The $47bn Iowa Public Employees' Retirement System is facing a governance crisis after its chief executive resigned and its chief benefits officer was fired amid investigations into misconduct allegations. Greg Samorajski stepped down effective May 1, while Steven Herbert was terminated Thursday. Both had been on administrative leave during the probes.

A former risk officer's lawsuit claims Samorajski and chief investment officer Sriram Lakshminarayanan used misleading benchmarks to make the fund appear to perform better than it actually did. Rich Wiggins alleged IPERS used easy-to-beat benchmarks that overstated performance, while understating management fees by excluding private equity incentive fees and carried interest. The fund reported investment costs of 13.7 basis points, but internal estimates showed costs could reach 70 basis points once all fees were included.

The turmoil has exposed what former officials call an unusually weak governance structure at IPERS. Unlike most public pension systems, the chief executive is appointed by the governor and reports through the state executive branch rather than to a governing board. This arrangement gave the CEO unusual authority with limited oversight. Iowa ranked 33rd in the Reason Foundation's measure of pension investment risk, placing it among the riskier US state retirement systems.