Table of Contents. Letter from the Chair and President 2. About MEPCO 4. Key Developments in 2011 and MEPCO s Work 5

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1 Annual Report 2011

2 Letter from the MEPCO Chair Table of Contents Letter from the Chair and President 2 About MEPCO 4 Key Developments in 2011 and MEPCO s Work Specified Plan Change Proposals 6 MEPCO s Objectives and Priorities for MEPCO Board of Directors 10 AMO Sponsors Corporation and Administration Corporation Representatives 11 Facts about OMERS 12 Auditor s Report 15 Financial Statements 16 The Municipal Employer Pension Centre of Ontario (the Centre), AMO s non-profit corporation, provides analysis and advice to its employer representatives on the OMERS Sponsors Corporation and Administration Corporation Boards. OMERS, like many of Ontario s public sector pension plans, continues to face a significant sustainability challenge which is influenced by the increasing number of retirees, changes in the workforce and much lower rates of investment return over the last few years all within a climate of difficult economic growth. Employing pension experts and offering consistent, strategic support of municipal perspectives to our OMERS representatives is extremely important. As well, through the Centre, municipal employers benefit from advice and research on pension legislation and related policy matters. The Centre s work is framed by the MEPCO Primary Plan Pension Platform that was approved in April The Pension Platform sets out principles and positions to guide MEPCO s work. At its core, the Platform promotes first and foremost, better affordability for the property taxpayer. Contributions over the last five years have grown about 60 per cent and are expected to continue to grow. This rate of contribution growth is not sustainable, which is why MEPCO has consistently sought some benefit relief for prospective employees (not current members) as one way to limit contribution increases. Association of Municipalities of Ontario (AMO) 200 University Ave., Suite 801 Toronto, Ontario M5H 3C6 Phone: Fax: Toll-free: In 2006, when OMERS was devolved to Plan sponsors, both employers and employees, it was in a surplus state. Now OMERS is in a deficit position and will be for some time if changes do not occur. The proposals MEPCO has developed do not negate the pension promise, but rather allow the Plan to adjust to different economic

3 and President climates and to remain affordable for municipalities and local property taxpayers. Municipal employer representatives at the OMERS Sponsors Corporation have made some progress. Employee groups are hesitant about change, but in the absence of some remarkable investment returns, OMERS will have no choice but to keep adjusting contribution rates. This is why AMO and MEPCO were pleased to see the Province s desire to get a handle on growing contribution rates as the means to deal with pension deficits in Ontario s public sector pensions, including OMERS. Municipal governments know that current contribution rates are unsustainable and becoming unaffordable and are putting upward pressure on property taxes at the expense of services to communities and people. MEPCO is participating in making submissions to the Ministry of Finance on its Budget initiative to find legislative measures that do not add to employer and taxpayer expense in order to manage public jointlysponsored pension plan deficits. The Centre is also preparing a submission to the Minister of Municipal Affairs and Housing on the governance review of Bill 206 the devolution legislation which also set up this current review, scoped to look at how well the interests of the sponsors (members and employers and retirees) are being represented, including accountability. Working together through MEPCO, municipal employers present a united front and prudent advocacy on OMERS matters. We know that pensions can be complicated and highly-technical. Yet, few issues have a greater potential to impact a municipality s bottom line. The Centre will continue to keep our members as informed as possible about the activities of OMERS. Work is underway on some new communications initiatives, including an online MEPCO Toolkit and a glossary of terms, to simplify complex terminology and to make it as easy as possible for municipal leaders to follow developments and help communicate municipal concerns. Given the reluctance of municipal employee associations/unions to work with municipal employers to make changes for the sustainability of the Plan, its future will continue to be challenged, if not bleak. Your continued support enables MEPCO to provide top-quality pension expertise so that we can develop policy positions and proposals and work to achieve more progress on the pension sustainability objective. Thank you for contributing voluntarily to this endeavor. Sincerely, Three Specified Plan Change (SPC) Proposals were approved by the OMERS Sponsors Corporation (SC) in More detail about these changes is available on page 7 and also through the SC website: www. omerssc.com. MEPCO is taking advantage of every opportunity to advocate the interests of municipal employers and the need for a more sustainable approach to the pension promise. Doug Reycraft, Chair Pat Vanini, President The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

4 About MEPCO The Municipal Employer Pension Centre of Ontario (MEPCO) is a strong, knowledgeable advocate that represents municipal employer interests on matters related to the OMERS Pension Plan. MEPCO supports AMO s municipal employer representatives on the OMERS Sponsors Corporation (SC) and Administration Corporation (AC) Boards by sharing its knowledge and expert legal counsel. The Centre also keeps municipal employers informed of OMERS-related developments. MEPCO is a separate, not-for-profit corporation created by AMO. The Centre s Board includes pension experts and municipal government representatives. The Board evaluates every benefit and contribution change proposal that goes before the SC Board to assess its impact on municipal government, the property tax base, municipal employees and the overall health of the OMERS Plan. MEPCO serves almost 50 per cent of active OMERS members (representing more than 90,000 employees), making it the largest single resource to employer representatives. Funding Structure MEPCO is funded entirely by voluntary contributions from municipalities. In 2011, more than 75 per cent of Ontario municipalities contributed to MEPCO. These funds support all operations, including retaining pension, actuarial and legal experts, undertaking research and sharing information and analysis in support of AMO s OMERS representatives. AMO recognized that the relatively small number of employee groups have long been well-resourced, wellorganized and well-funded. However, few of the 900 employer members had access to independent pension expertise. It was widely agreed throughout AMO s membership that municipal employers needed support, advocacy and resources so that their voices could be heard in the OMERS decision making process. MEPCO s Work Since its inception in 2008, MEPCO priorities have included OMERS funding pressures, the impacts of pension reforms on municipal employers, the need for a long-term funding strategy, and promoting OMERS employer group collaboration. Administratively, MEPCO sets its work plan and budget annually at its November meeting, determines fees (based on a per employee rate) and invoices municipalities in December. Looking Forward MEPCO s overriding goal is to advance well thought out, actuarially sound perspectives on OMERS matters in the interest of municipal employers and the overall health of the Plan. Part of strengthening our voice may include collaboration with other employer groups that are not part of MEPCO right now. Pooling resources and sharing knowledge with organizations that share our interests will help us advance as the leading resource to employee members of the OMERS Pension Plan. History In 2006, the Ontario Government devolved itself from its central sponsorship role in OMERS and created a new and independent governance model. OMERS is now governed by the Sponsors Corporation (SC), which is made up of employee, employer and retiree representatives. All representatives work together on plan design and contribution rate changes. 4 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

5 2011 New Specified Plan Change Timeline January February March April May June Stakeholder SC Member SC Member ±Feb 24 ±Mar 20 Apr 28 May 26 Jun 28 1 Concept & Evaluation Completed by March Tabling/Amending Formal Proposals March 1 - May 4 Final Diligence 5 Decisions Valuation Receipt SC Meeting Dates Updated March 2, 2011 Key Developments in 2011 and MEPCO s Work Approval of the OMERS Statement of Plan Design Objectives and Strategy The Statement of Plan Design Objectives and Strategy (SPDOS) for the OMERS Primary Plan was approved in January The OMERS Primary Plan faced significant funding challenges in 2010 that required changes to benefits and contribution rates. In response, employer representatives were successful in getting the OMERS Sponsors Corporation (SC) Board to agree to a mandatory review of the tools used to manage Plan funding in times of deficit and surplus. The SPDOS sets out a structure for decision making depending on Plan funding levels. It sets out what actions the SC should take in times of Plan deficit, when the Plan is fully funded and when there is a surplus. A key outcome is the inclusion of a commitment to build a reserve, with a requirement for 110 per cent funding, before any new Plan benefits can be considered. The structure set out in the SPDOS improves predictability in the face of large funding deficits that must be addressed by contribution increases and/ or benefit reductions. Negotiating the structure was a collaborative effort with support from both the employee and employer sponsors. You can read the entire SPDOS document at Approval of the MEPCO Pension Platform MEPCO worked throughout 2010 to complete the MEPCO Primary Plan Pension Platform and it was approved by the Board in April The Pension Platform is a set of principles and positions that guide the Board s decisions on matters regarding the OMERS Primary Plan. The Platform also serves as a framework for AMO representatives participation on the OMERS Sponsors and Administration Corporations. The Platform promotes an integrated approach to managing three key Plan areas: benefits, funding, and investment policy; and promotes the general principle that the Plan should be flexible in all three areas to allow it to adjust to sustainability challenges. The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

6 Specified Plan Change Proposals Three Specified Plan Change (SPC) Proposals were approved in 2011: 1. Primary Plan Contribution Rates (SPC#07-11(a)) Contribution rates for 2011, 2012 and 2013 were established by the Multi-dimensional Approach to Funding Deficit. The approach was developed by the OMERS Sponsors Corporation (SC) in While the contribution rate for 2012 was already determined, the way the rate is distributed amongst Normal Retirement Age (NRA) 60 and NRA 65 Plan members will change. After completing an independent contribution rate study, the SC will determine the distribution for OMERS 2012 Primary Plan Contribution Rates Rates are per side (employer/employee) Normal Retirement Age 65 Members Normal Retirement Age 60 Members On earnings below the YMPE 8.3% On earnings above the YMPE 12.8% On earnings below the YMPE 9.4% On earnings above the YMPE 13.9% 2. Funding the Retirement Compensation Arrangement (SPC #01-11(b)) The Retirement Compensation Arrangement (RCA) provides benefits to members whose pension benefits exceed the limit set out in the Income Tax Act and Regulation (ITA). The RCA is a separate arrangement from the OMERS Primary Plan with specific tax treatment. This proposal focused on maintaining a sufficient RCA to pay benefits to members. It proposed technical changes that create a threshold for directing contributions to the RCA in a given year, based on an annual review. 3. Supplemental Plan Contribution Rates and Rebound Costs (SPC #06-11(a)) This proposal set out new, lower contribution rates to the Supplemental Plan (SP) based on lower actuarial assumptions about costs. The SP offers optional top up benefits, in addition to the OMERS Primary Plan, to members of the police sector, firefighters and paramedics. MEPCO s position is that Supplemental Plan contribution rates would have to be changed in the first actuarial valuation report filed after an SP is populated. MEPCO evaluated each SPC Proposal considered by the Sponsors Corporation. MEPCO s support helped AMO s SC representatives advocate for the interests of municipal employers. Keeping Members Informed MEPCO keeps members informed by issuing OMERS Updates through and posting them on MEPCO also shares important information through AMO s weekly Watch File newsletter and by releasing Breaking News Alerts to AMO members through . MEPCO staff are also available to answer individual inquiries. MEPCO will continue with all of these efforts in In 2011, MEPCO s Board approved a Communications Plan to guide the Centre s activities and make information easier to access and understand. The Plan proposed new communications initiatives including an online MEPCO Toolkit. Education Contributions to public sector pension plans can have considerable impact on a municipality s bottom line. They can also affect the ability to deliver services that residents rely on. One key MEPCO priority is to help municipal representatives understand the implications of developments related to OMERS and the Ontario pension environment. In addition to communications initiatives to keep members informed, MEPCO held an information session for members at AMO s 2011 Annual Conference. 6 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

7 2011 Specified Plan Design Change Proposals and Sponsors Corporation Determination PROPOSED CHANGE TABLED BY RESULT OF VOTE Retirement Compensation Arrangement (RCA) Floating Earnings Threshold (SPC#01-11(b)) The Sponsors Corporation can move the threshold (upwards or downwards) for directing contributions to the RCA, based on the projected cash flow requirements as recommended by the Administration Corporation (AC) actuary. Electricity Distribution Association (EDA) Employer Representative Approved Primary Plan/ RCA Contribution Rate Methodology (SPC#07-11(a)) The Contribution Rate Allocation for 2012 was set (see page 6 for details). The Sponsors Corporation agreed to retain an independent actuarial firm to complete a study on contribution rate allocation. Police Association of Ontario (POA) and Ontario Professional Firefighters Association (OPFFA) Employee Representatives Approved Supplemental Plan Contribution Rates and Rebound Costs (SPC#06-11(a)) The Supplemental Plan costs and Primary Rebound Costs were updated. POA and OPFFA Employee Representatives Moved to mediation/ arbitration in May Approved on August 25, 2011 RCA Freeze Earnings Threshold (SPC#02-11(a)) Freeze the earnings threshold for 2012 and each subsequent year at 2011 levels. Review the threshold every five years. EDA Employer Representative Withdrawn by proponent RCA Contribution Threshold 10:1 (SPC#03(a)) RCA contribution rates to be at least one per cent higher than the corresponding above-yearly Maximum Pensionable Earnings contribution rate to the Primary Plan. OPFFA Employee Representative Withdrawn by proponent NRA (Normal Retirement Age) 60 Police Civilians (SPC#04-11) Make NRA 60 benefits available to Primary Plan members that are police civilians and whose employers change to NRA 60 in respect of this class of members. POA Employee Representative Failed due to lack of 2/3 affirmative majority NRA (Normal Retirement Age) 60 Paramedics (SPC#05-11) Amend the Primary Plan to provide NRA 60 benefits to paramedics. Canadian Union of Public Employees (CUPE) Employee Representative Failed due to lack of 2/3 majority The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

8 MEPCO s Objectives and Priorities for 2012 Contribute to the Ontario Pension Reform Process MEPCO applauds the Government of Ontario s decision to consider legislative changes that address the cost of public pensions, including OMERS. Municipalities deliver government programs and services that directly impact our day to day lives. It is essential that municipal costs are sustainable over the long-term. Within that context, municipal employee pension plans must be fair to employees, fair to taxpayers and viable for the future. Participate in the Ontario Municipal Employees Retirement System Act (Bill 206) Review MEPCO created a Bill 206 Review Subcommittee in 2010 to advocate for municipal employer interests in the 2012 mandatory review of the OMERS Act. The scope of the review is set out in the OMERS Review Act, When the review is completed, Tony Dean, the appointed reviewer, will submit a report to the Minister of Municipal Affairs and Housing. The report will include any recommendations for changes to the OMERS governance model. MEPCO will participate in the mandatory review to advocate for municipal employer interests and update members on new developments. Through MEPCO, Ontario s municipal employers have access to key knowledge on matters related to the OMERS Pension Plan. MEPCO s important work promotes sustainable, fair outcomes for municipal employees, employers and property taxpayers alike. - Dan Mathieson, Mayor of Stratford Advocate OMERS intended purpose: a pension plan for municipal employees Proposing changes to the Retirement Compensation Arrangement (RCA) Long-term viability of the Retirement Compensation Arrangement (RCA) was a key concern during the 2011 Specified Plan Change (SPC) proposal process (see page 7 for a complete list of 2011 SPC proposals). Concerns about RCA viability continue to arise. AMO, with the Ontario Association of Children s Aid Societies (OACAS) and the City of Toronto, tabled a 2012 SPC proposal that addresses the RCA in terms of capping contributory earnings of existing and new members of OMERS, to respond to the reasonable pension requirements of the municipal sector. Employees of OMERS may earn salaries far greater than the majority of municipal employees. Advocate for municipal employer interests by participating in the 2012 Specified Plan Change (SPC) proposal process AMO s representatives on the OMERS Sponsors Corporation (SC) will work with other SC Board members to support and propose Plan changes that promote cost reduction and overall Plan sustainability. MEPCO will share its resources with AMO s SC representatives and will evaluate all SPC proposals that go before the SC Board. Eleven SPC proposals will be considered by the Sponsors Corporation in Five of the proposals focus on pension cost reduction and they all came from employer representatives. The five proposals include capping the amount of earnings that can be contributed to the Retirement Compensation Arrangement (RCA), reduction of indexation levels, delays to early retirement and a change in rate at which benefits are accrued. You can follow the 2012 SPC proposal process as it progresses on MEPCO will also update members when the SPC proposal process is complete. 8 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

9 Support the Sponsors Corporation (SC) review of Primary Plan contribution rate allocation In 2011, the OMERS Sponsors Corporation (SC) agreed to complete an independent contribution rate study to determine the distribution of contribution rates for The 2013 rate was determined by the SC in However, the way the rate is distributed among Normal Retirement Age (NRA) 60 and NRA 65 Plan members will change. MEPCO supports the independent study process, as well as an equitable resolution of contribution rate allocation issues. The impact of contribution rate distribution on a given municipality will depend on how many of its employees are NRA 60 or NRA 65 members. Our employees are well represented by very organized and effective bargaining groups, and MEPCO provides a strong voice for municipalities through representation on the OMERS Sponsors Corporation and OMERS Administration Corporation. Knowledge is power, and MEPCO ensures municipalities are advised of OMERS-related developments and potential impacts. - Neil Ellis, Mayor of Belleville Keeping Members Informed Work will continue throughout 2012 to keep members informed of MEPCO developments and help ensure that members have access to the resources required to better understand MEPCO s work. An online MEPCO Toolkit, an initiative set out in MEPCO s 2011 Communications Plan, will be available to members in late An excellent resource for municipal officials and staff, the Toolkit will contain information on MEPCO, OMERS and Major Pension Issues. MEPCO will also work to create a glossary of terms. MEPCO and its actuary Aon Hewitt will also sponsor a session in the Plenary Hall of AMO s 2012 Annual Conference. The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

10 MEPCO Board of Directors 2011/2012 The MEPCO Board of Directors MEPCO Chair, Doug Reycraft served as AMO President from and presently serves as an AMO and FCM Board member. A retired teacher, Reycraft is the Mayor of Southwest Middlesex and a Councillor for the County of Middlesex. MEPCO Vice Chair, Peter Hume is a Councillor and current Chair of the Planning Committee for the City of Ottawa. He is AMO s immediate past President and served in that role for most of the August 2008 August 2011 term. Mr. Hume is a long serving member of AMO s Board of Directors and a member of the Hydro Ottawa Board. He is also a former Board Member of Waste Diversion Ontario (WDO) and former chair of the Municipal Property Assessment Corporation (MPAC). Michael Fenn (MA, AMCT) works as a consultant, through Fenn Advisory Services Inc. and StrategyCorp. He was an Ontario Deputy Minister for seven years, following which he served as CEO of several Crown agencies and national non-profit organizations. His municipal career included being City Manager of Burlington and later CAO of Hamilton-Wentworth Region, during which period he was also a Director and Vice-Chair of the OMERS Board. In 2010, Mr. Fenn was one of two Ontarians named to AMO s Honour Roll which recognizes people that go beyond their normal duties advocating for the betterment of municipal government. Norm Gamble is the former Chair of the Southwest Local Health Integration Network (LHIN). He has 32 years of experience in municipal administration and is a former CAO. Previous past president of the Ontario Municipal Administrators Association and a former AMO Vice President, he continues to consult and act as a Meeting Investigator for a number of Ontario municipalities. Manon Harvey (CA, ICD.D) is Vice President, Finance and Corporate Services, for the Canada Foundation for Innovation. She was previously Director of Finance for the Children s Hospital of Eastern Ontario. A Chartered Accountant and Certified Director, Ms. Harvey serves on the Retirement Plan Committee of the Association of Universities and Colleges of Canada (AUCC) and on the Board of Directors for Hydro Ottawa. Jacques Hétu (FCGA, FCPA ) served as the Mayor of the Town of Hawkesbury for six years. During that time he was also President of the Association of Francophone Municipalities of Ontario (AFMO) and a member of AMO s Board. A Certified General Accountant, he is the former National Treasurer of CGA Canada and a former Member of the Board of the Municipal Property Assessment Corporation (MPAC). Barbara Hume-Wright (B.A., B.Ed., M. Sc., C. Dir.) is the former Executive Director of the Ontario Association of Police Services Boards and is a former AMO staff member with substantial experience in the municipal sector. She also served on the former Joint Employer Steering Committee on OMERS Governance. Patrick Moyle is CAO of Halton Region. Formerly Executive Director of AMO, he has served several Ontario municipalities as a senior administrator. Mr. Moyle was the Chair of the former Joint Employer Steering Committee on OMERS governance. Andrew Smith (CFA, ICD.D) has 40 years of experience in the financial services industry with expertise in municipal employee pension funds. He has served as Chair of the Board of Trustees for both the Toronto Civic Employees Pension Fund and the Toronto Fire Department Pension Fund. Mr. Smith is a Chartered Financial Analyst and a Certified Director. He served on MEPCO s Board from 2008 May Gretchen Van Riesen (B.Sc. Mathematics) has more than 38 years of experience in the pensions and benefits industry. She is the Chair of the Board for Providence Healthcare and the Board of the Philip Aziz Centre for Hospice Care. After working as a consultant for over 20 years, she moved to CIBC where she retired in 2007 as Vice President, Global Pension and Benefits. At CIBC, Gretchen was responsible for policy and design, investment, and governance of CIBC s $3.5 billion pension plan. Gretchen is past Chair of both the Pension Investment Association of Canada (PIAC) and the Association of Canadian Pension Management. 10 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

11 AMO Sponsors Corporation and Administration Corporation Representatives AMO S Representatives on the OMERS Sponsors Corporation Marianne Love (LLB) is Co-Chair of the OMERS Sponsors Corporation and also Co-Chairs the OMERS Joint Council. She is a Senior Consultant for McDowall Associates, specializing in governance practice, job evaluation, pay equity, and compensation and performance management systems. Marianne was a Member of the OMERS Board from 1999 to She has a Law Degree from Osgoode Hall Law School, York University and a Bachelor of Arts Degree from the University of Windsor. She has over 25 years experience working and consulting in municipal government. Bruce Stewart (BComm., LLB, and QC) practiced labour law for 44 years, retiring as a partner of Hicks Morley in He has acted as employer counsel for many public sector organizations such as the Toronto District School Board, Toronto Police Services Board and the TTC. Mr. Stewart was Chair of the Labour Law Subsection of the Canadian Bar Association (Ontario) and the National Employer-Employee Relations Committee of the Canadian Chamber of Commerce. AMO s Representatives on the OMERS Administration Corporation Bill Aziz has 34 years of experience as an executive and director. He has extensive international and domestic experience. He is recognized as a financial expert in Canada, an alumnus of Ernst & Young and a graduate of the Ivey Business School. Mr. Aziz studied negotiation at Harvard, has completed the ICD Governance College and has recently attended the Osgoode Hall Pension Law program. He is also a director of Canada Bread. Frederick Biro joined the Regional Municipality of Peel Police Services Board as Executive Director in He served concurrently as Executive Director of the Canadian Association of Police Boards from1993 until1996. Mr. Biro has worked in the private sector and has extensive government experience, including being Senior Advisor, Director of Communications, and Press Secretary to a leader of the Ontario Progressive Conservative Party. From 2000 to October, 2007 he was a member of the OMERS Board, including a two-year term as Chair. He served on the Board of Associated British Ports from 2007 to Mr. Biro rejoined the OMERS Administration Corporation Board in September, In Memoriam It was with great sadness that MEPCO and AMO mourned the loss of Michael Power who served as AMO s representative on the OMERS Administration Corporation from Michael was involved with AMO for almost 30 years and served as Mayor of the Municipality of Greenstone, and its predecessor, the Town of Geraldton for a total of almost 35 years. He worked diligently to knit together and elevate the interests of all municipal governments. Michael was awarded Honourary Life Membership in the Association at the 2011 AMO Conference. He passed away on January 19, 2012 in Thunder Bay. In 2012, MEPCO s Board approved a donation to the Northwestern Ontario Medical Education Award Fund on behalf of Michael Power. The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

12 Facts About OMERS The Ontario Municipal Employees Retirement System (OMERS) was created in 1962 as the pension plan for municipal government employees in Ontario. It now has over $55 billion in net investment assets and serves 931 employers and more than 400,000 members, retirees and survivors. Employers Affiliation (as of December 31, 2011, OMERS Statistics) Health Unit 1.4% Library Board 1.6% Transit Authority 2.4% Utility 3.3% Children s Aid Society 3.7% Separate School Board 8.8% City of Toronto 9.5% Police Services Board 10.1% Board of Education 18.4% 0.9% Home for the Aged 0.8% Housing Authority 0.6% Conservation Authority 0.4% Social Services Administration Board 1.8% Other Employer 36.3% Municipality (excluding City of Toronto) Number of Active Members in OMERS Employer Groups EMPLOYER CATEGORY Active Members % of Active OMERS Members Municipality (excluding City of Toronto) 93, % Board of Education 47, % Police Services Board 26, % City of Toronto 24, % Separate School Board 22, % Children s Aid Society 9, % Utility 8, % Transit Authority 6, % Library Board 4, % Health Unit 3, % Home for the Aged 2, % Housing Authority 2, % Conservation Authority 1, % Social Services Administration Board 1, % Other Employer 4, % Total Active Members (excluding members on disability waiver) 256, % These include, for example, local boards of municipalities, economic development corporations and associations representing OMERS members. Source: 12 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

13 Members Affiliation (as of December 31, 2011, OMERS Statistics) POLICE 10.00% OTHER 2.50% OSSTF 4.40% OPSEU 3.50% ONA 1.10% SEIU 0.50% ATU 3.00% CAW 1.50% CIPP 0.60% COPE 0.50% MUN 20.60% IBEW 1.50% FIRE 4.40% ERFP 0.60% CUPE 45.30% Member Affiliation Breakdown EMPLOYER CATEGORY Active Members % of Active OMERS Members CUPE Canadian Union of Public Employees 116, % MGMT/NON-UNION Management/Union Excempt/Non-Union 52, % POLICE Police Associations of Ontario 25, % OSSTF Ontario Secondary School Teachers Federation 11, % FIRE Ontario Professional Fire Fighters Association 11, % OPSEU Ontario Public Service Employees Union 8, % ATU Amalgamated Transit Union 7, % IBEW International Brotherhood of Electrical Workers 3, % CAW Canadian Auto Workers Union 3, % ONA Ontario Nurses Association 2, % ERFP Educational Resource Facilitators of Peel 1, % CIPP Civic Institute of Professional Personnel 1, % SEIU Service Employees International Union 1, % COPE Canadian Office and Professional Employees Union 1, % OTHER Emploee affiliations with fewer than 1,000 members each 6, % Total Active Members 256, % Source: The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

14 OMERS Plan Governance In 2006 Bill 206, the Ontario Municipal Employees Retirement System Act, 2006 (the OMERS Act) came into effect. As a result, the Government of Ontario devolved itself from its central sponsorship role in OMERS. The OMERS Sponsors Corporation (SC) replaced the Government of Ontario as Plan sponsor. The SC is responsible for Plan design, including changes to benefits and contribution rates and setting compensation levels, and is made up of employee, employer and retiree representatives. The OMERS Administration Corporation (OAC) assumed the role of the existing OMERS Corporation. The OAC is responsible for the Plan s day to day operations including determining investment strategy, Plan valuation and pension benefit administration. AMO is represented on the Sponsors Corporation by Marianne Love (Co-Chair) and Bruce Stewart and on the Administration Corporation by Bill Aziz and Frederick Biro. MEPCO is the key resource and advisor to the AMO s representatives. The Sponsors Corporation Board Employer Representatives Marianne Love (Co-Chair) Association of Municipalities of Ontario (AMO) Joe Aitchison Ontario Association of Children s Aid Societies (OACAS) Wayne McNally Ontario Public School Boards Association (OPSBA) John Fleming City of Toronto Charlie Macaluso Electricity Distributors Association (EDA) Garth Pierce Ontario Association of Police Services Board (OAPSB) Bruce Stewart Association of Municipalities of Ontario (AMO) Plan Member Representatives Brian O Keefe (Co-Chair) Canadian Union of Public Employees (CUPE) Ontario Paul Bailey Police Pensioners Association of Ontario (PPAO) Diana Clarke Ontario Public Service Employees Union (OPSEU) Mark Ferguson Canadian Union of Public Employees (CUPE) Local 416 Jack Jones Ontario Secondary School Teachers Federation (OSSTF) Bruce Miller Police Association of Ontario (PAO) Frank Ramagnano Ontario Professional Fire Fighters Association (OPFFA) The Administration Corporation Board of Directors Employer Representatives John Sabo Ontario Catholic School Trustees Association (OCSTA) Bill Aziz Association of Municipalities of Ontario (AMO) Frederick Biro Association of Municipalities of Ontario (AMO) David O Brien Electricity Distributors Association Leslie Thompson City of Toronto Monty Baker Ontario Association of Police Services Boards (OAPSB) James Phillips Ontario Association of Children s Aid Societies (OACAS) Plan Member Representatives Rick Miller Ontario Professional Fire Fighters Association (OPFFA) David Carrington Canadian Union of Public Employees Ontario (CUPE) Richard Faber Retired Member Laurie Nancekivell Ontario Public Service Employees Union (OPSEU) Eugene Swimmer Police Association of Ontario (PAO) Sheila Vandenberk Ontario Secondary School Teachers Federation (OSSTF) John Wetherup Canadian Union of Public Employees Ontario (CUPE) 14 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

15 Financial Statements Municipal Employer Pension Centre of Ontario December 31, 2011 Independent Auditor s Report 16 Statement of Operations 17 Statement of Changes in Net Assets 17 Statement of Financial Position 18 Statement of Cash Flows 19 Notes to the Financial Statements The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

16 Independent auditor s report Grant Thornton LLP Suite Valleybrook Drive Toronto, ON M3B 2S6 T F To the Members of the Municipal Employer Pension Centre of Ontario We have audited the accompanying financial statements of the Municipal Employer Pension Centre of Ontario ( MEPCO ), which comprise the statement of financial position as at December 31, 2011, and the statements of operations, changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to MEPCO s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of MEPCO s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Municipal Employer Pension Centre of Ontario as at December 31, 2011, and its financial performance and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Toronto, Canada J une 25, 2012 Chartered Accountants Licensed Public Accountants Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 16 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

17 Municipal Employer Pension Centre of Ontario Statement of Operations Year ended December Revenue Municipal contributions $ 585,493 $ 614,763 OMERS Sponsor Corporation Board Member Allowance - 99,300 Interest earned 10,477 6,237 M iscellaneous - 1, , ,300 Expenses Administration 214, ,372 Consultants expense 62, ,384 Board expense 82,446 81,303 Communications expense 29,767 14,936 OMERS Sponsor Corporation Board Member Allowance 91, , , ,189 Excess of revenue over expenses $ 114,682 $ 141,111 Municipal Employer Pension Centre of Ontario Statement of Changes in Net Assets Year ended December 31 Arbitration & Mediation Wind Up Unrestricted Reserve Reserve Total Total Balance, beginning of year $ 124,337 $ 795,381 $ - $ 919,718 $ 778,607 Excess of revenue over expenses 114, , ,111 Inter-fund transfer (80,523) 30,523 50, Balance, end of year $ 158,496 $ 825,904 $ 50,000 $ 1,034,400 $ 919,718 See accompanying notes to the financial statements. The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

18 Municipal Employer Pension Centre of Ontario Statement of Financial Position December Assets Current Cash $ 201,952 $ 94,128 Investments (Note 4) 891, ,710 Accounts receivable 2,513 53,759 Prepaid expenses 2,344 2,324 $ 1,098,111 $ 1,027,921 Liabilities Current Accounts payable and accrued liabilities (Note 5) $ 63,711 $ 108,203 Net assets Restricted (Note 6) Arbitration and Mediation Reserve 825, ,381 Wind Up Reserve 50,000 - Unrestricted 158, ,337 1,034, ,718 $ 1,098,111 $ 1,027,921 On behalf of the Board Director Director See accompanying notes to the financial statements. 18 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

19 Municipal Employer Pension Centre of Ontario Statement of Cash Flows Year ended December Increase (decrease) in cash Operating Excess of revenue over expenses $ 114,682 $ 141,111 Change in non-cash operating working capital Accounts receivable 51,246 (12,733) Prepaid expenses (20) 401 Accounts payable and accrued liabilities (44,492) 38, , ,256 Investing I nvestments (13,592) (877,710) Net increase (decrease) in cash 107,824 (710,454) Cash, beginning of year 94, ,582 Cash, end of year $ 201,952 $ 94,128 Supplemental cash flow information Interest received $ 8,108 $ 7,781 See accompanying notes to the financial statements. The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

20 Municipal Employer Pension Centre of Ontario Notes to the Financial Statements Year ended December 31, Nature of operations and basis of presentation Municipal Employer Pension Centre of Ontario ( MEPCO ) is a not-for-profit organization incorporated on August 1, 2007 under letters patent under provisions of Part II of the Canada Corporations Act. MEPCO became operational on January 1, The mandate of MEPCO is to fulfill the obligations of the Association of Municipalities of Ontario ( AMO ) and others under the Ontario Municipal Employees Retirement Systems Act, Significant accounting policies The financial statements have been prepared in accordance with Canadian generally accepted accounting principles. Use of estimates In preparing MEPCO s financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the year. Actual results could differ from these estimates. Revenue recognition MEPCO follows the deferred method of accounting for contributions. Contributions received in advance are deferred and recognized as revenue in the period to which the fees relate. Investment income earned is recognized as revenue in the period it relates. Financial Instruments All financial instruments are measured at fair value on initial recognition. After initial recognition, the financial instruments are measured at their fair values, except for loans and receivables and other financial liabilities, which are measured at amortized cost. MEPCO has classified its cash and investments as held for trading. Receivables are classified as loans and receivables. Payables and accruals are classified as other financial liabilities. Fair values The fair value of cash, investments, accounts receivable and accounts payable and accrued liabilities are assumed to approximate their carrying amounts because of their short-term to maturity. 20 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

21 Municipal Employer Pension Centre of Ontario Notes to the Financial Statements Year ended December 31, Significant accounting policies (continued) Future accounting changes On December 31, 2010, the Accounting Standards Board issued Part III of the Accounting Handbook: Accounting Standards for Not-for-Profit Organizations ( ASNPO ). The standards are effective for annual financial statements relating to fiscal years beginning on or after January 1, The standards are applicable to all not-for-profit organizations. Not-for-profit organizations maintain the option to adopt International Financial Reporting Standards. Early adoption is permitted. MEPCO has decided to adopt Part III ASNFPO for the fiscal year beginning January 1, Capital management The capital structure of MEPCO consists of restricted funds (Note 6) and unrestricted net assets. The primary objective of MEPCO s capital management is to provide adequate funding to fulfill the obligations of AMO and others under the Ontario Municipal Employees Retirement Systems Act, The purpose of the restricted funds is to provide arbitration and mediation services to its members. Unrestricted net assets are funds available for future operations and preserved so MEPCO can have financial flexibility should opportunities arise in the future. For the year ended December 31, 2011, MEPCO is in compliance with all externally imposed capital restrictions. 4. Investments BMO Guaranteed investment certificate (GIC), interest rate 1.40%, due April 2012 $ 457,834 $ - BMO GIC, interest rate 1.35%, due September ,595 - RBC GIC, interest rate 1.30%, due December ,873 - BMO GIC, interest rate 0.75%, due April ,000 BMO GIC, interest rate 1.05%, due September ,608 RBC GIC, interest rate 1.2%, due December ,102 $ 891,302 $ 877,710 The Municipal Employer Pension Centre of Ontario (MEPCO) Annual Report

22 Municipal Employer Pension Centre of Ontario Notes to the Financial Statements Year ended December 31, Related party transactions Included in administration expense is $187,874 ( $119,641) for administration and occupancy costs charged by AMO. These transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Accounts payable and accruals include $29,663 ( $13,690) due to AMO. Amounts due to related parties are unsecured, repayable on demand and are non-interest bearing. 6. Net assets internally restricted Arbitration and Mediation Reserve The Board of Directors has allocated certain amounts to be used for specific purpose of arbitration and mediation. These funds are not available for general purposes and require the approval of the Board of Directors prior to use. Wind Up Reserve The Board of Directors has set aside funds for the eventual wind up of MEPCO. The Board approved that each year based on management s discretion an amount would be moved over to this reserve based on the surplus. 22 Annual Report 2011 The Municipal Employer Pension Centre of Ontario (MEPCO)

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