OMERS review recommends rework of two-tiered governance structure

The Ontario government is being urged to rework an unwieldy governance structure at one of the province’s largest pension funds after representatives for police and firefighters complained of a breakdown in transparency and efficiency.

The province released the results late Wednesday of a review it commissioned last year to improve governance at the Ontario Municipal Employees Retirement System (OMERS), which manages $141-billion for 640,000 public-service workers.

Pension expert Robert Poirier, the special adviser chosen to lead the review, makes 33 recommendations to the Minister of Municipal Affairs and Housing, Rob Flack.

Chief among them is that the province should dissolve one of OMERS’s two boards, known as the Sponsors Corporation, and replace it with a new “sponsors council,” which would add five non-voting members to the 14-member body.

The change would eliminate the large and expensive corporate structure that supports the Sponsors Corporation, which has its own staff and fiduciary duties.

In its place, it would create a simpler, more streamlined council supported by the sponsors’ own resources. The council would be directly accessible to all of the plan’s members, giving them more visibility and input into how OMERS is governed.

That is expected to save OMERS an estimated $10-million each year and create a more focused and transparent leadership structure, the report says.

The report’s recommendations would preserve the current division of duties, with the Sponsors Corporation (SC) – or sponsors council, if that change comes to pass – setting the plan’s contribution rates and benefits for plan members, and an independent, 15-member Administration Corporation (AC) board administering the plan and investing its assets.

The unusual, two-tier board structure at OMERS dates back to a 2006 restructuring. In addition to setting contributions and benefits, the SC board has also been responsible for making appointments to the AC board.

“Faced with a governance structure that has failed to adapt and evolve since 2006, the proposed amendments in this report aimed to realign the governance model with its original intent,” Mr. Poirier said in the report.

The SC board has been the target of pension plan members’ complaints, which boiled over last year when some members felt blindsided by planned changes to contribution rates set to take effect in 2027. Some members such as police, firefighters and other higher-paid municipal workers will see contributions rise by $15 to $20 per pay period.

Several OMERS employers wrote to the government in June, 2024, claiming the current structure lacked transparency and fair representation and had become inefficient.

One of those complaints was from transit agency Metrolinx, where Mr. Poirier was a director. He is the chief executive officer of consulting firm NeuState Advisory and a former executive in the pensions division of asset manager State Street Corp. He was appointed to lead the review last August.

Mr. Poirier also recommends establishing minimum standards for communication, transparency, engagement and mandatory consultations with sponsors and other plan members.

He said his report’s recommendations are aimed at returning to “the foundational principle of pension governance as a collaborative agreement between employees and employers,” with both groups actively participating.

It is now up to the province to decide whether to implement the report’s recommendations – and which ones to tackle first. In a statement, the Ministry of Municipal Affairs and Housing said the review was intended “to strengthen trust, transparency, and accountability” at OMERS.

“After months of analyzing the plan’s governance and meeting with key plan employee associations and employers, Mr. Poirier’s full report is now publicly posted, and members are being engaged on the recommendations,” the statement said.

In a statement in response Mr. Poirier’s report, the Sponsors Corporation said the current dual structure “has been key to SC improving access, enhancing security and preserving fairness for members and employers.”

“There are significant changes in governance in this report. Whether these changes add strength to OMERS will be revealed over time.”

The chair of OMERS’s AC board, George Cooke, said in a statement that the report “sets the stage for a new chapter in OMERS governance” and “successfully balances” the core tenets of the legislation that created the pension fund with efforts to address the sponsors’ concerns.

“We are pleased to see that the report recognizes the importance of maintaining OMERS as a jointly sponsored pension plan and clearly delineates the accountabilities and respective roles of the administration and the sponsors,” he said.

The report recommends extending Mr. Cooke’s term as chair for another four years to oversee the transition. He has led the AC board since 2013. And it calls for a progress report to the minister by June, 2027, followed by periodic governance reviews starting five years from now and every 10 years after that.

The employee associations did not raise concerns about the performance of the AC board, OMERS’s investment performance or the fund’s capacity to pay pensions.