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Sightlines Issue #5

Protecting Your Pension

Introducing the possible Plan options currently under consideration

Last month, we sent a special bulletin to members announcing important updates on the Comprehensive Plan Review, including revised timelines. In this latest edition, we’re sharing the results of the June Sponsors Corporation (SC) Board meeting, including the Plan change proposals and next steps.

Highlights

  • Despite recent gains, the OMERS Plan remains financially vulnerable to longer-term pressures beyond our immediate control
  • Extensive modelling shows that the cost of the Plan will continue to increase over time – substantially under some circumstances
  • Possible Plan options are being considered to help stabilize Plan costs, reduce long-term funding risk, and introduce an important level of equity across generations
  • Changes (if any) are unlikely to take effect before January 1, 2021
  • No impact on pension benefits accrued (earned) before the effective date of any change
  • No impact on current retirees or members who retire before the effective date
  • SAVE THE DATE: Member webcasts starting next month on August 14 and 16
  • New e-alerts: Sign up to get notifications on all the latest updates
  • New SC Facebook page – coming soon

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: 


Click any of the links above to learn more about each of the proposed Plan options.

     Key things to consider

As you consider the options, there are two essential things to keep in mind:

  • No changes have been confirmed at this point. The Board will vote on final changes in November, following broader consultation. As always, Plan changes require a two-thirds affirmative vote by the SC Board and are unlikely to take effect before January 1, 2021.
  • If the SC Board approves any of the proposed options in November, the approved changes will apply only to service after the effective date of the change. The current rules will apply to all benefits accrued (earned) before the effective date.
  • Any changes will have no impact on current retirees or members who retire before the effective date. In no case will benefits earned before the effective date be reduced.
As always, we encourage you to review these materials carefully. If you have any questions, check out our Frequently Asked Questions. If you have a question you can’t find an answer to, send an email to contact@omerssc.com.

     SAVE THE DATE: Upcoming webcasts

Between now and the SC Board meeting in November, we will be hosting a series of informational webcasts on the proposed Plan options. The first two sessions will be on August 14 and 16.

This is your opportunity to hear about the Comprehensive Plan Review first-hand. Sign-up details will be posted on our website later this month.
 
While registration may be limited, there will be a number of webcasts happening over the next few months and more opportunities to sign up for a future session. As always, you can continue to share your thoughts and questions by sending an email to contact@omerssc.com.

     Keeping you informed

The SC website is your central information source for regular updates on the Comprehensive Plan Review. This site will be updated with our latest resources, including videos, newsletters and answers to member questions. Please visit the site at www.omerssc.com and check back from time to time for the latest news. 

*New* Sign up for e-alerts

If you’d like to get an email notification on updates we post on the site, sign up for e-alerts by clicking here