Public pensions in Nebraska

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Nebraska public pensions
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Pension System
Number of pension systems 5
State pension systems: Nebraska School Employees' Retirement System
Nebraska Judges' Retirement System
Nebraska State Patrol Retirement System
State Employees Retirement Benefit Fund
County Employees' Retirement System
System type: Defined Benefit Plans and Defined Contribution Plans
Pension Health (2012)[1]
Fund Value: $9,058,379,000
Estimated liabilities: $11,484,452,000
Unfunded liabilities : $2,426,073,000
Percent funded: 78.9%
Percent funded change: Decrease.svg-3.87%[2]
Percent funded rank: 16[3]
Pension Fund Members (2012)
Total Members: 82,898
Active Members: 57,113
Other Members: 25,785
Other State Pension Information
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Pension Policy
Public pensions
State public pension plans
Public pension health by state
Nebraska public pensions are the state mechanism by which state and local government employees in Nebraska receive retirement benefits and are organized into five separate state administered pension funds. The defined benefits plans are for teachers, troopers and judges.

As of 2012, the system had an unfunded liability of approximately $2,426,073,000 and was 78.9 percent funded. According to the Pew Center on the States Widening Gap update, a report on pensions in all 50 states, Nebraska consistently paid its full annual pension contribution every year from 2005 to 2010. According to the report, most experts agree that a fiscally sustainable system should be at least 80 percent funded.[4]

Nebraska has 37,060 total public employees as of 2011.[5] In Fiscal Year 2012, the state had a total of 82,898 active pension fund members, with 20,697 receiving periodic benefit payments.[6] The state's pension systems account for 15% of the $751 million budget hole as of August 2010.[7] To keep the teacher and patrol plans actuarially sound the state needs approximately $112 million.[7]

According to the United States Census Bureau, the state has 9 locally-administered pension plans.[8]


Pension plans

In fiscal year 2012, according to the systems' Actuarial Valuation Reports, Nebraska had a total of 57,113 active members in its retirement plans. Our membership figures divide plan participants into two broad categories: active and other. Active members are current employees contributing to the pension system. Other members include retirees, beneficiaries and other inactive plan participants (usually terminated employees entitled to benefits but not yet receiving them).[9]

The following data was collected from the state's 2012 Actuarial Valuation Reports, which measured fund status as of July 1, 2012. Valuation reports are annual reports produced by outside consultants, using unaudited data provided by the pension systems themselves, in order to determine what employers in the system should contribute in the coming year to maintain or improve the fiscal health of the pension funds.

Nebraska’s Actuarial Valuation Reports for 2012 were produced by Buck Consultants, a global human resources consulting firm.[10] The "percentage funded" is calculated by taking the current value of the fund and dividing by the estimated amount of total liabilities. The assumed rates of return used to calculate current fund value vary by system (see "Rate of return" below for more information).

The Government Accountability Office (GAO) and Pew Research Centers cite a percent funded ratio of 80 percent as the minimum threshold for a healthy fund, though the American Academy of Actuaries suggests that all pension systems "have a strategy in place to attain or maintain a funded status of 100 percent or greater.[11][12]

The column labeled "SBS figure" refers to a market liability calculation of the fund by the nonprofit organization State Budget Solutions. This analysis uses a rate of return of 3.225 percent, which is based upon the 15-year Treasury bond yield. The organization calls this a "risk-free" rate of return that would make it easier for states to achieve their pension funding requirements in the future. Since 2006, all private sector corporate pension plans have incorporated market costs into their funding schemes.[13]

Basic Pension Plan Information -- Nebraska Public Employees Retirement Systems
Plans Current value Percentage funded Unfunded liabilities Membership
State figure SBS figure[14] State figure SBS figure[14]
State Employees Retirement Benefit Fund[15] $1,009,414,476 93.6% N/A[16] $68,543,296 N/A[16] 11,263 active members
Nebraska Judges' Retirement System[17] $111,006,176 107.0% $7,301,926 146 active members
Nebraska School Employees' Retirement System[18] $7,358,964,135 76.6% $2,250,192,999 39,886 active members
Nebraska State Patrol Retirement System[19] $282,810,785 78.1% $79,488,190 433 active members
County Employees' Retirement System[20] $281,261,645 94.5% $16,310,981 5,796 active members
TOTALS $9,043,457,217 78.9 percent 40 percent $2,421,837,392 $13,381,444,000 57,524 active members

Annual Required Contribution

Annual Required Contributions (ARC) are calculated annually and are a sum of two different costs. The first component is the "normal cost," or what the employer owes to the system in order to support the liabilities gained in the previous year of service. The second component is an additional payment in order to make up for previous liabilities that have not yet been paid for. According to a report by the Pew Center on the States, in 2010, Nebraska paid 100 percent of its annual required contribution.[21][22]

On June 25, 2012, the Government Accounting Standards Board (GASB) approved a plan to reform the accounting rules for state and local pension funds. These revised standards were set to take effect in fiscal years 2013 and 2014.[23] As a result, ARCs were removed as a reporting requirement. Instead, plan administrators and accountants will use an actuarially determined contribution or a statutory contribution for reporting purposes.[24]

ARC Historical Data
Fiscal year Nebraska Judges' Retirement System[17] State Employees Retirement Benefit Fund[15] Nebraska School Employees' Retirement System [18] Nebraska State Patrol Retirement System[19] County Employees' Retirement System[20]
Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed Annual Required Contribution (ARC) Percentage contributed
2012 $3,483,614 100% $32,096,097 100.0% $192,478,407 88% $7,774,506 100% $12,696,338 100%
2011 $3,579,661 100% $31,088,483 100.0% $177,075,136 89% $7,173,344 83% $11,908,346 100%
2010 $3,615,291 100% $30,679,003 100.0% $150,225,779 100.0% $6,260,122 100% $11,370,059 100%
2009 $3,491,335 100% $30,321,032 100.0% $130,649,490 100.0% $5,384,789 100% $10,555,174 100%
2008 $3,353,208 100% $29,208,772 100.0% $121,810,495 100.0% $4,855,700 100% $9,839,409 100%

Historical funding levels

Historical pension plan data - all systems
Year Value of assets Accrued liability Unfunded liability Funded ratio
2008 $8,139,492,345 $8,894,327,510 $767,113,470 97.28%
2010 $8,355,790,094 $9,969,090,553 $1,613,494,021 90.84%
2012 $9,058,378,564 $10,847,307,482 $2,426,072,604 86.88%
Change from 2008-2012 $918,886,219 $1,952,973,972 $1,658,959,134 -10.4%

Rate of return

Pension Hotspots Report
PensionHotspot final.png

Nebraska assumes a 7.75 percent rate of return.[25] According to a 2012 Pew report, most states presume an 8 percent rate of return, though 18 pension plans in 14 states lowered their expected rate of return in 2010 and 2011.[26]

Alternative Analysis

Percent Funded Status of Pension Plans
in the 50 States as of November 2013
Public pensions in NevadaPublic pensions in MassachusettsPublic pensions in ColoradoPublic pensions in New MexicoPublic pensions in WyomingPublic pensions in ArizonaPublic pensions in MontanaPublic pensions in CaliforniaPublic pensions in OregonPublic pensions in WashingtonPublic pensions in IdahoPublic pensions in TexasPublic pensions in OklahomaPublic pensions in KansasPublic pensions in NebraskaPublic pensions in South DakotaPublic pensions in North DakotaPublic pensions in MinnesotaPublic pensions in IowaPublic pensions in MissouriPublic pensions in ArkansasPublic pensions in LouisianaPublic pensions in MississippiPublic pensions in AlabamaPublic pensions in GeorgiaPublic pensions in FloridaPublic pensions in South CarolinaPublic pensions in IllinoisPublic pensions in WisconsinPublic pensions in TennesseePublic pensions in North CarolinaPublic pensions in IndianaPublic pensions in OhioPublic pensions in KentuckyPublic pensions in PennsylvaniaPublic pensions in New JerseyPublic pensions in New YorkPublic pensions in VermontPublic pensions in VermontPublic pensions in New HampshirePublic pensions in MainePublic pensions in West VirginiaPublic pensions in VirginiaPublic pensions in MarylandPublic pensions in MarylandPublic pensions in ConnecticutPublic pensions in ConnecticutPublic pensions in DelawarePublic pensions in DelawarePublic pensions in Rhode IslandPublic pensions in Rhode IslandPublic pensions in MassachusettsPublic pensions in New HampshirePublic pensions in MichiganPublic pensions in MichiganPublic pensions in AlaskaPolicypediaPension Health 2013.png
Note: The data in this map was compiled from state CAFR reports and Actuarial Valuation documents. Figures reflect a combination of all of the state pension plans.
Funded Ratio of State Public Pension Plans as compiled by State Budget Solutions

According to a 2012 analysis by the Pew Center for the States, most state pension plans assume an 8 percent rate of return on investments.[27] Critics assert that this assumption is unrealistic, citing changing market conditions and significantly lower investment returns across the board over the past several years.[28] When states lower the rate of return in an effort to accurately predict investment earnings, it increases the current plan liabilities, thereby lowering the percent funded ratio and causing the ARC to increase. This is because future plan liabilities are discounted based on the rate of return, so smaller expected investment returns result in larger actuarially accrued liabilities.[29] For example, on September 21, 2012, the Illinois Teachers Retirement System voted to lower its rate of return from 8.5 percent to 8.0 percent. This change increased the state's fiscal year 2014 ARC from $3.07 billion to $3.36 billion.[30] Similarly, when California's CalPERS reduced its projected annual rate of return from 7.75 percent to 7.5 percent in March 2012, it cost the state an additional $303 million for fiscal year 2013.[31]

The 2008 financial crisis had a devastating effect on pension plans nationwide and has resulted in slower economic growth and increased market volatility. In light of this, some market strategists find the 8 percent assumption to be overly ambitious. Stanford University Finance Professor Joshua Rauh stated that using past investment performance in this economic climate was "dangerously optimistic."[32] Advocates for a lower assumed rate of return argue that the standard assumptions could cause pension fund managers to engage in more risky investments and imprudent stewardship of public funds. Further, if pension plans were using more conservative assumptions, such as the 3 or 4 percent assumed rate of return used in the private sector, and the plans grew more quickly than expected, the fund would have a surplus and smaller future ARCs, which would be preferable to using optimistic assumptions and potentially being caught with larger-than-expected deficits.[33][34][35][36][37]

On the other hand, traditional public pension plan advocates argue that the dip observed in recent years is not sufficient proof of a long-term, downward trend in investment returns. According to Chris Hoene, executive director at the California Budget Project, "The problem with [the market rate] argument is there isn’t significant evidence other than the short term blip during the economic crisis that there’s been that shift. It’s a speculative argument coming out of a very deep recession."[32]

The National Association of State Retirement Administrators compiled data on the median annualized rate of return for public pensions for the 1-, 3-, 5-, 10-, 20-, and 25-year periods ending in 2013. While the median annualized rate of return failed to meet the 8 percent assumption that most public pensions assume over the 5- and 10-year periods, it was just shy (7.9 percent) over the 20-year period, and it exceeded 8 percent for the 1-, 3-, and 25-year periods. It is important to note that the NASRA data is reporting the median returns, indicating that even though median annualized returns exceeded 8 percent in the 25-year period, the investment portfolios for half of the examined public pension funds failed to meet an 8 percent assumed rate of return.[38]

In September 2013, the nonprofit organization State Budget Solutions published an analysis of state pension funding levels. In its calculations, State Budget Solutions used a 3.2 percent rate of return, the 15-year Treasury bond yield as of August 21, 2013, to discount plan liabilities.

The research found that in all states combined, state public employee pension plans have only 39 percent of the assets they need to cover their promised payments—a $4.1 trillion gap. According to the report, Nebraska's public pension plans were 40% funded, making it the 18th most funded state.[39]

Moody's report on adjusted pension liabilities

On June 27, 2013, Moody's Investor Service released its report on adjusted pension liabilities in the states. The Moody's report ranked states "based on ratios measuring the size of their adjusted net pension liabilities (ANPL) relative to several measures of economic capacity." In its calculations of net pension liabilities, Moody's employed market-determined discount rates (5.54 percent for Montana) instead of the state reported assumed rates of return (7.75 percent for Nebraska).[40]

The report's authors found that adjusted net pension liabilities varied dramatically from state to state, from 6.8 (Nebraska) percent to 241 (Illinois) percent of governmental revenues in fiscal year 2011.[40]

The adjusted net pension liability for Nebraska's pension system in fiscal year 2011 was ranked 50th.[40] The following table presents key state-specific findings from the Moody's report, as well as the state's national rank with respect to each indicator.

Adjusted net pension liabilities (ANPL) relative to key economic indicators - Nebraska
Governmental revenue* Personal income State GDP Per capita
State findings 6.8% 0.7% 0.6% $286
National ranking 50th 50th 50th 50th
*Moody's uses governmental revenues as reported in each state's consolidated annual financial reports; this includes not only state-generated revenue, but federal funds, as well.[40]


Enacted reforms


NE L 553
This bill, which was enacted on May 14, 2013 after the Governor's veto was overridden, changes provisions relating to school employee retirement to include the determination of final average compensation for new members, changes the minimum number of hours worked per week to be determined a regular employee, changes the actual accrued liability to be determined for each employee on a level percentage of salary basis, repeals a state contribution requirement to the Annuity Reserve Fund, and adds provisions regarding the annual benefit determination for members or beneficiaries.[41]


NE L 916
This bill, signed into law on April 6, 2012, amended public retirement provisions, provides for the use of retirement benefits to pay civil damages for utilities district employees, police officers, firefighters, county employees, judges, participants in deferred compensation plans, school employees, court employees, officers of the Nebraska State Patrol, and state employees as prescribed, exempted per diems from the definition of compensation, clarified tax-qualification requirements, and amended rollover distributions and death benefits.[41]


Legislative Bill 382
This bill, approved by the governor on May 4, 2011, increased employee and employer contribution requirements for the School Employees Retirement System, the State Patrol Retirement System and the Omaha School Employees Retirement System.[41]

Proposed reforms


NE L 638
This act, which failed on January 23,2013, would have provided a cash balance retirement system for school employees.[41]


NE L 1022
This bill, which failed on January 17,2012, would have changed officer and employer contribution rates under the Nebraska State Patrol Retirement Act.[41]

Local public pensions

Main article: Local government public pensions

According to the United States Census Bureau, the state has 9 locally-administered pension plans.[8]


Main articles: Public pension disclosure and Governmental Accounting Standards Board
  • Nebraska provides annual and quarterly reports through their investment council.[42] Pension recipients' names and pension amounts are not available under Nebraska public records law.[43]
  • Fund performance data can be found in annual and quarterly reports, though the information isn't as detailed as the Comprehensive Annual Financial Report would be, which most states release.[25]
  • State law requires public disclosure of pension investments.[44] A State Integrity Investigation has more information on public oversight of the state's pension system.[45]

See also

External links


  1. Figures below are compiled by adding up all state pension plans
  2. This figure is derived by calculating the percent difference between the current year's funding level and the system's percent funded from the prior year.
  3. Rank is relative to the 50 state pension programs. "1" refers to the healthiest pension plan while "50" would be the least well-funded plan.
  4. Pew Center on the States Widening Gap Update
  5. 2011 Annual Survey of Public Employment and Payroll, Census 2010
  6. 2010 Annual Survey of Public Employment and Payroll--Membership by State, Census 2010
  7. Cite error: Invalid <ref> tag; no text was provided for refs named account
  8. 8.0 8.1 "Public Employee Retirement Systems State- and Locally-Administered Pensions Summary Report: 2010," United States Census Bureau, April 30, 2012
  9. Organisation for Economic Co-operation and Development, "Pensions Glossary," accessed November 27, 2013
  10. Buck Consultants, "About Buck," accessed October 28, 2013
  11. United States Government Accountability Office Report to the Committee on Finance, U.S. Senate, "State and Local Government Retiree Benefits: Current Status of Benefit Structures, Protections, and Fiscal Outlook for Funding Future Costs," September 2007. Accessed October 23, 2013
  12. American Academy of Actuaries, "Issue Brief: The 80% Pension Funding Standard Myth," July 2012. Accessed October 23, 2013
  13. Governing Magazine, " Is There a Plot Against Pensions?" October 14, 2013
  14. 14.0 14.1 State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  15. 15.0 15.1 "State Employees Retirement System Actuarial Valuation Report as of July 1, 2012," accessed October 31, 2013
  16. 16.0 16.1 Analysis only available for system totals and not individual funds.
  17. 17.0 17.1 17.2 "Nebraska Judges' Retirement System Actuarial Valuation Report as of July 1, 2012," accessed October 30, 2013
  18. 18.0 18.1 18.2 18.3 "Nebraska School Employees' Retirement System Actuarial Valuation Report as of July 1, 2012," accessed October 30, 2013
  19. 19.0 19.1 19.2 "Nebraska State Patrol Retirement System Actuarial Valuation Report as of July 1, 2012," accessed October 30, 2013
  20. 20.0 20.1 20.2 "Nebraska County Employees' Retirement System Actuarial Valuation Report as of July 1, 2012," accessed October 30, 2013
  21. "Widening Gap Update: Nebraska," June 18, 2012
  22. Government Accounting Standards Board, "Annual Required Contribution (ARC)," accessed October 17, 2013
  23. Reuters, "Little-known U.S. board stokes hot pension debate," July 10, 2012
  24. State Budget Solutions, "GASB's ineffective public pension reporting standards set to take effect," June 5, 2013
  25. 25.0 25.1 Annual Report
  26. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  27. "The Widening Gap Update,” Pew Center on the States, accessed October 17, 2013
  28. The New York Times "Public Pensions Faulted for Bets on Rosy Returns," May 27, 2012
  29. Benefits Magazine "Public Pension Funding 101: Key Terms and Concepts," April 2013. accessed October 23, 2013
  30. Crain's Chicago Business "State teachers pension board lowers expected rate of return," September 21, 2013. accessed October 23, 2013
  31. Huffington Post "California Pension Funds Expect Lower Investment Return," March 14, 2012. accessed October 23, 2013
  32. 32.0 32.1 Governing "Expert: Governments Are Masking Their Pension Liabilities ," October 25, 2013. accessed October 25, 2013
  33. The Washington Post "Kansas’s pension funding gap just grew by $1 billion," September 6, 2013. accessed October 25, 2013
  34. Topeka Capital-Journal "KPERS' unfunded liability rises to $10.2B," September 4, 2013. accessed October 25, 2013
  35. Wall Street Journal "Pensions Wrestle With Return Rates," October 10, 2011. accessed October 23, 2013
  36. The Courant "Promising Too Much On Public Pensions," August 10, 2012. accessed October 23, 2013
  37. Business Wire "NCPERS 2013 Survey: Public Pension Plans Report Increasing Confidence, Lower Costs, Growing Returns," October 22, 2013. accessed October 25, 2013
  38. National Association of State Retirement Administrators "Issue Brief: Public Pension Plan Investment Return Assumptions," October 2013. accessed October 23, 2013
  39. State Budget Solutions, "Promises Made, Promises Broken - The Betrayal of Pensioners and Taxpayers," accessed September 20, 2013
  40. 40.0 40.1 40.2 40.3 Moody's Investor Service, "Adjusted Pension Liability Medians for US States," June 27, 2013
  41. 41.0 41.1 41.2 41.3 41.4 National Conference of State Legislatures, "PENSIONS AND RETIREMENT PLAN ENACTMENTS IN 2011 STATE LEGISLATURES," accessed October 31, 2013
  42. Financial reports
  43. Nebraska public records law
  44. Public disclosure law
  45. State Integrity Investigation