Fiscal Note
Fiscal Services Division
HF 687 – 411 Retirement System (LSB1947HV.1)
Staff Contact: Xavier Leonard (515.725.0509) xavier.leonard@legis.iowa.gov
Fiscal Note Version – As amended and passed by the House
Description
House File 687 relates to civil service entrance evaluations and benefits for members of the
Municipal Fire and Police Retirement System of Iowa (MFPRSI). The Bill expands the number
of disabilities eligible for an accidental disability benefit and allows retirees who are receiving an
ordinary benefit and who are within three years of retirement to apply for an accidental disability
benefit. The Bill also adds a mental health evaluation to the required examination of applicants
for civil service.
Background
Iowa Code chapter 400 relates to civil service and requires applicants for the positions of police
officer and fire fighter to take entrance examinations to determine whether the applicant meets
qualification standards. The examinations are designed to test the mental and physical ability of
an applicant to perform the duties of the position.
Iowa Code chapter 411 relates to a retirement system for police officers and fire fighters. The
chapter provides for the payment of pensions to retired members, members incurring
disabilities, and the surviving spouses and dependents of deceased members. The chapter
also relates to a disability program for police officers and fire fighters and includes standards for
entrance, guidelines for ongoing fitness and wellness, disability pensions, and postdisability
retirement compliance requirements.
Based on the July 1, 2022, actuarial valuation, the MFPRSI covers approximately 4,155 active
members; 1,181 disabled members; 3,172 retired members and beneficiaries; and 453 vested,
terminated members. The current actuarial accrued liability of the MFPRSI is $3.652 billion, the
actuarial value of assets is $3.083 billion, and the unfunded actuarial liability is $568.4 million.
The ratio of liabilities to assets (funded ratio) of the retirement system is 84.21%.
For FY 2024, members’ estimated annual contributions at the current rate of 9.40% total
$31.6 million, and cities’ estimated contributions at 22.98% total $88.4 million. Total covered
payroll is $349.8 million. The average annual compensation for an active member is $84,176.
Table 1 below shows the annual employer and employee contribution rates for FY 2020 to
FY 2024.
Table 1 — Annual Contribution Rates
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Employer Contribution Rate 24.41% 25.31% 26.18% 23.90% 22.98%
Employee Contribution Rate 9.40% 9.40% 9.40% 9.40% 9.40%
Total 33.81% 34.71% 35.58% 33.30% 32.38%
Iowa Code section 411.8 provides that member contribution rates will be increased for any
statutory changes, if the increase cannot be absorbed within the current contribution rates, up to
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a maximum of 11.35%. Costs are then applied 60/40 between the employer and employee.
Current member contribution rates are 9.40% of pay.
The MFPRSI provides for both an ordinary and accidental disability benefit for a member in
good standing with the System. The medical board determines whether a member is medically
able to perform the member’s job duties. If the member is determined to be unable to perform
the member’s duties, the MFPRSI decides whether the member is eligible for an ordinary or
accidental disability benefit. The compensation for an ordinary disability is 50.0% of the
average final compensation, whereas the compensation for an accidental disability is 60.0% of
the average final compensation.
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.”
Assumptions
• Expanding the number of disabilities eligible for an accidental disability benefit and allowing
retirees who are receiving an ordinary disability benefit and within three years of retirement
to apply for an accidental disability benefit will reduce the funded ratio of the Municipal Fire
and Police Retirement Fund by 0.12%, from 84.21% to 84.09%.
• Based on the most recent actuarial valuation report as of July 1, 2022, no increase in costs
can be absorbed within the existing contribution rates for FY 2024. The FY 2024 employee
contribution rate would need to increase from 9.40% to 9.64%, an increase of 0.24%.
• According to the MFPRSI, the total contribution rate impact of the Bill will be an increase of
0.24% to the members’ contribution rate. The provisions creating the impact include the
following:
• Allowing current ordinary disability retirees within three years of retirement to apply for
an accidental disability benefit will increase the total contribution rate by 0.04%.
• Permitting future ordinary disabilities to be treated as accidental disabilities due to the
elimination of the definite time and place requirement will increase the total contribution
rate by 0.12%.
• A 5.0% increase in total future disabilities due to the expansion of accidental disability
benefits combined with accidental disability tax advantages will increase member
contribution rates by 0.08%.
• All other actuarial assumptions made by the MFPRSI for annual actuarial valuations going
forward will be met.
• The MFPRSI may see an increase in administrative costs related to medical exams between
approximately $50,000 and $100,000 in FY 2024 and $20,000 and $50,000 in FY 2025 and
each year thereafter. This includes the implementation and performance of mental health
evaluations.
• Medical and administrative costs incurred by cities may increase for all injuries and diseases
related to employment, regardless of the type of benefit received from the System.
• There are approximately seven ordinary disability retirements per year.
• Eliminating the link between medical costs and MFPRSI accidental disabilities and requiring
medical cost coverage for cumulative injuries may result in additional medical costs being
covered by city employers.
Fiscal Impact
Administrative costs for the MFPRSI associated with performing mental health evaluations and
medical exams are estimated to increase between $50,000 and $100,000 in FY 2024 and
between $20,000 and $50,000 annually in FY 2025 and each year thereafter. Any increased
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administrative costs for the MFPRSI will be paid from the Municipal Fire and Police Retirement
Fund.
The unfunded actuarial accrued liability of the Municipal Fire and Police Retirement Fund is
estimated to increase by approximately $4.4 million in FY 2024. The funded ratio would
decrease from 84.21% to 84.09%.
Increasing members’ contribution rate from 9.40% to 9.64% is estimated to cost approximately
$839,000, or $202 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 687 on cities for additional
medical costs cannot be determined at this time but may be significant.
Sources
Iowa League of Cities
Municipal Fire and Police Retirement System of Iowa Actuarial Valuation Report
Municipal Fire and Police Retirement System of Iowa
Legislative Services Agency
/s/ Jennifer Acton
April 28, 2023
Doc ID 1371940
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 400.8, 411.5, 400.18, 411.6, 411.15, 411.1
Reprinted: 400.8, 411.5, 400.18, 411.6, 411.15