CANADA - OMERS, the C$35.9bn (US$16bn) Ontario Municipal Employees Retirement System, has scrapped plans to distribute part of its massive C$4bn (US$2.5bn) surplus amongst members and employers, due to the terrorist attack on New York.
OMERS has put the surplus distribution plan on hold due to the decline in equity markets worldwide, a situation that has since been exacerbated by the attack on America. The surplus plan would have saved active members and employers C$1bn in contributions, in addition to paying for a 6% increase in retired members pensions.
As a result, OMERS has put together a package of changes to the surplus plan that it considers prudent and necessary to protect both its funding level and members’ interests.
The most significant change to the surplus plan is that it will end the member and employer contribution holiday that is currently in place. Members and employers will resume contributions by July 2002, six months earlier than planned. When they resume, contributions will be phased in over three years, starting at one third of the normal rate.
Another notable change to the surplus plan involves the 6% pension increase for retired OMERS members. For members who retired before 1978, that increase will fall from 6% to 1.92%.
The pension fund also cites changes to the Canada Pension Plan (CPP) offset as justification for putting the surplus plan on hold. The CPP offset is the reduction that is applied to an OMERS pension when retired members reach age 65. The offset reduces the OMERS pension to allow for the amount that is received by members from CPP.
Originally, the fund had decided to reduce the CPP offset to 0.6% from 0.675. In light of the events of September 11, the lowering of the OMERS CPP offset has been postponed. OMERS said that it would consider the offset at a future date.
By Geoffrey Ho
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