If you’re a teacher, have been a teacher, know a teacher, or ever had a teacher in your life, this is something you should be aware of. Nebraska’s teacher pension fund is under threat from a new legislative proposal spearheaded by Governor Jim Pillen and Senator Beau Ballard, which could significantly impact the financial future of our educators. Let’s dive into what LB645 entails, its historical context, and why it’s crucial to take action.

What is LB645?

Background of Nebraska’s Pension Fund

Nebraska’s teacher pension fund has long been a pillar of financial security for educators. The current system, which was solidified back in 2013, made significant strides to bolster the fund’s sustainability. Back then, they hiked employee contributions, created a second tier with fewer benefits for new hires, and eliminated statutory sunsets that had allowed for lower contribution rates. In return, the state committed to increasing its annual contribution from 1% to 2% of school employee wages, which closed a $100 million annual gap and ensured the fund’s future.

The Threat of LB645

Now enter LB645, the bill that threatens to disrupt this balance. Sponsored at the request of Governor Pillen, it aims to reduce or remove the state’s 2% contribution entirely to both the statewide school employees’ retirement plan and the Omaha School Employees Retirement Plan (OSERS). With the state facing a $432 million budget shortfall, the push is to cover this gap by siphoning funds from these pension plans.

Potential Fallout

If LB645 becomes law, it could spell disaster. Cutting or eliminating the 2% contribution—which currently stands at $58.77 million annually—would jeopardize the financial health of both the statewide retirement system and OSERS. This could impede returning employee contribution rates to pre-2013 levels and decrease the likelihood of parity between the lower-tier and higher-tier benefits. Moreover, the statewide plan, which is projected to be fully funded by 2025 due to the 2013 agreement, could experience destabilization. This would put the long-term security of the system at risk.

Why We Need to Keep the 2% State Contribution

Actuarial Successes

The most recent actuarial report for the statewide retirement plan, dated November 12, 2024, showcases considerable successes that speak to the current system’s effectiveness. Projections indicate that the funded ratio will surpass 100% in the coming years. Furthermore, the plan could weather annual investment gains as low as 4.75% over the next decade without needing additional state contributions. These successes all reinforce the importance of the 2% state contribution in maintaining these positive trends.

The Value of Collaboration

The original 2013 deal was a collaborative effort between the Legislature and school employees to ensure the retirement system’s financial stability. Now, LB645 would potentially unravel over a decade of progress achieved through cooperation. The Nebraska State Education Association (NSEA) urges its members to contact their state senators and explain how the elimination of the state’s contribution would destabilize the retirement system and threaten its future.

In a time when we need to stand together, this legislation is yet another reminder that the fight for fair compensation and stable retirement plans continues. Let’s make our voices heard!

The author does not own or have any interest in the securities discussed in the article.