By Sheryl Smolkin
At this point it is not clear how the Ontario Registered Pension Plan (ORPP) that will come into effect in 2017 will affect Saskatchewan says Katherine Strutt, General Manager of the Saskatchewan Pension Plan.
“I don’t believe the provincial government is interested in a mandatory pension plan,” she says.
The ORPP is a plan that will require employer and employee contributions to generate additional government benefits in excess of monthly Canada Pension Plan benefits. The average amount of CPP for new beneficiaries in January 2015 was $618.59/month. The maximum monthly CPP benefit in 2015 is $1,065.
Key features of the ORPP as set out in the consultation paper Ontario Retirement Pension Plan: Key Design Questions are as follows:
- The plan would be phased in beginning in 2017 with the largest employers. Contribution rates would be phased in over two years.
- Employees and employers would contribute an equal amount, capped at 1.9% each on an employee’s annual earnings up to $90,000. Earnings above $90,000 would be exempt from ORPP contributions.
- Earnings below a certain threshold would be exempted to reduce the burden on lower income workers.
- Contributions would be invested at arm’s length from the government. ORPP would pool investment and longevity risk and aim to replace 15% of an individual’s earnings.
- Participation would be mandatory, but workers who already participate in a “comparable workplace pension plan” would not be enrolled in ORPP. The government says its preferred definition of a comparable plan includes defined benefit and target benefit multi-employer pension plans.
- Additional conversations will be held on the best way to assist the self-employed.
An article on the International Foundation of Employee Benefits Plans website aptly summarizes some of the controversy that still surrounds the new program:
“The ORPP proposal has raised concerns among many plan sponsors of defined contribution (DC) plans because the government is proposing that they may not be considered comparable workplace pension plans. Many DC plan sponsors say they already provide adequate contributions. If those plans are not considered comparable, some question whether employers will continue them and/or lower their contributions in order to fund both ORPP and a DC plan.
Another concern is that mandatory contributions will reduce take-home pay and may result in the reduction of other workplace benefits. In the paper, the government said “ . . . some employers may take stock of their current approaches and make decisions about the right compensation mix going forward . . .’”
Both the federal Liberals and NDP parties have publicly supported a CPP enhancement. If either of these parties forms the newly-elected federal government in October, Ontario might opt to hold off on ORPP implementation until a similar national program can be adopted.