Overview

Like many other pension plans, the OMERS Plan is currently in a deficit position. At the end of 2011, the deficit was about $7.3 billion, due for the most part to three factors:

  • losses stemming from the 2008 global market meltdown, and how they are accounted for in deficit calculations;
  • a lower 2011 investment return resulting from the European debt crisis and other factors; and
  • rising Plan costs as members age.

Pension law requires that plans such as OMERS take steps to return the fund assets to 100% of the Pension Plan’s long-term obligations over time. OMERS has a strategy to return the Plan to a fully funded position, consisting of three components: :

  1. an investment strategy designed to generate stable net returns of 7% to 11% per annum on average
  2. temporary contribution rate increases phased in over three years from 2011 to 2013
  3. a temporary benefit reduction starting in 2013 that impacts only Plan members who leave their employment before they are eligible for retirement 

The temporary contribution rate increases and benefit measures remain in effect until the Plan returns to fully funded status, when they will be reviewed by the OMERS Sponsors Corporation.

Based on our current projections, OMERS deficit will continue to grow to about $10 billion by the end of 2012, and then will begin to shrink until it is eliminated over the next 10 to 15 years. In the meantime, OMERS continues to carefully monitor any pressures on the funding of the Plan.

As for OMERS ability to pay pensions every month, the Plan is healthy and operating well: during 2011, the Plan collected about $2.6 billion in contributions and paid out about $2.4 billion in benefits and still has $55 billion in net assets.