OMERS 2012 Contribution Rates and Plan Changes Announced

July 05, 2011
On June 28, 2011, the OMERS Sponsors Corporation (SC) approved changes to the OMERS Primary Pension Plan (OMERS Plan) and Retirement Compensation Arrangement (RCA).
  • Contribution rate increases were set for 2012, the second increase as part of a three-year strategy announced in 2010; and
  • The funding flexibility of the RCA was enhanced.

The SC also made the decision to file the December 2010 Primary Plan valuation. 

Contributions to the OMERS Plan are made by members and matched by employers. Along with investment earnings, contributions provide members with lifetime retirement income. Contribution rate changes are effective with the first full pay in 2012.

Contribution rates   2011 2012
Normal retirement age65 members On earnings up to CPP earnings limit* 7.4% 8.3%
  On earnings over CPP earnings limit* 10.7% 12.8%
Normal retirement age 60 members On earnings up to CPP earnings limit* 8.9% 9.4% 
  On earnings over CPP earnings limit* 14.1% 13.9%

*CPP earnings limit (Year’s Maximum Pensionable Earnings or YMPE) in 2011 is $48,300; the limit in 2012 will be higher. OMERS members pay a lower rate of contributions on earnings up to the YMPE because OMERS and the CPP are designed to work together to provide pension benefits. Pension plan contributions are tax deductible which will lessen the net impact on Plan members. 

In 2010, OMERS announced a three-year contribution rate increase for the OMERS Plan, totalling 2.9% per side (members and employers).

  • A flat 1% contribution rate increase per side was implemented in 2011.
  • Rate increases for 2012 were allocated following a review of a contribution rate study and other information provided by OMERS actuary. Rates have been set and affect members differently at various earnings levels and normal retirement age groups (65 and 60). Some groups will be paying more or less than the 1% average for 2012. These rates will provide the Plan with the total contributions required in accordance with the SC decision.
  • The SC will set contribution rates for 2013, following a comprehensive review. These rates will average 0.9% per side.

These adjustments are based on careful consideration of rates and benefits within the total OMERS membership. The SC will continue to review the principles for allocating and determining contribution rates for all members.

Examples of biweekly contribution increases, based on 26 pay periods

Normal Retirement Age 65

Total annual earnings example 2011 contributions 2012 contributions Difference per pay (gross) Difference per pay (net)
$25,000 $71.16 $79.81 $8.65 $6.40 
$50,000 $144.47 $162.56 $18.09 $12.46

Normal Retirement Age 60

Total annual earnings example 2011 contributions 2012 contributions Difference per pay (gross) Difference per pay (net)
$50,000 $174.55 $183.71 $9.16 $6.31
$75,000 $310.13 $317.36 $7.23 $4.98

These rate increases are intended to be temporary, and are part of a long-term strategy to return the Plan to full funding. When the Plan reaches full funding and the deficit is eliminated, rates will be adjusted. 

These changes do not affect OMERS retired members, deferred members, or survivors. 

RCA: The RCA is a separate fund that pays benefits over and above the maximum pension payable under the OMERS Plan. The SC approved a change that requires an annual review of the RCA to ensure that it maintains a viable funding level. Effective January 1, 2012, the earnings level at which contributions are made to either the OMERS Plan or the RCA will vary each year based on the actuary’s projections (within a certain range). 

Valuation: Pension plans must file an actuarial valuation showing assets and obligations at least once every three years. The decision was made to file the December 31, 2010 OMERS Plan valuation with the regulators. The next required filing will be the December 31, 2013 valuation. 

The OMERS SC is responsible for plan design and contribution rate decisions. The SC represents both members and employers contributing to the Plan and will make any decisions on changes through its annual planning cycle. 

OMERS is one of the top pension plans in Canada, and like many other major public sector plans, is on course to address funding challenges. OMERS is well-positioned to meet its pension obligations. To read more about plan funding, please see the latest edition of Member News.