A new cap on contributory earnings for members of OMERS went into effect on Jan. 1, 2011, and Toronto Hydro isn’t happy about it. The utility provider has filed a lawsuit against the pension system.
According to an OMERS representative, “the OMERS Sponsors Corporation (SC), through its annual review cycle, is responsible for any changes to pension plan design and benefits. The decision to introduce a cap on contributory earnings was considered, approved and communicated by the SC in June 2009, to be effective Jan 1, 2011,” the rep said.
He added, “As to the process, any sponsor and/or stakeholder can propose a change to the SC for consideration, and those proposed changes are voted on by the SC during their annual review process. The SC is made up of equal representation of employers and employee reps, and any plan design change requires a two-thirds majority to be accepted. Once a plan design change has been approved by the SC, it is the responsibility of the OMERS Administration Corporation to give effect to the change, and that has been done effective Jan. 1, 2011.”
However, Toronto Hydro seems to feel that this isn’t fair for the employees who receive large bonuses as part of their pay. The hydro company wants all of this pay to count toward their employees’ pension calculation.
“Toronto Hydro’s concern is that OMERS is capping executive performance pay but not base salaries, which could be equal to or greater than base plus performance pay,” explains Blair Peberdy, vice-president of marketing, communications and public affairs with Toronto Hydro. “It’s our opinion that executives should be required to earn their salaries based on measurable performance targets, and not have the salary hard loaded into base pay. We feel that performance based compensation plans hold executives accountable and are a key element in how companies should be run.”
He confirmed that only one or two Toronto Hydro executives are affected by this policy change.
OMERS justifies the change in policy because including bonuses as part of pensionable income was very expensive to the plan and unfair to members who do not recieve large bonuses.
The cap does allow for members to include up to 150% of salary as pensionable earnings. If an executive earns $200,000 in salary and receives a $175,000 bonus, only $100,000 of the bonus would count toward pensionable earnings, according to an example given by The Toronto Star.
The OMERS representative said he could not comment on the case specifically due to it being in front of the courts.