MEPCO UPDATE
November 7, 2017

Issue:
In December 2017, the OMERS Sponsors Corporation (SC) will vote on a proposed change to the OMERS Plan that would leave it to local municipalities and their paramedic unions to consider NRA 60 benefits as part of collective bargaining.

Background:
There is a history of unsuccessful plan change proposals submitted by CUPE/OPSEU to the SC Board to enable access to NRA 60 OMERS Plan benefits for paramedics, none of which has been supported by AMO/MEPCO. We are told that the Income Tax Act (ITA) provides for equal treatment of paramedics, police officers and firefighters for pension purposes and that since paramedics do not currently qualify for NRA 60 benefits under the OMERS Plan, there is a perception of inequity and lost opportunity under the ITA for potential benefit accruals.

The option to negotiate NRA 60 benefits would impact all current and future paramedics and their employers. If the proposed Plan Change is approved and conversion from NRA 65 to 60 is negotiated, a member would pay higher contribution rates, may retire up to 5 years earlier and may have NRA 65 credited service at the conversion date reduced by up to 25%. These requirements may not necessarily be attractive to the full membership of an association. Employer pension contributions to OMERS would also increase due to the higher NRA 60 contribution rates and earlier retirement of paramedics could result in local organizational impacts.

Analysis:
If the proposal is approved, these specific contract negotiations or related interest arbitration could add to municipal pension costs. Assuming 2017 OMERS contribution levels (blended rate of 21.3%) and full conversion from NRA 65 to NRA 60, total annual employer and paramedic OMERS benefit costs would each increase by $3.3 million. SC staff advise that of the number of 6719 paramedics (at December 2016), just 20% would benefit, 43% may benefit, depending on when they choose to retire, and 37% would not benefit. Of the 43% that may benefit, it is debatable that 18% of this number would benefit because their unreduced NRA 65 date is close to their unreduced NRA 60 date. Given the fewer numbers that would clearly benefit, it may be difficult for a local union to bring the benefit proposal forward for a small portion of its membership, at least in the short term.

Why Make a Decision on the Proposal Now?
Currently both OMERS Boards are engaged in a range of studies designed to provide information on how the future OMERS Plan membership may change, municipal workforce trends and a future Macroeconomic Outlook. These studies, expected to be completed by June 2018, will identify data and trends related to future municipal workforces. These results will guide OMERS Board decisions on the development of the 2030 OMERS Strategy and a Comprehensive Review of the OMERS Pension Plans to ensure they are sustainable, meaningful and affordable.

Given that SC Board consideration of NRA 60 benefits for paramedics has been an annual employee proposal for nine years, the MEPCO Board believes that the prudent approach is to defer an SC Board vote on the Plan Change proposal until the OMERS study results are available in June 2018. It is not clear to the MEPCO Board why a decision on this matter must be taken before these important OMERS study results are available to both Plan sponsors and the SC Board to inform a decision on the proposal. In fact, the SC Board has decided to defer its consideration of other important Plan Change proposals such as including Non-Full Time employees in the OMERS Plan and the Modified Indexation (MI²) Proposal pending its review of OMERS study results.

MEPCO’s Advice to the SC Board:
Given concerns about the justification and cost of the proposed plan change, the MEPCO Board strongly believes that the SC Board defer its consideration of the Paramedics NRA 60 Plan Change proposal until the OMERS study results are available to inform decision making.