Meeting Summary 

AC Board – December 12, 2019

Confirmation of Appointment of Officers

To facilitate compliance reporting and certification requirements in other jurisdictions, the AC has found it useful to summarize the current senior officers of the corporation in an annual confirmatory resolution.  Also, to facilitate the signing of certificates and powers of attorney, it is useful to appoint various corporate counsel as assistant corporate secretaries.

The AC Board approved a resolution, effective January 1, 2020, that gave effect to this intention.

2020 Consolidated Annual Financial Operating Plan Recommendations

Each year, the AC Board approves the Operating Plan and Benchmarks used by Management to assess financial performance in the year ahead.

Following discussion and as recommended by the Audit & Actuarial Committee at its meeting held on December 4, 2019 and by the Investment Committee at its meeting held on December 5, 2019, the AC Board approved the 2020 Consolidated Operating Plan with a net projected income of $7.404 billion and a net return of 6.9%.

2019 Asset-Liability Study

The objective of the Asset-Liability Study is to ensure that assets are sufficient to meet long-term pension obligations.  The 2019 Study incorporated several changes compared to previous studies.

As recommended by the Investment Committee at its meeting held on November 12, 2019, the AC Board approved the OMERS Primary Plan asset allocation targets and ranges, effective January 1, 2020, consistent with the conclusions of the 2019 Study.

Statements of Investment Policies and Procedures

The Pension Benefits Act (Ontario) (the PBA) requires the AC Board to establish a Statement of Investment Policies and Procedures (SIPP) for each of the Primary Plan and Supplemental Plan and that these statements be reviewed annually.  The Primary Plan SIPP and the Supplemental Plan SIPP were last approved by the AC Board on December 13, 2018.

Although not required by the PBA, the AC Board has also established a SIPP for the RCA which was last approved by the AC Board on December 13, 2018.

Based on the annual review of the Statements of Investment Policies and Procedures (SIPPs) by senior management and internal and external legal counsel, and as recommended by the Investment Committee at its meeting on November 12, 2019, the AC Board approved the Primary Pension Plan SIPP, the Supplemental Plan SIPP and the RCA SIPP, all effective January 1, 2020.  In accordance with AC’s practice, these policies are posted on the OMERS website.

Statement of Investment Authorities

The Statement of Investment Authorities (SIA) provides a comprehensive delegation of investment decision-making authority from the AC Board to the Chief Executive Officer.  The Investment Committee has responsibility for reviewing this policy and recommending it to the full AC Board for final approval.

The changes to the SIA reflected editorial clarifications on policy exceptions.

As recommended by the Investment Committee at its meeting on November 12, 2019, the AC Board approved the revised Statement of Investment Authorities, effective January 1, 2020.

Statement of Investment Beliefs and Sustainable Investing Policy

The Statement of Investment Beliefs (SIB) provides a high-level description of a set of core principles that guides investment activity at OMERS.  The SIB was last reviewed and updated in 2016.  In addition, the AC Board approved a Sustainable Investing Policy (SIP) in March 2019 that provides a coordinated approach to OMERS long-term sustainable investment considerations around environmental, social and governance practices.  The AC Board directed that the SIP be reviewed annually by the Investment Committee at the same time that the Committee considers the Statements of Investment Policies and Procedures and the Statement of Investment Beliefs so that the Committee can provide an integrated and holistic recommendation to the AC Board on these key investment governance policies.

Management did not recommend any substantive changes to either of these policies.

Following discussion, the Board requested one minor revision to the SIP.

The AC Board approved the revised Statement of Investment Beliefs and the revised Sustainable Investing Policy, both effective January 1, 2020.  In accordance with AC’s practice, these policies are posted on the OMERS website.

Primary Plan Risk Appetite Statement

Management has worked with the Risk Oversight Committees of both Boards to evolve the Primary Plan Risk Appetite Statement (RAS) and incorporated updates related to the 2025/2030 Strategy.  With the support of the AC Risk Oversight Committee, Management was recommending Board approval of the Primary Plan RAS in December 2019 because it was likely that the SC would not approve the RAS until February 2020 and there may be potential modifications arising from the SC’s further contemplations.

As recommended by the Risk Oversight Committee at its meeting held on November 12, 2019, the AC Board approved the revised Primary Plan Risk Appetite Statement, effective January 1, 2020, subject to consideration of such changes as may be approved by the SC Board following completion of its review of the Primary Plan RAS.  The AC Board also directed Management to report to the Risk Oversight Committee on any changes to the Primary Plan RAS as may be approved by the SC Board together with a plan to reconcile any such changes into the Primary Plan RAS as approved by the AC Board.

Risk Framework

The concept of developing a Risk Framework arose from the need to better understand how all the various aspects of risk management – such as policies, procedures, roles and responsibilities, risk categories and metrics – fit together across OMERS.  The Risk Framework will assist in effective management, communication and oversight of risk by articulating OMERS approach to managing risk and by identifying the material risks to which OMERS is exposed.

The revised Risk Framework was updated based on input from each of the OMERS SC and AC Risk Oversight Committees.

As recommended by the AC Risk Oversight Committee and the AC Governance Committee, at their meetings on November 12 and November 13, respectively, the AC Board approved the Risk Framework, effective January 1, 2020.

Risk Management Mandate Review

A Mandate for the Risk Management Group was originally approved in 2015.  The purpose of the Mandate is to make clear the roles and responsibilities of the function and having such a Mandate is considered a leading practice.

AC Management is of the view that it is good practice for the Risk Management Mandate to be reviewed and reassessed regularly.  Following this cycle, Management proposed to review the Mandate on a three-year cycle, with an opportunity to advance the review if circumstances warrant.  The updated Mandate reflects the evolution of the Subsidiary Risk Appetite Statements and reporting, as well as organizational changes.

As recommended by the Governance Committee at its meeting held on November 13, 2019, the AC Board approved the Risk Management Mandate, effective January 1, 2020 and changed the review cycle of the Mandate from annually to at least every three years.

Board and Committee Mandate Review

Consistent with its responsibilities, the Governance Committee annually reviews all Committee Mandates and the Board Mandate to assess the full package of Board-level responsibilities and how they fit together.

All Committees reviewed their respective 2019 Mandates at their recent meetings and proposed several changes which were then forwarded to the Governance Committee for review at its meeting on November 13, 2019, with the objective that the Governance Committee would make a comprehensive recommendation to the AC Board regarding all Mandates.  It was also timely to update the Board Mandate and the Management Mandate to ensure that they are consistent with current practices.

The Board requested a minor revision to the AC Board Mandate.

Following discussion and as recommended by the Governance Committee at its meeting on November 13, 2019, the AC Board approved amended Board, Management and Committee Mandates, all effective January 1, 2020.  Mandates are posted to the OMERS website.

Appointment of Standing Committees for 2020

In accordance with the Board Chair Role Description contained in the OMERS Governance Manual, a key responsibility of the Board Chair is to develop a recommendation for Board and Committee leadership roles.  In accordance with the Board Committee Operational Guidelines, the Board Chair is to propose Committee membership to the Board annually in December, following consultation with the Governance Committee.

The Board Chair confirmed that in setting the composition of the Audit & Actuarial Committee for 2020, a majority of the AAC members meet the standards of financial literacy or possess relevant actuarial or pension experience.  The Board Chair also noted that that there was a position pending on the Appeals Committee and that he intends to ask one of the new directors to fill that spot. This would be completed by February.

Following discussion, the AC Board approved the recommendations of the Board Chair for the appointment of the Chairs and members of the Standing Committees.  Committee composition is posted on the OMERS website.

Funding Policy and Discount Rate Protocol – OMERS Primary Plan

The Primary Plan Funding Policy was last approved by the AC Board on August 18, 2016 with a scheduled renewal in August 2019.  At its August 14, 2019 meeting, the AAC deferred recommendation of approval of an updated policy by the AC Board until February 2020 to allow the SC to advance work on the risk appetite statement and Funding Management Strategy.

AC Management has updated the Funding Policy with the following content changes:

  • updated the Funding Risk and Funding Risk Management sections to reflect recent work on the joint risk appetite statement; and
  • updated the discount rate setting methodology to reflect the OMERS 2025 Strategy and the Discount Rate Protocol between the AC and SC.

As a result of discussions which took place at the Joint AC/SC Strategic Planning Session on October 9, 2019 a discount rate protocol was developed to provide more detail around considerations and consultations that will go into discount rate determination in line with the OMERS 2025 and 2030 Strategy, while recognizing the responsibilities of each Board and the interdependencies under the OMERS bicameral model.  The AC Board was asked to approve the discount rate protocol, which was also approved by the SC at its meeting on December 11, 2019.

Following discussion and as recommended by the Audit & Actuarial Committee on December 12, 2019, the AC Board approved the Funding Policy – Primary Plan, effective February 1, 2020 and the discount rate protocol, effective immediately.