Entries in pension plan (5)


Why are we ploughing ahead with ORPP?

The provincial government released the final design parameters for the Ontario Retirement Pension Plan (ORPP) last week, but it wasn’t successful in quieting the calls from the business community to delay the plan until the federal government has completed its review of the Canada Pension Plan (CPP).  

Many members of the Peterborough Chamber of Commerce are left wondering why the rush?  When the ORPP was announced, the reason for hatching a made-in-Ontario retirement plan was because the federal government was unwilling to consider expanding CPP.  The new government has committed to a conversation with Canadians about how to improve the program and yet Ontario is ploughing ahead.  Our agricultural community may have something to say about the impact of ploughing a field that has been tapped too often.   

The Ontario Chamber of Commerce policy staff has identified the impact of the newly announced design details including:

Implementation timelines. We learned that government will not extend ORPP implementation timelines, as we had asked. This will put pressure on both government and employers to meet the January 1st, 2017 implementation timeline, which we believe is very ambitious. These tight timelines necessitate increased collaboration between government and employers over the next 11 months.

A new funding policy. In the event that the ORPP becomes underfunded, there exists the potential for the ORPP Administration Corporation Board of Directors to increase contribution rates by up to 0.2 percent. The OCC had been seeking a guarantee that employer contribution would not exceed 1.9 percent and we will continue to lobby the government on this point.

A clearer definition of employment. Until the parameters were issued, it was unclear what constituted an “Ontario employee.” This has now been defined. A person will be considered employed in Ontario if they report to work, full- or part-time, at an employer’s establishment in Ontario. This definition captures a greater number of businesses than many anticipated, including federally regulated businesses.

A streamlined comparability test. The government is establishing a comparability test that can be applied at the level of a subset of employees. This has important implications for those employers whose employees are not offered identical benefits. For example, some employers have different benefits for part-time and full-time employees. The government has indicated that this test would streamline the administrative process of assessing plan comparability. The OCC looks forward to receiving greater detail on this comparability test.

ORPP is a large part of the cumulative burden that Ontario businesses are facing.  It has the potential to hurt our competitiveness by hampering a business’ ability to hire or even retain their current employees.  While the economic analysis by the province indicates that there will be a period of reduced GDP growth, as businesses adjust to the cost, the analysis is also banking on reduced Employment Insurance (EI) and Workplace Safety & Insurance Board (WSIB) premiums.  These are not guaranteed reductions.  In the case of EI the federal Liberals did say during the election they would reduce premiums, but not near the same amount as expected when the premium rate was announced under the previous government.  In the case of WSIB, the earliest implementation date is 2019, allowing for a year of adjustment for businesses.  

In October 2015, the Peterborough and Kingston Chambers of Commerce submitted a recommendation to the federal government that employees be allowed to increase their CPP contributions.   

The Peterborough Chamber has been involved in the ORPP conversation for the past two years and has contributed letters and impact analysis on behalf of our members.   And while some of the design details have been created in direct response to focused advocacy by us and our colleagues at the OCC, the question remains why January 2017 is a hard and fast timeline. 

Taking the time to allow the federal government to examine the CPP is not a sign of weakness; it’s a sign of a province recognizing that ORPP will have a negative impact on our fragile economy, hurt our competitiveness and is not the best answer right now for business or Ontario residents.   


Federal government considers voluntary expansion to CPP

Photo courtesy: Ontario Chamber of CommerceInteresting news from Federal Finance Minister Joe Oliver today. He says government will consider voluntary expansion of CPP contributions.  Over the summer, a committee will meeting with stakeholder groups to discuss the option.  

The Ontario government has said that one of the reasons for bringing in the Ontario Retirement Pension Plan (ORPP) was because the federal government refused to make changes to CPP.  

Currently the provincial government is working on building the ORPP program.  Earlier today, they approved legislation to allow Pooled Registered Pension Plans (PRPPs) in Ontario.

More here on the federal announcement: 

Globe and Mail: http://trib.al/erYAW24 

CBC.ca: http://cbc.ca/1.3087896 

Links to Voice of Business Blog articles on ORPP: bit.ly/1CZOrfW


OCC: Budget 2015 What it means for business

2015 Ontario Budget Analysis

Today, the Government of Ontario tabled its 2015 Budget. What follows is a summary of the key highlights from a business perspective.

On the whole, this is a no-surprise, mixed-bag budget for Ontario businesses. The government is making much needed investments in transportation infrastructure across the province, but little is being done to address the growing burden on businesses and get the province’s fiscal house back in order.


The provincial deficit has risen

The 2014-15 deficit is projected to rise to $10.9 billion, up from $10.5 billion in 2013-14. The total debt is projected to grow to $284 billion this year – equivalent to $20,772 of debt for every Ontarian. Ontario now spends $11.4 billion a year on interest payments to finance its debt.

Government remains committed to eliminating the deficit by 2017-18 by managing compensation costs and continuing its comprehensive program review.

OCC Analysis

Budget 2015 makes the right commitments but is vague on details when it comes to how the government will meet its deficit reduction targets.

We applaud the government for making difficult decisions in terms of wage restraint measures. Government has held average annual growth in program spending to 1.5 percent and they are making difficult spending cuts in education, health, and other vital areas.

However, the government of Ontario needs to win the confidence of employers by adopting a clear plan to achieve their deficit reduction targets. As a start, it should adopt new service delivery models in areas where these models can bring efficiencies.

Addressing the fiscal situation should continue to be the top priority for government. Eliminating the deficit is the most important step the government can take to improve Ontario’s competitiveness and create jobs in the province.

Government is plowing ahead with the Ontario Retirement Pension Plan

The 2014-15 deficit is projected to rise to $10.9 billion, up from $10.5 billion in 2013-14. The total debt is projected to grow to $284 billion this year – equivalent to $20,772 of debt for every Ontarian. Ontario now spends $11.4 billion a year on interest payments to finance its debt.

The government is reiterating its commitment to establishing a standalone, mandatory Ontario pension plan by 2017. The Ontario Retirement Pension Plan (ORPP) will require employers and employees to contribute 1.9 percent of an employee’s yearly earnings (up to a maximum of $90,000) per year.

Budget 2015 commits government to establishing a body (the ORPP Administration Corporation) that will be responsible for administering the plan and investing contributions.

OCC Analysis
The OCC remains concerned about the impact that the ORPP could have on the economy. According to our recent survey, only one in four businesses in Ontario can afford the costs associated with the new plan, while 44 percent of businesses will reduce payroll or hire fewer employees in response to the ORPP.

Budget 2015 provides little in the way of clarity for employers on the details of the ORPP. We continue to call on government to develop a comprehensive understanding of the impact of the ORPP and to re-examine the narrow exemption rules it has in place. As it stands, only employers that offer defined-benefit pension plans are exempt from making contributions to the ORPP. These narrow parameters ignore the contributions that many employers are already making to their employees’ retirement through defined-contribution plans, for example.

Government is making important investments in transportation infrastructure

Budget 2015 increases dedicated transportation infrastructure funds by $2.6 billion to $31.5 billion available over 10 years. These funds will be used for transit, transportation, and other priority infrastructure projects across Ontario. About $16 billion of this will be invested in transit the Greater Toronto and Hamilton Area (GTHA) while $15 billion will be invested in transportation and other priority infrastructure projects outside the GTHA.

OCC Analysis

We welcome increased spending in areas of strategic, economic importance, including transportation infrastructure. The Province should continue to make use of its world-leadingAlternative Financing and Procurement (AFP) expertise in order to ensure it is getting the best bang for its infrastructure buck.


Employers will continue to be shocked by rising electricity rates

Budget 2015 makes a few small tweaks to existing electricity programs. The Industrial Conservation Initiative (ICI), which provides a financial incentive to larger businesses to shift their electricity consumption from peak periods, is being expanded by lowering the threshold for qualifying industrial sectors from five megawatts to three. The Northern Industrial Electricity Rate (NIER) program is being extended beyond March 2016, with annual investments of up to $120 million.

OCC Analysis

Budget 2015 does little to address business’ concerns over rising electricity rates. According to the OCC’s most recent survey, rising electricity prices are the number one factor hurting business competitiveness.

While the expansion of the ICI and the extension of the NIER program is encouraging, we remain very concerned about out-of-control electricity rates. Coupled with the announced sale of a portion of Hydro One, there is significant uncertainty in the business community in this respect.

Same old, same old on Ring of Fire

Budget 2015 reiterates government’s previous commitment of up to $1 billion towards the development of transportation infrastructure in the Ring of Fire region. Since making this commitment, the government has established the Ring of Fire Infrastructure Development Corporation (ROFIDC) to facilitate investment decisions.

OCC Analysis
Budget 2015 shows little in the way of progress on development of the Ring of Fire since this time last year. There is still no infrastructure plan in place, there remains little agreement between the most important players, and delays in issuing exploration permits have stalled any potential development. As we have noted previously, we are still years away from opening a mine in the Ring of Fire. Further, development timelines are increasingly characterized by uncertainty.

Government is aggressively pursuing an asset recycling strategy

The government has increased its asset optimization target to $5.7 billion, up from a $2.6 billion target in 2014. The government reiterated its earlier announcement that it is selling 60 percent of Hydro One and will inject the profit into transportation infrastructure.  

OCC Analysis
The OCC supports the government’s goal to maximize the value of its assets. As it undertakes its asset review, government must ensure that its actions do not hurt domestic industry and, as it relates to the sale of electricity infrastructure, do not put the rate payer at risk.


Government is implementing a Cap and Trade regime to combat climate change

The government has reiterated that it is introducing a cap and trade system, and will set an overall emissions limit (the cap) on those facilities included in the program. Businesses will have their own greenhouse gas quota and will then be able to sell (trade) their quota if they are under their emissions limit.

OCC Analysis
The government has only recently announced its intention to move forward with a cap and trade system, and so questions about the parameters of the system remain. We do not yet know which sectors will be subject to the system, how emissions limits will be set, or the timelines for implementation.

We are concerned that this cap and trade system could add to the already onerous burden that government seems to be placing on the shoulders of employers.


Other notable announcements:

  • Good news for forestry: The government is enhancing the Jobs and Prosperity Fund by $200 million and is extending eligibility to the province’s forestry sector.
  • Innovation initiative: The government is investing $20 million to establish a Health Technology Innovation Fund and appoint a Chief Innovation Strategist.
  • Cuts to the Apprenticeship Training Tax Credit: The government is returning ATTC funding levels to their pre-recession level, resulting in $30 million in cost-savings.
  • Beer coming to a grocery store near you: The government is reiterating its commitment to permit the sale of beer in grocery stores for the first time in Ontario history.
  • Youth employment:  The government is renewing the Ontario Youth Jobs Strategy to the tune of $250 million in the next two years. The strategy provides incentives to employers to employ young Ontarians
Comment through the "Peterborough Chamber" group of LinkedIn.

Businesses concerned about proposed pension policy

The Peterborough Chamber of Commerce recently had the opportunity to be at the table when Associate Minister of Finance Mitzie Hunter stopped in Peterborough as part of province-wide consultations on the Ontario Retirement Pension Plan (ORPP).  A seat at the table is one way the Chamber of Commerce is able to bring the business message to political leaders.  

The Ontario government lays out the current parameters of the retirement savings plan in its Key Design Questions document:

  • Require equal contributions to be shared between employers and employees not exceeding 1.9 per cent eachOffer a predictable stream of income in retirement for life, and index benefits to inflation
  • Pool longevity and investment risk
  • Aim to replace 15 per cent of an individual’s earnings
  • Require benefits to be earned as contributions are made
  • Require “locked-in” contributions and accumulated benefits

Until February 13, 2015, the Government is looking for feedback on three areas:

  1. The Right Minimum Earnings Threshold
  2. Addressing the Needs of the Self-Employed
  3. Definition of Comparable Workplace Pension Plan

The Chamber Network has serious concerns about what is deemed a “Comparable Workplace Pension Plan”.  Current practice has many private sector businesses offering plans that would be considered incompatible because of how they are set up and managed.  

The Chamber Network has responded to this proposed legislation in a number of ways including the presentation during the consultation process.  To date there have been two conference calls, a letter to Minister Hunter, a Day of Advocacy and a press release asking the legislation be deferred until further information on the economic impact of the plan is acquired. An OCC survey revealed that only 23 per cent of businesses believe they can afford the costs associated with increased employer pension contributions.    

The Peterborough Chamber made three points to the consultation committee:

What it would take an average business to make the money needed to fund the ORPP

For example, a company with 25 employees, each making $40,000 has a payroll of $1,000,000.  The ORPP will add another $19,000 annually to the company’s payroll.  If the company has a profit margin of 4 per cent (which is an average across industry and various sectors), the company will need to sell/provide another $475,000 in products/services to earn that $19,000.  

This leads to other questions such as what happens to businesses that are not able to afford the increase.  Will this force them to consider how they grow, if they grow, and their overall viability?  

The importance of financial literacy 

Future generations must understand the importance of saving for the future.  They must have a fundamental
understanding of financial matters.  The Chamber Network has been lobbying the provincial government to create and add a business course to the curriculum which includes making financial literacy a requirement of high school graduation. This concept is comparable to the graduation requirement of 40 volunteer hours. 

The Chamber Network also has policy recommendations dealing with adult literacy and essential skills. 

Minister Hunter has explained that the issue of improving financial literacy was included in her mandate letter on developing the ORPP from the Premier, so it is on the provincial radar. 

The ORPP is not an isolated cost

The example above dealing with profit margins and what it takes to absorb an increase relates to one increase.  It doesn’t reflect the fact that electricity prices are anticipated to go up 42 per cent over the next several years, that Ontario has high WSIB premiums, that there is slow growth for the foreseeable future, and that municipal taxes go up each year.  While 1.9 per cent employer contribution doesn’t sound
unreasonable on its own, the truth of the matter is that it’s not an increase that is
happening on its own.   

The ORPP has businesses, especially those categorized as small and medium enterprises, very wary.  This is not to say that employers don’t recognize that there is a serious problem at hand.  In a survey by the Ontario Chamber of Commerce (OCC) over 70% of Ontario businesses believe pension reform should be a priority.  The concern is how pension reform is achieved and the effect it will have on Ontario’s economy and future growth.  

Comment through the "Peterborough Chamber" group of LinkedIn.


Enhancing competitiveness and job creation is the focus of a business-driven economic agenda for Ontario  

The Greater Peterborough Chamber of Commerce has partnered with the Ontario Chamber of Commerce to release Emerging Stronger 2015.  This is the fourth edition of the document which is a business-driven economic agenda for Ontario.  

The report identifies the immediate steps that government and the private sector must take to enhance Ontario’s economic competitiveness and spur job creation in the province including:

  • Make Ontario’s regulatory system more open and responsive
  • Develop a targeted and coherent intergovernmental strategy for Ontario’s manufacturing sector
  • Modernize Ontario’s apprenticeship system and the regulation of skilled trades
  • Ease the fiscal burden on municipalities by fixing outdated labour legislation
  • Provide information and support to enable Ontario businesses to take full advantage of the Canada-E.U. Comprehensive Economic Trade Agreement (CETA)
  • Mitigate the impact of pension reform on the business climate 
  • Bend the electricity cost curve

 “The recommendations in Emerging Stronger 2015 speak directly to issues affecting Peterborough businesses”, says Stuart Harrison, President and CEO, Greater Peterborough Chamber of Commerce. “They encourage improvements for the manufacturing and trades sectors, as well as changes to the regulatory framework for business and the interest arbitration and tendering processes for municipalities.

The Emerging Stronger brand is based on five priorities: 

  1. Fostering a culture of innovation and smart risk-taking in order to become a productivity leader
  2. Building a 21st century workforce
  3. Restoring fiscal balance by improving the way government works
  4. Taking advantage of new opportunities in the global economy
  5. Identifying, championing, and strategically investing in our competitive advantages in the global economy

Thanks to our research partners, the Mowat Centre at the University of Toronto and Leger Marketing.

Find the full report here: Emerging Stronger 2015

Comment through the "Peterborough Chamber" group of LinkedIn.