Carlos Changemaker
Omaha Public Schools, the biggest school district in Nebraska, is swiftly approaching the transfer of its pension fund management to the state, a process that will take less than 50 days.
Nevertheless, the scope of issues that the Nebraska State could inherit from the Omaha School Employees Retirement System was significantly broadened by a recent state audit, as leaders of the state retirement system were informed on Monday.
The $1 billion shortfall in the OPS pension fund resulting from poor investment decisions over the years is not the sole concern. Local management errors exacerbated the situation, and the extent of these mistakes is ambiguous.
Mistakes uncovered by State Auditor Mike Foley include uncorrected or uncollected overpayments and inaccuracies in cash and medical benefit calculations that impacted retired individuals negatively or positively.
Accounts that were not credited with their accrued interest, resulting in a loss of $23,000 for one individual, and discrepancies in records were identified. One person even received $53,000 after already cashing out.
State Auditor Mike Foley’s team was pressed by members of the Nebraska Public Employees Retirement Systems board about the responsibility for rectifying these errors post the state’s assumption of control on September 1.
In response to questions via email from the Examiner, Foley expressed skepticism about the accuracy of data that the state might acquire from OSERS, stating that the necessary corrections might not be made before the state takes over the plan.
John Murante, the NPERS executive director, inquired about the requirement for OSERS to address pre-takeover errors and the estimated hours state employees will need to rectify them.
Murante highlighted that lawmakers might not have consented to managing the system had they been aware of the substantial day-to-day management challenges within the Omaha pension fund.
Noting the complexity of administering a plan affecting 15,000 pension members in need of corrections, Murante emphasized the need for a comprehensive assessment of the necessary corrections.
During their audits on retirement funds, the auditors generally sample about 25 fund contributors, uncovering excess balances exceeding $8 million across multiple accounts, with administrative costs for OSERS yet to be determined.
“These dollar amounts are staggering, even with just a sample,” Murante commented at the meeting.
Major issues regarding the OPS retirement fund emerged during an investigation by the Omaha World-Herald, revealing poor investment decisions made by the local pension fund between 2007-09.
The investigation focused on stock sell-offs during the 2007-08 recession and subsequent efforts to shift funds into less flexible investments post-recession. Queries arose regarding the basis for investment decisions made by OSERS leaders.
Despite considerable new contributions from the district and plan participants, the gap between projected benefits and payments into the plan continued to widen, as reported by the World-Herald.
The Omaha district fund held $1.58 billion as of Dec. 31 and had a pension liability of $2.68 billion by Aug. 31. OPS boasts around 6,700 employees and roughly 5,100 retirees under the plan.
OSERS Administrator Shane Rhian, in response to the audit findings, admitted that not all identified issues had been resolved within OPS but assured that they would be rectified before the state takes over.
OPS spokeswoman Bridget Blevins highlighted the commitment to addressing necessary issues ahead of the transition on September 1 and ensuring the continued funding of the plan for its members.
Omaha Education Association President Kathy Poehling expressed satisfaction at the state assuming daily OSERS management responsibilities, emphasizing the ongoing addressing of the audit issues and security of pension checks for retirees.
Poehling reassured members that the necessary payments are being made, investment returns under state supervision are positive, and the unfunded liability will gradually diminish over time.
Amid concerns raised by board member Jim Schulz regarding required corrections and potential miscalculated payments, Murante clarified that OPS district taxpayers and retirees would bear the burden of rectifying the situation, with OSERS being kept separate from the state teacher retirement plan.
Murante reassured current and former OPS teachers that the state will efficiently address and fix any identified management issues, expressing confidence in the state’s capabilities.
The progress toward state management transition was a key agenda item, detailing document sharing, scanning of nearly 60,000 documents, and computer data exchange.
IT personnel noted a delay of up to 12 weeks in data migration, partially due to challenges faced by OSERS during an early 2000s data conversion. Nonetheless, the team anticipates providing required data for the transition by early September.
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