Plan Risk Assessment
What is plan risk assessment
OMERS Sponsors Corporation (SC) is responsible for determining benefit levels and setting contribution rates for the OMERS Pension Plans, collectively “the Plans”. Our objective is to ensure that the Plans remain sustainable, affordable and meaningful for current and future members. Plan risk assessment is part of our ongoing responsibility to review the risks and opportunities facing the Plans and to evaluate what action, if any, needs to be taken to improve their long-term resiliency.
The SC Board has decided that this sustainability review will not result in changes to benefits or contribution rates. We feel this is the right decision after extensive consideration and analysis, including feedback from Sponsors and Stakeholders as well as the results of the asset-liability study and the updated long-term discount rate strategy, both of which were approved by the Administration Corporation (AC) Board in August 2023. Specifically, at its September 2023 meeting, the SC Board determined that the current level of contributions, together with our expected future level of investment earnings, positions the Plan to build the resiliency it needs for the current level of benefits as the Plan matures.
In the event that the SC Board determines the need to consider changes at any time, this information will be communicated directly from OMERS. If you have any questions about changes that the SC may or may not be considering, please visit omers.com for updates or contact us directly.
In making its decision, the SC Board considered several factors and perspectives, including:
Any changes that impact affordability for members and employers are always very carefully considered, and particularly so in the 2023 economic environment.
Feedback from conversations with our Sponsor and stakeholder organizations was largely to keep the Plan unchanged in the short-term, while being able to respond quickly in the future if needed.
During the time that we conducted our review, there was material change in the economic environment, particularly a significant increase in long-term interest rates. As a result of this change, OMERS conducted further analysis to assess its impact on the health of the Plan both in the long term and short term.
In light of changes in the interest rate environment, the AC Board made two strategic decisions at its meeting on August 16, 2023:
The approval of a new target asset mix for OMERS investments effective January 1, 2024, and
The approval of an updated strategy and target for the real discount rate used to measure OMERS pension liabilities.
More information about the target asset mix or the discount rate strategy and target can be found here.
OMERS has confidence in our long-term investment strategy and our ability to take advantage of investment opportunities.
Why does the SC conduct regular plan risk assessments?
As the Plan continues to mature, it is important to regularly assess our resiliency to future risk and uncertainty. In doing so, the SC reviews the funded status of the Plan through a long-term lens over a range of possible outcomes and assesses its ability to manage through these outcomes.
In accordance with our mandate, we will continue to monitor the health of the OMERS Plan as the economic environment changes, and other risks and opportunities arise. Our objective remains to continue to build the resiliency the Plan needs in order to deliver a sustainable, affordable and meaningful over the long term to the current and future generations of members.
More information on funding considerations can be found here.
Other proposals under consideration
Previously the SC agreed to consider five Plan change proposals we had received from the Ontario Professional Fire Fighters Association (OPFFA), all of which dealt with the provisions of the Plan offering age 60 normal retirement pensions to certain eligible police officers, firefighters and paramedics. Below is an update regarding the status of each of the proposals:
In June 2023, the SC Board approved a change related to the methodology by which pensions were converted from the normal retirement age 65 provisions to the normal retirement age 60 provisions. You can read more about the new methodology here.
Two proposals the SC Board is considering would modify the way in which we allocate the Plan’s total contributions across its membership. The SC Board is committed to further assessing these proposals in the context of a broader review of our philosophy for setting contribution rates as part of our 2024 work plan. It is important to note that irrespective of the outcome of this review, the SC has committed that contributions will remain the same, including the existing allocations across the membership, until at least January 1, 2026.
The final two proposals related to normal retirement age (NRA) conversions will be further considered in 2024.
What lies ahead
As part of the SC’s normal course of business, we will continue to focus on the key areas that allow us to fulfill our mandate, namely:
Ongoing monitoring of the Plan’s long-term health;
Reviewing policies and by-laws to ensure effective governance;
Assessing the appropriateness and fairness of contribution and benefits across members; and
Completing appointments to both the AC and SC Boards.
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.