The stated objective of Bill 56 is to provide a further
mandatory provincial retirement plan to address a perceived
inability of many Ontarians to adequately prepare to maintain their
standard of living when they retire. The intention of the
Bill is to establish the pension plan by January 1, 2017 through
the introduction of further legislation that will provide for the
administration, operation and requirements of the pension
plan. It is expected that the government will now begin a
consultation process to address specific proposed components of the
new retirement pension plan.
Bill 56 provides for the creation of an "administrative
entity" to manage the plan including the enrolment of eligible
employees and employers, the collection, holding and investment of
contributions, and the administration of benefits.
While the details of the plan requirements are to be set out in
further legislation, a Schedule to the Bill sets out the
Basic Requirements of the plan. These
requirements include the following:
Enrolment of "eligible" employees and employers is
Eligible employees are persons who are 18 or older and under 70
years of age, are employed in eligible employment in
Ontario, have annual earnings above a minimum threshold (which is
not yet set), and who do not participate in a "comparable
workplace pension plan".
Similar to the Canada Pension Plan, all eligible employers must
deduct contributions from salary and wages of eligible employees,
and must also make employer contributions.
The maximum earnings threshold for 2017 will be $90,000 plus a
further adjustment at the same percentage rate of increase between
2014 and 2017 as is set out in the Canada Pension
The contribution rate for employers shall be equal to the rate
for employees, and the combined rate shall not exceed 3.8 per
cent.Rates shall be phased in through transition rules to be set
under the legislation.
In contrast, the current combined employer and employee
contribution rates into the Canada Pension Plan are 9.9% with a
maximum total contribution of $4,712.40. If the Ontario plan
was immediately in place, with maximum pensionable income of
$90,000 and a maximum combined contribution rate of 3.8%, the total
combined contribution would be $3,420 with equal employee and
employer contributions of $1,710.
"Eligible employment" is not defined in the Schedule,
except that it is stated to be all employment in Ontario other than
those which are exempted under the further full pension plan
legislation. The Schedule provides that exceptions
"shall be similar in nature to the exemptions for employment
under the Canada Pension Plan (Canada)". The
exceptions under the Canada Pension Plan are quite
specific and narrow.
An important part of the further legislation will be a
description of what types of workplace pension plans are
"comparable" plans as described in the Bill. For
example, will a group RRSP plan or other structured retirement
plans satisfy this requirement, though not technically a
"pension plan"? There should be ample reason for
employers, particularly smaller employers with no retirement plan
in place for employees, to engage in the consultation
process. Moreover, as rules describing comparable plans come
into focus all such employers and their employees may wish to
explore the benefits of establishing their own plans in order to
qualify for the exemptions.
Any of the lawyers of CCPartners would be pleased to assist
employers in understanding Bill 56, to begin the process of
preparing for public consultation and to assess the risks and
benefits of alternative and potentially comparable pension
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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