Changes to school retirement plans advanced

Lawmakers advanced a bill March 31 that would make changes to the state’s school retirement plans.

LB1042, introduced by Omaha Sen. Jeremy Nordquist, would change the cost for repurchase of relinquished creditable service in the School Employees Retirement Plan.

Nordquist said the Nebraska Public Employees Retirement System has calculated that the cost currently assessed is not adequately covering the cost of restoring the service credit. Service credits are relinquished when a member terminates employment and withdraws all accumulated contributions, he said. If the person again becomes a school employee, he or she has the option to buy back the relinquished service credits.

A Nebraska Retirement Systems Committee amendment, adopted 29-0, would provide an effective date for the cost changes to repurchase relinquished service credits. Current members who rejoined the school system prior to the effective date of the bill and file an application for repurchase of creditable service prior to July 1, 2016, would be charged the current lower cost for service credits.

All other members who rejoin the system after the effective date of the bill, and members who already have rejoined the system but choose not to file an application prior to July 1, 2016, would be charged the actuarial cost to the retirement system to repurchase relinquished creditable service.

Nordquist offered an amendment to the committee amendment, adopted 26-0, which would require returning employees to complete repurchase of credits within five years. A member would pay to the retirement system an amount equal to the previously withdrawn contributions for the credible service to be restored, plus an amount equal to the actuarial assumed rate of return on such amount to the date of repayment—currently 8 percent.

The plan is damaged when returning employees wait until they are near retirement to repurchase their credits, Nordquist said, and his amendment would encourage them to do so sooner.

“We think that’s a fair way of doing it for people who decide to cash out and come back to the system,” he said.

Omaha Sen. Rick Kolowski supported the amendment, saying it is an equitable way to address a difficult situation.

“[I] think it’s a very fair and a very balanced approach,” he said.

The committee amendment also incorporated provisions of LB1041, introduced by Nordquist, which would change the length of service required for new employees of the School Employees Retirement Plan and the Class V (Omaha) School Employees Retirement Plan to be eligible to purchase additional service credit.

Beginning July 1, 2014, new employees of the two plans would not be eligible to purchase service credit – also known as “air time” – until they have acquired 10 years of creditable service. Employees hired before the deadline still would be eligible to purchase air time after acquiring five years of creditable service.

Nordquist said the change is necessary because the school retirement plans receive significant general fund dollars from the state.

The bill also would make several technical changes to the Class V plan, including:
• inserting references to the Internal Revenue Code regarding the duties and responsibilities of the trustees who administer the plan;
• clarifying that school board or board of trustees members will not be personally liable for their actions related to retirement system duties except in cases of willful dishonesty, gross negligence or intentional violations of the law; and
• requiring annual presentation of a Class V school board’s most recent actuarial valuation report to the committee at a public hearing, beginning March 1, 2015.

LB1042 advanced to select file on a 28-0 vote.