Further Details on the Contribution Rates Review
June 25, 2024
OMERS contribution rates reflect the different value of benefits earned between the Normal Retirement Age (NRA) 65 and NRA 60 retirement age provisions in the Plan and the different value of benefits earned for earnings below and above the Years Maximum Pensionable Earnings (YMPE). As a result, we have four contribution rates.
The SC Board regularly monitors the contribution rates to achieve the goals of price stability and having rates that are, on balance, aligned to our contribution rate principles. This is particularly important as OMERS has a very diverse membership.
As a result of its most recent review, at its June 25, 2024 meeting, the SC Board approved future updates to contribution rates to reflect the updated Contribution Rate Policy and changes to the membership profile and actuarial assumptions. These updates will become effective beginning January 1, 2027.
OMERS membership demographics have evolved over time in the following ways:
While some members participate in OMERS for most of their career, an increasing proportion join the Plan mid-career or late career and participate in OMERS for shorter time periods.
Fewer members are qualifying for and taking advantage of unreduced early retirement benefits.
The addition of non-full-time members since 2023 has further widened the diversity of the makeup of our membership.
The current contribution rates have been in effect since January 1, 2015. OMERS external actuary has recently performed a contribution rate study based on the proposed Contribution Rate Policy using the same data and assumptions that were used in the December 31, 2023 valuation. This study produced contribution rates which differ from the current contribution rates.
In deciding whether to make changes to contribution rates, the SC Board applies judgment in balancing the objective of price stability with alignment to its Contribution Rate Policy. At its June 25, 2024 meeting, the SC Board approved the following adjustments to contribution rates:
Current Contribution Rates (in effect since January 1, 2015) | |
|---|---|
Portion of Contributory Earnings | |
Approved Contribution Rates (effective January 1, 2027) | |
|---|---|
Portion of Contributory Earnings | |
Current Contribution Rates | Approved Contribution Rates | |
|---|---|---|
Portion of Contributory Earnings | Portion of Contributory Earnings |
Below YMPE | |
|---|---|
NRA 65 | 9.0% |
NRA 60 | 9.2% |
Above YMPE | |
|---|---|
NRA 65 | 14.6% |
NRA 60 | 15.8% |
Below YMPE | |
|---|---|
NRA 65 | 8.6% |
NRA 60 | 9.6% |
Above YMPE | |
|---|---|
NRA 65 | 15.7% |
NRA 60 | 16.7% |
Below YMPE | Above YMPE | Below YMPE | Above YMPE | |
NRA 65 | 9.0% | 14.6% | 8.6% | 15.7% |
NRA 60 | 9.2% | 15.8% | 9.6% | 16.7% |
* YMPE refers to the Year's Maximum Pensionable Earnings. It is the earnings threshold used to determine the Base Canada Pension Plan benefits and contributions. The 2024 YMPE is $68,500.
These approved adjustments will not increase or decrease overall contributions to the Plan. However, contributions for some members and employers will decrease, while contribution rates for other members and employers will increase.
The SC Board recognizes the need to provide sufficient time for employers and members to transition to the new rates. For that reason, the new contribution rates will not take effect until January 1, 2027.
Approximate impacts on members
Approximately 70% of members will see a decrease in contributions.
The estimated impact on member contributions depends on their retirement provisions and level of Contributory Earnings, as illustrated below:
Estimated impact on bi-weekly contributions per pay (after tax)* |
|---|
Estimated impact on bi-weekly contributions per pay (after tax)* |
NRA 65 | |
|---|---|
$40,000 | Decrease of $5 |
$60,000 | Decrease of $6 |
$80,000 | Decrease of $4 |
$100,000 | Increase of $2 |
$120,000 | Increase of $6 |
$140,000 | Increase of $11 |
$200,000 | Increase of $23 |
NRA 60 | |
|---|---|
$40,000 | Increase of $5 |
$60,000 | Increase of $6 |
$80,000 | Increase of $10 |
$100,000 | Increase of $15 |
$120,000 | Increase of $16 |
$140,000 | Increase of $20 |
$200,000 | Increase of $29 |
Annual Contributory Earnings | NRA 65 | NRA 60 |
$40,000 | Decrease of $5 | Increase of $5 |
$60,000 | Decrease of $6 | Increase of $6 |
$80,000 | Decrease of $4 | Increase of $10 |
$100,000 | Increase of $2 | Increase of $15 |
$120,000 | Increase of $6 | Increase of $16 |
$140,000 | Increase of $11 | Increase of $20 |
$200,000 | Increase of $23 | Increase of $29 |
* These figures are approximate and provided for illustration purposes only, based on assumptions and calculated at a point in time. The table was prepared as if the revised contribution rates were in effect in 2024 (i.e., reflects 2024 YMPE of $68,500, which will increase each year in line with the average Canadian wage increases). In addition, after-tax calculations are based on marginal tax rates at the various earnings levels for Ontario residents in 2024, and assume no additional income. Actual contributions will be based on earnings in 2027 and the actual YMPE which may be materially different than the estimates shown above.
Since employers match member contributions, the impact on employers will depend on the earnings of their members, and which NRA provision they participate under.
In the normal course of business, the SC Board will continue to conduct periodic reviews of our contribution rates. The next scheduled review will occur in 5 years (2029).
Questions?
If you have any questions pertaining to the outcome of this review, other questions you may have of the SC, or would like to provide us with feedback, please contact OMERS Sponsors Corporation here.