{"id":38534,"date":"2025-04-17T13:30:34","date_gmt":"2025-04-17T19:30:34","guid":{"rendered":"https:\/\/update.legislature.ne.gov\/?p=38534"},"modified":"2025-04-17T14:38:31","modified_gmt":"2025-04-17T20:38:31","slug":"school-retirement-plan-changes-advanced-2","status":"publish","type":"post","link":"https:\/\/update.legislature.ne.gov\/?p=38534","title":{"rendered":"School retirement plan changes advanced"},"content":{"rendered":"

Lawmakers gave first-round approval April 17 to a measure that would gradually reduce contribution rates to the school employees retirement system based on its actuarial funding level.<\/p>\n

\"Sen.
Sen. Beau Ballard<\/figcaption><\/figure>\n

Currently, the state contribution is an amount equal to 2% of the compensation of all members of the retirement system. Under LB645, as introduced by Sen. Beau Ballard of Lincoln at the request of Gov. Jim Pillen, that contribution rate would be set at an amount equal to 2% of compensation if the funded ratio is less than 92%, beginning July 1, 2025.<\/p>\n

Under the measure, the state\u2019s contribution rate would gradually decrease as the funding ratio increases, ending when the plan is 100% funded. The bill would increase the state\u2019s contribution rate automatically in the following fiscal year should the actuarially funded ratio decrease.<\/p>\n

Ballard said the current contribution levels were set in 2013, when the state\u2019s school retirement plan was facing a $108 million shortfall. After increasing the contribution rates for employees, employers and the state, he said, the plan now is on track to be over 100% funded by next year.<\/p>\n

\u201cWe are effectively overfunding our plan by 6.61%,\u201d Ballard said.<\/p>\n

A Retirement Systems Committee amendment, adopted 38-0, would replace the bill. Under the amendment, beginning July 1, 2025, different contribution levels would be required from plan participants, employers and the state, contingent on the funded ratio on the actuarial value of assets in the previous year.<\/p>\n

Under the amendment, state contribution rates would be set at three different funding levels. If the plan is:
\n\u2022 less than 96% actuarially funded, the state\u2019s contribution rate would drop to an amount equal to 2% of the compensation of all members of the retirement system;
\n\u2022 between 96% and 100% actuarially funded, the state\u2019s contribution would be 0.7% of total compensation; and
\n\u2022 100% or greater actuarially funded, the state would cease making contributions.<\/p>\n

The employee contribution rate also would be set at different funding levels. If the plan is:
\n\u2022 less than 96% actuarially funded, the rate would be 9.75% of employee compensation;
\n\u2022 between 96% and 98% funded, the contribution rate would drop to 8.75%;
\n\u2022 between 98% and 100% funded, the contribution rate would be 8%; and
\n\u2022 100% or greater actuarially funded, the rate would be set at 7.25%.<\/p>\n

Employer contributions would continue to be coupled with employee contributions, which currently is 101% of employee contributions. The amendment is projected to increase state revenue by $32.6 million in fiscal year 2025-26 and $51.4 million in FY2026-27.<\/p>\n

Ballard said the amendment reflects a compromise reached with teachers, school districts and the state. On average, the provisions would result in an additional $1,000 in annual take-home pay for Nebraska teachers, he said, along with savings for school districts that could result in property tax relief.<\/p>\n

\u201cThese agreed upon reductions have built-in protections for the long-term sustainability of the fund,\u201d Ballard said.<\/p>\n

Elmwood Sen. Robert Clements, chairperson of the Appropriations Committee, echoed that sentiment in his support of the measure.<\/p>\n

A required actuarial study conducted on the proposed changes indicates that the teachers\u2019 retirement fund will remain at 100% funded at least 56% of the time over the next 10 to 20 years, he said, even when taking into account a projected drop in the rate of return on investments.<\/p>\n

\u201cSaying this is a threat to the stability of the retirement plan is not true,\u201d Clements said. \u201cThe plan is in good shape.\u201d<\/p>\n

Sen. Dan Lonowski of Hastings, a retired teacher and wrestling coach, also spoke in favor of the proposal, saying he was convinced that it would not endanger the teachers\u2019 retirement plan.<\/p>\n

Young people don\u2019t enter the teaching profession for the money, he said, but the benefits can help keep people in the profession when they reach the mid-point of their careers.<\/p>\n

Lonwoski said his teaching career required 10- to 12-hour days and weekends in gymnasiums for wrestling meets. By year 15, he said, he questioned whether he could keep it up for the long run.<\/p>\n

\u201cTo have a decent retirement always ahead of me \u2014 knowing what was coming \u2014 helped,\u201d Lonowski said.<\/p>\n

Also speaking in support, Elkhorn Sen. Tony Sorrentino said continuing to fund a 100% funded retirement system is like continuing to pour water into a pitcher after it\u2019s already full.<\/p>\n

Lincoln Sen. Danielle Conrad filed and later withdrew a motion to indefinitely postpone LB645. She said the proposal was \u201chastily done\u201d without proper input from all stakeholders, which she said was in contrast to past changes to retirement systems that were undertaken over time and with extensive negotiation and study.<\/p>\n

\u201cAnyone looking at the market \u2014 and reading the headlines and watching their 401K and watching their investments \u2014 knows that right at this moment there is a period of incredible economic volatility and uncertainty,\u201d Conrad said. \u201cIf you wouldn\u2019t make major changes to your retirement planning right this second, then you shouldn\u2019t foist that on thousands and thousands of Nebraska teachers.\u201d<\/p>\n

Omaha Sen. John Cavanaugh said he was not necessarily opposed to the substance of the proposal, but raised concern that lawmakers were making decisions in a rush in order to fill a hole in the state budget. As a matter of principle, he said, senators should not look to retirement funds when facing a shortfall.<\/p>\n

\u201cI know that there are accounting reasons we want to get this [bill] passed so we can claim whatever it is that the [state contribution] will be \u2026 so that when the budget comes out, it will look like it\u2019s balanced on paper,” Cavanaugh said.<\/p>\n

After withdrawing her motion to indefinitely postpone the bill, Conrad offered a motion to bracket the measure until April 24. She encouraged lawmakers to wait until after a public hearing on an additional amendment that potentially would lower the minimum retirement age for educators to 55, which is scheduled for April 23, before taking action on LB645.<\/p>\n

The bracket motion failed on a vote of 7-29 and lawmakers advanced the bill to select file 38-0.<\/p>\n","protected":false},"excerpt":{"rendered":"

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