OMERS Sponsors Corporation (SC) has approved temporary changes to support the funded status of the OMERS Primary Plan:
- A three-year contribution rate increase for both members and employers, beginning in 2011, following the filing of the 2009 Primary Plan actuarial valuation with regulators this year.
- Changes to the calculation of benefits members receive if they terminate employment before they're eligible for an pension. (This only affects benefits based on service earned after 2012.)
OMERS pension formula, inflation protection in retirement, survivor benefits and disability benefits are not affected.
The SC is determining the exact rates for both (ages 65 and 60), and will consider this issue at its August meeting.
Multi-dimensional approach to funding deficit
The changes were undertaken as a temporary strategy to support the funded security of the OMERS Primary Plan. OMERS Primary Plan had a funding shortfall of $1.5 billion at December 31, 2009.
The deficit is expected to increase over the next four years as nearly $5 billion of net losses, mostly from the 2008 global market downturn, are recognized on the balance sheet.
"The SC has a responsibility to manage surpluses and deficits through benefit and contribution rate changes," said Marianne Love, OMERS SC Co-Chair. "The changes the SC has approved are the result of careful consideration of the options for addressing the growing deficit."
"The OMERS SC will continue to carefully monitor the Primary Plan's funded status, and to make any decisions on changes through our annual planning cycle," said Brian O'Keefe, OMERS SC Co-Chair.
Temporary contribution rate increases
Contribution rates for both active members and employers will increase in 2011 through 2013, as follows:
- 2011 - effective with the first, full pay in 2011, contribution rates will increase, on average, by 1% per side (employee/employer) as a percentage of a member's earnings.
- 2012 - effective with the first, full pay in 2012, contribution rates will increase, on average, by an additional 1% per side (employee/employer).
- 2013 - effective with the first, full pay in 2013, contribution rates will increase, on average, by an additional 0.9% per side (employee/employer).
Once the rates are finalized for 2011-2013, OMERS will inform all Plan members and employers, and provide examples of how the increases will affect their contributions.
Temporary benefit calculation changes
Starting in 2013, these changes will only affect members who terminate employment prior to being eligible for early retirement - i.e., members who terminate before age 55 (normal retirement age 65) or 50 (normal retirement age 60). These changes will not affect any benefits based on service accrued before 2013.
OMERS is developing member case examples and cost analyses, and will provide increased detail on these changes and their impact via www.omers.com and in our fall newsletters.
Other OMERS SC Plan decisions
The SC has also committed to taking the following future actions:
- to elect not to provide "grow-in" rights (optional for plans like OMERS, under Ontario Bill 236), which increase the costs of benefits provided to certain terminating members; and
- to develop and document protocols and guidelines for future Plan decision-making.
For more details, please visit the SC website at www.omerssc.com (Plan Design Changes – SPC 09-10(b)).