MEPCO Update: PSAB Guidance and Response to Calls for OMERS Independent Review
Public Sector Accounting Board’s Exposure Draft, Proposed Section 3251, Employee Benefits
In fall 2018, the Public Sector Accounting Board proposed revisions to accounting guidance that could require public sector employers to state their proportionate share of the net assets of pension plans in which they participate. MEPCO has been actively monitoring these proposed changes and engaging with the Public Sector Accounting Board (PSAB), OMERS, and other affected employers and unions.
With the release of the July Exposure Draft, PSAB has included provisions that we believe recognize that municipal employers participating in OMERS do not have the ability to reflect their share of liabilities and assets on their financial statements. MEPCO strongly endorses the inclusion of paragraphs .033-.035, which outline scenarios in which a public sector entity may not be able to identify its share of the pension obligation with sufficient reliability. It is our expectation that municipal employers will continue to account for their pension obligations according to the guidance for defined contribution plans.
MEPCO has submitted a letter to PSAB on this matter. OMERS has created a number of resources for municipal employers, including a presentation by Brandon Weening, OMERS Senior Vice President, Corporate Finance, and a short overview document.
MEPCO encourages municipal employers to review the Exposure Draft, seek advice from your own advisors, and submit your own comments to PSAB. Comments on the Exposure Draft are due by November 25, 2021.
AMO and MEPCO Do Not Support the Call for an Independent Review
CUPE Ontario is currently calling for an independent review of OMERS’ multi-year investment performance. AMO and MEPCO do not support this call.
AMO and MEPCO believe the role of all Plan sponsors is to ensure that individuals with expertise in governance, finance, and pension administration are appointed to the OMERS Boards. Through MEPCO, AMO appointees to the OMERS Sponsors Corporation (SC) and Administration Corporation (AC) Boards have access to the resources, intelligence, and analysis they need to fulfill their governance responsibilities in a way that is fully informed by the priorities, realities, and aspirations of Ontario’s municipal employers. AMO and MEPCO do not have a role in guiding or scrutinizing OMERS AC’s investment decisions or strategies, nor should they.
That said, the MEPCO Board, and AMO staff, work closely with OMERS Board appointees, and with OMERS senior staff, to ensure the needs and expectations of municipal employers are front and centre in the work of both the AC and SC Boards. That includes very frank discussions about Fund performance.
OMERS recently released its results for the first half of 2021. The results are very good, with a net return of 8.8% in the first six months of this year. That net investment income of $9.2 billion, over six months, brings the Fund’s value up to $114 billion. Over the twelve months ending June 30, 2021, the Plan earned a net investment return of 18.2%. The results demonstrate a significant improvement over the 2020 results which reflected a net loss of 2.7%.
AMO and MEPCO have full confidence in both the AC and SC Boards to ensure the $114 billion OMERS Plan remains affordable, sustainable, and meaningful in the decades ahead. Achieving that goal will be very challenging in the face of changing demographics, Plan maturity and market instability.
AMO and MEPCO are committed to working with all OMERS Plan sponsors to achieve that goal.