Plan Funding Overview - Managing the Funded Status
Protecting our funded status using a robust approach to funding management
OMERS funded status on a smoothed basis was 97% in 2021, which is unchanged from the prior year.
Managing the Plan’s funded status
Making good, long-term decisions to protect the Plan’s funded status is critical to keeping the Plan healthy over the long term. There are three levers available to manage the Plan’s funded status:
Responsibility for implementing strategies to manage these three levers is shared between OMERS Sponsors Corporation and OMERS Administration Corporation.
The OMERS Sponsors Corporation sets contribution rates and benefit levels - taking into consideration the Plan’s funded status (full reserve, partial reserve or deficit) - to ensure the Plan remains sustainable, affordable and meaningful for generations to come.
OMERS Administration Corporation determines the actuarial assumptions and methods used to calculate pension obligations - including the Plan’s discount rate, based on advice from an independent actuary - and sets minimum funding requirements in accordance with pension laws and regulations. OMERS Administration Corporation is also responsible for investments on behalf of the Plan.
Financial strength rating
Current assessments of OMERS creditworthiness by third-party credit rating agencies:
AAA from DBRS
Aa1 from Moody's Investors Service
AA+ from Standard & Poor’s.
Frequently Asked Questions
When the value of a defined benefit (DB) pension plan’s assets is worth more than its estimate of pension obligations to its members, the plan is considered to be in surplus.
On the other hand, when a plan’s estimate of pension obligations is greater than the value of its assets, the plan is considered to be in deficit.
Over time, DB plans such as OMERS will cycle through periods of both surplus and deficit.
Full funding means that a plan’s assets equal or exceed its obligations.
OMERS continually assesses the value of its assets against an estimate of its pension obligations to members.
OMERS carefully monitors its funded status by conducting a comprehensive actuarial Plan valuation every year.
As part of the plan valuation, OMERS pension obligations are carefully mapped out for years into the future -- for all plan members.
OMERS may serve a single plan member for 70 years or even more – from the time they begin employment, throughout their career, for their life in retirement and for their eligible spouse – so it is critical to carefully assess projected obligations to our members over the long-term.
Additional Voluntary Contributions (AVCs) are optional members' retirement savings. While AVCs are invested in the OMERS Fund, the actuarial deficit does not affect AVC accounts. The actuarial deficit is related to the defined (DB) component of the OMERS Plan.
Under Ontario law, OMERS must file a detailed actuarial valuation at least once every three years with the regulator.
Pension plans must take action to address any deficits identified in the actuarial valuation.
OMERS reports its assets on both a “smoothed” (5-year) and market-value basis. The smoothed value of assets is used for the regulatory funding valuation reporting, while the market value is used in financial statement reporting.
Smoothing is a method to spread from any single year the actual investment return above or below the assumed actuarial investment return over a longer period of time.
Smoothing of assets buffers the pension plan from having to make sudden drastic changes to contribution rates or benefits because of significant investment gains or losses in any one year.
The funded ratio is the relationship of a pension plan's assets to its obligations.
OMERS funded status on a smoothed basis was 97% in 2021, unchanged from the prior year. The funded ratio is an indicator of the long-term financial health of the Plan.
Many economic factors - including volatility in financial markets, persistently low interest rates, and capital flows into alternative asset classes - present risks that impact the ability of our investment teams to generate investment returns that meet or exceed the discount rate of the Primary Plan. Demographic factors include unanticipated increases in life expectancy, trends in retirement and future membership levels. Over time, these risk factors can change, affecting the assumptions used to determine our actuarial liabilities, potentially changing our funded status.