Platte
Institute
policy
STUDY
June 2013
Nebraska’s Public
Pension System
Repeating Our
Successes
Will Lead Us
to Solvency
By David J. Kramer
Partner, Baird Holm LLP
Nebraska’s Public Pension System | Platte Institute Policy Study
Table of Contents
Section
Today’s Context
Page
Today's Context
2
What are Defined Benefit and Defined
Contribution Pension Plans?
3
Nebraska's Pension Framework
Schools Retirement System
Judges Retirement System
State Patrol Retirement System
State Employee Retirement System
County Employee Retirement System
3
4
4
5
5
5
Other Pension Systems
5
City of Omaha Combined Police and
Fire Retirement System
6
Collective Bargaining and Public Pensions
6
The Way Forward
7
Repeating the 1983 Solution
7
Conclusion
8
About the Author
9
Endnotes
9
There was a time when the American public was more than
happy to provide government employees with extremely
generous benefit packages. There was a recognition that
public employee salaries were generally behind their private
sector counterparts and political subdivisions made up for
those deficiencies by providing top of the line health
insurance, vacation, sick leave, and pension benefits.
As public sector wages began to creep up and in some
instances pass their private sector counterparts, few noticed
the impact of those increased wages on the estimated
pension payouts in Defined Benefit pension plans. For
many years, especially during good economic times,
political subdivisions, including a few here in Nebraska,
liberalized their pension programs as a way to reward longterm employment. Even more troublesome, as times
became more difficult some political subdivisions sought to
trade current wage and benefit concessions for more
lucrative pension benefits. The net result of these practices
has been to create a massive underfunding of public sector
pensions that threatens to overwhelm political subdivisions
all across the country.
2
The national picture of public sector pensions is dramatic
and troublesome. According to a recent study conducted
by the Pew Center on the States using 2010 fiscal year data,
the gap between states’ assets and their obligations for
public sector retirement benefits was $1.38 trillion, up
nearly nine percent from fiscal year 2009.1 Of that figure,
$757 billion was for pension promises and $627 billion was
for retiree health care. Nebraska is among the top states in
the nation with 84 percent of its pension liability funded.2
But that still means Nebraska is 16 percent underfunded.
Even more troubling are the results from an October 2012
study, prepared by the actuarial consulting firm Milliman.3
Milliman analyzed the 100 largest public sector defined
benefit plans and estimated that the current unfunded
liability is $1.193 trillion. That total represents only 67.8
percent of the amount currently needed to provide benefits
for present and future retirees enrolled in the plans.
Figure 1: Milliman 100, Aggregate Funded Status4
$ Trillions
Reported Recalibrated
Figures
Figures
Market Value of Assets
$2.513
Actuarial Value of Assets
$2.705
Accrued Liability
$3.600
$3.706
Unfunded Accrued Liability*
$0.895
$1.193
Funded Ratio
75.1%
67.8%
*Based on actuarial value of assets for reported figures and market value of
assets for recalibrated figures.
Fortunately only one Nebraska pension plan falls among
that top 100, the School Retirement System, and Milliman
concluded it fared better than the national ratio with
funding at 80 percent.
Many states are beginning to take action to address their
pension shortfalls. Illinois and Pennsylvania are currently
engaged in extensive debates over pension reform and
states like Rhode Island, Utah, Georgia, Wisconsin and
others have recently enacted reforms designed to roll back
benefits in an effort to curb unfunded liabilities.
Platte Institute Policy Study | Nebraska’s Public Pension System
For some, these actions have come too late. One need look
no further than the recent bankruptcy filing in Stockton,
California, for evidence of the effect of these unfunded
liabilities on municipalities. The causes of Stockton’s crisis
are being debated, but two of the most significant
contributors are widely acknowledged to be the
unmanageable pension debt and out of control salary
obligations.5 In fact, more than 33 local political
subdivisions, including seven cities, have attempted to file
for bankruptcy since 2010.6 While not all of these
bankruptcies were caused by unfunded pension liability, it
has been a factor in a significant number of them.
What Are Defined Benefit and Defined
Contribution Pension Plans?
income has led to a significant debate over whether the
assumed rate of return is sustainable.9 In the event of a
shortfall in funding employers with Defined Benefit plans
(taxpayers) bear the risk of loss and are entirely responsible
for the guaranteed amount to each employee.
Defined Contribution plans – which include 401(k) and
403(b) plans – are, on the other hand, relatively
straightforward. Employers, employees, or, in most
instances both employers and employees, make
contributions to a retirement account in the employee’s
name. These contributions are usually made pre-tax and
payment of tax is deferred until the employee withdraws
the pension at retirement. The contribution amount can be
set either unilaterally by the employer or through the
collective bargaining process and is usually either as a
percentage of salary or a specific dollar amount per pay
period. The employee often has some flexibility to direct
investment of his or her pension funds and the risk of
investment loss to the retirement account remains with the
employee. The employer’s only obligation with a Defined
Contribution plan is to make the initial contribution. There
is, by definition, no future or unfunded liability.
There are generally two types of pension plans: Defined
Benefit plans and Defined Contribution plans. In a Defined
Benefit plan, employers guarantee their employee a set
pension payment (or annuity) that is usually calculated as a
percentage of the employee’s final pay (or average
compensation in final years) multiplied by the employee’s
years of service. The practical effect of these types of plans is
that the employee’s pension is calculated using his or her
highest salary years. This approach has also resulted in a
practice known as spiking – where individual employees in
their final years of service prior to retirement work added
hours to, in some instances, dramatically increase the salary
upon which the pension is calculated by adding in unused sick
leave and compensatory benefits into the final year of pay.
Nebraska’s current public employee pension system is
anything but uniform. While not as complicated as many
states, there are significant variances in plans based on the
type of political subdivisions the public employee worked
for and the actual job performed.
Public Sector Defined Benefit plans are initially funded by
two sources: direct contributions by the political
subdivision that employs the employee and payroll
deductions by the employee. Defined Benefit systems then
invest those contributions in the hope of generating
sufficient income to keep employer and employee
contribution level relatively low. Investment parameters are
usually set by a quasi-independent Governing Board or
Trustees. The investment return on these assets matters
because, over time, investment earnings account for a
majority of public pension fund revenues.7 A shortfall in
expected investment earnings must be made up by higher
contributions or reduced benefits.8 Contribution rates are
theoretically designed to ensure that the plan will be fully
funded over time. However, the reliance on investment
Most public employees in the state of Nebraska are
enrolled in one of five plans administered by the Nebraska
Public Employees Retirement Systems (NPERS). NPERS
is managed by the Public Employees Retirement Board
(PERB), which is charged with administering the statewide
retirement systems and one deferred compensation plan
for the State of Nebraska. The PERB consists of eight
members appointed by the Governor for five-year terms.
Six members are participants in the retirement systems
administered by the PERB. Two are at-large members and
are not employees of the State of Nebraska or any of its
political subdivisions. The State Investment Officer is also a
member of the PERB in a non-voting, ex-officio capacity.
This board is required to annually report on the actuarial
condition of state retirement systems to the Legislature
Nebraska’s Pension Framework
3
Nebraska’s Public Pension System | Platte Institute Policy Study
There are five mandatory retirement plans which are
administered by NPERS, all of which are governmental
plans as defined under Internal Revenue Code § 414(d)
and 29 U.S.C. § 1002(32) [i.e. ERISA § 3(32)].10 The
mandatory plans NPERS administers are for State,
County, School, Judges and Patrol employees. Of these
five plans, three are Defined Benefit plans and two are
Defined Contribution/Cash Balance plans. The Defined
Contribution/Cash Balance plans are essentially a hybrid
between Defined Benefit and Defined Contribution
plans. The Defined Benefit plans are the Nebraska
School Employees’ Retirement System,11 the Nebraska
Judge’s Retirement System,12 and the Nebraska State
Patrol Retirement System.13 The Defined
Contribution/Cash Balance plans are the State
Employees Retirement System;14 and the County
Employees Retirement System.15
prior to age 65 must have at least 5 years of service to apply
for a benefit. Employees who retire prior to age 65 with less
than 5 years of service are eligible for a refund of
contributions with interest. Since the School Retirement
System is a Defined Benefit Plan, employees who are
eligible for full benefits determine their pension as follows:
Average 3 highest
12-month periods
of compensation
X
Creditable
Service
Years
X
Formula
Factor
(currently 2%)
With the most recent revisions to the School Retirement
System, the Legislature made slight modifications to the
above formula for new employees enrolling in the system
after June 1, 2013. The most significant change is the
increase in the first part of the formula from three years
average salary to five years.20
Judges Retirement System
Schools Retirement System
The School Retirement System for Nebraska school
employees has been in existence since 1945. It covers all
permanent public school employees who work at least 2016
hours per week on an ongoing, regular basis, except Class V
school districts. The plan excludes employees of the
University of Nebraska, and the Nebraska State Colleges
and Community Colleges. Temporary and substitute
employees are not eligible to participate. Employees have
historically contributed 7.28 percent of gross compensation
to the system while the employer school districts
contributed 101 percent of the employee contribution. As a
result of concern over the solvency of the system, the
legislature in 2009 increased over several years the
employee contribution rate from 7.28 percent to the
current rate of 9.78 percent.17 That increase was originally
scheduled to sunset on 9/1/2017. During this last
legislative session, the legislature repealed the sunset
provision.18 The legislature has also agreed to increase the
state’s contribution to the School Retirement System from
one to “two percent of the compensation of all members of
the retirement system.19
School employees may generally retire with full and
unreduced benefits at any time after reaching the age of 65
or at such time as their age and years of service combined
equal 85. This latter category is known as the “Rule of 85.”
In order to be eligible for the Rule of 85, the employee must
be at least 55 years of age. School employees who retire
4
The Nebraska Judges Retirement System has been in
place since 1955 and membership for district and
Supreme Court judges became effective January 3, 1957.
Workers’ Compensation Court judges were added
September 20, 1957, county judges and separate juvenile
judges were added January 5, 1961, municipal judges
were added October 23, 1967, and court of appeals judges
were added in September 1991. The system is funded by
contributions made by the participants as well as fees
assessed against legal filings. Fees are currently at $6 until
July 1, 2014 at which time they will decrease to $5. The
legislature has approved extending the $6 fee infinitely.21
Judges hired on or after July 1, 2004, or Judges who
elected to do so contribute eight percent of salary.22 Upon
reaching 20 years of service credit, this rate decreases to
four percent. Judges hired before July 1, 2004 who elected
not to participate in the provisions created by LB1097
contribute six percent of compensation. Upon reaching
20 years of service credit, this rate decreases to zero
percent. Contributions were temporarily increased in
2009 by one percent until July 1, 2014.23 Since the Judges
Retirement System is a Defined Benefit Plan, employees
who are eligible for full benefits determine their pension
as follows:
Average 3 highest
12-month periods
of compensation
X
Creditable
Service
Years
X
Formula
Factor
(currently 3.5%)
Platte Institute Policy Study | Nebraska’s Public Pension System
State Patrol Retirement System
County Employee Retirement System
The State Patrol Retirement System has been in existence
since 1947. State Patrol employees can retire at age 50 with
at least 25 years of service, or with 10 or more years on a
reduced basis. The normal retirement age is 55. Retirement
is mandatory at age 60. State patrol members contribute 19
precent of salary to the pension system. This was increased
in 2011 from 16 percent.24 The employer contribution rate
remains 100 percent of the employee rate. On July 1, 2013,
both the employee and the state contribution rates will
decrease to 16 percent. Besides normal benefits, members
of the State Patrol also receive disability and survivor
benefits. Since the State Patrol Retirement System is a
Defined Benefit Plan, employees who are eligible for full
benefits determine their pension as follows:
County employees who were not otherwise covered by
pension plans were initially brought under the 1965 County
Employees Retirement Act. In 1973, the Legislature brought
the Retirement System for Nebraska Counties under the
board’s administration and by 1987, all counties, except for
Douglas and Lancaster, were required to belong to the County
Employee Retirement System. The County Employee
Retirement System is identical to the State Employee
Retirement System except for the fact that the counties
contribute 150 percent of the employee contribution, as
opposed to the 156 percent that the state contributes.
Average 3 highest
12-month periods
of compensation
X
Creditable
Service
Years
X
Formula
Factor
(currently 3.0%)
State Employee Retirement System
The State Employees’ Retirement has been in existence
since 1964. It initially began as a Defined Contribution plan
and was amended to in 2002 to provide employees with as
Cash Balance option.25 Employees who began participation
in the State Employees’ Retirement Plan (the Plan) after
January 1, 2003, are required to participate in the Cash
Balance benefit. Employees who were employed prior to
January 1, 2003, were given the option of keeping their
traditional Defined Contribution benefit or converting to
the Cash Balance benefit. Under the current system,
employees in both systems contribute 4.8 percent of salary
pre-tax to the plan. The State contributes 156 percent of
the employees’ contribution. Employees are vested after
three years of employment, and may retire as early as age
55. Employees in the Defined Contribution plan are
permitted to invest their accounts (both employer and
employee contributions) in multiple investment fund
options provided by the state. Employees participating in
the Cash Balance plan, essentially receive a guaranteed rate
of return based on the Federal Mid-term rate plus 1.5
percent. In no case will their rate of return be less than 5
percent. Because the retirement account belongs to the
employee under either of these plans, employees may roll
over their accounts to other plans at retirement.
Other Pension Systems
In addition to the pension systems administered by
NPERS, there are several other pension systems are
administered for county employees in Douglas and
Lancaster counties, employees of individual municipalities
all across the state, employees of the University of
Nebraska, employees of the Nebraska State College
system, and employee of the state’s Community Colleges.
Of the above, the City of Lincoln Employee Retirement
plan,26 the Lancaster County Employee’s Retirement
plan,27 the University of Nebraska Retirement plan,28 the
State College Retirement Plan29 and most municipal
retirement plans are Defined Contribution plans. The
state’s Community Colleges each set their own retirement
systems. The level of contribution and the type of benefit
varies from system to system.
The remaining plans are all defined benefit plans with some
significant level of underfunding. The City of Omaha’s
Combined Police and Fire Retirement System, has an
Adjusted Unfunded Actuarial Liability (Payable from
Payroll Related Contributions) as of January 1, 2012, of
$597,646,878.30 The City of Omaha Employee’s
Retirement System has an Adjusted Unfunded Actuarial
Liability as of January 1, 2012, of $184,069,012.31 The City
of Lincoln’s Police and Fire Pension Fund has an Adjusted
Unfunded Actuarial Liability as of August 31, 2012, of
$50,378,578.32 The Douglas County Employee’s
Retirement plan has an Adjusted Unfunded Actuarial
Liability as of January 1, 2013, of $142,623,078.33
Ultimately, these are the plans that will necessitate the most
immediate action.
5
Nebraska’s Public Pension System | Platte Institute Policy Study
City of Omaha Combined Police
and Fire Retirement System
Collective Bargaining and
Public Pensions
The City of Omaha Combined Police and Fire
Retirement System is a Defined Benefit plan that, while
combined, actually has differing contribution obligations
under the Police and Fire labor agreements. Police
officers currently contribute 16.35 percent of earnings to
the pension system.34 That rate is scheduled to continue
through 2013 and will revert back to 15.35 percent unless
agreed otherwise.35 These contributions are made prior to
federal income tax withholding.36 The City contributes
20.17 percent of each employee’s pensionable earnings
annually to the system.37 In addition, in exchange for
certain pension benefit changes and reductions designed
to address the current pension funding shortfall, the City
of Omaha currently contributes an additional 13.5
percent of each employee’s pensionable earnings annually
to the system.38 The net result of this agreement is that
the City of Omaha currently contributes a total of 33.67
percent each employee’s pensionable earnings annually to
the system.
The ability of political subdivisions to make unilateral
changes to their pension plans is limited by the United
States Constitution, the Nebraska Constitution and the
Nebraska laws governing collective bargaining. The
contract clause of the United States Constitution
provides that “No [s]tate shall … pass any … [l]aw
impairing the [o]bligation of [c]ontracts … .”44 That
clause, along with the following language from the
Nebraska Constitution, “Nothing in this section shall
prevent local governing bodies from reviewing and
adjusting vested pension benefits periodically as
prescribed by ordinance,”45 have been interpreted by the
Nebraska Supreme Court to mean that public employers
cannot make unilateral changes to their pension plans
which impair contract rights to a vested pension.46 The
net result of these limitations is that changes to existing
pension plans have to be negotiated and agreed to by the
affected employees, generally through the collective
bargaining process. Given the value of today’s pension
plans, there is little incentive for current employees to
make significant concessions to their plans, except to
prevent cuts, such as in salaries or employment, where the
government has more leeway. Moreover, unions are
loathe to create pension plans for new employees that are
different from current plans because it creates an “us” vs.
“them” scenario within their bargaining units.
Employees covered under the Fire Collective Bargaining
Agreement have slightly different pension contributions.
Firefighters currently contribute 17.15 percent of
earnings to the pension system.39 That rate is scheduled
to continue through 2014.40 These contributions are
made prior to federal income tax withholding.41 The City
contributes 21.015 percent of each employee’s
pensionable earnings annually to the system.42 In
addition, in exchange for certain pension benefit changes
and reductions designed to address the current pension
funding shortfall, the City of Omaha currently contributes
an additional 11.95 percent of each employee’s
pensionable earnings annually to the system.43 The net
result of this agreement is that the City of Omaha
currently contributes a total of 32.965 percent each
employee’s pensionable earnings annually to the system.
Police and Fire employees who are eligible to retire
calculate their pension based on the highest consecutive
26 bi-weekly pay periods in last five years and the Career
Overtime Average (COTA – which is designed to end the
practice of spiking). The pension rate scale ranges from
20 percent to 75 percent of earnings depending on years
of service and the age at which retirement commences.
6
Public employers are further hamstrung by the fact that if
they fail to gain concessions at the bargaining table, the
Commission of Industrial Relations (CIR) does not
generally make modifications to the structure of the
pension plan. The CIR will, if presented with appropriate
evidence, attempt to calculate a current hourly rate value
for the pension.47 Such evidence is incredibly expensive to
obtain as employers are required to conduct an actuarial
analysis of all proposed comparable employers. To the
extent that the hourly rate value for pension benefits
exceeds that which is prevalent, the Commission may
now adjust wages downward to compensate for the value
of those benefits. However, that analysis cannot be used
to modify the pension plan itself – which doesn’t solve the
fundamental problem.
Platte Institute Policy Study | Nebraska’s Public Pension System
The Way Forward
The answer to these challenges is actually rather simple:
Defined Contribution pension plans. The private sector
figured it out a long time ago. That is why from 1980
through 2008, the proportion of private wage and salary
workers participating in Defined Benefit pension plans fell
from 38 percent to 20 percent.48 The State of Nebraska has
actually done a pretty good job of moving there as well.
Most state and county employees are already on Defined
Contribution/Cash Balance type plans. And while there are
a significant number of state and school employees on
Defined Benefit plans, at the statewide level they are
relatively well funded.
While the answer is simple, getting there is not. The move
from Defined Benefit plans to Defined Contribution plans
comes with many challenges. In the absence of sufficient
investment earnings to cover the actual cost of benefits,
Defined Benefit plans become, in many respects, Ponzi
schemes – in which the funds paid in by the current
employees are used to pay out the unfunded obligations due
to the retirees. Creating Defined Contribution plans for new
employees after a date certain will deprive the Defined
Benefit plan participants of contributions from current
employees. There is significant debate over whether this
shift will decrease or increase the cost to public employers.49
Underfunded Defined Benefit plans are, at the most basic
level, simply a debt that must be paid off.
There is, however, the potential that the amount of the
unfunded liability may skyrocket because current actuarial
calculations presuppose continued contributions of new
employees into the plan. The acceleration of the unfunded
liability should also prompt actuarial review of the assumed
rates of return on the soon to be dwindling principal
amounts in the Defined Benefit plan, especially if the
projected rates of return are overly optimistic. To the
extent that the public employer relies too heavily on
current employee contributions to fund repayment of that
debt may ultimately require the public employer to bear
additional cost. However, the obligation exists regardless of
how many new employees do or do not enter the plan.50
As if these challenges were not enough, the cost of
overcoming them will likely have to be borne by the
political subdivision. That means the taxpayers are on the
hook. There are those who will allege that moving from
Defined Benefit plans to Defined Contribution plans will
result in new costs to the political subdivision. However,
most costs are not new, they are simply shifted costs from
the long term to the near term. Public employers who
currently provide Defined Benefit plans in lieu of Social
Security (primarily Omaha Police and Fire) will need to
carefully craft the Defined Contribution plan to avoid
having to enroll current employees who are not covered by
Social Security (primarily Omaha Police and Fire). Those
employers and employees are currently paying the
Medicare Tax of 1.45 percent. They are not paying the
Social Security tax of 6.2 percent.
Why would a political subdivision want to undertake any of
these risks? Because at some fixed date in the future
political subdivisions and the taxpayers will be able to
breathe a sigh of relief. Perhaps an analogy will illustrate the
point. Since the taxpayer will ultimately bear the burden of
paying for the unfunded liability of the Defined Benefit
plans, pension funding is a lot like a mortgage. Defined
Benefit plans are the equivalent of interest only loans. You
never get any closer to really owning the home and you are
subject to the vagaries of the market on how much you will
owe when it is time to move out. Transitioning to a
Defined Contribution plan is more like having a traditional
fixed rate mortgage. We know that, if we stick it out the
mortgage term, we’ll be free and clear, regardless of the
change in value over time. Our contributions to principal
will be small at the start and large at the end. But we know
there is an end. Today, there is no end in sight for Nebraska
taxpayers on the hook for Defined Benefit plans.
Repeating the 1983 Solution
Believe it or not, a few really smart people in the legislature
saw the pension crisis coming and took action 30 years ago.
They saved many political subdivisions across the state
from the unfunded liability crisis we face today by
converting most fire and police pensions from Defined
Benefit plans to Defined Contribution plans.
Unfortunately, not everyone saw the light, and rather than
applying the new law to all cities, it was only applied to
cities of the first class. The savings were not felt
immediately. In fact, for many, there were significant shortterm costs. However, today those political subdivisions
today enjoy little or no unfunded liability. The net result is
7
Nebraska’s Public Pension System | Platte Institute Policy Study
far greater flexibility in their budgets and tax rates because
they are not carrying the burden of funding Defined Benefit
pension plans. That is not the case for places like Lincoln
and Omaha. Such a change will undoubtedly have the risk
that new public employees will retire with less than what
they would receive under the current Defined Benefit
plans.51 However, those employees would share the same
risks that most of the rest of society face with their
retirement plans. The framework in 1983 and implemented
in 1984 in the Police Officers Retirement Act52 and the
Firefighters Retirement System53 should serve as the basis
for establishing new Defined Contribution plans for all new
public employees, but particularly those in Defined Benefit
plans at the county and municipal level. The process itself
would be relatively straightforward. Effective a date certain,
political subdivisions would no longer be able to enroll new
employees into existing Defined Benefit plans. Instead,
those new employees would be enrolled in Defined
Contribution or Defined Contribution/Cash Balance
plans. Employees on the payroll prior to the effective date
would be grandfathered into the Defined Benefit plan.
Public employers would be required to maintain two
separate systems until such time as there are no longer
eligible participants for the Defined Benefit plan.
Conclusion
Fixing Nebraska’s public pension problem doesn’t seem to
be high on anyone’s agenda. It should be. The current
actuarial analysis set forth above demonstrates that there is
nearly $1 billion of unfunded liability in the Omaha,
Lincoln and Douglas County pension systems alone. And
what of the state and school retirement systems?
Nebraskans should demand better. There are three
legislative steps we can take today to minimize our long
term exposure and ensure our pensions are fully funded.
First, Nebraska should eliminate pensions from the purview
of the collective bargaining process. Nebraska’s collective
bargaining mechanism does not afford us with the ability to
make dramatic structural changes to our pension system
without massive concessions on wages and other benefits.
Public employers and unions, together, have contributed to
the funding shortfalls by manipulation of the pension
system each collective bargaining cycle. Contribution levels
and benefits can be skewed dramatically for short term
8
political gain as underfunding from previous contracts is laid
upon the shoulders of current employees or worse, pushed
onto future employees.
Second, in an effort to be more transparent, political
subdivisions should be required to include, as a separate
line item in their budgets, the actual amount being spent on
funding the underfunded pensions. Look no further than
the City of Omaha. The 2013 Budgeted Classified Regular
Employees Earnings are $69,396,610.54 The 2013
Budgeted Classified Regular Employees Earnings are
$47,635,149.55 Using the current pension contribution
rates of approximately 33 percent of payroll for Fire and
Police, the City of Omaha will contribute approximately
$38,620,480.47 in 2013 to the combined pension system.
Even if you assumed that the City of Omaha would
contribute 10 percent (which exceeds the 6 percent
contribution currently made by cities of the First Class for
police officers56) under a defined contribution system, the
savings are staggering: $26,917,304.57. That equates to
elimination of the controversial Omaha restaurant tax or
reduction of the property tax levy by ten cents, the
equivalent of a 20 percent reduction in the City of Omaha’s
current property tax levy.
Third, and most importantly, the days of Defined Benefit
pension plans for new public employees must come to an
end. While the cost of moving to Defined Contribution
plans won’t be cheap, the cost of inaction will be
dramatically more expensive. Every new employee added
to a Defined Benefit pension plan means another 40-60
years of liability. Each day that passes with no resolution
extends our liability. There isn’t time to waste.
Platte Institute Policy Study | Nebraska’s Public Pension System
About the Author
David J. Kramer represents both public
and private sector clients with labor and
employment issues. His public sector
practice is focused on providing political
subdivisions with assistance in
comparability analysis, negotiations,
contract administration and litigation
before the Commission of Industrial
Relations. David assists private sector clients with both
traditional labor and general employment law as well as
employment related litigation. David is listed in The Best
Lawyers in America® 2012 (copyright 2011 by
Woodward/White, Inc., Aiken, SC) for his work in
Government Relations Law.
Endnotes
1 The Widening Gap Update, The Pew Center on the States, June 2012.
http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Pensions_Update.pdf
2 Id.
3 See http://publications.milliman.com/publications/eb-published/pdfs/2012-public-pensionfunding-study.pdf.
4 Id., Table 1
5 stockton-ca-americas-most-miserable-city-just-got-a-lot-more-miserable
6 Governing, The States and Localities, April 2, 2013. http://www.governing.com/govdata/municipal-cities-counties-bankruptcies-and-defaults.html
7 National Association of State Retirement Administrators ISSUE BRIEF: Public Pension Plan
Investment Return Assumptions, January 2013 update,
http://www.nasra.org/resources/issuebrief120626.pdf
8 Id.
9 Id.
10 http://npers.ne.gov/SelfService/public/aboutus/aboutus.jsp
11 School Employees Retirement Act, Neb. Rev. Stat. §§ 79-901 to 79-977.03
12 Judges Retirement Act, Neb. Rev. Stat. §§24-701 to 24-714
13 Nebraska State Patrol Retirement Act, Neb. Rev. Stat. §§ 81-2014 to 81-2040
14 State Employees Retirement Act, Neb. Rev. Stat. §§ 84-1301 to 84-1331
15 County Employees Retirement Act, Neb. Rev. Stat. §§ 23-2301 to 23-2332
16 Increased from 15 to 20 hours by LB 553, passed May 2013
17 Nebraska Revised Statute 79-958 as amended by Laws 2009, LB187, § 1;
18 Laws 2013, LB 553, passed May 2013
19 Id.
20 Id.
21 Laws 2013, LB 306, presented to Governor May 29
22 Laws 2004, LB1097
23 Laws 2009, LB414
24 Laws 2011, LB382
25 Laws 2002, LB687, passed April 18, 2002
26 http://lincoln.ne.gov/city/person/risk/Ameritas/Ameritas%20plan%20highlights.pdf
27 http://lincoln.ne.gov/city/person/risk/natwideplan.pdf
28 http://hr.unl.edu/benefits/retirement/401a.shtml
29 http://www.nscs.edu/Policy%20Manual/Policy%20Manual%20Master/Policy%205405.pdf
30 http://www.cityofomaha.org/humanresources/images/stories/public_documents/retirement/
valuations/Police_Fire/Actuarial%20Valuation%201-1-12.pdf
31 http://www.cityofomaha.org/humanresources/images/stories/public_documents/retirement/
valuations/Civilian/Actuarial%20Valuation%201-1-12.pdf
32 http://lincoln.ne.gov/city/person/pfpen/documents/Actuary083112.pdf
33 Douglas County Employees Retirement Plan, Interim Actuarial Review, January 1, 2013.
34 City of Omaha Police Collective Bargaining Agreement, page 88P,
http://www.cityofomaha.org/humanresources/images/stories/public_documents/union_contr
acts//2010%20-%202013%20Police%20Labor%20Agreement.pdf
35 Id.
36 Id.
37 Id.
38 Id. at 91P
39 City of Omaha Fire Collective Bargaining Agreement, page 115F,
http://www.cityofomaha.org/humanresources/images/stories/public_documents/union_contr
acts//Fire%20Labor%20Agreement%202011%20through%202014.pdf
40 Id.
41 Id.
42 Id.
43 Id. at 119F
44 U.S. CONST. art. I, § 10, cl. 1
45 NE CONST, Article III, § 19
46 Calabro v. City of Omaha, 531 N.W.2d 541 (Neb.1995)
47 Laws 2011, LB 397
48 The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of
Baby Boomers, by Barbara A. Butrica, Howard M. Iams, Karen E. Smith, and Eric J. Toder, Social
Security Bulletin • Vol. 69 • No. 3 • 2009. http://www.ssa.gov/policy/docs/ssb/v69n3/v69n3p1.pdf
49 http://www.american.com/archive/2012/may/public-sector-pensions-the-transition-costs-myth
50 Id.
51 http://www.omaha.com/article/20121219/NEWS/712199911/1016
52 Nebraska Revised Statutes sections 16-1001 to 16-1019
53 Nebraska Revised Statutes sections 16-1020 to 16-1042
54 City of Omaha Police Department 2013 Budget, Division Summary of Major Object Expenditures,
p. 276,
http://www.cityofomaha.org/finance/images/stories/Budgets/budget2013adopted/2013%20A
dopted%20FINAL%20Sec%20F%2007%20Pol.pdf
55 City of Omaha Fire Department 2013 Budget, Division Summary of Major Object Expenditures, p. 297,
http://www.cityofomaha.org/finance/images/stories/Budgets/budget2013adopted/2013%20Adopt
ed%20FINAL%20Sec%20F%2008%20Fire.pdf
56 Nebraska Revised Statutes 16-1005 to 16-1006
9
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