As has been widely reported throughout the year, the Ontario government intends to introduce the Ontario Retirement Pension Plan (the “ORPP”) as a supplement to the Canada Pension Plan.
The ORPP will apply to every Ontario employee who is not a member of a “comparable” workplace pension plan and will be phased in between January 1, 2017 and January 1, 2020.
The main features of the ORPP are as follows:
- The ORPP will apply to Ontario employees in eligible employment. “Eligible employment” has yet to be defined and depending on how “Ontario employees” is defined, employees who are not resident in Ontario and do not report to work at any particular establishment of their employer but are paid from Ontario may be required to contribute to the ORPP.
- Employees who participate in a “comparable” workplace pension plan will not be required to contribute to the ORPP. According to information released by the Ontario government in August 2015, a “comparable” workplace pension plan will be a defined benefit registered pension plan that matches or exceeds the benefit being provided through the ORPP or a defined contribution registered pension plan with a minimum total contribution of 8% of base salary earnings, at least 4% of which must be employer contributions. Other retirement savings plans commonly offered by employers, such as Group RRSPs or DPSPs, willnot be considered comparable workplace pension plans. Employers who only offer and employees who only participate in Group RRSPs or DPSPs will be required to contribute to the ORPP.
- Participating employees and employers will be required to contribute an equal amount to the ORPP. The required contribution rate for both employees and employers will be 1.9% of an employee’s annual earnings up to $90,000; prior to January 1, 2020, contribution rates will be phased in. The minimum earnings threshold has not yet been announced.
- The start date for contributions to the ORPP will vary depending on the size of the employer’s workforce and whether the employer had a registered workplace pension plan in place (it does not have to be a “comparable” workplace pension plan for these purposes) as of August 11, 2015.
What should employers do now?
In anticipation of the roll-out of the ORPP, employers should review existing retirement savings arrangements sooner rather than later. Will your plan be considered a “comparable” workplace pension plan or will you be required to contribute to the ORPP?
If an employer’s plan is not a “comparable” workplace pension plan or has elements that are not “comparable” (i.e., a waiting period for eligibility), employers would be well advised to take time now to consider the impact of the ORPP on their overall compensation and benefits package and whether any changes should be made. Employers in unionized sectors should also consider discussing the ORPP in current or upcoming negotiations in order to ensure that the ORPP is properly addressed in any collective agreement.