The Ontario Municipal Employees Retirement System is changing its additional voluntary contributions program to allow pension members to keep non-locked-in funds in their voluntary account after they turn 71, so they can continue to earn returns from the OMERS fund.
The changes, which were approved on Aug. 31, were introduced in response to member requests made through OMERS Sponsor Corp.’s annual process for plan design changes. “Members had been asking, can we keep our money in the fund and continue to earn the good return and the low fees that the program offers, relative to what they might be able to get out in the [retail market],” says Chris Vanden Haak, director of pension policy and communications for the OMERS Sponsor Corp.
The voluntary account program has been in place for a number of years and one of its features is that members had to take the money out when they hit age 71, says Vanden Haak. Funds in the voluntary account are invested in the OMERS fund and receive the same net investment returns. The program has minimal management fees and expenses, as well as an annual administration fee of just $35.
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The new option brings three important changes to a voluntary account:
- Pension members are no longer required to transfer non-locked-in funds out of their account by the end of the year in which they turn 71. Any non-locked-in funds that a member has in an account on Dec. 31 of the year they turn age 71 will remain in their account, and their participation in OMERS voluntary account program will continue.
- The pension member must withdraw a minimum amount each year starting with the year they turn age 72. This withdrawal, which OMERS will call the “income amount,” is required under the Income Tax Act and must be paid in cash.
- Optional withdrawals during the withdrawal window must be made in cash after the year the member turns age 71. Fund transfers to another savings arrangement are no longer available.
While the new option only applies to non-locked-in accounts, Vanden Haak says at some point OMERS Sponsor Corp. is hoping the same extension can apply to members with locked-in accounts.