As a result of the American Recovery and Reinvestment Act of 2009, the IRS has implemented new tax withholding tables. The new tables reflect an income tax credit on “earned income.” Earned income does not include interest, dividends, and pension payments.
If federal income tax is currently withheld from your pension payment, you may notice that the amount being withheld has decreased, resulting in a slightly larger benefit payment. (If federal income tax is not being withheld from your benefit payment, this change will not affect your benefit payment amount.)
If less taxes are being withheld, you may end up with a year-end tax liability. If you are concerned that having less taxes withheld may affect your 2009/2010 tax returns, please contact your financial advisor. If necessary, you can change your withholding by filing a new W-4P with the System. W-4P forms can be obtained from the System’s office or website at www.mfprsi.org
The Municipal Fire and Police Retirement System of Iowa’s (MFPRSI) purpose is “to promote economy and efficiency in the municipal public safety service” within the State of Iowa. To achieve its purpose, the retirement System is charged with the administration of a retirement plan which makes pension payments to its members who have retired from public service as a police officer or fire fighter and to their beneficiaries. The System administers a comprehensive disability program for its membership and the forty-nine employing cities.
Created by act of the 1990 Iowa Legislature, the System initiated its formal operations on January 1, 1992. By Iowa law, an instrumentality of the cities, MFPRSI is administered under the direction of a Board of Trustees representing the membership, the cities, the citizens of Iowa, and the Iowa General Assembly. Members, city officials and any interested parties are encouraged to contact MFPRSI with any questions you may have concerning the programs it administers under Iowa Code Chapter 411. _____________________________________________________
Current Financial Situation 2008 Update The retirement system has since July 1, 2008 experienced a decline in the value of its overall portfolio due to the affect of the credit crisis on the capital markets. This decline in value is consistent with that experienced by other institutional plans and by the portfolios of individuals which are invested in tax sheltered vehicles such as IRA’s, 457 plans and 401K plans.
It is important to note that the benefits established by the Iowa Legislature in Iowa Code Chapter 411 are committed benefits and will be paid as they come due, to each retiree and beneficiary of the plan.
The system's portfolio is invested in a diversified manner in accordance with the asset allocation policy established by the Board each year. This policy is designed to exceed the actuarial funding requirements for the plan using an extended time horizon (over 20 years in length). The portfiolio's performance has exceeded this requirement over the life of the plan. Through June 30, 2008, the annualized performance for the portfolio was 8.8% in comparison to the actuarial assumed return requirement of 7.5% annualized. Performance since June 30, 2008 has detracted from this favorable spread.
The U.S. equity markets have declined by over 30% year to date. The system's portfolio has not experienced that level of reduction since it is broadly diversified. Information which describes the system’s investment policy and portfolio can be found at the system’s website: www.mfprsi.org under the investment drop down tap found on the left side of the front page.
The overall allocation policy of the system is as follows:
US Equity 30.0%
Non- US Equity 20.0%
Real Estate 10.0%
Alternative Investments 10.0%
Total Equity Oriented Investments 70.0%
US Fixed Income 10.0%
Tactical Fixed Income 20.0%
Cash 0.0%
Total Debt Oriented Investments 30.0%
Total Plan Annualized Performance Expectation 8.00%
Standard Deviation (Annual Risk) 10.40%
The Board of Trustees and the administration of the system will continue to carefully examine the implications of this reduction in value and the outlook for the capital markets going forward. Historically, contribution rate adjustments have been made as required to fund the plan as the system’s portfolio has experienced growth and at times, reductions in value due to increases and declines in the capital markets.
As stipulated by Iowa Code Chapter 411, the Board of Trustees will, based upon the actuarial valuations of the plan for future years, adopt changes to the contribution rate to meet the funding requirement of the plan.
