It’s official: Civilian city employees hired after March 1 will participate in a new pension plan, one that functions more like a 401(k) plan.
The pension changes, approved Tuesday by the Omaha City Council, mark a significant step in Mayor Jean Stothert’s goal of reducing employee costs and solving the city’s pension crisis.
And, Stothert said, the new plan will protect the city from future unfunded pension debt.
“We knew we could not just accept a contract that would fix the financial problem this year or the city’s budget this year,” Stothert said. “We had to look into the future to prevent those things from happening.”
Under the plan, new employees will be guaranteed a certain amount of money as their minimum retirement benefit, like a traditional pension plan.
But their overall annual retirement payout will depend on the market, more like a 401(k).
This system, called a cash balance plan, is “an entirely new pension plan, one that hasn’t been implemented in the City of Omaha,” the city’s lead negotiator, Mark McQueen, told the council last month.
Current employees will keep a traditional pension plan. But they will receive less payout and have to contribute more going forward.
These changes are intended to prevent the pension system from running out of money, which the civilian pension plan was previously projected to do within about 20 years.
Now, according to city estimates, it will be fully funded in that time frame.
“We’ve flipped on its head the current unfunded liability problem,” McQueen said.
He said the change will help the city’s bond rating, which has dropped in recent years.
City Council President Pete Festersen, a Democrat, called the move an “important step” but added, “Obviously there’s a lot more work to be done.”
Two other groups — police officers and firefighters — are working under contracts that have expired.
Stothert said negotiations with those groups are going well and she expects to have a deal with the city’s firefighters soon.
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