The Ontario Registered Pension Plan

April 21, 2016

In the 2014 Budget, the Ontario government set out its commitment to establishing and launching a province-wide pension plan, intended to build upon the Canada Pension Plan (“CPP”) and provide a predictable source of retirement income for life. Notwithstanding significant debate and some opposition by stakeholders, on April 14, 2016, the government proceeded to implement its plan with the release of the proposed Ontario Retirement Pension Plan Act, 2016.

Similar to the CPP, the Ontario Registered Pension Plan (“ORPP”) will require both employer and employee contributions through payroll deduction, and will pay a benefit on retirement that varies depending on how many years the employee contributed and the employee’s earnings.

The ORPP will begin enrolling employers in 2017, with the first phase of contributions beginning January 1, 2018.  By 2020, subject to legislative approval, every employee in Ontario would be part of either the ORPP or a comparable workplace pension plan.

The following are some design features of the ORPP:

• it will apply to employees between the ages of 18 and 70 who work in Ontario or are paid salary and wages from an employer in Ontario, including employees who work from home offices;
• it will be mandatory for employers and employees without a comparable workplace pension plan;
• employers will contribute up to 1.9% on an employee’s annual earnings up to $90,000;
• employees will make contributions equal to those of the employer;
• employers will be required to pay contributions on behalf of eligible workers, and also to collect and remit contributions from those employees;
• the minimum earnings threshold for eligible employees will be $3,500;
• employees who object to participation in the ORPP on religious grounds may apply for an exemption, similar to the approach for CPP.

Similar to the CPP, all contributions to the ORPP will be held in a trust and invested for the benefit of members, and will not form part of the government’s general revenues. Benefits on retirement will include a benefit paid for life and a survivor benefit, indexed to inflation.  The ORPP is designed to provide roughly 15% of a worker’s pre-retirement income, up to a maximum cap, after 40 years of contributing to it.

The ORPP is to be phased in over a period of several years, with contributions for large employers (500+ employees) and medium employers (50-499 employees) without registered workplace plans starting in 2018.  It will also be reviewed five years after its full implementation to help ensure that it is meeting its intended objectives, and periodically thereafter.

Stay tuned for further updates.

---