On Tuesday, the Omaha City Council approved a major change in the city’s pension system.
Starting on March 1, all new city hires will be placed into a pension plan that resembles a hybrid between a 401(k) and a traditional pension, as opposed to the defined-benefit plan currently in place.
Public safety workers are not affected.
The new plan, called a “cash balance plan”, will operate like a 401(k) in that its eventual payout will largely depend on the market.
But it does guarantee a minimum retirement benefit, much like a defined-benefit plan.
Current employees will keep their pension plan. But going forward, they will have to contribute a higher percentage of their paychecks to the system.
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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.”
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.
Public safety workers aren’t affected by this change, because they work under different contracts.
But change could be coming soon: the city is currently in the midst of negotiating new contracts for police and firefighters.