What you need to know about the ORPP
The Kathleen Wynne government recently announced it is delaying the introduction of its much ballyhooed Ontario Retirement Pension Plan (ORPP) while it negotiates with the federal government and other provinces on an enhanced CPP.
At this point, the government says it still intends to proceed with the ORPP as it’s unlikely that all provinces can agree on a CPP enhancement large enough to take the place of the ORPP. Here’s what you need to know about the ORPP:
The Ontario government is implementing a pretty much mandatory (unless you’re on an Aboriginal reserve) provincewide pension plan for workers who don’t have a workplace plan. Employees and employers will pay matching contributions to the plan.
Who and When?
The government has delayed the planned 2017 phase-in for employees of large firms (500 or more employees). Current plan is to begin in 2018 with workers in large firms and medium-sized firms (50-499 employees) and in 2019 for employees of small firms (fewer than 50 employees). Companies whose existing registered pension plans are not deemed at least on par with ORPP must join by 2020. Employees must be between 18-70 years old, earn at least $3,500 a year, and not have a comparable workplace pension plan.
How much will this cost me?
Person with a salary of about $45,000 would pay $788 more a year, someone earning a salary of $90,000 would pay about $1,643 more a year.
How much will this get me?
Depends how long you pay in, but a $45,000-a-year worker who contributes for 40 years nets about $6,410 a year at retirement while a $90,000-a-year worker would get about $12,815 a year.
Cost Benefit Analysis by Conference Board of Canada says Ontarians will end up with more disposal income on retirement over the long term and a stronger economy. There’s likely savings for the federal government too in Old Age Security payments.
Same analysis says that in the short term, fewer jobs and higher consumer prices are likely. Also, over time, employees will bear the full burden as employers pay lower wages to compensate for ORPP.
YOUR QUESTIONS ANSWERED
- If I hire a nanny, do I have to pay ORPP for that employee? Yes.
- If I already have a workplace plan in place for my employees, do I have to join? Yes, if it’s not “comparable” to the ORPP. Yes, for any waiting period before a workplace plan kicks in.
- How many people will eventually be enrolled in the ORPP? More than four million.
- How will the funds in the ORPP be invested? The Ontario government says an independent, arm’s-length body will invest the funds, and the government will not direct how they’re used.
WHAT ARE PEOPLE SAYING ABOUT ORPP?
Ontario Chamber of Commerce: “Our members still do not have a clear understanding of how the ORPP will impact Ontario’s business climate and the broader economy.”
Non-profit organization CARP, which advocates for interests of Canadians as we age: “By providing target benefits to allow Ontarians to better plan for retirement, the ORPP can reduce poverty in old age and provide stable retirement income.”
Progressive Conservative MPP Julia Munro: “The ORPP remains a huge new payroll tax that will force businesses to cut jobs and will reduce the take-home pay of workers and their families. The majority of small business owners oppose this mandatory provincial pension plan. In fact, most would have to freeze or cut salaries/positions to cope with the added costs. The government’s internal documents estimate that Ontario will lose 54,000 jobs per year.“
NDP MPP Jennifer French’s viewpoint: “Ontario New Democrats believe that everybody in the province deserves to retire with dignity and to share in the benefits of an Ontario public pension plan. We are concerned that the premier’s plan could exclude seasonal workers, contract workers, and far too many precariously employed Ontarians who, though vulnerable, may not be considered ‘eligible’ for the ORPP.”
Associate Finance Minister Mitzie Hunter: ”We made the ORPP one of the pillars of our economic plan because we believe that every worker deserves to have a secure retirement. Two-thirds of Ontario employees do not have a workplace pension plan. This number is worse for younger Ontarians, 75% of whom don’t have access to a workplace plan. At the same time, voluntary savings vehicles likes RRSPs and TFSAs are under utilized. Recent polling commissioned by HOOPP shows that more than half of Ontarians without workplace pension plans saved nothing for retirement in the last year. With a lack of national consensus on CPP enhancement, Ontario is moving forward with our plan to provide retirement income security for Ontarians.”