What even is OSERS? Explaining the basics behind OPS’s $771 million pension shortfall
Until former OPS Superintendent Mark Evans arrived in Omaha, he admits he had never heard of OSERS. He wasn’t the only one. Most people in Omaha likely have never heard of the pension fund that’s now costing the school district a bundle. Here’s a quick OSERS primer.
What is OSERS?
It stands for the Omaha School Employees’ Retirement System, and it serves staff and retirees in the Omaha Public Schools. It was established in 1909, decades before the State of Nebraska created pensions for the rest of the state’s teachers. It’s believed OPS is among just eight school districts nationally with its own pension fund. The others: New York City, Chicago, Washington, DC, Kansas City, Denver, St. Louis and St. Paul, Minnesota. That also makes OSERS one of the smallest public pension funds in the country.
Who is served by OSERS?
OSERS currently covers roughly 7,500 active teachers and staff members, and mails monthly checks to about 4,500 retirees.
Who runs OSERS?
Effective Jan. 1, 2017, the Legislature turned OSERS investments over to the Nebraska Investment Council, the agency that handles investments for statewide pension funds. Before that, the fund’s board of trustees and OPS school board determined investment policy. The board of trustees, hired chief executive and staff continue to administer retirement benefits. The trustees once had 10 members that included three members of the school board. It now has seven members: two outside business representatives, four staff representatives and the district superintendent. The staff representatives are elected by their class of employees, including one current retiree. The OSERS office is in the OPS headquarters building, 3215 Cuming St., where the trustees meet monthly. Its website is osers.org
How do the finances of OSERS work?
OSERS is a defined benefit pension plan, meaning that the district promises vested members a specified monthly payment for life upon retirement, with the payment determined by a formula that takes into account earnings history and years of service. The financial success of the plan for years allowed OSERS to offer more generous benefits than the state teachers’ plan.
Benefits have since been scaled back by the Legislature to more closely conform with the state plan, though those already in the system at the time of the changes continue to receive the enhanced benefits. The average monthly retirement benefit in 2017 was $1,720. All OPS employees pay nearly 10 percent of their gross salary into the fund, a figure which is essentially matched by the district.
The state in recent years has also kicked in a small amount, equal to 2 percent of annual payroll. The money in the trust fund — currently nearly $1.3 billion — is held and invested. The return on those investments, plus the money paid in annually, are supposed to be enough to pay promised benefits into the future.
Can OSERS meet its obligations?
If annual actuarial evaluations find there is a significant shortage between current assets and projected returns and estimated long-term obligations, the district and its taxpayers are required to make additional payments into the fund. That’s what’s happening now, as the current projected shortfall of $771 million forced the district to make an extra $18.9 million payment this school year. OSERS is currently projected to meet only 64 percent of its future obligations, well below the 80 percent that is generally considered the minimum for a healthy fund. It will take years of enhanced payments and good investment returns for OSERS to get back to adequate levels of funding.