Ontario municipal pension fund giant OMERS has received a proposal from some of its employer members to increase the amount of time it would take for workers in the plan to gain a full pension from 35 years to 38 years.
The proposal will be voted on at the end of June, but would require significant backing from union representatives at the Ontario Municipal Employees Retirement System to be approved.
Under the proposal – made by representatives from the Electricity Distributors Association, the Association of Municipalities of Ontario and the City of Toronto – the so-called multiplier of 2, now used to calculate when a person would be entitled to full benefits, would be cut to 1.85 starting in 2015.
“This is just one of the proposals that has been tabled,” John Pierce, vice-president of public affairs at OMERS, said Friday. He declined to predict whether the measure had enough support to be approved.
OMERS has an annual process of reviewing benefits and pension fund premium payments.
The pension fund has previously had proposals from employers to end inflation protection enjoyed by members, but the requests have not been approved because of the need for benefit reductions to pass with two-thirds support. Votes at the plan are divided equally between employers and worker representatives, making it difficult to get the needed support to approve cuts, which are usually anathema to union members.
OMERS, like many pension plans, is under-financed because of low interest rates and flagging stock market returns, and currently has a deficit of just under $10-billion. OMERS said it is about 86 per cent funded and expects the deficit to be eliminated gradually over the next 10 to 15 years.
The employer groups making the proposal said in a note that the because of the funding deficit, “contribution rates are currently at an all-time high putting a significant strain on members and their employers, at a time when our economy is also under stress.”
They said the change would involve only a small pension reduction for those close to retirement age and would be “not material” for them, while having “an immediate impact on funding.”
Currently, a full pension at OMERS is equal to 70 per cent of a person’s top five years of income. With the current multiplier, it would take 35 years to earn that amount. Those working fewer years receive a lesser amount based on multiplying their years of service by the multiplier of two.