MEPCO Member Newsletter - March 2020
MEPCO Board report: March 2020
What’s new at OMERS
On January 1, 2020, changes to the OMERS Sponsors Corporation governance by-laws came into effect. The changes were proposed following an assessment of board governance and effectiveness. Key among the goals of the review was to modernize governance of the OMERS plan. MEPCO supported the proposed changes with a view to good governance practices, affordability and the long-term sustainability of the plan.
OMERS 2019 returns
OMERS reported a 2019 investment return of 11.9% or $11.6 billion, net of expenses. With the plan valued at $109 billion, the 2019 performance exceeded 2018 net return of 2.3%. The performance reflects OMERS’ funded status improvements for the seventh consecutive year. The 2019 improvement in the plan’s funded status primarily reflects its five-year net investment return of 8.5%. All asset classes generated positive returns, led by public equities. Over the past five years, OMERS has earned $9.8 billion of net investment income over and above the amount required to fund its pension obligations. Current market turmoil will have a considerable impact in the short-term. The OMERS Administration Corporation Board and staff are working to minimize long-term impacts.
OMERS considering two plan design changes
Currently, the Sponsors Corporation is considering two potential plan changes as part of its 2020 planning cycle. If the changes are approved in June 2020, they would be effective January 1, 2023. The 2020 plan review is outlined on the OMERS website and is the subject of analysis by MEPCO.
Shared Risk Indexing
'Shared Risk Indexing' is proposed to help deal with long-term plan sustainability and affordability, and is supported by MEPCO. It would mean inflation increases to plan benefits, earned after December 31, 2022, are fully granted until a point where the plan cannot sustain them. Under current rules, the Sponsors Corporation must provide full indexing to inflation for all retirees regardless of the plan’s financial situation. Establishing this provision now would mean greater flexibility to manage in the future. Note this proposal would have no impact on benefits/service earned prior to December 31, 2022.
The other proposal relates to the 'non-full-time employees' who are currently not eligible for OMERS enrolment. If passed, this proposal would allow all part-time and seasonal employees to opt-in to the OMERS plan at any time. There are currently about 26,000 part-time municipal and 20,000 seasonal municipal employees who would acquire the option of joining OMERS. (Note, there are already about 20,000 part-time municipal employees who are enrolled under current rules.) While it is difficult to predict uptake, MEPCO’s preliminary financial analysis indicates that for every 10% of newly eligible part-time and seasonal employees who opt-in, the cost for municipal employers collectively would be approximately $13.5 million. Consequently, MEPCO does not support this proposal.
MEPCO Board activities
Highlights of the March 2020 MEPCO meeting include:
- The MEPCO Board received an update from Sponsors Corporation and Administration Corporation Directors, with information shared on investment returns, market conditions, and proposed plan changes.
- Analysis of 2020 proposed plan changes was presented.
- The 2020 membership report was presented, indicating continued strong support for the work of MEPCO.
- MEPCO Board members Doug Reycraft (Chair), Gretchen Van Reisen and Manon Harvey were reappointed to the Board.
- The next 2020 MEPCO Board meeting dates were set for May 11, September 14 and December 7.