Legislation sets out requirements for contributions, calculation of benefits, employer responsibilities and penalties for non-compliance
Bill 186, the Ontario Retirement Pension Plan Act (Strengthening Retirement Security for Ontarians), 2016, sets out requirements for who have to contribute or would be exempt, how contributions and benefits would be calculated, employer responsibilities, and penalties for not complying.
The government says it will begin enrolling employers next January. Contributions will be phased in, beginning in 2018.
“Bill 186 brings us one step closer to achieving our goal that all eligible Ontarians are part of the ORPP or a comparable plan by 2020,” Associate Finance Minister Mitzie Hunter said during a debate.
She said the ORPP is necessary because two-thirds of Ontario workers do not have a workplace pension plan and Ontarians are not saving enough for retirement.
Here is a look at some of the key provisions in the bill:
Who has to contribute: ORPP contributions would be mandatory for employees aged 18 years to 70 years who are employed in Ontario and who do not take part in a workplace pension plan that is comparable to the ORPP.
Employment in Ontario refers to employees required to report to their employer’s establishment in the province or paid from their employer’s establishment in Ontario. It would not include federal government workers or self-employed individuals.
For a defined benefit pension plan to be comparable to the ORPP, its annual benefit accrual rate would have to be at least 0.5 per cent of an employee’s annual remuneration for a pension at the plan’s normal retirement date.
For a defined contribution pension plan to be comparable, the plan’s total mandatory contribution rate would have to be at least eight per cent of an employee’s annual remuneration and the employer’s contribution rate would have to be at least half of that. Voluntary contributions and contributions that employers are required to make on voluntary employee contributions would not be included.
Who is exempt:
Employees covered by a workplace pension plan that the ORPP Administration Corporation deems comparable, and their employers, would not have to contribute to the plan. However, the bill would allow these employers to opt in.
The bill would prohibit contributions from employees under 18 years old and older than 70 years old, as well as employees receiving an ORPP pension other than a pension for a surviving spouse. The bill would allow employees under the age of 70 who are receiving an ORPP pension to suspend the pension payments so they can make more contributions to the plan.
Employees whose earnings are exempt under a tax treaty Canada has signed with another country would be exempt, as would tax-exempt First Nations employment unless an employer or an employee opts in.
The bill would also allow individuals to opt out on religious grounds after applying to the ORPP Administration
Corporation for permission.
Calculating contributions: Contributions would be calculated in a similar way to CPP contributions, with employers and employees equally paying into the plan. An annual basic exemption of $3,500 would apply to contributions. Employees and employers would contribute up to an annual maximum pensionable earnings amount. The maximum would be adjusted each year for changes in the province’s average wage. For 2018, the maximum would be set as though it were $90,000 in 2017.
The full employer and employee contribution rate would be 1.9 per cent, although it would be lower while the government phases in the ORPP. In 2018, large (at least 500 employees) and medium (50-499 employees) employers without registered workplace pension plans would begin paying contributions. The rate for both employers and employees would be 0.8 per cent, rising to 1.6 per cent in 2019 and to 1.9 per cent in 2020.
Small employers without registered workplace pension plans would begin paying into the ORPP in 2019, with the rate set at 0.8 per cent. It would rise to 1.6 per cent in 2020 and 1.9 per cent in 2021. Employers with registered plans that do not meet the ORPP comparability test would have to begin paying contributions in 2020, with the rate set at 1.9 per cent.
The government has not yet said which types of earnings would be included when calculating ORPP contributions. The bill proposes pensionable earnings would be covered in regulations. As a result, it is not yet known if the government will harmonize ORPP pensionable earnings with those under the CPP.
Employees on leave: The bill would not allow employees to contribute to the plan while they are on a leave of absence allowed under the Employment Standards Act, 2000, unless they elected to do so. If employees on leave opted not to pay contributions, employers would not be required to pay their share. However, if an employee chose to continue ORPP contributions while on leave, the employer would have to pay contributions.
Successor employers: If one employer immediately succeeded another employer due to the formation or dissolution of a corporation or the acquisition of all or part of the other employer’s business, the successor employer could take into account the amount of ORPP contributions the original employer deducted, remitted or contributed. Both the original employer and the successor employer would be liable to pay all ORPP amounts the original employer owed.
Employer responsibilities: Bill 186 would require employers to calculate and deduct employees’ ORPP contributions and remit them to the ORPP Administration Corporation, along with the employer’s contribution.
The Ontario government says it is in talks with the federal government about having the Canada Revenue Agency (CRA) help administer the plan, but it is not yet known if the CRA will collect ORPP remittances and, if so, whether they will be harmonized with the remittance of federal source deductions.
The legislation would also require employers to keep records. Details on the type of information and for how long will be included in regulations.
Pensions: The ORPP pension benefit would aim to replace 15 per cent of an individual’s pre-retirement earnings, up to about $90,000. The size of the pension would depend on the length of contribution and salary.
Individuals who pay into the ORPP would be eligible to receive pension benefits when they turn 65; however, they could opt to take a reduced pension as early as age 60 or delay it until up to age 70 for an enhanced pension.
Penalties: The bill proposes to allow the ORPP Administration Corporation to impose administrative penalties of up to $10,000 if an employer fails to remit contributions on time or provide documents or information within 30 days of being requested to do so.
The bill would also authorize fines for employers found guilty of offences under the act, such as failing to remit contributions or providing false information. Penalties of up to $100,000 would apply for a first offence. For subsequent offences, the penalty would be up to $200,000.
Opposition MPPs took issue with the bill. Progressive Conservative (PC) members said the government was exaggerating the need for a new pension plan. They said it would hurt the province’s economy by increasing costs for businesses and workers and leading to job losses.
“While larger businesses may be able to absorb these added costs, smaller businesses will be forced to either reduce the size of their workforce or the hours those employees are able to work,” said PC MPP Julia Munro.
New Democratic Party (NDP) members criticized the number of exemptions allowed in the Act, saying they will result in millions of Ontario workers being excluded from the ORPP. NDP MPP Jennifer French said the ORPP should require universal coverage, like the CPP.
She added that the government should ensure that ORPP legislation mirrors that of the CPP as much as possible.
“Any departure of the ORPP from the CPP will make it difficult to integrate the ORPP into a future and potential CPP enhancement,” French told the legislature.
While the government has no plans to remove exemptions for employers with comparable plans, Hunter told the legislature that she still hopes to broaden ORPP coverage to include some workers currently excluded.
“If they have a comparable plan, they are exempt, because it’s deemed that they have adequate coverage. If they do not have a comparable workplace pension plan, then they will be part of the ORPP. For the self-employed, for federally regulated employees, we will continue to press the federal government to ensure that we can give them an option to be part of this plan as well,” Hunter said.
To read the full story, login below.
Not a subscriber?Start your subscription today!