CANADA - The OMERS Board has approached the Ontario government to gain approval for an average plan contribution increase of 0.6% of earnings for both employers and employees for 2006.
OMERS provides retirement benefits on behalf of 900 local government employers across Ontario and if given the go-ahead the new rates would come into effect in January, 2006.
The scheme first alerted members and employers that contribution rates would have to rise in 2004, though at that time it looked as though it would be as high as 1-2% of earnings.
“We knew there would have to be a contribution rate increase to help with the current funding deficit,” said Frederick Biro, OMERS board chair.
“Depending on our future investment returns and other factors such as interest rates and salaries, there may need to be another rate increase,” added Biro. “That said, we continue to work hard to avoid an additional increase because we know that higher rates directly affect our active members and employers. The Board balanced these considerations when it recommended the rates for 2006.”
“Our total Fund return for 2004 was 12.1% – exceeding our benchmark return of 9.9% and the plan’s funding requirements for the year,” said OMERS president and CEO, Paul Haggis. “As a result, our actuaries revised their funding forecast slightly, which led the Board to recommend a lower (0.6%) rate increase.
“This was largely due to strong market returns, and our new investment strategy, which we implemented in 2004. We shifted more plan assets into private market investments, such as infrastructure (bridges, energy and pipelines) and private equity.
“We expect that raising contribution rates, coupled with our new investment strategy, will help to offset the deficit and, in time, return the plan to full funding.”
Biro said: “We’re committed to ensuring that we meet the plan’s funding challenges in the most prudent manner for our current and future plan participants.”
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