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Benefits and Pensions MonitorNew, Independent Governance Model For OMERSBill 206 (An Act to Revise the Ontario Municipal Retirement System Act) was passed by the Ontario legislature February 26. The act will take effect upon proclamation, which is expected later this year. “The new OMERS Act establishes a new and independent governance model for the Ontario Municipal Retirement System (OMERS), gives employers and employees joint control over the OMERS pension plan, and introduces supplemental plans. Two separate, but complementary, governing bodies will be established,” says Debbie Oakley, senior vice-president, corporate affairs. Under the act, sponsorship of the plan is transferred from the Ontario government to a new Sponsors Corporation, which is responsible for plan design and contribution rates. The Sponsors Corporation will comprise 14 members, seven representing plan employers and seven representing plan members. The plan administration and investment management functions will continue to be overseen by the OMERS board, which will be renamed as the Administration Corporation and will also consist of an equal number of representatives from plan members and employers. The legislation requires the Administration Corporation to establish supplemental plans for police officers, firefighters, and paramedics, offering the benefits specified in the act. These plans would offer benefits not offered in the primary plan and would be funded by the contributions of the employers and members who participate in that particular plan. Supplemental plans for other OMERS members can be established in the future by the Sponsors Corporation. Autonomy Longstanding Objective “Autonomy, or independent governance, has been a longstanding objective of the OMERS board and many stakeholders,” says Oakley. “In 2002, at the Ontario government’s request, the board provided advice to the Minister of Municipal Affairs on an independent governance model. In 2005, the government of Ontario introduced Bill 206, with the Minister of Municipal Affairs and Housing noting, in a release dated February 22, 2006, that ‘it’s important to all those who pay into OMERS because it gives them control over their own pensions for the first time’.” The new legislation puts OMERS governance on the same footing as other major public sector pension plans in Canada such as the Ontario Teachers’ Pension Plan, the BC Municipal Plan, and the Hospitals of Ontario Pension Plan. At these plans, decisions about plan benefits and contribution rates are made by the sponsors who pay for the plan. The province of Ontario initially established the OMERS plan in 1963. The province makes no direct financial contributions to the plan, but, until now, made all final decisions on such things as plan design, benefit changes, and appointing the OMERS board. With the new legislation, OMERS will now be governed by, and directly accountable to, the members and employers who fund the plan.
Priorities For Implementation To implement the Act, OMERS‚ priorities over the next year are:
Business As Usual Oakley says it will be business as usual at OMERS. “Our focus remains investing the funds and administering the plan for the benefit of the members. Most plan members and retirees will see little immediate change as a result of the new act. “However, for police officers, firefighters, paramedics, and their employers, there will be change in the next two years as the supplemental plans are established and negotiated at the local level. One benefit may be bargained initially, then additional benefits can be bargained one at a time, at three-year intervals.” Plan sponsors will have new responsibilities. They will be making the decisions on benefits and contribution rates. In the future, they will be making appointments to the boards of the Sponsors and Administration Corporations. Oakley says independent governance is important because it aligns accountability for decisions with those who are affected by them and whose contributions help fund the plan. In future, important decisions about benefits and contributions will be made by the employers and members who pay for the plan. “This is a fundamental principle in pension plan governance.” Period Of Transition Of course there are some risks involved, says Oakley. “With any significant change, there is a period of transition and adjustment and OMERS faces some unique challenges in that it is a multiemployer, multi-union plan. OMERS is fully prepared for the implementation of the new OMERS Act and is ready to work with the Sponsors Corporation to effectively manage the plan. Like all registered pension plans, OMERS is subject to laws that protect the rights of members and set investment limits to minimize risk to the pension fund. The new OMERS Act does not affect these provisions.” |
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