State lawmakers grilled officials representing Iowa's largest public employees' pension fund Monday, saying they are pleased with the retirement program's direction but concerned about long-term liabilities of nearly $7 billion.

The Iowa Legislature's Public Retirement Systems Committee adjourned without making recommendations for legislation during the upcoming 2018 session. But lawmakers signaled they will continue to closely scrutinize IPERS in the months ahead to protect the interests of taxpayers and the system's 355,000 members.

Sen. Charles Schneider, R-West Des Moines, the committee's vice chairman, told the Des Moines Register on Monday it's good that IPERS made changes in economic assumptions earlier this year that include lowering the pension fund's target for investment gains from 7.5 percent to 7 percent annually. Those changes have also revised assumptions for inflation, wage growth, payroll, and interest on contribution balances.

But while the adjustments are a better reflection of economic realities, Schneider said he and his fellow legislators still have questions and they want to gather more information.

“We can’t just bury our heads in the sand and pretend like we don’t have a $6.9 billion unfunded liability. I know that there is a plan to pay it off. But that plan is only as good as the assumptions on which it is based," Schneider said. "And if those assumptions aren’t realistic then we are going to have to go right back to the drawing board and create a new unfunded liability. ... I just want to make sure that we are truly providing retirement security for our hardworking public employees and that they know that they can rely on their retirement security."

Both Schneider and Rep. Dawn Pettengill, R-Mount Auburn, who chairs the pension committee, said they do not anticipate the 2018 Legislature will attempt to pass legislation to implement 401(k)-style defined contribution plans for newly hired public employees. Such plans, which do not guarantee a monthly pension check, are less risky for government employers and are favored by conservative groups and taxpayers' organizations.

The committee devoted the day to hearing presentations from representatives of several public employees' retirement organizations while peppering them them with questions about actuarial reports and other details. This included IPERS' officials describing how they have a long-term plan to amortize the pension system's liabilities over the next 27 years. To accomplish this goal, IPERS needs to raise annual pension expenses by $42.4 million for state and local governments and by $28.4 million for public employees, starting July 1, 2018.

"It looks like we are in good shape — on an upward trajectory," Pettengill said. But she agreed with Schneider that the committee needs to continue to closely monitor Iowa's public pension plans.

IPERS' officials said the long-term unfunded liability resulted from over a decade of insufficient contributions, coupled with recessions in 2001 and 2009, changes in mortality tables, and unfunded benefit enhancements.

The Iowa Legislature in 2010 adopted pension reforms that include allowing increased contributions for both public employees and employers, a longer period for pension vesting, changes in the pension formula, and an increased reduction in benefits for early retirees.

The committee on Monday asked dozens of questions from pension fund officials, including queries about methodologies used by actuaries, efforts to prevent public employees from manipulating the system to secure bigger pensions, and strategic plans to cut costs by hiring internal investment managers for some asset classes. They also asked about allocation of investments in categories that include domestic and international stocks, bonds, cash, and several other types of assets.

“The classic struggle every year when you are looking at asset allocation is how much risk is prudent," said Karl Koch, IPERS' chief investment officer. He added, “In general I would say that our approach is more conservative than our peers."

For the 12 months ending June 30, 2017, IPERS' investments earned 11.7 percent, net of fees. Over the past 10 years, IPERS has had annualized returns of 5.89 percent and over the past 20 years it has had annualized returns of 7.45 percent.

IPERS is currently 81.4 percent funded, which some Democratic elected officlals and others have cited as evidence the pension fund is in good shape with about $32 billion in assets. The funded ratio of a pension plan equals the value of the assets in the plan divided by a measure of the pension obligation.

However, Patrice Beckham, a consulting actuary for Cavanaugh Macdonald Consulting LLC, of Bellevue, Nebraska, told lawmakers Monday that there is “no magic funded ratio” and that the funded ratio is just one piece of an equation to evaluate a pension fund’s stability. Cavanaugh Macdonald prepared IPERS' actuarial report.

The American Academy of Actuaries supports Beckham’s view, describing what it says is the “80 percent pension funding standard myth.”

The academy says an 80 percent funded ratio often has been cited in recent years as a basis for whether a pension plan is financially or “actuarially” sound. But the Pension Practice Council of the American Academy of Actuaries finds says that while the funded ratio may be a useful measure, under­standing a pension plan’s funding progress should not be reduced to a single measure or benchmark at a single point in time. Pension plans should have a strategy in place to attain or maintain a funded status of 100 percent or greater over a reasonable period of time, the academy says.