MEPCO Update on OMERS: April 25, 2013
The SC Board is required to make decisions by the end of June. Employer representatives are continuing efforts to reduce plan benefits on either a temporary or go forward basis, in order to deal with high contribution rates.
As at April 23, five SPC proposals have been submitted from both employer and employee sponsors. Highlights:
Proposal #01-13 NRA 60 Police Civilians (PAO)
Proposal would make NRA 60 benefits available to members of the Primary Plan who are police civilians and whose employers change to NRA 60 in respect of this class of members, effective January 1, 2014.
Proposal #02-13 Reduce Indexing to 50% (AMO, Toronto, OAPSB)
Proposal has 3 elements:
i)
When the Primary Plan is in deficit, the current automatic 100% indexing would be reduced to up to 50% of the CPI increases in the previous year, meaning that only 50% of the CPI increase would be pre-funded.
ii)
Where retirees whose pension may be less in any year as a result of (i), the SC would determine if pensions of retirees should be increased for that year, after receiving the Primary Plan valuation for the previous year. In making its determination the Corporation will consider the current state of the Fund, the likelihood of further contribution increases being required in the next 5 years, the amount of CPI increase in the previous year and such other factors as the Corporation shall take into account in making its decision.
iii)
Upon the next filing of the Primary plan valuation, contributions would be reduced to the minimum level permitted by law.
This proposal would be effective January 1, 2015 or as soon as notice of change can be given, but not later than January 1, 2016.
Proposal #03-13 Delay Early Retirement (AMO, Toronto)
Current members in respect of service after December 31, 2015 and employees becoming members of OMERS after this date would not be able to exercise an unreduced early retirement option before age 55 for NRA 60 members and age 60 for NRA 65 members, effective January 1, 2016.
Proposal #04-13 Benefit Accrual Rate 1.85% (AMO, EDA)
(i)
Beginning January 1, 2015, a reduced multiplier of 1.85% in the pension formula for earnings above the YMPE (Year’s Maximum Pensionable Earnings for CPP set by CRA) would be applied.
(ii)
Allow the maximum years of service accrual to increase to permit members to continue to achieve a pension with a 70% replacement ratio.
Proposal #05-13 NRA 60 Paramedics (OPSEU,CUPE)
This proposal would amend the Primary plan to allow employers to provide NRA 60 benefits to paramedics, effective January 1, 2014.
Summary:
Proposals 2, 3 and 4 would contribute to the sustainability of the Plan and help reduce the current pressures on the Plan. Proposals 1 and 5 would shift certain employees to NRA 60 which has a higher allocation of contribution rate given the cost of the NRA 60 benefits and would impact municipal budgets where municipalities have their own police services and provide ambulance services.