Greater Peterborough Chamber of Commerce says businesses are concerned about Ontario pension plan

The provincial Liberals are moving ahead with plans to install the Ontario Retirement Pension Plan (ORPP).  Businesses are concerned with the immediate and long term implications of such a program and chambers across the province, including the Greater Peterborough Chamber of Commerce, took part in a “Pension Advocacy Day” on Wednesday, October 8, 2014.   

The Peterborough Chamber and 50 other chambers across Ontario also recently signed a letter expressing the concerns of the business community.  The Ontario Chamber of Commerce (OCC), on behalf of the provincial Chamber Network, sent a letter to the Honourable Mitzie Hunter, Associate Minister of Finance. Minister Hunter has been charged with developing the framework for the ORPP.  The provincial government chose to develop this plan after the federal government refused to make any changes to the Canada Pension Plan (CPP).     

As stated in the letter, the business community is very aware that a section of the population that is not prepared for retirement and acknowledges that “significant number of retirees, who lack sufficient income to maintain their standards of living, would have serious implications on the fiscal health of Ontario.”

However, many employers believe a standalone provincial pension plan is not the best route for Ontario.  As expressed in the letter, the concern lies in the cumulative effect of a number of expected increases for employers over the next few years from soaring electricity costs to very high WSIB premiums and yet Ontario’s Ministry of Finance projects the real annual GDP to be at 2.1% for the next twenty years.  This would be down from 2.6% growth seen in the previous twenty years. 

The provincial government is still in the very early design stages of the ORPP.  Here’s what we know so far:  

  • The ORPP will require equal contributions to be shared between employers and employees, not exceeding 1.9 per cent each (3.8 per cent combined) on earnings up to a maximum annual earnings threshold of $90,000. The ORPP maximum earnings threshold would increase each year, consistent with increases to the CPP maximum earnings threshold. 

Here are some illustrative examples of how much businesses will end up paying using the known parameters: 

  • A business has five employees, all of whom make $50,000.00 annually.
    • The business will need to pay $883.50 (1.9%) per employee per year in ORPP contributions
    • The business will be paying $4,417.50 in total, per year, in ORPP contributions for its 5 employees
  • A business has 20 employees, 10 of whom make $90,000 annually, five of whom make $50,000 annually, and five of whom make $30,000 annually. 
    • The business will need to make ORPP contributions of $1,643.50 for each employee that makes $90,000, $883.50 for each employee that makes $50,000, and $503.50 for each employee that makes $30,000.
    • The business will be paying $23,370 in total, per year, in ORPP contributions for its 20 employees. (OCC Backgrounder 2014)
  • Businesses already participating in a comparable workplace pension plan would not be required to enrol in the ORPP. The government has not yet defined what it means by “comparable plan”.
  • The ORPP would be publicly administered at arm’s length from government and have a strong governance model. 

Increased costs are not the only concerns of business:   

  • Unnecessary bureaucracy
  • Fragmentation of the pension landscape 
  • Ontario is moving in a different direction on pension while other provinces are looking at using Pooled Registered Pension Plans (PRPPs) (OCC letter to Minister Hunter September 2014) 

According to the OCC survey Emerging Stronger 2014 employers are overwhelmingly in favour of Pooled Registered Pension Plans (PRPPs). These plans allow for greater flexibility in terms of employer contribution and would not be mandatory.

Starting in 2017, the ORPP will be phased in and coincide with expected reductions in Employment Insurance premiums.  The largest employers would be enrolled first and contribution rates would be phased in over two years.  

Comment through the “Peterborough Chamber” group of LinkedIn. 

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