Changes to Omaha school retirement plan advanced

Senators amended and advanced a bill from general file May 18 that would make several changes to the Omaha school retirement plan.

As introduced by Omaha Sen. Jeremy Nordquist, LB448 would have made current and new Class V (Omaha) school employees members of the School Employees Retirement System of the state of Nebraska.

Nordquist said he introduced the bill as a placeholder to begin discussions on merging the Omaha school plan with the statewide system. Omaha public schools is the only district in Nebraska to have its own retirement system.

A Retirement Systems Committee amendment, adopted 25-17, became the bill. Nordquist said the amendment contains several significant components that would bring the two retirement systems closer to a potential merger in the future.

Among other changes, the amendment would further align Omaha member benefits with statewide school employee benefits by limiting the state service annuity and medical cost of living increase to individuals who were members prior to July 1, 2015. It also would raise the normal retirement age for Omaha school members from 62 to 65.

In addition, the amendment would:
• move investment authority from the Omaha board of trustees and Omaha school board to the Nebraska Investment Council;
• restructure the administration and governance of the Omaha system to more closely align with the Public Employee Retirement Board’s governance of the statewide system; and
• create greater state funding parity between the two systems.

Nordquist said the amendment was the result of extensive negotiations and was intended to reduce benefits and ensure professional management of investments to further secure the state’s largest school district’s retirement plan.

“This is to make sure that both plans are headed in the right direction,” he said.

Seward Sen. Mark Kolterman offered an amendment to the committee amendment to eliminate a requirement that if the state transfers funds to meet a shortfall in the statewide school retirement system, a proportional transfer would be made to the Omaha system.

While both plans currently are adequately funded, Kolterman said, he had concerns about making the state responsible for possible future shortfalls in the Omaha system.

“In principle, I support many aspects of this bill,” he said. “I think it would be good if we could eventually merge the two plans together and have the same plan for all teachers in the state.”

Nordquist opposed the amendment, saying the provision does not mean that the state automatically would transfer funds to the Omaha system. There are many options in the event of a future shortfall, he said, including reducing benefits or increasing contribution rates. The state does not have a history of using general funds to fill shortfalls in retirement systems, he said.

Omaha Sen. Heath Mello agreed, saying the provision simply would ensure parity between the two systems. Because LB448 would move investment authority for the Omaha system to the state, he said, it would make sense to align future responsibility for those investments as well.

“In the last six years, we’ve set the precedent of treating both of these plans consistently,” Mello said. “This should be the state policy moving forward.”

The Kolterman amendment failed 21-17. Twenty-five votes were needed.

The bill advanced to select file on a 25-19 vote.