On December 8, 2014, the Ontario Government introduced Bill 56, Ontario Retirement Pension Plan Act. Bill 56 sets out the parameters for the Ontario Retirement Pension Plan (ORPP). If Bill 56 receives Royal Assent in the future, which is expected, almost all employers that have employees in Ontario will be impacted.
The ORPP is a mandatory provincial pension plan. Some of the parameters of the ORPP that are in the first version of Bill 56 are as follows:
- Contributions to the ORPP will be made by eligible employers and eligible employees. A person who participates in a "comparable" workplace pension plan is not an "eligible employee" (i.e. contributions do not have to be made to the ORPP with respect to such persons), but the legislation has not yet defined what constitutes a comparable workplace pension plan.
- Contributions will be determined by applying the "applicable contribution rate" (which will be the same for eligible employers and eligible employees but will not exceed 3.8 percent combined) to the portion of the eligible employee's annual salary and wages between the minimum and maximum thresholds. The maximum threshold for 2017 will be $90,000 adjusted in accordance with legislation.
- Normally, retirement benefits under the ORPP will be paid for the life of a plan member beginning at age 65, but such benefits may begin to be paid as early as 60 years of age or as late as 70 years of age as long as they are actuarially adjusted. Retirement benefits under the ORPP will be indexed to inflation.
Bill 56 sets a deadline of January 1, 2017 for the Ontario Government to establish the ORPP. In the meantime, the Ontario Government has released a consultation paper entitled Ontario Retirement Pension Plan: Key Design Questions. Three key policy areas are addressed in the consultation paper:
- What constitutes a "comparable" workplace pension plan? The Ontario Government has indicated that its preferred approach is to define comparable workplace pension plan as a defined benefit or target benefit multiemployer pension plans. This would mean that defined contribution pension plans, pooled registered pension plans, and group registered retirement savings plans would not be a "comparable" workplace pension plan. The Ontario Government has asked the following question, among others: in your view, what would be the best definition of "comparable" workplace pension plans?
- What is the right minimum earnings threshold? The 2014 Ontario Budget indicated that earnings below a certain threshold would be exempt from contributions, to reduce the burden on lower-income workers. One question the Ontario Government has asked is how different employers will be affected if the minimum earnings threshold is different than that of the Canada Pension Plan.
- How to best assist self-employed individuals? One question the Ontario Government has asked is whether Ontario should engage in discussions with the Government of Canada to amend the Income Tax Act rules to allow the selfemployed to participate in the ORPP.
The Ontario Government has provided all parties (including employers) until February 13, 2015 to make submissions on the consultation paper and the ORPP initiative. All types of businesses, including small and medium-sized business, may wish to make submissions to ensure that their voices are heard. Members of our Pension and Benefits Group would be pleased to assist your business in making submissions to the Ontario Government on the wide-impacting ORPP legislation and the consultation paper.
On a related note, on December 8, 2014, the Ontario Government also introduced Bill 57, Pooled Retirement Pension Plans Act, 2014 (PRPP Act). Ontario's proposed PRPP Act incorporates many features of the federal Pooled Registered Pension Plans Act, including voluntary participation and contributions by employers, automatic enrolment of employees, locked-in contributions and low cost, but has a few Ontariospecific features where appropriate. We will continue to monitor developments with respect to Bill 57.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
