OMERS Commentary

July 17, 2012
By

We are pursuing the OMERS pension review process. It has come to our attention that there are no cities that have submitted proposals to the Review.

We urge your to contact your local politicians and bring them up to date!

Here is our perspective on the Review and why it is important that cities become involved and participate. It will hopefully clear up a lot of the misconceptions about the process and what currently is happening.

OMERS commentary

It pertains to the OMERS pension plan which is the pension system for city employees across Ontario. There are some specific concerns we are trying to address.

1) The shortfall at OMERS is escalating rapidly and is cause for concern for us. Last year for example the plan increased its shortfall by $2.8 billion This was despite funding of $2.7 billion based on employees and employers matching contributions at 12.9% of salary (25.8%). The 2013 contributions will be 15.9% per employee at the higest level.
http://www.lfpress.com/news/london/2012/04/26/19684746.html
http://www.omers.com/corporate/news_article.aspx?newsid=5611

2) The current shortfall is $7.3 billion and this is up from a zero deficit just three years ago. We estimate the plan will end up at least $9 billion short by the end of this year. It is increasing at a very rapid rate and increased contributions appear to have no impact on the deficit.

3) The province has dropped responsibility for the OMERS plan directly onto cities and has moved away from an implicit backstop on pension shortfalls. In conjunction with this they have commenced a pension review based on changes to the plan in 2006. The elected city officials we have spoken with are blissfully unaware of the changes to the pension plan or the current review.

4) It is fair to suggest that since the plan has a $7.3 billions shortfall for 263,000 employees, this can be prorated to the cities based on the number of employees they have? The shortfall amounts to $27,750 for each employee. Future contributions into the plan are matched by the employer and employee at 50/50.  For Example, Ottawa has 14,000 FTE employees and the allocation on the OMERS pension shortfall for them would be $27,750 X 14,000) or $388.5 million.

5) The cities and OMERS are suggesting to us that the plan is fine because there is still more money coming in from contributions that being paid out in benefits. In 2011 the plan paid out $2.4 billion double from  $1.153 billion in 2002 and contributions amounted to $2.7 billion, up from $404 million in 2003.

lease review the attached information. Our current goal is to wake up local elected officials and hope that some would provide input into the current OMERS pension review.

OMERS Governance website

Globe and Mail

Everyone want to avoid what happened in Scranton Pennsylvania

Leave a Reply