State and County Cash Balance Dividend Approved!

The Nebraska Public Employees Retirement System is pleased to announce a dividend has been approved for eligible members of the State and County Cash Balance retirement plans.

Each year an actuarial study is conducted to ascertain the funded status of the Cash Balance plans. The 2018 actuarial reports for the plans were presented at the May 21 meeting of the Public Employees Retirement Board (PERB). These reports found both plans sufficiently funded to allow the PERB to grant a dividend. After reviewing the actuarial reports and recommendations from the plan actuary, the PERB voted to grant the maximum amounts recommended – a 5.46% dividend for State Cash Balance members, and an 8.42% dividend for County Cash Balance members.

To be eligible, you must be a participant in the Cash Balance plan and have had an account balance on December 31, 2017. Dividends will be based on your account balance as of that date and credited to your account by September 1, or as soon as administratively possible.

Why are the dividends different between the two plans? How is the amount of the dividend determined?
We get these questions every year when a dividend is issued and it can be somewhat difficult to explain.

The dividend amount is recommended by the plan actuary in their annual report. The primary factor used by the actuary to determine the amount is the funded status of the plan before and after the dividend is issued. Simply put... the plan can only pay out “surplus” amounts and must remain adequately funded after the dividend is issued.

When determining funded status, the actuary is looking not only at the money coming into the plan (investment returns), but also the funding necessary to pay out current and future benefits including the guaranteed rate of return, and the “enhanced” monthly annuity payments to retirees. The plan is obligated to pay these benefits to participants, even during a market downturn.

While the investment returns for both plans are the same, determining the funded status is a bit more complicated.

Funded status is impacted by plan member demographics. The number of members in each plan, the age of the members, their account balances, and the percentage of members who purchase an annuity at retirement... these all affect funded status. These factors change each year as members retire and new members join the plan. As a result, the funded status and amount available for a dividend will fluctuate.

In addition, the State and County Cash Balance Plans are separate plans with different membership demographics, and separate trust funds. This can create different funded ratios and subsequently, different amounts available for a dividend between the two plans. Per the current actuarial report, the County plan had $34,058,428 available for a dividend, and the State $63,632,381. While the County amount was smaller, there are significantly less members in the County plan. As a result, the maximum dividend recommended by the actuary for the County was 8.42%, and the maximum for the State was 5.46%. FYI, last year the State plan had a better-funded status and paid out a higher dividend (3.07%) than the County (0.51%).

The actuarial reports are published on the Publications page for members who wish to review the content. The dividend synopsis in both State and County reports is on page 31.