July 9, 2012

The OMERS Sponsors Corporation (SC) recently approved two of the eleven Specified Plan Change (SPC) proposals submitted by various sponsors in the 2012 cycle.  Five of the failed 2012 proposals focused on pension cost reductions related to the RCA, early retirement, indexation reduction (2) and the benefit accrual rate and were submitted by various OMERS employer sponsors.  The SC also approved the filing of the 2011 Primary Plan and Supplemental Plan Valuations.  The remaining proposals either failed or were withdrawn.  

The two Specified Plan Change Proposals that passed were: 

a) RCA Restrictions (SPC #01‐12(c)):
The Retirement Compensation Arrangement (RCA), which is a separate pension agreement, provides benefits beyond the maximum pension available under the Primary Plan. The RCA has special tax treatment.  For 2012, the Canada Revenue Agency set this amount at about $145,000. The Sponsors Corporation has been concerned with the ability to fully fund the RCA benefits and the approved proposal imposes an additional constraint for very high income earners,
by limiting the total contributory earnings to seven times the CPP earnings limit, i.e. about $350,000 for 2012. This change will be in effect from January 1, 2014 for members enrolling in OMERS after that date and from January 1, 2016 for members enrolling prior to January 1, 2014.  

b) Contribution Rate Methodology (SPC #10‐12(b)):
There was concern as to how the contributions were allocated between NRA 60 and NRA 65 for 2012.  The SC approved a new methodology for establishing future contribution rates and an allocation for 2013. The principles which guided the SC decision are transparency, limited volatility and complexity, value for money, pooling, cost effectiveness and controllable versus uncontrollable experience.    

The SC approved allocations of the 2013 contribution rates are based on the previously approved 0.9% increase. The total contribution rate for 2013 is 21.2 %, up from 19.4% in 2012.  

The SC approved allocation of the 2013 contribution rates is:
Contribution Rates for 2013 (per side)
  Normal Normal
  Retirement Age 60 Retirement Age 65
*Up to CPP Earnings Limit 9.3%  9.0%
Over CPP Earnings Limit 15.9% 14.6%
Blended Contribution Rate 12.3% 10.3%
*The CPP earnings limit in 2012 is $50,100; the limit in 2013 will be higher 

For the technical calculation methodology for future years allocation between NRA 60 and NRA 65 refer to “Specified Plan Change Decisions” at www.omerssc.com. 

Below is a snapshot of the Status of all the Specified Plan Change Proposals (This Chart is from OMERS and for additional details, go to www.omerssc.com)  
 
Relevant Dates   Proposal
Amended/APPROVED June 28 SPC#01‐12(c) RCA ‐ Restrictions
FAILED June 28 SPC#02 -12(a) Delay Early Retiremenrt
FAILED June 28 SPC#03 -12(a) Reduce Indexing to 50%
FAILED June 28 SPC#04 -12(a) Reduce Indexing to 70%
FAILED June 28 SPC#05 -12 NRA60 - Police Civilians
WITHDRAWN June 28 SPC#06 -12(a) Contribution Rate Methodology – Capped Increases
FAILED June 28 SPC#07 -12 NRA 60 Paramedics
WITHDRAWN Before posting April 27 SPC#08 -12  
WITHDRAWN June 28 SPC#09 -12 Contribution Rate Methodology – 1%
Amended/APPROVED June 28 SPC#10‐12(b) Contribution Rate Methodology – Fixed Differential
FAILED June 28 SPC#11‐12 Benefit Accrual Rate – 1.85%

For More Information

More information about OMERS, the Sponsors Corporation and these pension matters is available on the MEPCO website and on the OMERS website.

The Municipal Employers Pension Centre of Ontario (MEPCO)
MEPCO is a not‐for‐profit corporation, created by AMO, to ensure that its employer representatives on the OMERS Sponsors Corporation and Administrative Corporation are informed well‐resourced and supported by leading pension expertise. MEPCO can raise and manage funds, hire experts who will provide appropriate research and information, and share insights with others as needed.