Today, the Government of Ontario responded to the Hamilton Chamber of Commerce and Ontario Chamber of Commerce’s (OCC) call to revise the comparability rules under the proposed Ontario Retirement Pension Plan (ORPP). The changes announced today will expand the comparability rules under the ORPP and extend the plan’s phase-in period.
Key Details of the Announcement
- Businesses who offer a Defined Contribution (DC) plan with a total combined contribution rate of 8%, where at least 4% is contributed by the employer, will not have to pay into the ORPP. Employers with mandatory defined benefit plans that offer a set amount of retirement income that remains constant over employees’ lifetimes, that save at least 0.5 per cent will be exempt.
- Those businesses who offer a non-comparable type of pension plan or do not offer any type of pension plan will have to contribute to the ORPP.
- Large employers (500 or more employees) will start contributing in 2017, medium sized employers (approximately 50-499 employees) in 2018, and small employers (50 or fewer employees) in 2019. Any employer that offers a non-comparable Defined Benefit (DB) or DC plan will begin to make contributions in 2020. Employers can also upgrade their internal plans by 2020 to meet the ORPP requirements.
- In 2022, people who are 65 or older can start drawing on the ORPP. Workers, whether part-time or full-time, will start contributing at age 18 and can do so until they turn 70. The plan will collect 1.9 per cent of a workers’ income up to $90,000 from both employers and employees to a total of 3.8 per cent, or a combined total of $3,420 a year.
Our Reaction
Today’s announcement is a step in the right direction for Ontario businesses. The government has responded to the business community’s concerns by broadening its definition of a “comparable” pension plan.
However, we remain concerned that the ORPP, in its current form, will raise costs for the majority of businesses who operate in the province, including those employers that offer non-comparable plans like Group RRSPs. Recent OCC survey data indicates that if faced with mandatory increased contributions under the ORPP, 44 percent of businesses would reduce their current payroll or hire fewer employees in the future.
The OCC and Hamilton Chamber of Commerce will continue to work with the government to ensure that they have a full appreciation of the potential impacts of the ORPP. In addition, we encourage the government to continue conducting consultations with the business community over the coming months.
For more information please contact:
Huzaifa Saeed | Policy & Research Analyst, Hamilton Chamber of Commerce | T: 905-522-1151 ext: 230 | C: 905-220-3030 | e: h.saeed@hamiltonchamber.ca
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