The case for change
Change is seldom easy, but it is often necessary – in the best interests of our members. Despite recent investment success, the OMERS Plan remains financially vulnerable to longer-term pressures. Consider the facts:
- The Plan has not yet recovered fully from the 2008 financial crisis. As at December 31, 2017, the Plan was 94% funded and had a deficit of more than $5 billion on a smoothed basis.
- We have the highest discount rate among our peer plans, which means that we are allocating more risk to future generations.
- Investment markets are challenging in 2018, and OMERS is not immune to investment market pressures. The Plan needs to generate about $6 billion in investment earnings each year just to maintain its funding at current levels.
- In 2017, the Plan collected $4 billion in contributions from members and employers, and paid out $4 billion in pensions. Going forward, the Plan will pay out more than it collects, creating a negative cash flow.
- Enhancements to the Canada Pension Plan (CPP) will increase both benefit and contribution levels for OMERS members and employers, beginning in 2019.
- Like all major pension plans, we also face a number of financial realities that are beyond our immediate control. These include a steadily maturing plan, longer life expectancy, changing demographic and workplace trends, and an increasingly uncertain economic environment.
Collectively, these factors will increase the cost of the Plan over time – substantially under some circumstances. This means higher contributions for members and employers, reduced benefits, or some combination of the two.
That’s where the Comprehensive Plan Review comes in. The primary objective is simply to ensure that the OMERS Plan remains sustainable, meaningful and affordable for generations to come. It’s about protecting the Plan’s long-term future – and the essential benefits it provides.
Summary of proposed Plan options
Following an intense eight-month review – including regular discussions with sponsors and other stakeholders – the SC Board has identified the following potential Plan options for further consideration and consultation: