2011 Specified Plan Changes



Decisions

This year, following a thorough review and analysis of available information, the SC

  • approved the 2012 Primary Plan contribution rates,
  • established a process for determining the 2013 contribution rates and
  • implemented a mechanism for future funding of the Retirement Compensation Arrangement (RCA). It also
  • approved the filing of the 2010 Primary Plan Valuation and the 2010 Supplemental Plan Valuation.
  • Additional, more detailed information is available in OMERS member and employer communications and on the OMERS website.
  • A Mediation/Arbitration decision regarding the Supplemental Plan contribution rates (and rebound costs associated with the Primary Plan) for Supplemental Plan members was received at the August 25th meeting of the SC. (Learn more about Supplemental Plan rates on the OMERS website.)

The following provides a high level overview of each approved Specified Plan Change and its impact.

Primary Plan Contribution Rates

This change sets the Primary Plan Contribution rates for 2012 and a process for determining the 2013 contribution rates.

Last year, the SC approved a multi-year phased approach to help address the deficit, which included increasing contribution rates by an average of 2.9% per side, over a three year period. The 2011 rates were established by adding 1% to each of the four groups (NRA 60 and 65, and earnings under and over the CPP earnings limit).

Based on a review of the contribution rate study and additional information received from the OMERS Administration Corporation, the SC determined, by a 2/3 majority vote, that the 2012 contribution rates will be as follows:

Primary Plan Contribution Rates

Rates per Side (Employee/Employer
2012

Normal Retirement
Age 65 Members

On earnings < CPP earnings limit
8.3%
On earnings > CPP earnings limit
12.8%

Normal Retirement
Age 60 Members

On earnings < CPP earnings limit
9.4%
On earnings > CPP earnings limit
13.9%
CPP earnings limit in 2011 is $48,300; the limit in 2012 will be higher

The SC also agreed to conduct a further independent study to help guide the allocation of future contribution rates, including the identification of appropriate elements for a single OMERS pool. The 2013 contribution rates will be set following receipt of this study in 2012.

RCA Funding

This change is intended to address the funding of the Retirement Compensation Arrangement (RCA); it does not impact the benefits payable from the Primary Plan or the RCA nor the total contributions paid by members and employers.

The RCA is a separate arrangement that pays benefits over and above the maximum pension payable under the Primary Plan and it is currently funded on a modified pay as you go basis to minimize the tax inefficiencies. Balancing sustainability with tax inefficiency, the SC approved a change that would require an annual review of the RCA to ensure that, on an ongoing basis, the RCA maintains a fund of sufficient size that it would not be expected to be fully depleted for at least 20 years. To achieve this, the earnings level at which contributions are made to either the Primary Plan or the RCA will vary each year based on the actuary's projections (within a certain corridor).

Supplemental Plan Contribution Rates

This change will only affect members and employers who participate in the Supplemental Plan for Police, Firefighters and Paramedics. As of the date of the decision, there were no members in the Supplemental Plan.

The Supplemental Plan allows for the provision of additional, optional benefits to Police, Firefighters and/or Paramedics. Depending on the benefit being provided, affected employees and employers pay an additional contribution to both the Supplemental Plan AND to the Primary Plan (Rebound Costs).

Supplemental Plan Contribution Rates

Supplemental Plan Benefit Provisions

Supplemental Plan Costs
Rates per Side
(Employee/Employer)

Primary Plan Rebound Costs
Rates per Side
(Employee/Employer)

NRA 60
NRA 65
NRA 60
NRA 65
2.33% Accrual
2.15%
1.85%
0.20%
0.25%
80/85 Factor
0.45%
0.30%
None
None
*BAE 3
0.60%
0.50%
None
None
*BAE 4
0.35%
0.30%
None
None
*BAE 3/BAE 4 - best 3 or 4 years average earnings

File the 2010 Primary Plan Valuation and 2010 Supplemental Plan Valuation

The SC has agreed to file the 2010 Primary Plan Valuation and the 2010 Supplemental Plan Valuation.

View further detail about the timing and outcomes of decisions on all seven Specified Plan Change proposals considered by the SC in 2011.