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August 21, 2013
OMERS ponders benefits reduction

A growing pension deficit may force Canada’s second largest pension fund to reduce its pension benefits.

The Ontario Municipal Employees Retirement System (OMERS) says it is considering a proposal to change its retirement calculation formula to cope with a $10 billion pension deficit.

According to reports, the plan is considering reducing its pension calculation formula to 1.85 per cent of earnings times years of service from the current level of 2.0 per cent.  Under that arrangement, members would have to work 38 years in order to receive a pension equal to 70 per cent of their pre-retirement income. Today, members have to work 35 years to receive that amount.

If implemented, the new formula would become effective in 2015.

The revised calculation formula would not affect current retirees and would have minimal, if any, impact on those nearing retirement. However, the reform would reduce the benefits of future employees as well as younger members who joined the plan recently.

The OMERS plan is administered on a joint employer-employee basis by a 14-member board with equal representation between employers and plan members. The proposal to consider reducing the benefits originated with three employer representatives.

The plan manages approximately $60 billion in assets. It represents 429,000 active and retired members and 900 municipal employers.

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