In August, the Cedar Rapids school board approved a $20,000 incentive for up to 40 teachers to retire early, first come, first served, with applications due Nov. 1.1 In June, when it approved the same $20,000 incentive for building administrators, the district said the money would come from $900,000 in its management fund, $800,000 for teachers and $100,000 for administrators.2 In Des Moines, the fiscal 2025 offer to teachers and administrators in the district's own pension plan, the Des Moines Teachers' Retirement System, with at least 20 years of continuous service was "$50,000 plus $2,500 for each year of consecutive service," and the district's audit says the retirement offer raised management fund spending by $3.8 million that year.3
Those are the numbers a board votes on. There is a second benefit it doesn't get a vote on. As long as a district offers group health insurance, state law lets an employee who retires before 65 stay on the plan until 65, at the retiree's own expense.
The rule nobody votes on
Iowa Code 509A.13 says a public employer with a group health plan "shall allow its employees who retired before attaining sixty-five years of age to continue participation in the group plan or under the group contract at the employee's own expense until the employee attains sixty-five years of age."4 The retiree pays the premium. The district doesn't have to contribute. The statute doesn't mention spouses or dependents, so whether they can stay on depends on the district's plan and carrier contract. It doesn't define "retired" either, and some plans read it as 55 or older: Clarke's and Pella's audits say retirees must be at least 55.5,6
The right lasts far longer than COBRA, which usually runs up to 18 months and lets the plan charge up to 102% of its cost.7 Retiring doesn't have to cut coverage off at once, either. IPERS rules say a school employee who retires after finishing the year can keep "group insurance coverage at employee rates for the remainder of the school year" without breaking the bona fide retirement IPERS requires.8
Who it reaches
Regular IPERS members who are vested can start a pension at 55. There is no early-retirement reduction once they reach normal retirement age: 65, 62 with 20 years of service, or age plus service of 88.9 A teacher who started at 24 and never left hits 88 at 56, with no pension reduction and nine years to go before Medicare. For those nine years, 509A.13 guarantees them a place on the district plan if they pay for it.
That isn't a small group. The Iowa Department of Education counted 1,807 full-time public school and AEA teachers, 4.8% of the total, whose age and years of experience added up to 88 or more in 2024-25. It also counted 967 teachers aged 61 to 65; the two groups overlap.10 Teachers who retire and want to come back face a separate deadline: the one-month IPERS return for licensed teachers ends with 2027 retirements, as we explain in our article on that change.
What it costs, in five audits
Retirees on the plan are older than the active staff around them, and district audits put a number on what that means. Here is how five districts' audits for the year ended June 30, 2025 describe their pre-65 retirees.
| District | Retirees | Active staff | OPEB liability |
|---|---|---|---|
| Des Moines | 66 | 4,561 | $40.1M |
| Marshalltown | 37 | 714 | $7.1M |
| Ankeny | 40 | 1,384 | $5.5M |
| Clarke | 12 | 214 | $0.8M |
| Pella | 31 | 288 | $0.7M |
Des Moines counts current retirees, beneficiaries and dependents, and its active total adds fully and not yet fully eligible members. Pella's headcounts are as of July 1, 2023.3,11,12,6,5 The OPEB liability is an actuary's estimate of what retiree health coverage already earned will cost in future years, not a yearly bill.
The audits for Marshalltown, Pella and Clarke use the same sentence: retirees under 65 "pay the same premium for the medical and prescription drug benefits as active employees, which results in an implicit rate subsidy and an OPEB liability."12,6,5 In plain terms, the retiree pays the same blended rate as everyone else, but a 60-year-old's expected claims run higher than a rate driven mostly by younger, active employees. The difference lands in the plan's costs and, eventually, its renewals.
Ankeny's audit says retirees "contribute the full premium," which on its PPO plan was $669 a month for single coverage and $1,583 for family coverage as of July 1, 2025.11 Des Moines says it provides "no subsidy" for employees who retired on or after June 30, 2002.3 Neither statement means those retirees cost nothing. Both districts report the OPEB liabilities in the table, because a retiree paying the full blended premium can still cost the plan more than that premium.
Can the management fund pay for early retirement?
Yes, within limits. Iowa Code 279.46 lets a board adopt an early retirement program paying "a monetary bonus, continuation of health or medical insurance coverage, or other incentives." The board picks the eligibility age, and employees must give notice "prior to April 1."13 The board can put the cost for retirees 55 and older in the district management levy, and pay it from the management fund.13,14 The Department of Education says continued health coverage is allowed from the management fund when it's part of such a program, but an incentive for someone who retired younger than 55 "would be paid from the General Fund."15
The programs vary widely:
- Emmetsburg offered, for 2026 retirements, up to $10,000 a year toward the district's single health plan for four years, or the same amount into a 403(b).16
- Tipton pays $6,000 a year for five years, into an HRA for retirees who stay on the school's health plan or a 403(b) for those who don't.17
- Pella pays a percentage of final-year salary, for staff 55 or older, from 38% for 10 years of service to 57% for 15 or more, monthly until 65. Its audit shows 60 participants and a liability of $3,187,037, more than four times its retiree health OPEB liability.6
- Nevada pays 45% of salary into a tax-sheltered annuity over up to three years. Total payouts are capped at $100,000 a year unless the board waives the cap, and health coverage continues "entirely at the retiree’s expense."18
Before the board approves an incentive
An incentive is a fixed sum, paid out over a set period. The 509A.13 right lets a retiree stay on the plan until 65, paying the premium, whether or not the board offers an incentive. So the questions worth settling are about the plan as much as the bonus. What premium will retirees pay, and does the carrier contract let spouses stay on? How many staff are 55 or older, and how many are still short of IPERS normal retirement, the group 279.46 is written for?
And is the program adopted in time? Employees have to give notice before April 1, so a board that wants an incentive for next summer's retirements has to vote early enough for staff to decide.