The state would take over management duties for the Omaha school retirement plan under a bill advanced from general file last Thursday.

Senators passed a bill in 2019 to require an examination of the possible transfer of management responsibilities from the Omaha School Employees Retirement System board of trustees to the Public Employees Retirement Board, which manages the rest of the state’s plans through the Nebraska Public Employees Retirement Systems.

Seward Sen. Mark Kolterman, chairperson of the Retirement Systems Committee and sponsor of Legislative Bill 147, said his bill was the result of that study. As introduced, the proposal would transfer duties and responsibilities for management of the OPS plan to the PERB effective Sept. 1, 2023.

A committee amendment would delay the transfer until Sept. 1, 2024, to allow time for completion of compliance audits. The amendment also would require completion of a transfer of management agreement among the school district, board of education, board of trustees and the PERB by Dec. 31, 2021.

Kolterman said the transfer would allow OPS to focus on its primary mission of educating students instead of being consumed by managing a troubled retirement plan. The amendment specifies that the school district remains solely liable for the retirement system’s funding obligations. OPS also would cover all costs for the management transfer.

Kolterman said the amendment explicitly would ensure that the state is not liable for the plan’s nearly $1 billion unfunded liability. Despite that, he said, Gov. Pete Ricketts has indicated some concern that the bill might be a first step toward someday merging the OPS plan with the state’s system.

“I don’t see this as a slippery slope,” Kolterman said. “To me, it looks more like an uphill obstacle course with a lot of side speed bumps. I don’t see how on earth we would ever agree to take on a billion dollars’ worth of liability.”

Omaha Sen. Brett Lindstrom supported the bill and the amendment. Professional management by the state would put the OPS plan in a better financial position going forward, he said, echoing the belief that the bill would not lead to a merger.

“The discussion of taking over the unfunded liability has never come up,” Lindstrom said. “This is only to deal with the integrity of the plan.”

But Sen. Mike Groene of North Platte expressed concern that the bill would provide another “link” to bind the OPS plan with the state plan. If financial markets drop again, he said, the state would be more likely to step in if it is managing the plan already.

“Retirement plans never go broke,” he said. “The government always bails them out.”

Lawmakers voted 32-10 to adopt the committee amendment, which included components of three additional bills, all sponsored by Kolterman.

Provisions of LB 145 would require completion of the compliance audit by Nov. 1 and delay the first audit conducted by the state auditor by one year to July 1, 2022.

Provisions of LB 582 would terminate the board of trustees’ authority to administer the plan on July 1. On that date, new members of the board of trustees, appointed by the board of education, would begin serving their terms. This board of trustees would facilitate the transfer of management to the PERB on Sept. 1, 2023.

Finally, provisions of LB 146 would clarify membership eligibility in the Omaha school plan and define termination of employment to ensure that bona fide separation of service has occurred.

The definition of termination of employment would codify current district guidelines regarding re-employment during the 180-day period that allow voluntary unpaid bona fide service without limitation. Temporary service would be allowed after a 30-day waiting period following termination if it is to accomplish a specific purpose or task, not to exceed one year.

Substitute service would be allowed on an intermittent basis, defined as no more than eight service days during a calendar month.

Senators voted 31-5 to advance LB 147 to select file.

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