We see attacks on Pension Plans in the US and even here in Canada, in places like Alberta. We spend good money funding a good pension plan, but are we under attack? Will the proposed plan changes take the heat off?
- Pension funding is vitally important, and a plan that can withstand the economic ups and downs successfully reduces the need to increase pension contribution rates to compensate. This keeps the focus off of the cost of the plan. We know it is funded 50% by employers and 50% by employees but it can still be negatively spun in the public.
- A healthy plan is a stable plan, is less likely to be under attack.
Q - I am guaranteed my pension income, and have paid into it, they owe me my pension, correct?
A - The Plan is managed to maintain a fully funded or surplus state as much as possible, but there are only 2 was to maintain this if the economy/investments can't keep up.
- Contribution rates for employees and employers can be raised
- The retirement benefits of current employees can be reduced
There is no guarantor, or mechanism to pay pensions if OMERS were to fail financially. This is why OMERS leaders forecast and look for ways to share the risk, not just limiting the burden to the active member and employer.
Q - Why aren’t investment returns enough?
A - Basically, the change in plan maturity, less active employees and more retirees puts an undue burden on active employees to sustain the plan.
- Investments have performed well in the past, but the challenge our Plan faces in the future are real
- OMERS is now paying out more in pensions annually than they receive in contributions in the same time frame, and the gap is widening
The more members and employers there are to support the Plan’s return to health, the more affordable the recovery is for everyone involved