Session Review: Retirement Systems

Lawmakers made several changes to the state’s retirement systems this session.

LB306, introduced by Omaha Sen. Jeremy Nordquist, extends an increase in Nebraska judges’ retirement contribution rates by removing a pending July 1, 2014 sunset on a 1 percent employee contribution rate increase that was established in 2009.

The bill incorporates provisions of LB229, also introduced by Nordquist, which remove a scheduled July 1, 2014 sunset of an additional $1 fee on various court filings that was added in 2009. The fee increase is directed to the Judges Retirement Plan and will help offset any unfunded liabilities.

The bill also incorporates provisions of LB232, introduced by Omaha Sen. Steve Lathrop, which provides a 5 percent salary increase for Supreme Court judges beginning July 1, 2013. An additional 5 percent increase takes effect July 1, 2014.

LB306 passed on a 41-6 vote.

Nordquist also sponsored LB553, which creates 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.

The new benefits tier will 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 will be 1 percent instead of the current 2.5 percent adjustment figure. The changes will not apply to members of SERS prior to July 1, 2013.

The bill makes a series of other changes to the plans, some of which include:
• the state statutory contribution rate will 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 will be changed from level dollar to level percentage of salary beginning July 1, 2013;
• eligibility for membership in the school retirement plan will be changed from 15 hours per week to 20 hours; and
• the sunset will 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.

Finally, the bill incorporates provisions from three additional bills sponsored by Nordquist:
• LB554 applies the provisions of LB553 to all Class V school employees hired after July 1, 2013;
• LB305 changes the amortization method in the Nebraska State Patrol Retirement Act from level dollar to level percentage of salary beginning July 1, 2013; and
• LB306 changes the amortization method in the Judges Retirement Act from level dollar to level percentage of salary beginning July 1, 2013.

Senators initially voted 27-8 to approve LB553, which was insufficient for passage of a bill with an emergency clause. Nordquist filed a motion to reconsider the vote, which was adopted, and the bill passed with the emergency clause 34-0.

LB553 subsequently was vetoed by Gov. Dave Heinemann. Senators voted 32-1 to override the veto.

Also approved this session was a bill that makes technical changes to various state retirement plans.
The Nebraska Retirement Systems Committee sponsored LB263 on behalf of the Nebraska Public
Employees Retirement System. The bill includes clarifications to the state Public Employees
Retirement Board governing statutes and updates Internal Revenue Code and other provisions for judges, state patrol officers, counties, school and state employees.

Among other changes, the bill:
• amends the definition of employee in the county plan;
• requires elected county officials to participate in the county plan within 30 of days of taking office;
• clarifies in the school plan that only per diems paid as expenses are not considered compensation; and
• makes it permissive to charge a fee for retirement education and financial planning programs.

The bill also incorporates provisions from two other bills:
• LB594, introduced by Bellevue Sen. Scott Price, directs the Nebraska Investment Council, rather than the Board of Educational Lands and Funds, to manage and invest the Nebraska Veterans’ Aid Fund; and
• LB321, introduced by Bellevue Sen. Sue Crawford, clarifies that only permanently disabled police officers are required to spend down their unused annual or sick leave credits to receive disability salary or pension.

The bill passed on a 45-0 vote and takes effect immediately.

Among the bills heard by the committee were three that did not advance.

LB138, introduced by Omaha Sen. Bob Krist, would transfer all existing funds in the University of Nebraska’s health benefits trust fund to a new fund held by the Nebraska Investment Council. The bill remains in committee.

Omaha Sen. John Nelson introduced LB638, which would create a cash balance benefit plan for school employees hired after July 1, 2014. Currently, school employees participate in a defined benefit plan.
LB639, also introduce by Nelson, would switch state patrol officers and judges employed after July 1, 2014 from a defined benefit plan to a cash balance plan.

The committee voted 6-0 to indefinitely postpone both bills.

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