Managing Funding Pressures OMERS Primary Pension Plan MEPCO November 2, 2009

Funding Pressure Deficit of $279 million at Dec 2008 Compared to surplus of $82 million as at Dec 2007 $6.4 billion more to come over next 4 years MV of Assets $43,438 Smoothing Adjustment 6,363 Smoothed value of assets $49,801 Pensioners $20,269 Deferred vested members 944 Active members 28,867 Actuarial Liabilities $50,080 Actuarial Surplus/(Deficit) $(279)

Funding Pressure Normal cost is 15.09% of contributory earnings (based on 12.31.2008 valuation results) Compare to current combined contribution rate of 15.04% of contributory earnings (based on 2009 rates) Rising to over 15.6% by 2016 or 2017 before declining Lead time required Solving the puzzle Implementing and communicating the solutions NEED TO START NOW

Where we think we are heading Assuming: Plan experience evolves as actuarially assumed (Baseline Projection) No change in assumptions No solvency funding required Year Recognition of the $6.4 b deferred loss, with interest Est. g-c deficit at the end of the year Cont rate increase (per side) App. req’d avg annual return needed to break even 2008 - $0.3 b 0.15% (1.1.2010) 2009 $0.6 b $0.9 b 0.40% (1.1.2011) 18% in 2009 2010 $1.5 b $2.5 b 0.90% (1.1.2012) 16% in each of 2009 to 2010 2011 $2.6 b $5.4 b 1.75% (1.1.2013) 16% in each of 2009 to 2011 2012 $3.0 b $8.7 b 2.65% (1.1.2014) 15% in each of 2009 to 2012 Reflecting not only higher deficit funding requirements but also higher normal cost due to aging Less than 1 in 20 chances that this can be sustained

$279 million of deficit – $6.4 billion more to come It can be worse $279 million of deficit – $6.4 billion more to come

It can be worse Normal cost of 15.09% of contributory earnings and rising – compared to an effective combined contribution rate of 15.04%

It can be worse Solvency funding remains a threat if the Primary Plan is not exempted OECP recommended JSPPs be exempted from funding solvency deficiencies If exemption not forthcoming, solvency deficit could rise to above $3 billion at December 31, 2011, and an additional increase in contributions of 0.4% to 0.5% each side in 2013 is possible

It can be worse Results of the review of key actuarial assumptions and methods in 2009 and 2010 might necessitate the adoption of more conservative approaches If all Mercer’s considerations are adopted, increase in actuarial liabilities could be as much as $3.5 billion. Changes to salary and retirement assumptions alone could be as much as $2.2 billion, resulting in potentially another 1% each side in 2011 or 2012. Experience worse than Negative scenario Approximately 25% chance of investment return being less than the Negative Scenario assumption

Moving Forward In light of current economic environment: Continue to review plan valuation and projections Determine action needed to address deficit Develop an Objectives Statement Partner with OAC on growth initiatives

Managing Funding Pressures OMERS Primary Pension Plan MEPCO November 2, 2009