June 21, 2012

A number of activities are underway and the MEPCO Board wants to bring its membership up to date.

a) Pension Sustainability and Contribution Rates - 2012 Ontario Budget Public Sector Pension Initiative

Many Joint Sponsored Pension Plans (JSPPs) have funding shortfalls, as does OMERS. The Province, as announced in the budget speech is consulting on proposed legislation that would “focus on ensuring that measures to improve funding do not add to employer and taxpayer expense beyond what has already been agreed to.” During the budget lock up, AMO received clarification that public sector pension plans would include OMERS.

The pension burden for municipalities participating in OMERS has increased considerably in recent years and some of the Province’s transfer partners, such as school boards are OMERS employers and impacted by increasing contributions. Minimum funding levels for the OMERS Primary Plan have increased almost 60% since 2005 and are expected to continue to increase. During this time, there have been no benefit reductions and the future benefit reductions scheduled to begin on January 1, 2013 are relatively minor. Contribution rates have risen over the past two years with a scheduled increase of 0.9% in 2013.
 
In order to manage future funding deficits to secure public pension plan sustainability, the Province’s proposed approach for containing costs focuses on capping contributions and reducing future or ancillary benefits for “prospectus” employees to deal with the shortfalls before contributions could be increased.

AMO/MEPCO representatives have met with Ministry of Finance staff to discuss municipal employer interests in this approach for containing costs and specific aspects of how a contribution capping regime might work, perspectives on what the triggers for pension plan benefit reduction might be and how to deal with disputes should plan sponsors not be able to negotiate benefit reductions and the transition into and out of a capping regime when shortfalls are handled.

After the first phase of consultations, the advice of both employer and employee groups of the various pension plans is to be analyzed and work will be undertaken through the summer on drafting legislation, with introduction of legislation likely in the fall.

b) Bill 206 (OMERS Devolution) Mandatory Review

The OMERS Review Act provides for a scoped review of the governance provisions of Bill 206 by the end of 2012. Bill 206 devolved the sponsorship responsibilities from the Province to the plan sponsors. The Review Act legislation was passed in response to CUPE’s threatened province-wide strike while the devolution was being debated in the Legislature.

The Honourable Kathleen Wynne announced the appointment of Tony Dean to undertake a review of the Bill’s governance model for OMERS. The review focuses on the effectiveness and fairness of OMERS governance, including such matters as how well the interests of OMERS employers, members and retirees are being represented; the governance accountability to employers, members and retirees; and how well the governance model ensures fairness and the overall financial stability of OMERS. The legislation does not permit reconsideration of the principle of devolving responsibility for OMERS governance to plan sponsors nor the decision to create supplemental plan options for fire and police that would then be negotiated locally. (So far no supplemental plans have been negotiated locally as they are very expensive.)

The MEPCO Board/AMO is working on a submission that will put forward perspectives of municipal employers and will share it with members in the near future. Dean’s time line for completing the stakeholder consultation process is early September, followed by his assessment of submissions and a report to the Minister by the end of the year, as required by the legislation. Details on the terms of reference for the review and consultation are available at http://www.mah.gov.on.ca/Page9860.aspx.

c) OMERS Specified Change Proposals 2012

The Sponsors Corporation will deal with the various proposals submitted by employers and employee groups to change plan design at its meeting later this month. Several proposals try to achieve some benefit reduction, such as reduced indexation, which is currently at 100%. In order for a proposal to pass, it requires a two-thirds majority vote of the Sponsors Board, which means three employee votes joining all employer representatives in voting for a proposal. A synopsis of each of the eleven proposals is available here.

MEPCO will continue to provide updates to members on developments on these and other OMERS initiatives as they proceed.

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.