Ontario Provides Additional Detail on Provincial Pension Plan

Ontario premier Kathleen Wynne announced today details on the design of the Ontario Retirement Pension Plan (ORPP). The ORPP was one of her key election promises. The government says its program is designed to address the 3 1/2 million Ontario workers it says do not have a secure workplace pension plan. According to today’s announcement:

  • Employers who currently offer a workplace pension plan that is comparable to the ORPP will be exempt. A comparable plan is one that provides a predictable stream of replacement income and an adequate standard of living in retirement similar to the benefit that would be provided by the ORPP. A comparability test for each type of plan has been developed.
  • Qualifying plans — including defined contribution (DC) plans — would need to meet a minimum contribution threshold, be locked in and be regulated by existing provincial pension standards. To be considered comparable, a DC plan must: (1) Have a minimum annual contribution rate of 8 per cent; and, (2) Require at least 50 per cent (in other words 4 per cent) matching of the minimum rate from employers.
  • When fully introduced, the ORPP will require companies to pay premiums of 1.9 per cent of salary for each employee, up to $1,643 a year, and workers will pay an equal amount.
  • The ORPP will be phased in.  The goal is that every employee in Ontario would be part of the ORPP or a comparable workplace pension plan by 2020. Benefits would be paid starting in 2022.
  • Large employers (500 or more employees) that do not have registered workplace pension plans will start making contributions in 2017. Employers with 50 to 499 employees will start making contributions in 2018 and those with less than 50 employees will start in 2019. Employers with registered plans that do not meet the comparability test, will start making contributions to the ORPP in 2020.
  • Like the CPP, the ORPP would be funded by equal co-contributions from both employers and employees.
  • Contributions would also be phased in, reaching 1.9 per cent each from employers and employees by 2021.

For further information on today’s announcement go to http://news.ontario.ca/mof/en/2015/08/the-ontario-retirement-pension-plan.html. Further details will be made available once finalized. One other noteworthy piece of information: The province says its goal is for every employee in Ontario to be part of the ORPP or a comparable workplace pension plan by 2020 – including the self-employed. However, the federal Income Tax Act (ITA) does not currently allow self-employed individuals to participate in registered pension plans. Ontario has asked the federal government to amend the ITA to allow for the self-employed to participate in the ORPP, but to date that has not been agreed to.

Ontario Trucking Association Needs Your Input

OTA was one of over a thousand groups or individuals to participate on the consultations on the ORPP, expressing concerns over the cost implications of the plan. By clarifying the exemptions and by phasing the ORPP, the government will argue it has attempted to address the concerns raised by employer groups. In order to respond further, OTA needs input from you. Please take a moment to complete the following OTA survey by clicking here.