A Canadian union has filed a legal challenge with Ontario’s independent pension regulator over the $82.4 billion Ontario Municipal Employees Retirement System (OMERS)’s policy for paramedic plan members’ access to early retirement options.
According to the Canadian Union of Public Employees (CUPE), OMERS has two classifications for its members: normal retirement age 65 (NRA 65) and normal retirement age 60 (NRA 60). NRA 65 members can retire with an unreduced pension at the age of 65 at the earliest, or 30 years of service, and the earliest retirement age is age 55. NRA 60 members can retire with an unreduced pension at age 60 at the earliest, or after 30 years of service, and their earliest retirement age is 50.
CUPE, which filed the legal challenge with the Financial Services Regulatory Authority of Ontario (FSRA), says OMERS had prohibited unions representing paramedics from negotiating earlier retirement options with employers from 2005 to 2020, despite police and firefighters in the plan already having earlier retirement options. OMERS extended the earlier retirement option to paramedic members beginning Jan. 1 of this year; however, CUPE said OMERS’ rules for transitioning paramedic members from NRA 65 to NRA 60 put members at risk of a reduced pension.
“Paramedics have been demanding that OMERS allow them fair access to earlier retirement options for over a decade,” Fred Hahn, president of CUPE Ontario, said in a statement. “Now OMERS is saying working paramedics can transition to earlier retirement options only at the risk of deep cuts to their pensions. This is completely unacceptable, and these front-line workers simply deserve better.”
CUPE also released a scathing report that criticizes OMERS for its investment portfolio’s underperformance for 2020 and over the longer term. OMERS reported a 2.7% loss for 2020, well off its benchmark’s return of 6.9%, marking the first time the pension fund has reported a loss since the financial crisis of 2008. As a result, the fund’s total net assets fell by C$4 billion to C$105 billion ($82.4 billion). The fund also reported three-, five-, 10-, and 20-year annualized returns of 3.7%, 6.5%, 6.7%, and 6.0%, respectively. The union has called for an independent third party to review OMERS’ investment policy and strategy.
“CUPE Ontario feels these issues are so serious that a fully transparent expert review of OMERS investment strategies, returns, and internal performance assessment is urgently needed,” said the report. “This review should be conducted by the plan sponsors and stakeholders themselves … and should be fully independent of OMERS staff, who have a clear conflict of interest in conducting a review of their own performance.”
The union said OMERS’ claim that its 2.7% loss was due to the economic impacts of COVID-19 is unsupported, and it points to other major pension plans that were investing in the same economic climate but had better returns.
“There are some undeniable, systemic, and long-standing issues,” Hahn said. “The serious longer-term underperformance of OMERS merits an expert, independent review, conducted by sponsors and other representatives of plan members. We’ll keep pushing for an independent review of OMERS’ poor long-term investment record.”
An OMERS spokesperson told CIO that the pension fund is aware of the announcement CUPE issued and that it will cooperate fully with any questions or insights FSRA needs. It also said that because the matter involves one of its sponsors and its regulator, it will not comment further.