Ontario municipal workers pension fund shortfall

[capricorn]

OMERS was established in 1962 to serve local government employees across Ontario. Today, we represent 928 employers, 400,000 members, retirees and survivors, including:

Municipal workers

Children’s Aid Society workers

Firefighters

Emergency Services staff

Police

School Board staff (non-teaching)

Transit workers

Hydro workers

http://www.omers.com/About_OMERS.htm

In 2008, the OMERS Fund posted a $279 million funding shortfall. This could grow to more than $6 billion over the next few years, as the full impact of 2008 is reflected in the funding balance sheet (OMERS will report 2009 results in 2010).

The main reason the deficit continues to grow is the pension industry practice of actuarial “smoothing,” which helps cushion a plan’s funding from volatile market conditions. Instead of the losses from 2008 being applied immediately, they are factored into OMERS funding over a longer period.

Like all pension plans, OMERS is required to eliminate any funding deficit, and is considering all available options: reduce benefits on a go-forward basis, raise contribution rates, and increase investment returns.

http://www.omers.com/Retirees/Publications/Retired_Member_News_46_-_Winter_2009_2010/OMERS_plan_to_manage_funding_deficit.htm

Ottawa taxpayers are facing a $10.8 million bill next year to top-up the pensions of municipal workers.

A memo to City Councillors from City Treasurer Marian Simulik obtained by CFRA News says municipalities have been advised that the 2011 contribution rates for both employers and employees under the Ontario Municipal Employee Retirement System will increase to help address a funding shortfall in the OMERS Plan.

--

Simulik tells Councillors "it is important to note that not all the estimated City portion will result in a corresponding increase in property taxes," adding some of the additional costs will be offset and funded by the water/sewer rates and other user fees.

http://www.cfra.com/

This will impact every municipality in Ontario. I expect municipal governments will get very creative finding ways to get taxpayers to help dig Omers out of the ditch.

[August1991]

This will impact every municipality in Ontario. I expect municipal governments will get very creative finding ways to get taxpayers to help dig Omers out of the ditch.

The same is happening in Quebec because of the huge losses of the Caisse - the State institution charged with deciding who gets the savings of many Quebecers - so that their nest egg will provide in retirement. (As it turns out, the Caisse bureaucrats made many mistakes.)

Capricorn, you are right to point out that in teh case of municipal employees (like all State employees), it is ultimately taxpayers who are liable to make these future pension payments. So, if a pension fund of State employees lacks money, and the retired employees sue for redress, governments can simply raise taxes to make up the shortfall. (Let's be honest here. When Harper decided to give Maher Arar $10 million to settle his case, federal taxpayers paid the bill. The same logic applies when there is a pay equity settlement involving State employees.)

OTOH, governments can pass laws, and rewrite old ones. I would not be surprised if governments, say around 2025 or so, change the terms of pension payments to retired State employees. There are several ways they could do this but ultimately it will be a question of what is politically acceptable. As long as baby boomers are a large part of the electorate, I think State pensions will be safe.

The Ontario Teachers' Pension Plan saw its funding shortfall balloon to $17.1 billion in 2009, despite strong investment returns.

While the fund posted a 13 per cent return on investments last year, the plan's deficit was almost seven times higher than the $2.5-billion shortfall at the end of 2008.

"We continue to face serious funding challenges," said Teachers' president and CEO Jim Leech, who attributed the deficit increase to low interest rates.

"It is confusing because we had a very good year of investment returns and yet our cost of pensions grew faster than our assets."

CTV

I love phrases like that: "... yet our cost of pensions grew faster than our assets."

Edited September 24, 2010 by August1991

[capricorn]

I love phrases like that: "... yet our cost of pensions grew faster than our assets."

I heard through an unofficial source that the pension fund in question granted municipal employees a 4 year premium holiday when the fund was financially healthy. The s*it will soon hit the fan.

[PIK]

Time for pension people to pay for their own pensions, not the taxpayer, I have no pension and do not see why I should pay for yours.

[Michael Hardner]

Time for pension people to pay for their own pensions, not the taxpayer, I have no pension and do not see why I should pay for yours.

Because you agreed to, and you can't revoke a contract unilaterally.

[bjre]

It is better send all Children’s Aid Society workers to jail in order to save kids in this province.

[Topaz]

There are some private pensions out there that will pay all the cost towards the pension UNTIL the person becomes 60, then they deduct what that person would get from CPP, then every time that person gets an increase in CPP, that money is deducted. Now, I can't see were that is fair and when that person does retire, whatever that person leaves with in pension, that company shouldn't be able to take another away, no increases but no decreases. IF any pensions should be viewed its the MP's, I think that too much money as far as pensions paid by tax payers. We also have to reminds ourselves that the pensions that these workers get, is agreed by council, so maybe votes should take care who they vote in.

[FengGao]

Pension fund is a government run Ponzi scheme

[William Ashley]

http://www.omers.com/About_OMERS.htm

http://www.omers.com/Retirees/Publications/Retired_Member_News_46_-_Winter_2009_2010/OMERS_plan_to_manage_funding_deficit.htm

http://www.cfra.com/

This will impact every municipality in Ontario. I expect municipal governments will get very creative finding ways to get taxpayers to help dig Omers out of the ditch.

OK who is making all the money - someone has to be getting it. I think this is the first key in determining a safe investment.

Edited October 25, 2010 by William Ashley

[Bugs]

http://www.omers.com/About_OMERS.htm

http://www.omers.com/Retirees/Publications/Retired_Member_News_46_-_Winter_2009_2010/OMERS_plan_to_manage_funding_deficit.htm

http://www.cfra.com/

This will impact every municipality in Ontario. I expect municipal governments will get very creative finding ways to get taxpayers to help dig Omers out of the ditch.

Nice presentation, but I have one question. OMERS is supposed to be administering the pensions from contributions of the government and employees, however they have that worked out. Why is the taxpayer on the arm for the shortfall? OMERS is the trustee.

[scribblet]

I heard through an unofficial source that the pension fund in question granted municipal employees a 4 year premium holiday when the fund was financially healthy. The s*it will soon hit the fan.

At the time that happened, Mike Harris in his 'wisdom' deemed that pension plans should not have more than a certain amount of surplus $$ so therefore, these surplus funds had to be distributed. http://www.fin.gov.on.ca/en/publications/2001/pension01.html

Committees were formed to decide how the surplus should be distributed, long story short, most of the surplus funding distribution was in favour of active employees who received the 4 year premium holiday - which I believe was actually cut short when the global recession hit. This meant of course that employers did not have to pay in the matching contributions either.

Retirees were short changed, they only received an improvement in the widow/er's pension raising it from 60 to 66% and something else I don't remember, it was very lop sided against those who contributed towards the surplus. I never read the whole thing or understood why Mike Harris thought this should happen, I think most of us realized that this would come back to bite us later, obviously it has.

I don't normally think that the taxpayers should be on the hook for any shortfall but considering that it's quite likely that had Mike Harris not legislated this, there would have been enough funds to cover the current problems, maybe they should.

Remember Bob Rae agreeing to 4.1 billion in payouts to the teacher's pension, I understand that after all their successes since then, they too now have an unfunded liability.

OMERS pensions include CPP, they are not stacked although I think firefighter's pensions are stacked. When a person retires before 65 they calculate a CPP offset amount which is deducted at age 65 when CPP kicks in. If you retire early at 60 then you actually benefit with the additional CPP for 5 years. Premiums are based on all of this, if pensions were stacked, then premiums would be higher.

I'm just going to read up on these links.

ETA: Over the years the retirement age has been lowered to the 80 factor and or 55 and out. One thing they can do is raise the factor to 85 or 90, in my experience most people who retired that, early went back to work. (somewhere else)

Edited October 31, 2010 by scribblet

[mikedavid00]

Time for pension people to pay for their own pensions, not the taxpayer, I have no pension and do not see why I should pay for yours.

Amen.

[Topaz]

I'm sure the taxpayers and the On. workers won't appreciated this article that tells of the spending habits of the people at the top of the pesnion fund. http://ca.news.yahoo.com/s/torsun/101113/canada/pension_fund_bosses_living_high_off_hog

[Michael Hardner]

I'm sure the taxpayers and the On. workers won't appreciated this article that tells of the spending habits of the people at the top of the pesnion fund. http://ca.news.yahoo.com/s/torsun/101113/canada/pension_fund_bosses_living_high_off_hog

They are managing $50B in assets. It's not like being a high school principal.

[mikedavid00]

They are managing $50B in assets. It's not like being a high school principal.

The idea is, is that there are plenty of wealthy people in Canada who benefit directly from the tax payer.

You have no idea how much of our financial sector on Bay street is built off our tax dollars. While indirectly, pretty much the whole TSX has our tax dollars in it.

Public workers do not pay taxes as they get paid THROUGH taxes. Ultimatly the stock market, funds, and salaries of these people on Bay street belong to the private sector workers in Canada.

Canada is a funny country. We take from the poor and give to the rich.

[Michael Hardner]

The idea is, is that there are plenty of wealthy people in Canada who benefit directly from the tax payer.

You have no idea how much of our financial sector on Bay street is built off our tax dollars. While indirectly, pretty much the whole TSX has our tax dollars in it.

Public workers do not pay taxes as they get paid THROUGH taxes. Ultimatly the stock market, funds, and salaries of these people on Bay street belong to the private sector workers in Canada.

Canada is a funny country. We take from the poor and give to the rich.

All of this depends on how you look at it. Private wealth is generated from a social structure that we all fund publicly as well. This is an economy - the movement of money from person to person.