On June 28, 2011, the OMERS Sponsors Corporation (SC) approved changes to the OMERS Primary Pension Plan (OMERS Plan) and Retirement Compensation Arrangement (RCA).
The SC also made the decision to file the December 2010 Primary Plan valuation.
Contributions to the OMERS Plan are made by members and matched by employers. Along with investment earnings, contributions provide members with lifetime retirement income. Contribution rate changes are effective with the first full pay in 2012.
*CPP earnings limit (Year’s Maximum Pensionable Earnings or YMPE) in 2011 is $48,300; the limit in 2012 will be higher. OMERS members pay a lower rate of contributions on earnings up to the YMPE because OMERS and the CPP are designed to work together to provide pension benefits. Pension plan contributions are tax deductible which will lessen the net impact on Plan members.
In 2010, OMERS announced a three-year contribution rate increase for the OMERS Plan, totalling 2.9% per side (members and employers).
These adjustments are based on careful consideration of rates and benefits within the total OMERS membership. The SC will continue to review the principles for allocating and determining contribution rates for all members.
These rate increases are intended to be temporary, and are part of a long-term strategy to return the Plan to full funding. When the Plan reaches full funding and the deficit is eliminated, rates will be adjusted.
These changes do not affect OMERS retired members, deferred members, or survivors.
RCA: The RCA is a separate fund that pays benefits over and above the maximum pension payable under the OMERS Plan. The SC approved a change that requires an annual review of the RCA to ensure that it maintains a viable funding level. Effective January 1, 2012, the earnings level at which contributions are made to either the OMERS Plan or the RCA will vary each year based on the actuary’s projections (within a certain range).
Valuation: Pension plans must file an actuarial valuation showing assets and obligations at least once every three years. The decision was made to file the December 31, 2010 OMERS Plan valuation with the regulators. The next required filing will be the December 31, 2013 valuation.
The OMERS SC is responsible for plan design and contribution rate decisions. The SC represents both members and employers contributing to the Plan and will make any decisions on changes through its annual planning cycle.
OMERS is one of the top pension plans in Canada, and like many other major public sector plans, is on course to address funding challenges. OMERS is well-positioned to meet its pension obligations. To read more about plan funding, please see the latest edition of Member News.