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

2. 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)

3. Funding Pressure
Normal cost is 15.09% of contributory earnings (based on 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

4. 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% ( )
2009
$0.6 b
$0.9 b
0.40% ( )
18% in 2009
2010
$1.5 b
$2.5 b
0.90% ( )
16% in each of 2009 to 2010
2011
$2.6 b
$5.4 b
1.75% ( )
16% in each of 2009 to 2011
2012
$3.0 b
$8.7 b
2.65% ( )
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

5. $279 million of deficit – $6.4 billion more to come
It can be worse
$279 million of deficit – $6.4 billion more to come

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

7. 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

8. 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

9. 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

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