MEPCO Member Newsletter - July 2020
Important Plan Changes Approved by OMERS Sponsors Corporation
At the June 24 meeting of the OMERS Sponsors Corporation, the SC Board passed important Plan changes that will affect municipal employers and employees. Changes to the Plan require the support of two-thirds of the SC Board.
The following amendments to the OMERS pension plan were approved:
- Extending leave purchase deadlines
- Reducing or eliminating the 36-month employment requirement for purchases of periods of reduced pay
- Permitting temporary layoffs as purchasable service
- Non-full-time expansion
- Shared risk indexing
The first three amendments were undertaken in response to the impact on employees of COVID-19. These changes provide additional flexibility to ensure that employees affected by COVID-19 (such as through temporary layoffs) will not be disadvantaged by buy-back and other provisions that had not previously contemplated the COVID-19 emergency.
These provisions do not have cost implications for employers. For example, employees laid off temporarily due to COVID-19 will have the ability to buy back lost service at their own expense. Additional detailed information about these changes can be found on the OMERS website.
The other two provisions, non-full-time expansion and shared risk indexing, are measures that have been under consideration by the SC Board for several years and were, in modified versions, part of the 2018 Comprehensive Plan Review.
Non-full-time expansion amends eligibility rules for part-time and seasonal employees, allowing them the option of enrolling in OMERS if they choose. The change will take effect on January 1, 2023.
MEPCO did not support this amendment as it has the potential to increase costs for municipal employers. It is difficult to predict precisely how much this amendment will cost municipal employers, due to the uncertainty over how many part-time and seasonal employees will elect to enrol in OMERS.
MEPCO estimates that for each 1% of newly eligible part-time and seasonal employees who elect to join OMERS, the costs to municipal employers will be $1 million annually – aggregated province-wide.
For more detail, see the OMERS FAQ on this change.
Shared Risk Indexing
The shared risk indexing amendment is an important new development for municipal employers, and an accomplishment for MEPCO. This amendment is fundamentally important for the long-term financial sustainability of the Plan.
Shared risk indexing provides the option for the SC Board, based on its annual assessment of the Plan’s health and viability, to reduce future inflation increases on benefits earned after December 31, 2022.
This change is effective January 1, 2023, and does not affect benefits earned before that date.
This means that for retirees, the benefits earned on or before December 31, 2022, will be granted full indexation. Benefits earned on or after January 1, 2023, will be subject to shared risk indexing, meaning that the level of indexation will depend on the SC Board’s annual assessment of the financial health of the Plan.
If future SC Boards deem the use of this prevision necessary, it will apply to benefits earned after January 1, 2023, allowing the impact to be shared more broadly than if this amendment were not passed at this time.
From MEPCO’s perspective, this change will enhance the financial sustainability of the Plan, make it more affordable for employers and employees, and protect Plan benefits.
See the OMERS FAQ on this change. OMERS also provides additional information about shared risk indexing and non-full-time expansion, which is available on the OMERS website.
MEPCO and OMERS at the AMO Conference
MEPCO is creating an opportunity for you to learn more about what’s happening at OMERS at the 2020 AMO Conference.
You will hear about the Plan changes noted above and the important work of the OMERS Sponsors Corporation. You will also learn about the work and efforts of the OMERS Administration Corporation to manage through the COVID-19 emergency, ensure seamless service to OMERS members, and to protect and grow the $100 billion OMERS Plan.