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HomeMy WebLinkAboutTR-65-96 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON REPORT #6 REPORT Meeting: COUNCIL File# Date: July 8, 1996 Res• # By-Law# � Report#:---TR-65-96____ File #: Subject: OMERS I Recommendations: � It is respectfully recommended to Council the following: 1. THAT Report TR-65-96 be received; 2. THAT the recommendations outlined in this report be approved; and 3. THAT the appropriate By-Laws be forwarded to Council when available from OMERS. BACKGROUND: 1.0 At a meeting held on March 11, 1996, the Council for the Municipality of Clarington passed the following resolution: "That the correspondence received from the Municipal Finance Officers Association of Ontario (MFOA), pertaining to the Ontario Municipal Employees Retirement Board (OMERS) Early Retirement Plan (ERP's), be received and referred to the Treasurer for review and report." I A copy of the correspondence is attached (Attachment "A"). 1.1 The correspondence dealt with two issues. First, there is a proposal to continue a similar OMERS Type 7 Supplementary Early Retirement Plan to the one in which the Municipality participated in under the Social Contract Act. 1.2 Secondly, MFOA was requesting that a resolution be endorsed to eliminate the age and factor differential for eligibility for early retirement between police and fire personnel and all other OMERS members. See Attachment "A" for a copy of MFOA's proposed resolution. i i PAPER° RE_,E TH6 6 PRIMED W RECYCLED PAPER TR-65-96 page - 2 - OMERS TYPE 7 EARLY RETIREMENT PLAN: 2.0 Subsequent to the above correspondence, the Ontario Government approved the proposal to extend the Type 7 Supplementary Plan with one notable difference. The Plan was devised in order to encourage reorganizations and downsizing of Municipal governments. The Plan under the Social Contract duration provided for the cost of the benefit to be paid out of the OMERS pension surplus in order that the early retirement plan could be offered to Municipal employees at no cost to the Municipality. The approved plan extension is an employer-paid plan whereby the Municipality would have to fund the cost of the early retirement benefit. 2.1 The Municipality may choose to offer any or all of the following benefits to any or all classes of employees: i a) an unreduced early retirement pension from age 60; b) an 80 factor; C) improved reduced early retirement pension; and d) early retirement within 15 years of NRA 65. 2.2 Under the plan the Municipality entered into previously (per confidential Report TR-50-94), only the unreduced early retirement pension from age 60 and an 80 factor options were offered to eligible employees. 2.3 It is recommended that the same two options be offered to eligible employees under the new employer-paid early retirement agreement and the other alternatives be investigated for potential opportunities. 2.4 Of the eighteen (18) employees provided with the early retirement option under confidential report TR-50-94, seven (7) employees took advantage of the opportunity. This plan concluded at the end of the Social Contract period, March 31, 1996. 2.5 Some additional conditions attached to the new Type 7 plan include: (a) there must be a certified downsizing plan; (b) the agreement with OMERS is for a one year renewable time frame; and (c) the last day to enter into a Revised Type 7 agreement is March 31, 1999. 2.6 At the current time, enrollment packages are not yet available from OMERS. They will be made available sometime during the summer months. Lists of eligible employees will also not be available until the enrollment package is ready. i TR-65-96 Page - 3 - 2.7 It is recommended that once the enrollment packages are available from OMERS, staff and/or Mayor/Clerk, as appropriate be authorized to enter into an agreement with OMERS for the payment of the supplementary benefits provided under the Revised Type 7 early retirement plan. 2.8 It is recommended that the 1996 budget be used as the basis to establish a downsizing and restructuring program within the context of the plan. 2.9 It is recommended that Department Heads be authorized to offer the early retirement option to eligible employees as provided by OMERS, and be authorized to enter into early retirement agreements for employees who are eligible based on the same criteria but who are not a part of the OMERS plan. 2.10 Staff will report back to Council on the status of the plan after the summer break. 2.11 It is also recommended that, as with the previous Type 7 plan, that the employees interested in the early retirement option be offered continuation of coverage under the Municipality's Master Insurance Plans that exist and as they are identified in the Collective Agreement(s) at the time that the employee elects to retire, to a maximum of 5 years or normal retirement age, whichever is less. EQUAL TREATMENT OF CONTRIBUTORS UNDER OMERS TYPE 7 PLANS 3.0 MFOA was requesting that a resolution be endorsed to eliminate the age and factor differential for eligibility for early retirement between police and fire personnel and all other OMERS members. Under the OMERS Type 7 plan available during the Social Contract period, police and fire personnel were eligible after attaining a 75 factor (age + years of service) or using a normal retirement age (NRA) of 60 in determining eligibility for early retirement within 15 years of NRA. All other contributors required an 80 factor and a normal retirement age of 65. 3.1 Since the correspondence was received, the Province has removed this differential from the revised Type 7 to provide equal treatment of all contributors by including an 80 factor or NRA of 65 for eligibility for the early retirement plan. Therefore, it is not necessary to take further action on the MFOA request. I OMERS ELIGIBILITY FOR COUNCILLORS: 4.0 A Council may elect to participate in OMERS. The Council, as a class is treated separately for purposes of OMERS membership. At the effective date of Council participation individual Councillors may elect not to join OMERS, however, should the class for Council be established, all new, future members of Council who are under the age of 71 and who are not OMERS pensioners must join the plan. The terms and conditions for Councillors membership are similar to those for regular municipal employees. I TR-65-96 Page - 4 - 4.1 A survey was done of comparable area municipalities. One of the four area municipalities surveyed has Council participation in the OMERS plan. 4.2 The OMERS plan is structured such that the employee contributes approximately 6% of his/her earnings per pay period and the employer matches this contribution. In the case of Councillors, as one third of the Councillor's salary is a non-taxable expense reimbursement, only two-thirds may be included in contributory earnings. Therefore OMERS contributions are calculated on the taxable two-thirds of the salary paid to the Councillor. 4.3 The pension benefits earned by Councillors are the same as for other OMERS NRA 65 members. OMERS assumes that Councillors are continuous full-time members and therefore Councillors earn credited service for each month while serving on Council. 4.4 As with other OMERS employees, Councillors are also eligible to buy-back past service in order to maximize credited service at the Councillors expense. This is directed under the OMERS Act and the Municipality is not able to match the employer portion for any buy- back options exercised. This is the case with most buy-back options offered to employees at large with few exceptions. 4.5 It is recommended, in order to treat all eligible members on a consistent basis, that Councillors be established as a class under the OMERS plan and that existing Councillors be provided the option to become an OMERS member. 4.6 It is recommended that OMERS be notified of Council's decision regarding Council enrollment in OMERS. OMERS will then return a sample By-law for Council approval. Once OMERS has received a certified copy of the By-law, the Municipality will notify OMERS which councillors elect to join and those who elect not to join. Once the plan is established, all future Councillors will be required to participate with deductions taken directly from each pay cheque. Respectfully submitted, Reviewed by, I a 're A. Marano, H.BSc.,A.M.C.T., W.H. Stockwell, Treasurer. Chief Administrative Officer. MM/NT/hjl Attachment I i i i 1.3.'11 i 5'f b6 l I nu{1 1 L 1 YHL t l(1H':-.> lydbbZJq 1WJ M. Marano) `''own of C Pa 41697910GO MFOA 552 FGIl FEB 23 COUNCIL DIRECTION Attachment "A" MFOA MUNICIPAL FINANCE OFFICERS'ASSOCIATION OF ONTARIO • TO THIS TREASURER Ontario Municipal Employees Retirement Board (0ME11,S) Early Retin.ment Plans (ERPs) With the end of the Social Contract stipulations scheduled for March 1996, the OMERS Board, at the uuging of MFOA and many others, submitted a request to the Provincial Government to extend Type 7 Supplementary Early Retirement Plans (a.� an employer-paid option) indefinitely. It appears that approval may be granted which could extend Type 7 Supplementary plans to 1999. The original :Early Retirement Plan (ERP) Type 7 was developed as an employer-paid option to. facilitate anticipated downsizing, and was referred to within OMERS as a Supplementary Platt. Supplementary plans required several elements: • a certified downsizing P lan (a pp roved by Council and passed under by-law with certification from an .authorized municipal official); + a reasonable payback term; • regular payments made to OMERS by the employer (spread over a period of up to 10 years); and + a two-year sunset clause stipulated by Management Board. With the introduction of the Social Contract, the OMERS Board approv,:d the use of$200 million of pension liability savings arising from wages frozen under the Social Contract Act, to allow municipalities to develop downsizing plans with as few layoffs as possible. This initial 5200 million was augmented periodically when demand e)dceeded cash reserves. Plans are being. discussed at present to continue a similar supplementary plan with the following conditions: The price of the extension to 1999 will be recovered at full cost or some portion :.hereof, at the discretion of the OMERS Board. Previously this post was provided at no charge to municipalities. New Supplementary Plans are to be instituted under one-ye�.-r agreements, as required by the Pension Conunission of Ontario, and the option exists to develop Type 7 Supplementary Plans wber-a costs of the Plan are shtared by the employer and employee. i Regulations are being considered to prevent double dipping - thy:: is, receiving two pension payments from the same retirement fund arising from two distinct periods o,employment. For example, if an employee retires under a Typ 7 Supplementary ?ct[T rill<lii�lp�inClYlrC i:u:hOric.- . r-...,.-.. uG/GJ/7b tJ �G Jr r.Jl; Huntt;trHL 19HSb?341b9 M. Marano, "own of C Page 883 4169791 060 MFOA S62 PC12 FEB 23 '96 14:2--; / Plan, and subsequently returns to work for another OMERS employer, the pension payable under the original Early Retirement plan is reduced by a corresponding amount (the amount attributable to the Type 7 Supplementary V.an eAancement) to reflect years worked for the subsequent employer. Previously, Type 7 Supplementary Plans contained provisions for police and fire persomiel to become eligible after attaWng a 75 factor (age + years of servicr,) using a norm. al retirement age (NRA.) of 60, as opposed to an 80 factor and a NRA of se e 65 for all other � OMERS contributors, The practice of continuing this different;al betwcen police and fire a.ad all. other OMENS employees/exs is currently being debated. Duriq_ the last round of discussions that followed the first introduction of Supplementary plane, employers were financially alarmed that police and fire had been treated preferentially. :since tWs practice might be extended for police and fire in the second routed of supplementary plans, MFOA urges you to voice your concerns to ONCERS anal to the Government of Ontario. We ask that your municipality endorse the attachi�d resolution and forward it M30011 as possible to the list provided as well as your Member of Provincial Parliament. February 13, 1996 The Municipal Finartce Officers .Association of Ontario requests that you endorse the attached resolution and forward it to the: following: Hon. David Jolson Ms Joanne Fulkerson Chair of Management Board of Cabinet Chair, OMERS Office of the Chair .1 University Ave:riue 12th Floor, Ferguson Block Suite 1000 77 Wellesley St; West Toronto, 'Ontario Toronto, Ontario M5J 2P1 M 7 A I N.3 fax (416) 360-8758 fax (416) 327-3790 Hon. Robert Ri neiman Your Metnber of Provincial Minister and Solicitor General Parliament Office of the Solicitor General and Correctional Services cc. MFOA Suite 400, 175 Bloor St. East ,ghl0 w_ Toronto, Ontario -'>.j'}'(of M4W 3R8 i _ - - fax (416) 326-5085 Hon. Al Leach Minister of Municipal Affairs and Housing _� -_ 17th Flexor, 777 Bay Street �Oc L .j..�__ Toronto. Ontario - - -. MSG 2ES _. fax (416) 326-5085 - {[ fG/Li/yh 1J.;I13.1b EST; MUtt1L'lFAL FINHY—> 19056234169 M. Marano, "own of C Page 804 4169791 060 MFOA 562 P03 FE21 23 196 14:24 Municipal Finance Officers' Association of Ontario (MFOA) R sOLUI'ION 96-1 EQUAL 'TREATMENT OF CONTRIBUTORS UNDER 'T F E (;)MFRS EARI,y RE-FIREMENI' FLANS - TYPE 7 Whereas OMERS and the Provincial Government are considering the introduction of new Supplementary Pension Plans. (Type 7) as an Early Retirement option for municipalities from the end of the Social Contract to 1999; and Whereas the availability of the Early Retirement Plan (Type 7) will be oxtremoly valuable to municipalities in managing their continued efforts in downsizing and restructuring initiatives; and Whereas the Municipal Finance Officers' Association (MFOA) is supportive of the initiative to extend Type 7 Supplementary Plans to 1999 which is currently being cowidered by OMERS and the Provincial Government: and Whereas MFOA is in favour of OMERS using more of the pension liability savings resulting from wages frozen through the Social Contract to help employers and e::llployees manage downsizing and "restructuri.ng; and Whereas OMERS and the Provincial Gov+;rnrnent are considering continuing the inequitable practice of offering the early retirement differential between police and fire personnel after attaining a 75 factor (age + years of service) using a normal retirement age (NRA) of 60 and all other OMERS contributors after attaining an 80 factor (age + years of service) and a nonnal retirement age (NRA) of 65; and Whereas MFOA does not support this differential treatment between, employee groups as it contradicts the purpose of Type 7 Supplementary Early Retirement Plans as an early retirement option for municipalities, given that police and fire departments as an emergency service tend not to downsize their work1brees to a considerable extent -I.ue to cutbacks in municipal revenues; and Whereas MFOA is of the strong opinion that this.continued practice will have a detrimental financial impact on municipalities, as municipalities will lose their seasor.(.-d police and fire personnel, only to be replaced by new personnel if downsizing is not carried out, requiring tune and money to train replacement police and fire personnel; I Therefore be it resolved that OMERS and the Provincial Government be requested to treat all OMERS contributors equally and that the factors that are- usdd in developing the early retirement plats support the intent of the plan, that is, to support and enc.:.urage downsizing and restructuring initiatives in municipalities; Further be it resolved that OMERS and the Provincial Government reconsider its position of using some more of the pension liability savings due to frozen wages through the Social Contract to help employers and employees manage downsizing and resttueturipg.