New details of the Ontario Registered Pension Plan released
In a news conference held today, Ontario Premier Kathleen Wynne unveiled more details on the Ontario Registered Pension Plan (ORPP), and which pension plans will be considered “comparable”, making them exempt from participation.
The ORPP will be phased in over six years to allow businesses to adapt or bring their current pension arrangements in line with the ORPP. Employers without a registered pension plan will be phased in beginning in 2017. Large employers with over 500 employees will be first, employers with 50-500 employees will begin participating in 2018, and in 2019, small employers with less than 50 employees will be required to participate. Self employed people (subject to changes being made to the federal Income Tax Act) would begin participating in 2020, and contribute in a similar manner as they contribute to the CPP. Employers with an existing pension plan that is not considered comparable to the ORPP will have until 2020 to bring it in line or join the ORPP.
To be exempt from the ORPP, contributions must be locked-in. Defined benefit plans must be mandatory for all employees, and save at least 0.5%. Defined contribution plans will also need to be mandatory and require at least 8% savings from employees and 4% from employers to compensate for market fluctuations.
Still missing from the details of the ORPP is whether small amounts of earnings could be exempt, such as the CPP which exempts earnings under $3500/year, and an estimated cost of implementing the plan, as well as its ongoing administrative costs.
IFB has participated in the government’s consultations on the ORPP, and we remain concerned about the overall cost-benefit of the proposal, and whether forced participation will take savings out of voluntary options which offer more investment flexibility and accessibility to these funds, if needed. In addition, many employers who currently offer Group RRSPs will be forced to terminate them due to the mandated contributory requirements of the ORPP.
To read IFB’s response to the ORPP consultation, click here.