School retirement plan changes advanced

Lawmakers gave first-round approval April 18 to a bill that would make changes to the state’s school retirement plans.

LB553, as originally introduced by Omaha Sen. Jeremy Nordquist, would create a new tier of reduced benefits for employees under the School Employees Retirement System (SERS) who begin work for the first time on or after July 1, 2013.

Nordquist said the recent economic downturn has created significant pension shortfalls.

“In 2000 the plan was 112 percent funded and now we are at 77 percent funded,” he said. “We have a $108 million liability that we need to cover to keep pension plans solvent.”

A Retirement Systems Committee amendment, adopted 35-0, replaced the bill.

Under the amended bill, the new benefits tier would take into account a five year salary average to determine benefits instead of the three year average used currently. The maximum cost-of-living adjustment would be 1 percent instead of the current 2.5 percent adjustment figure. The changes would not apply to members of SERS prior to July 1, 2013.

The amended bill would make a series of other changes to the plans, some of which include:
• the state statutory contribution rate would be increased from 1 percent to 2 percent of total compensation of all school employees beginning July 1, 2014;
• the amortization method in the School Employees Retirement Act would be changed from level dollar to level percentage of salary beginning July 1, 2013;
• eligibility for membership in the school retirement plan would be changed from 15 hours per week to 20 hours; and
• the sunset would be eliminated from the school budget and lid exclusions for expenditures above the Class V employer contribution rate of 7.37 percent and the school employer contribution of 7.35 percent.

Columbus Sen. Paul Schumacher supported the bill, although he said it represented only a quick fix.

“I think we need to pass this because we have a statutory obligation [to cover the liability],” he said. “When you tell people you’re going to calculate their retirement on 8 percent return and make promises to them, that means we’re going to be facing these issues repeatedly.”

LB553 also incorporates provisions from three other bills introduced by Nordquist.

LB554 would apply the provisions of LB553 to all Class V school employees hired after July 1, 2013.

LB305 would change the amortization method in the Nebraska State Patrol Retirement Act from level dollar to level percentage of salary beginning July 1, 2013.

LB306 would change the amortization method in the Judges Retirement Act from level dollar to level percentage of salary beginning July 1, 2013.

Senators advanced the bill to select file on a 33-0 vote.