LINCOLN — The Omaha Public Power District has failed to comply with a state law passed two years ago that requires government entities to report the status of their underfunded pension systems to the Legislature.
In a letter to OPPD President and CEO Tim Burke, the chairman of the Legislature’s Retirement Systems Committee said the issue recently came to the committee’s attention. The committee told OPPD to submit a report about the fiscal health of its defined benefit retirement plan by March 31.
The public utility also must appear before a panel of state lawmakers before the legislative session ends April 20.
“Our sole purpose is just to make sure that we have an understanding of what their plans are, because we have a fiduciary liability,” said State Sen. Mark Kolterman of Seward, chairman of the Retirement Systems Committee.
But Edward Easterlin, OPPD’s chief financial officer, said in a statement that state law isn’t clear about whether the reporting requirement applies to public power districts.
And until it received Kolterman’s letter, Easterlin said, OPPD had not received any written communication about the law.
Still, he said, the utility plans to promptly respond to Kolterman’s letter and “anticipates a discussion on the retirement plan with all interested stakeholders.”
“Despite the uncertainty whether the law as written applies to a public power district, OPPD will provide a report to the committee as requested by Sen. Kolterman and has every intention going forward to add this reporting to our list of ways to continue to be transparent,” he said.
A 2014 state law authored by Sen. Heath Mello of Omaha requires all political subdivisions with defined benefit plans funded under 80 percent to submit a report to the Legislature.
OPPD’s retirement plan at the end of 2015 was 72.4 percent funded, Easterlin said; 80 percent is seen as the minimum benchmark for a healthy plan.
Lawmakers can require that a local government entity go before a legislative committee for a public hearing. If the entity doesn’t comply, the state auditor can conduct an audit.
The Cities of Omaha and Lincoln, along with Douglas County and the Eastern Nebraska Health Agency, have appeared before the legislative panel to discuss their pension troubles.
Mello, a member of the Retirement Committee, said the purpose is to make legislators aware of local pension issues and ensure that steps are being taken to fix them.
Omaha’s funding ratios for its two pension plans, for example, have improved over time. Two years ago the city’s civilian plan was 54 percent funded, while the police/fire plan was 47 percent funded.
In 2015 the civilian plan was 56 percent funded and police/fire was 50 percent funded.
The reporting process has allowed the state to provide oversight, Mello said.
“This process has brought those plans to light, and the Legislature and the public are now more aware of the proposal to help move those plans into a more financially sustainable path,” he said.
At a meeting earlier this month, OPPD’s board discussed plans to contribute $52.7 million to its retirement plan in 2016, up from $46.6 million in 2015. The utility expects its pension liabilities to be fully funded in 20 years.
Funding for the utility’s retirement plan in recent years has been 69.7 percent in 2012, 71.9 percent in 2013 and 73.9 percent in 2014. It stood at 72.4 percent in 2015.
In 2014, the first year of the reporting requirement, a second method used to determine funding ratios showed OPPD’s plan funded above 80 percent, meaning it didn’t need to report to the Legislature, according to Easterlin.
The underfunded pension issue had “minimal impact on the general rate increase for 2016,” Easterlin said.
OPPD in December announced a 4 percent rate increase for 2016 in addition to a rate restructuring plan that critics say unfairly hurts poor and low-use customers.
Easterlin said the funding level is primarily the result of global market instability and longer life expectancy.
World-Herald staff writer Cole Epley contributed to this report.
Contact the writer: 402-473-9581, email@example.com
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