(as at December 31, 2015)
Additional Voluntary Contributions (AVCs) are members' retirement savings. While AVCs are invested in the OMERS Fund, the actuarial deficit does not affect AVC accounts. The actuarial deficit is related to the defined (DB) component of the OMERS Plan.
The funded ratio is the relationship of a pension plan's assets to its obligations.
In 2015, the funded ratio, a key indicator of the long-term financial health of the Plan, increased to 91.5%, up from 90.8% in 2014.
The Funding Management Strategy, which was published in 2014, includes three funding zones and sets out parameters for setting contribution rates and benefits within each zone, in order to maintain a healthy balance between the Plan’s assets and long-term pension obligations. The Funding Management Strategy clearly sets out the conditions for when contributions and benefits will be adjusted to manage the long-term financial health of the Plan.
As the funding level improves, and we move from Deficit into the Reserve and Surplus Management zones, we will build reserves by taking a conservative approach to reducing contributions and restoring benefits.
For more information about OMERS approach to protecting our funded status, see OMERS 2015 Annual Report.
The Primary Plan is on track to be fully funded by 2025.
Many economic factors - including volatility in financial markets, persistently low interest rates, and capital flows into alternative asset classes - present risks that impact the ability of our investment teams to generate investment returns that meet or exceed the discount rate of the Primary Plan. Demographic factors include unanticipated increases in life expectancy, trends in retirement and future membership levels. Over time, these risk factors can change, affecting the assumptions used to determine our actuarial liabilities, potentially changing our funded status.