In June, the Ontario Municipal Employees Retirement System (OMERS) announced it would be voting on a number of changes that would hugely impact the 500,000 workers that contribute to it across Ontario in November.
According to Fred Hahn, President of the Canadian Union of Public Employees Ontario, at the latest OMERS sponsors meeting the plan presented skewed numbers to convince union representatives that changes to the pension plan are necessary to protect workers.
“It’s all about the math!” he explains. “The math is like an equation and if you plug various pieces into an equation the output will be whatever you plug in. If you plug in a bunch of terrible looking variables, then the outcome could make it look like the plan’s in trouble. That’s not true.”
Since the announcement in June, CUPE Ontario, whose membership includes 44% of workers in the OMERS pension plan, has been leading the charge in fighting against the changes.
“120,000 CUPE members in Ontario are part of the OMERS pension plan,” he explained. “It’s incredibly important to those members but also to our communities, and so any proposed changes that would reduce the benefits for future or current retirees are changes we’re gonna oppose. And that’s what we have been doing.”
The changes include a requirement of being five years away from retirement age before being able to apply for early retirement, changes to how pensions are calculated as well as conditional indexation.
The deindexing has been the key issue in coverage of the announcement and in CUPE’s campaign. According to Hahn and CUPE this could mean a difference of around 25% in pension payments throughout retirement.
“One of the key components of this plan, a defined benefit pension plan, is that it is indexed against inflation so that when people retire their retirement income is adjusted on an annual basis by the rate of inflation, up to a maximum of 6 percent a year. If your income is frozen then your buying power decreases, so having the pension indexed against inflation is incredibly important. And today that’s a guarantee, it’s written into the plan text, it must be paid.”
Throughout the summer CUPE has been encouraging members to write emails directly to OMERS stating that they oppose these changes. They have also led demonstrations outside the OMERS office to let them know pension plan members oppose these changes and been meeting with other unions to try and convince their representatives on the OMERS board to vote in favour of workers this November.
How does OMERS work?
The OMERS sponsors board is made up of representatives of employers and unions. They meet annually in June and any changes to the OMERS pension plan are presented at that meeting and typically voted on the next June. Any changes require a two-thirds majority vote.
“Every year sponsors, both employers and unions, can try to make changes to the plan, and every year employers have been proposing what we would consider concessions. Reductions to the benefits of some sort. So every year unions have voted against the employers proposed cuts and employers have proposed against the unions proposed improvements. So things have stayed pretty status quo.”
Over the last couple of years, however, the pension plan has increasingly convinced folks who are sponsors through hiring specialists to do analysis and reports that the future of the pension plan looked dire and would suggest that OMERS pension plan is in trouble, and that changes are necessary in order to preserve the pension for the future.”
According to Hahn, the June meeting was an example of ‘spin’ tactics, where flawed studies were used to present skewed projections to scare union representatives into voting for changes that seem like they are protecting workers in the long term, when they are really making concessions in the short term.
“The plan is proposing that the guarantee be removed, and that indexation be conditional based on the performance of the plan. In other words if the plan has enough money, then it could give retirees some indexing and if it does not, it would not. The reason that’s bad is you can’t really depend on or say for certain that the plan will always be 100% funded. We know this from 2008.”
Following the 2008 financial crisis, OMERS did fall into a deficit, dropping to only being 88% funded. However, according to Hahn, protections have already been put in place to fortify the pension plan during financial crises and those strategies worked. Today, the OMERS is back to being 94% funded.
“The plan that people put in place around 2010 after the financial crisis is working. That was the largest recorded financial crisis on record. It is no question that there will be another financial crisis. Capitalism has crisis inherently built into it. There are fluctuations in markets. But to suggest that we must plan for another 2008 by cutting an essential benefit that we maintained through 2008 till today is ridiculous,” said Hahn.
Employers manufacturing a crisis
Currently OMERS is one of the largest pension plans in Canada with $95B in assets and $9B in profits in 2017. According to Hahn, the doomsday messaging is connected to the 2008 financial crisis, but not for the purposes of protection against a future crisis. One of the strategies that brought OMERS funding rate up after 2008 was increased contributions from all sponsors. These concessions are a way to cut back on the contributions employers currently have to make towards workers’ pensions.
“The whole reason this is happening is because of those increased contributions. Employers do not want to make increased contributions to this plan. They want to reduce their contributions. Workers, on the other hand, are more than happy to make increased contributions to their pension, more than happy to defer more of their wages to their retirement income because they understand how important that is for them and their families when they retire,” said Hahn “But employers think short term. They think only about the cost to their balance sheet on an annualized basis and having to make these increased contributions.”
Hahn describes the presentation at the June meeting as starting with an image of the globe on fire, and included numbers that project life expectancy of all those born after 2000 at 150.
“They actually said ‘If you don’t agree that the pension plan is in trouble and that these kinds of changes are necessary you are like a climate change denier.’ We have tried to undo the damage that has been done. People – they’re good folks – they’ve been convinced that their duty is to make these hard choices.”
Following the presentation CUPE hired their own experts, including an actuary that formerly worked at OMERS who explained that the facts presented at the meeting were in fact engineered to make it seem like the pension plan was at risk and that conditional indexation would protect it and through that, protect workers.
“They basically came back to us and said ‘you’re being bamboozled. We need to tell the other unions this.’”
According to CUPE’s actuaries the challenges facing pension plans, (like the potential for another market downturn or the workforce not increasing the way it has in the past) are being overstated and the solutions are being misrepresented.
“Because, sure, are there challenges for this pension plan, like there are for all pensions today? Yes there are. Every major public jointly sponsored pension plan is wrestling with these same kinds of challenges and they are dealing with them. There are a variety of ways that you deal with these challenges to plan better for the future. The only plan being presented to OMERS members, is to cut their benefits.”
Interestingly, the November vote is a change in schedule for the OMERS board which usually meets and votes once a year in June. That the vote for this major change in the pension plan is being pushed forward by over six months is undoubtedly a tactic to limit the possibility for action in opposition to these changes.
The CUPE strategy has been to rally workers and reach out to other unions, as well as another important demographic, current retirees. Currently, Ontario law guarantees that if you have an accrued benefit in a pension plan that cannot be taken away. This is protected through the Ontario Pension Benefits Act. In this way, retired workers are seemingly protected from any changes that might apply to the pension plan for current workers. However, as Hahn points out, the same protection was previously in place in New Brunswick, Quebec and Saskatchewan, and was taken away.
“In all three of those provinces Conservative governments – or governments that call themselves by other names but are really conservative – have taken away, have changed their provincial pension laws and allowed governments to reach back in and take away accrued benefits and so retirees, CUPE retirees in New Brunswick and Quebec and Saskatchewan who thought they were safe, who thought they had benefits they could rely on because the law protected them, are no longer protected and in fact have had reduced pensions.”
Given the recently elected Tory government at Queen’s Park has already begun its expected attack on workers in Ontario by freezing the minimum wage at $14 per hour, cutting the WSIB employer premium rates and other promised changes, cuts to pension benefits is not at all out of the realm of possibility. Ontario workers need to respond to any and all attacks with unity, with solidarity and with advocacy.
“The pension plan is saying to retirees don’t worry, this isn’t about you, you’re safe. [They’re] trying to divide workers against each other. So we’re saying to our retirees, you’re not safe.”
CUPE’s efforts to engage directly with workers, with other unions and their OMERS representatives and with retirees in response to this attack on pensions is an example of union solidarity that will be essential in Ontario over the next four years, and that for municipal workers will hopefully make the difference over the next four weeks, before the OMERS sponsors board meets again to vote.