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IAP Project Summary
Individual Account Program (IAP) Remediation Project Summary
Since its inception January 1, 2004, the IAP has not met the expectations of members, employers, and stakeholders. As such, PERS has created an IAP Remediation project to simplify the program for members and employers, ensure that contributions and earnings are fully posted, and provide for future corrections if necessary to address missing or inaccurate data.

Changes to the IAP will more closely align the program with the way PERS administers regular accounts under Tier One and Tier Two. It will take several months to complete the account remediation. Corrected IAP statements for 2004 and 2005 (showing adjusted total contributions and earnings for each year) will be sent to members later this year.

Remediation Project Highlights
1. Member accounts will be credited with earnings annually instead of monthly.

Annual earnings will be credited with the same structures and timeframes used for Tier One and Tier Two accounts. Originally, IAP accounts were credited monthly with a “unit value” that was confusing. Annual earnings crediting to member accounts will allow PERS to work with employers to ensure that member contributions are accurate and complete before allocating earnings on a year-end balance basis so members are not adversely affected by posting delays or corrections.
2. Administrative fees will be deducted from earnings on the IAP fund instead of directly from member accounts.
Program administration fees will be deducted from IAP fund earnings as part of the annual crediting process. Previously, a monthly administrative fee was deducted from member accounts. Remediation will restore the previously deducted monthly fees to member accounts.
3. PERS will recalculate member IAP account data for 2004 and 2005 (and will do the same for 2006) so all contributions received in a calendar year will receive the same earnings percentage for each year.

Due to a variety of problems with the IAP start-up and administrative structure, member contributions were not posted in a consistent and timely manner. Those problems caused members to have varying annual earnings rates. The new earnings structure will credit all contributions received for a calendar year with the same annual percentage, so all members will have same annual earnings crediting rate. Any subsequent contribution adjustments will also be credited with the appropriate annual earnings rate(s).
IAP earnings crediting rates for both 2004 and 2005 are projected to be in the 12 percent per year range.
IAP earnings for 2006 will be credited in March 2007; IAP earnings for 2007 and beyond will be credited in the same manner, i.e., March of the subsequent year.

Basic Principles for IAP Remediation
At the beginning of the IAP Remediation process, staff recommended to the PERS Board that any IAP remediation plan should reflect the following principles:
1. Members should not be harmed financially by the IAP structure and administration. PERS will determine what member account balances would have been if all contribution posting and earnings processes worked as they should have and will correct the account balances accordingly.
2. Transparency and simplicity should be IAP core values.
3. The IAP structure and reporting system should be as simple and understandable as possible. The IAP should not be expected or designed to be more than the statute directs. The statute requires a very simple account structure: contribute 6 percent of subject salary to an individual member’s account that is then adjusted at least annually for earnings, losses, and administrative charges.

The IAP was statutorily created in 2003 to provide an individual account-based retirement benefit for new workers hired on or after August 29, 2003, and for Tier One/Tier Two members active on and after January 1, 2004. The IAP benefit is in addition to the member’s other retirement program benefit (i.e., Tier One, Tier Two, or OPSRP).
House Bill 2020 passed in August 2003 and required the IAP to be established in time to receive member contributions on salary paid beginning January 1, 2004. All member contributions (6 percent of covered salary) have been deposited in the IAP since that date.
The IAP structure required PERS to create a new reporting system for employers to supply information to PERS. The system needed to be built on a new technology platform that would interact with the agency’s legacy system. Employers had to learn and adopt a new reporting structure that accelerated and altered the format and scope of the employee data that needed to be transmitted.
Read the IAP Remediation project plan