OMERS Sponsors Corporation (SC) has approved two plan change proposals in a meeting in June 2009:
- a small contribution rate increase for both members and employers, starting in 2010, arising out of the decision to file the December 31, 2008, valuation; and
- a cap on the level of incentive pay included in contributory earnings, effective 2011.
“These changes are a necessary step to allow time to help ensure the funding security of the OMERS plans,” said OMERS SC Co-Chair Marianne Love.
“The SC will continue to carefully monitor the Plans’ funding position, on a yearly basis, to determine whether any further changes are needed,” added SC Co-Chair Brian O’Keefe.
The next steps include approving the Plan text wording related to the two changes.
At the end of 2008, OMERS Primary Pension Plan had a funding shortfall of $279 million. OMERS expects this to increase over the short term.
In 2009, the SC considered a range of proposals to address the funding shortfall including changing benefits with respect to service going forward and increasing contribution rates.
The OMERS plan provides lifetime income for members in their retirement. OMERS will continue to work hard to build wealth to secure the pension promise for our current and future retirees.
Contribution rate increase – starting in 2010
Beginning with the first, full pay period in 2010, the rates paid by active members (and matched by their employers) will be as follows. For comparison, we have also listed the current contribution rates.
|
|
|
2009 |
2010 |
|
Normal retirement age 65 members
|
On earnings up to CPP earnings limit |
6.3% |
6.4% |
|
On earnings over CPP earnings limit |
9.5% |
9.7% |
|
Normal retirement age 60 members
|
On earnings up to CPP earnings limit |
7.7% |
7.9% |
|
On earnings over CPP earnings limit |
12.8% |
13.1% |
|
CPP earnings limit in 2009 is $46,300; we will know the 2010 limit later this year. |
On a paycheque level, members will notice the following changes in 2010:
Normal retirement age 65 (most OMERS members)
|
Total annual earnings example |
2009 contributions |
2010 contributions |
Difference per pay* |
|
$25,000 |
$60.58/pay |
$61.54/pay |
$0.96 |
|
$50,000 |
$125.71/pay |
$127.77/pay |
$2.06 |
|
$75,000 |
$217.05/pay |
$221.04/pay |
$3.99 |
|
$100,000 |
$308.40/pay |
$314.31/pay |
$5.91 |
Normal retirement age 60 (most OMERS police officers and firefighters)
|
Total annual earnings example |
2009 contributions |
2010 contributions |
Difference per pay* |
|
$50,000 |
$155.33/pay |
$159.32/pay |
$3.99 |
|
$75,000 |
$278.41/pay |
$285.28/pay |
$6.87 |
|
$100,000 |
$401.49/pay |
$411.25/pay |
$9.76 |
|
*Based on 26 pay periods annually and the 2009 CPP earnings limit. As the 2010 limit will be higher, the actual dollar increases in contributions may be slightly less than those indicated here. |
Cap on level of incentive pay included in contributory earnings – starting in 2011
Most OMERS members would not be affected by this plan change. It would affect only those members whose incentive pay is a large percentage of their earnings.
This plan change will cap a member’s earnings for pension purposes at 150% of contributory earnings calculated before incentive pay. The effective date is January 1, 2011.
OMERS members who receive incentive pay could be affected – their incentive pay over the capped amount would not be used to calculate their pension, nor for deducting contributions. An example of incentive pay is an annual performance bonus that is part of a member’s regular/ongoing compensation.
A very small number of OMERS members would be affected. OMERS will work closely with those employers who may have members affected by this proposal.
We will provide further detail in the online Employer Administration Manual.
