The government has recently proposed a new pension plan, called the Ontario Registered Pension Plan (ORPP), which is to be introduced in 2017. This mandatory provincial pension plan is being designed to enhance retirement income security for employees. If not already participating in a plan, both employees and employers will be required to each contribute 1.9% of the employee’s earnings (on earnings up to $90,000). This proposal states that if a comparable plan is already in place, employers and employees will be exempt from the ORPP. 

 People are not saving enough for retirement; current workers are under saving, and workplace pension plans are uncommon. The government is planning to regulate the amount of money put into pension plans in order to ensure that the population is saving enough for a comparable standard of living after retirement. The implementation of the ORPP will enhance the retirement security for employees,

 With more people contributing to pension plans, Actuaries will be busier than ever.

 However, there is one controversial area. The mandated government contribution is only required if employees and employers don’t already have a satisfactory plan. The controversy is regarding what is satisfactory. The government’s current proposal intends to exclude contributions to RRSPs, or any other defined contribution plan and only consider plans that have defined retirement benefits. 

 I believe that if an employer has any type of retirement program in place (Defined Benefit, Defined Contribution, DPSP, or RRSP), as long as the total contribution in that plan at least equals a prescribed minimum, the company should be exempt from the ORPP. I also believe that a prescribed minimum contribution level could be incorporated into employers’ Defined Contribution plans so that the plan meets the comparable test.

 The provincial budget was released April 23, 2015 and it reiterated the intent to implement the ORPP in 2017. The government continues to have an extensive consultation process, where they are discussing the key design issues with businesses, pension experts, labour associations and individuals and technical advisers. The government will review the feedback from these groups, are further analyzing the design parameters and will be announcing their conclusions on the design parameters in the coming months.

 

Kathy Licata, President