New proposals continue to shrink public sector pensions
In case you missed it, last week marked the most recent skirmish in a much larger battle to bring burgeoning public-sector compensation costs under control.
The Ontario Municipal Employees Retirement System (OMERS), the largest pension fund in Ontario , is studying a change that would reduce the key figure used to calculate how much money an employee will receive each year in retirement.
The proposal would reduce the “multiplier” rate now used to calculate when workers would be entitled to full benefit to 1.85% from 2%. Other potential changes include curbs on indexing for inflation and a delay in early-retirement eligibility.
Currently, a full pension at OMERS is equal to 70% of an employee's top five years of income. With the current multiplier, that means it would take 35 years to reach that point.
Under the new proposal, workers -- which include paramedics, transit workers, firefighters, police and city workers -- would have to work three years longer to reach that threshold. While that may not seem like much for those without any plan at all, it is a big deal for those currently participating.
OMERS, like many pension plans, is under-financed because of low interest rates and so-so stock market returns, and currently has a deficit approaching $10-billion. This change would go a long way to reducing that number, the employer group maintains.
And they're not alone in angling for change. Recently, Aon Hewitt talked to employers concerning likely actions over the next year in respect of the design, management, and delivery of their pension plans.
Click here for that report.
Is your pension plan provider telling you the rules are changing? How so?
By Gordon Powers, MSN Money