Straight Talk

Answering your key questions

The Comprehensive Plan Review has been underway for the past six months, and has included direct consultation with sponsors and other stakeholders. As part of the planned process, the intent is to engage directly with employers, unions and members before determining what, if any, changes are either necessary or advisable. As a starting point, here are some key questions that members have been asking.

Recent indicators suggest the Plan is doing well, so why are you conducting a Comprehensive Plan Review now?

Like most major pension plans, OMERS has enjoyed some strong investment returns over the past few years. Yet, even with these gains, the Plan has not fully recovered from the 2008 financial crisis. Ten years after the fact, we still have a deficit (funding shortfall) of $5.4 billion. There is still work to be done – and challenges to overcome.

Won’t the Plan be fully funded by 2025?

The hope and expectation is that the Plan will be fully funded by 2025 – assuming that all goes consistently well. It does not anticipate another significant market correction. Nor does it fully account for some of the longer-term realities that will increase the cost of the current Plan in the future – substantially in some cases.

So, the sky is falling?

Not at all. The Plan has $95 billion in assets that are being managed on your behalf by some of the best investment professionals in the business. Your pension is secure! We just need to be realistic about the future, and to take steps to ensure that the Plan remains sustainable, meaningful and affordable for the next 20, 50 and even 100 years.

Can’t we just leave the Plan exactly like it is?

Extensive analysis confirms that the cost of the current Plan will continue to rise over time. This leaves the Board with three fundamental options: (1) charge members and employers more contributions for the current Plan; (2) keep contributions at current levels, but reduce benefits over time; or (3) find the best possible balance between the two.

Is the intent to cut benefits?

The intent is not to cut benefits. Rather, the intent is to determine if there is a better and more equitable way to deliver the pension promise in a changing world. That includes the possible introduction of pension improvements, such as mandatory participation for non-full-time workers.  

Is it true that you’re looking to de-index the Plan?

There is no discussion around eliminating indexing altogether. While no decisions have been made at this point, the SC Board is exploring the possibility of introducing “conditional indexing” at some point in the future. Unlike “de-indexing,” conditional indexing provides indexing when the Plan is financially healthy. If the Plan gets into financial trouble, indexing can be reduced (or suspended) on a temporary basis. As such, conditional indexing provides an essential lever or temporary safety valve to relieve funding pressures if and when we need it. 

How will the changes impact my pension as a retiree?

They won’t. If you are retired before any change takes place, your pension, including guaranteed indexing, is secure. As a retiree, you will continue to receive full indexing under the terms of the Plan. The changes, if any, will only impact members (active and deferred) who accrue (earn) pension benefits from the effective date of the change.

How will the changes impact my pension as an active member?

It is important to note that any changes would have no impact on benefits that active members accrue (earn) up to the date the change takes effect. For example, members would receive full indexing for service up to the effective date plus conditional indexing on the portion of their service after the effective date of the change.

To take the example further, let’s assume the Plan introduces conditional indexing, effective January 1, 2021 – when you have 28 years of service. You would receive full indexing on all 28 years of your service prior to the effective date. If you work another two years – let’s say to January 1, 2023 – conditional indexing would apply only to your service starting January 1, 2021 (two years). 

Isn’t the introduction of conditional indexing unfair to future generations?

As outlined above, indexing would be provided when the Plan’s financial health is strong. Given that improvements in life expectancy are predicted to continue, future members will likely collect their pensions for longer than current retirees – which will increase the value of the total benefit they receive from OMERS.

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