Omaha school retirement bill expanded, advanced

Lawmakers expanded the scope of a bill that would make changes to the Omaha school employee retirement plan before advancing it from general file Feb. 25.

As introduced last session by former Sen. Jeremy Nordquist, LB447 would make the following governance changes to the Class V (Omaha) School Employees Retirement (OSERS) Act:
• create independent investment authority for the board of trustees;
• place retirement system employees under the control of the board of trustees;
• remove board of education members from the board of trustees; and
• provide for election of trustees by members of the retirement system.

A Retirement Systems Committee amendment, adopted 34-0, replaced the bill and inserted provisions of LB448 as amended during general file debate in 2015. That bill, also sponsored by Nordquist, stalled on select file and was bracketed by unanimous consent.

Omaha Sen. Heath Mello, who introduced the bill for debate this session, said the committee amendment represented negotiation and compromise reached over the interim by all impacted parties. Taken together, he said, the provisions are an important step toward eventually merging the OSERS plan with the state school employees plan.

“The reality is that reforming public pensions is difficult work,” Mello said. “There is a lot of work that still lies ahead.”

The amendment would place the OSERS staff under the control of the OSERS board of trustees and allow the board to appoint the OSERS administrator and oversee the administrator and staff. It also would transfer investment authority for OSERS funds to the state treasurer, the Nebraska Investment Authority and the state investment officer.

State funding also would change under the amendment. If the state appropriates funds for an actuarially required contribution (ARC) in the school employee plan, and the OSERS plan also has an ARC, the Omaha Public School District (OPS) could request a public hearing before the Appropriations Committee to request additional state funding to pay its ARC.

If the committee recommends payment of the additional funding, and it is approved by the Legislature, the school plan ARC would be computed as a percent of payroll and the state would contribute to OSERS the lesser of the same percent of payroll that was paid to the school plan or the percent of OSERS members’ compensation needed to the meet the OSERS plan ARC.

Seward Sen. Mark Kolterman, chairperson of the Retirement Systems Committee, explained that Omaha taxpayers currently are responsible for any ARC payments to the OSERS plan, while the state is legally responsible for ARC payments to the school employee plan.

Kolterman said the amendment would address concerns he raised last session regarding state responsibility for future ARC payments to the OSERS plan.

“Last year this payment would have been made automatically—that’s what I objected to,” he said. “[Now] the entire legislative body would have to approve the payment.”

Mello supported the change, noting that past ARC payments to the OSERS plan have not been paid in full annually by OPS. Calling the millions in unpaid ARC obligations “alarming,” he said more state oversight is necessary.

“The only way that you solve pension problems going forward is by best practices,” Mello said, which includes full annual payment of ARC obligations.

The amendment would limit the state service annuity and medical cost of living increase in the Omaha plan to individuals who were members prior to July 1, 2016.

In addition, school plan members would no longer be able to work up to 20 hours per week while receiving the disability benefit. An employee hired after July 1, 2016, no longer would be able to vest with half year of service credit if he or she is at least 65.

Kolterman said the changes would result in significant cost savings to both the OSERS and school employee plans.

The amendment also would incorporate provisions of three additional bills.

LB805, introduced by Mello, would require each political subdivision that has a defined benefit plan to conduct an actuarial experience study at least every four years.

LB922, introduced by Kolterman, would adjust the terms of the Public Employee Retirement Board (PERB) so that no more than two members would be appointed or reappointed in any one year. It also would clarify procedures for filling a vacated term.

LB986, introduced by the Retirement Systems Committee, would add new duties for the Nebraska Public Employees Retirement Systems executive director, the PERB and the actuary regarding experience studies and annual evaluation reports.

Hyannis Sen. Al Davis supported the bill and the amendments, saying the state needs to manage retirement funds in a way that is beneficial to Omaha school employees and all Nebraska taxpayers. He said LB447 would provide greater stability to the OSERS plan and more closely align it with the state school employee plan.

“It is our responsibility to make necessary changes and to make sure that the plans are fully funded,” Davis said.

Following the 26-0 adoption of a Kolterman technical amendment, the bill advanced to select file 32-0.

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