under this chapter and to elect to participate in the defined 10 contribution plan is irrevocable upon approval from the system. 11 NEW SUBSECTION . 10. A person who is newly hired in a 12 position as an employee in regular service on or after July 13 1, 2013, shall become a member of the Iowa public employees’ 14 defined contribution retirement plan created in chapter 97E and 15 shall not be considered to have entered covered employment for 16 the purposes of the benefits plan created in this chapter. 17 NEW SUBSECTION . 11. Notwithstanding any provision of this 18 section to the contrary, a member of the system who is subject 19 to a qualified order for the purpose of enforcing child, 20 spousal, or medical support obligations or marital property 21 orders pursuant to section 97B.39 shall not be eligible to 22 transfer to the defined contribution plan created in chapter 23 97E unless the order is modified to apply under the defined 24 contribution plan created in chapter 97E. 25 Sec. 5. NEW SECTION . 97E.1 Plan created —— definitions. 26 1. An Iowa public employees’ defined contribution 27 retirement plan is created within the Iowa public employees’ 28 retirement system. 29 2. As used in this chapter, unless the context otherwise 30 requires: 31 a. “Board” means the defined contribution advisory board 32 created in section 97E.2. 33 b. “Defined benefit system” means the Iowa public employees’ 34 retirement system created in chapter 97B. 35 -2- LSB 2104YH (4) 84 aw/sc 2/ 11

H.F. 418 c. “Member” means an employee who has elected coverage under 1 the plan and who has a retirement account in the plan. 2 d. “Plan” means the Iowa public employees’ defined 3 contribution retirement plan created in this chapter. 4 e. “Retirement account” means an individual participant’s 5 account that includes both employee and employer contributions 6 and investment gains and losses, less any plan administrative 7 expenses. 8 f. “System” means the Iowa public employees’ retirement 9 system created in chapter 97B. 10 Sec. 6. NEW SECTION . 97E.2 Defined contribution advisory 11 board. 12 1. Board established. A board is established to be known 13 as the defined contribution advisory board, referred to in 14 this chapter as the “board” . The duties of the board are to 15 review matters relating to the establishment and management 16 of the plan. The board shall meet upon the call of the chief 17 executive officer of the Iowa public employees’ retirement 18 system. 19 2. Investment review. The board shall review, at least 20 annually, the products, investments, and services offered by 21 the providers under the plan and the investment information 22 available to members and potential members of the plan on an 23 ongoing basis. 24 3. Membership. 25 a. The board shall consist of six voting members. The 26 voting members shall be as follows: 27 (1) Two public members, appointed by the governor, who are 28 not members of the defined benefit system created in chapter 29 97B or the plan created in this chapter. 30 (2) Two members, appointed by the governor, who are eligible 31 to be members of the plan. Of the two members appointed, 32 one shall be an active member who is an employee of a school 33 district, area education agency, or merged area and one 34 shall be an active member who is not an employee of a school 35 -3- LSB 2104YH (4) 84 aw/sc 3/ 11

H.F. 418 district, area education agency, or merged area. 1 (3) Director of the department of administrative services. 2 (4) One member, appointed by the governor, who represents 3 employers of employees eligible to be members of the plan who 4 are not state employees. 5 b. Four voting members of the board shall constitute a 6 quorum. 7 c. The two public members and the one employer member shall 8 be paid their actual expenses incurred in the performance of 9 their duties and shall receive a per diem as specified in 10 section 7E.6 for each day of service not exceeding forty days 11 per year. The members who are eligible to be a member of the 12 plan and the director of the department of administrative 13 services shall be paid their actual expenses incurred in the 14 performance of their duties as members of the board, and the 15 performance of their duties as members of the board shall not 16 affect their salaries, vacations, or leaves of absence for 17 sickness or injury. 18 d. The appointive terms of the members appointed by the 19 governor are for a period of six years beginning and ending 20 as provided in section 69.19. If there is a vacancy in the 21 membership of the board for one of the members appointed by 22 the governor, the governor has the power of appointment. 23 Gubernatorial appointees to this board are subject to 24 confirmation by the senate. 25 Sec. 7. NEW SECTION . 97E.3 Defined contribution plan 26 established —— assets to be held in trust —— contracted 27 services. 28 1. The system shall establish a defined contribution plan 29 in accordance with this chapter. The plan must be established 30 as a pension plan for the exclusive benefit of members and 31 their beneficiaries and as a qualified plan pursuant to section 32 401(a) of the Internal Revenue Code and its implementing 33 regulations. Retirement accounts must be established for each 34 member of the plan. Assets of the plan must be held in trust. 35 -4- LSB 2104YH (4) 84 aw/sc 4/ 11

H.F. 418 The system shall be the trustee of the plan. The plan is 1 established in addition to any retirement, pension, deferred 2 compensation, or other benefit plan administered by the state 3 or a political subdivision. 4 2. The system shall contract for plan administration and 5 use a competitive bidding process when contracting for services 6 for the plan. Services include consulting, educational, 7 investment, recordkeeping, or other services for the plan. 8 Sec. 8. NEW SECTION . 97E.4 Iowa public employees’ 9 retirement system —— powers and duties —— rulemaking. 10 1. The system has the powers and shall perform the duties 11 regarding the plan, as applicable. 12 2. The system shall, in accordance with chapter 17A, 13 adopt rules necessary for the administration of this chapter, 14 including rules concerning the following: 15 a. Matters necessary for the treatment of the plan or plans 16 as a qualified plan under applicable sections of the Internal 17 Revenue Code. 18 b. The treatment of dormant or inactive accounts. 19 c. The security and privacy of information maintained by 20 the system concerning a member’s investments, as required by 21 applicable law. 22 d. Minimum asset, reserve, insurance, or other security 23 requirements intended to ensure the solvency of a contractor 24 used by the system for investment services. 25 e. The commencement of benefit payments under the plan. 26 Sec. 9. NEW SECTION . 97E.5 Administrative expenses and 27 fees. 28 1. The system may establish a fund within the plan for 29 paying the plan’s administrative expenses. 30 2. The system may do any of the following: 31 a. Assess fees to pay the reasonable administrative costs 32 of the plan. 33 b. Negotiate with a vendor or vendors for vendor 34 reimbursement of administrative expenses for the plan. 35 -5- LSB 2104YH (4) 84 aw/sc 5/ 11

H.F. 418 3. All fees assessed must be fully disclosed to plan members 1 and treated as public information. 2 4. Costs for the system to provide for contract oversight 3 are included as part of the administrative expenses of the 4 plan. 5 Sec. 10. NEW SECTION . 97E.6 Membership. 6 Except as otherwise provided in this chapter, a member of 7 the plan means an employee who has commenced covered employment 8 on or after July 1, 2013, or any employee commencing covered 9 employment prior to that date and who has elected coverage 10 under the plan. 11 Sec. 11. NEW SECTION . 97E.7 Transfers or rollovers into 12 plan. 13 The plan shall accept the rollover and direct transfer 14 of contributions and the income on those contributions from 15 another eligible retirement plan to the member’s account. The 16 plan’s acceptance of regular rollovers, direct rollovers, and 17 direct transfers from another eligible retirement plan shall 18 only be to the extent permitted by the Internal Revenue Code. 19 The term “direct rollover” includes a rollover of a member’s 20 account balance in the system to the plan pursuant to a plan 21 choice election authorized under section 97B.42. 22 Sec. 12. NEW SECTION . 97E.8 Vesting —— allocation of 23 contributions. 24 1. A member is fully vested in the plan with respect to the 25 member’s and employer’s contributions and the income from those 26 contributions from the date that the employee becomes a member 27 of the plan. 28 2. Each member’s retirement account in the plan shall be 29 credited with member and employer contributions calculated as 30 provided in section 97B.10. Member contributions shall be 31 treated in the same manner as provided for contributions made 32 under section 97B.11 pursuant to section 97B.11A for federal 33 and state income tax purposes. 34 Sec. 13. NEW SECTION . 97E.9 Maximum contribution 35 -6- LSB 2104YH (4) 84 aw/sc 6/ 11

H.F. 418 limitation. 1 The annual additions to a retirement account in the plan 2 shall not exceed the annual limits on contributions as 3 specified in section 415 of the Internal Revenue Code and 4 adjusted annually by the commissioner of internal revenue. 5 Sec. 14. NEW SECTION . 97E.10 Investment alternatives —— 6 notice of changes —— default fund. 7 1. The system shall select providers for the plan to provide 8 for a sound and diversified mix of products, investments, and 9 services from which individual members may select alternatives 10 for the investment of the member’s retirement account to 11 achieve the member’s financial and retirement goals. At least 12 four of the providers selected shall be insurance companies 13 authorized to issue annuity contracts in this state. The 14 system may limit the providers selected to no more than six. 15 The selection by the system of a provider shall not constitute 16 an endorsement of the provider. 17 2. The system shall from time to time review the suitability 18 and management of the products, investments, and services 19 offered by providers and may change the products, investments, 20 and services to be offered. The system shall notify affected 21 members of potential changes in products, investments, and 22 services before any changes become effective. 23 3. Assets within each member’s retirement account must be 24 invested as directed by the member. 25 4. The system shall provide for a balanced alternative 26 investment to be established as a default alternative 27 investment. If a member fails to direct how the member’s 28 retirement account is to be invested, the member’s entire 29 account balance shall be invested in the default alternative 30 investment. 31 Sec. 15. NEW SECTION . 97E.11 Payout of retirement account 32 balances when terminating plan membership. 33 Any time after termination of covered employment by a 34 member, a member or the member’s beneficiary may terminate plan 35 -7- LSB 2104YH (4) 84 aw/sc 7/ 11

H.F. 418 membership by making a written application to the system and 1 removing the member’s retirement account balance from the plan 2 through any combination of the following payout options, each 3 of which is subject to applicable regulations of the internal 4 revenue service: 5 1. A direct rollover to an eligible retirement plan or to an 6 individual retirement account or annuity pursuant to section 7 401(a)(31) of the Internal Revenue Code. 8 2. A regular rollover to an eligible retirement plan 9 pursuant to section 402(c) of the Internal Revenue Code. 10 3. A lump sum distribution of the member’s retirement 11 account balance. 12 Sec. 16. NEW SECTION . 97E.12 Distribution options for plan 13 members —— rulemaking —— minimum distribution requirements —— 14 restrictions. 15 1. Subject to the requirements of this chapter and chapter 16 97B, if applicable, a member may, after termination of covered 17 employment, leave the member’s retirement account balance in 18 the plan, and the member is eligible for a distribution as 19 provided in this section. 20 2. After termination of covered employment, upon written 21 application to the system, a member may select a distribution 22 option offered pursuant to a contract negotiated by the system 23 with a plan vendor or vendors. 24 3. A member who is less than seventy and one-half years of 25 age who returns to covered employment shall not continue to 26 receive a distribution under this section while the member is 27 actively employed in a covered position. 28 4. The system shall adopt rules pursuant to chapter 17A 29 to administer this section and to provide that distributions 30 comply with the minimum distribution requirements established 31 in the Internal Revenue Code. 32 Sec. 17. NEW SECTION . 97E.13 Death benefits. 33 A plan member’s beneficiary shall be designated and 34 determined pursuant to rules adopted by the system under 35 -8- LSB 2104YH (4) 84 aw/sc 8/ 11

H.F. 418 chapter 17A. Upon written application filed with the system 1 after the death of a plan member, the member’s beneficiary is 2 entitled to the member’s retirement account balance and all 3 rights established in and subject to this chapter. 4 Sec. 18. NEW SECTION . 97E.14 Minimum retirement account 5 balance required for membership after termination —— adjustment 6 by rule. 7 1. a. If a member’s retirement account balance is less than 8 the current maximum amount prescribed by the internal revenue 9 service that may be distributed without triggering automatic 10 rollover rights at the time that the member terminates covered 11 employment, the member shall terminate plan membership by 12 removing the member’s retirement account balance from the plan 13 in a manner provided pursuant to section 97E.11. 14 b. If the member fails to remove the member’s retirement 15 account balance, the system may close the account by paying 16 to the member a lump sum distribution of the member’s entire 17 account balance. 18 2. The system may by rule adjust the minimum retirement 19 account balance provided in this section as necessary to 20 maintain reasonable administrative costs and to account for 21 inflation and to ensure compliance with applicable internal 22 revenue service requirements. 23 Sec. 19. DEFINED CONTRIBUTION ADVISORY BOARD —— INITIAL 24 APPOINTMENTS. Notwithstanding any provision of section 25 97E.2 to the contrary, the term of membership for an initial 26 appointment to the defined contribution advisory board shall 27 be as follows: 28 1. The following shall be appointed for an initial six-year 29 term: One employee member and one public member, as designated 30 by the governor. 31 2. The following shall be appointed for an initial four-year 32 term: One employer member and one public member, as designated 33 by the governor. 34 3. The following shall be appointed for an initial two-year 35 -9- LSB 2104YH (4) 84 aw/sc 9/ 11

H.F. 418 term: One employee member, as designated by the governor. 1 EXPLANATION 2 This bill establishes a mandatory defined contribution 3 retirement plan for all employees commencing covered employment 4 on or after July 1, 2013, and creates an option for employees 5 covered under the Iowa public employees’ retirement system 6 (IPERS) to elect out of coverage under that system and into a 7 defined contribution plan established by IPERS effective July 8 1, 2013. 9 Membership in the defined contribution plan is established 10 by the bill. The bill provides that a person hired on or 11 after July 1, 2013, in regular service, who would otherwise 12 be eligible for coverage under the defined benefit system of 13 IPERS, must commence coverage under the defined contribution 14 plan established by IPERS. Active members of IPERS in regular 15 service as of July 1, 2013, are given an option for 18 months 16 from July 1, 2013, to transfer to the defined contribution 17 plan. If a member transfers coverage, IPERS shall transfer 18 moneys to the member’s account in the defined contribution plan 19 in an amount equal to the amount the person would be eligible 20 to receive as a refund if the person terminated membership 21 under IPERS. 22 The bill provides that IPERS shall establish the defined 23 contribution plan as a qualified plan pursuant to section 24 401(a) of the Internal Revenue Code and shall be the trustee 25 of the plan. The bill provides that IPERS shall contract for 26 the administration of the plan through a competitive bidding 27 process. The bill authorizes IPERS to assess fees for the 28 administration of the plan. 29 The bill provides for the establishment of a defined 30 contribution advisory board which shall review, at least 31 annually, the investment alternatives provided under the plan. 32 The board consists of six members, to include the director 33 of the department of administrative services, two employee 34 members who would be eligible to be in the plan, one employer 35 -10- LSB 2104YH (4) 84 aw/sc 10/ 11

H.F. 418 member, and two public members. Except for the director of the 1 department of administrative services, the governor appoints 2 the members of the board. Of the two employee members, one 3 shall be a school employee and one shall not. The employer 4 member shall represent employers of employees who are not state 5 employees. The bill further provides transition provisions 6 governing the terms of initial appointments to the board. 7 The bill provides that a member shall be vested in the 8 defined contribution plan immediately. 9 The bill provides that contributions to the plan from 10 employers and employees shall be pretax and based on the 11 contribution percentage rates under Code chapter 97B. 12 The bill provides that IPERS shall select a diversified mix 13 of investment alternatives under the plan and may limit the 14 number of investment providers to no more than six. The bill 15 provides that at least four investment providers be insurance 16 companies authorized to issue annuity contracts in this state. 17 The bill provides that moneys in a member’s retirement account 18 shall be deposited in a balanced fund if the member fails to 19 select an investment option. Distributions to plan members, 20 eligible rollovers of accounts, and death benefit provisions 21 are included in the bill. The bill also provides for an 22 immediate distribution of moneys in a member’s account if the 23 account balance is less than the maximum amount prescribed by 24 the internal revenue service that can be distributed without 25 triggering automatic rollover rights. 26 -11- LSB 2104YH (4) 84 aw/sc 11/ 11