Canada: If My Company Sponsors A DC Pension Plan, Will We Need To Participate In The ORPP?

We assumed the answer was no. Now it's not so clear.

What is the ORPP?

The Ontario Retirement Pension Plan (ORPP) is an unprecedented, Ontario-only, mandatory provincial pension plan intended to provide pension coverage to working Ontarians without workplace pension plans. Starting in 2017, affected employees and employers in Ontario will be required to contribute an equal amount to the ORPP, capped at 1.9 percent each (3.8 percent combined), on an employee's annual earnings up to $90,000.

The Ontario Budget and the ORPP

The 2014 Ontario Budget1 stated that:

Since the ORPP is intended to assist individuals most at risk of undersaving, particularly middle-income earners without workplace pensions, those already participating in a comparable workplace pension plan would not be required to enrol in the ORPP.

Since defined benefit (DB) pension plans, defined contribution (DC) pension plans, and multi-employer pension plans (MEPPs)2, as defined under the Ontario Pension Benefits Act (PBA), are all employee pension plans registered under the PBA, the assumption made by many in the pension industry was that the Ontario Budget's reference to comparable workplace pension plans would include DB plans, DC plans and MEPPs.

Ontario's ORPP Legislation and Consultation Paper

On December 8, 2014, the Ontario government introduced its proposed ORPP legislation, and on December 17, 2014, released a Consultation Paper inviting feedback on the ORPP's key design details. Public input on the Consultation Paper was required to be provided by February 13, 2015.

A key issue of the ORPP's design details being considered as part of the Consultation Paper is the plan types that will fall within the definition of comparable workplace pension plans. Employers with a comparable workplace pension plan will be exempt from participating in the ORPP. In the Consultation Paper, the Ontario government has indicated a preference for the view that DB plans and MEPPs constitute comparable workplace pension plans, but that DC plans will not constitute comparable workplace pension plans. Does this mean that employers currently offering DC pension plans must also participate in the ORPP? The question is a significant one since DC pension plans are increasingly the norm in Ontario, including among employers who previously provided a DB plan for their employees and have either closed or terminated their DB plan (or the DB component of their plan).

What is the Best Definition of a Comparable Workplace Pension Plan?

Ontario's Consultation Paper sets out the following features as the ORPP key features:

  1. mandatory employer contributions;
  2. locked-in funds;
  3. benefit provided for life;
  4. indexation to inflation; and
  5. pooled investment risk.

Notwithstanding the fact that the proposed ORPP includes all five features listed above, in our view, if a plan meets the criteria under both (1) and (2) above, namely, if the plan has mandatory employer contributions and the benefits are locked-in (locked-in means that plan members cannot withdraw their retirement funds but they must be used to provide a retirement income), then the plan should constitute a comparable workplace pension plan.

DB plans, DC plans and MEPPS all satisfy the conditions under (1) and (2). Group registered retirement savings plans, deferred profit sharing plans and pooled registered pension plans do not meet the conditions under (1) and (2) and should not therefore, in our view, constitute comparable workplace pension plans. The remaining features in (3) to (5) above (and in particular, (4) and (5)), while perhaps desirable from a policy perspective, do not constitute the standard framework necessary for a workplace pension plan and therefore should not be required features of a comparable workplace pension plan.

Similarly, under the PBA, a plan must satisfy the features in (1) and (2) above in order to qualify for registration as an employee pension plan. This means that DB plans, DC plans and MEPPs all constitute pension plans under the PBA. The PBA imposes minimum standards on these plans, thereby affording members considerable protection with respect to their benefits. Further, based on the terms of the PBA, whether or not a plan satisfies the criteria under (3) to (5) has no impact on its qualification as a registered pension plan. Although the primary objective of all pension plans is to provide periodic payments for the lifetime of the plan member, the PBA permits transfers to other vehicles that may or may not provide a benefit for life. The ability to mitigate longevity risk is, however, available to members through the purchase of annuities from an insurance company.

While the Consultation Paper indicates a preferred approach that all DB plans and MEPPs meet the definition of a comparable workplace pension plan, we note that many single-employer DB plans and MEPPs themselves do not meet all criteria under (1) to (5) above. Most private sector DB plans and MEPPs do not, in fact, index benefits to inflation, so most of these plans would not satisfy the criteria under (4) above.

Furthermore, members of a DB plan or a MEPP who have terminated employment or plan membership may elect to, and often choose to, transfer the commuted value of their pensions to a prescribed retirement savings arrangement, which, like a DC pension plan, does not meet the conditions under (3) to (5) above.

DC Plans

While the Consultation Paper's preferred approach is to exclude DC plans from the definition of a comparable workplace pension plan, a question asked in the Consultation Paper is whether there are circumstances under which DC plans should be considered comparable workplace pension plans. Would establishing a minimum employee/employer contribution rate for DC plans make DC plans comparable?

In our view, a DC plan with a minimum employee/employer contribution rate of 1.9 percent for employees and 1.9 percent for employers (for a 3.8 percent total contribution rate), thereby mirroring the proposed ORPP contribution rates, should be considered a comparable workplace pension plan. For DC plans where either no employee contributions are required or the minimum employee contribution rate is less than 1.9 percent, then the total employer contribution rate, or the total employee/employer contribution rate, as applicable, should be, at a minimum, 3.8 percent.

We note that DC plans must provide for a minimum employer contribution of one percent of members' earnings in order to be eligible for registration as a pension plan under the Income Tax Act (Canada). For most DC plans, however, both employee and employer contributions are required, and it is our experience that the majority of employer-sponsored DC plans have a total contribution rate that is at least four percent, with the employer-required contributions usually as high as, or higher than, the employee required contributions.

If Ontario were to take the position that:

  1. DC plans do not constitute a comparable workplace pension plan and thereby require DC plan sponsors to also participate in the ORPP; or that
  2. only a DC plan with a total required contribution of 10 percent, for example, constitutes a comparable workplace pension plan,

then some DC plan sponsors in Ontario could choose to amend their DC plan to offset their employer contributions in future by their required ORPP contributions, or more likely, could choose to abandon their employer-sponsored DC pension plans altogether.

A further question posed in the Consultation Paper is whether requiring members to convert a portion of their savings in a DC plan to an annuity upon retirement would make a DC plan a comparable workplace pension plan. We do not think it would be desirable for a member's DC plan savings to have to be converted into an annuity in order for a DC plan to be considered a comparable workplace pension plan. Since the price of annuities fluctuates greatly with interest rates, imposing such a requirement could subject DC plan members to an unreasonable level of risk related to the level of interest rates at the time of their retirement.


As suggested above, a significant number of private sector employers in Ontario with registered pension plans have either closed or frozen their DB plans and now offer only DC plans for their new hires. The Ontario government's Consultation Paper informs us that the government would prefer not to consider these DC plans, regardless of the level of contributions, to be comparable workplace pension plans. For the reasons discussed above, we disagree with this approach. In our view, DB pension plans, DC pension plans (at least those having a minimum combined employee and employer contribution level equivalent to that of the ORPP) and MEPPs should all meet the definition of comparable workplace pension plans for purposes of being exempt from participating in the ORPP. If Ontario excludes DC plans from comparable workplace pension plans, then this may have unintended negative consequences for the members of those plans, since many employers may simply terminate their DC plans rather than incur the additional financial cost of ORPP mandatory participation in addition to the costs of their employer-sponsored pension plans. Simply put, we hope to see DC pension plans included in the definition of comparable workplace pension plans.


1. July 2014

2. The Ontario Consultation Paper dated December 17, 2014, refers to target benefit MEPPs which means MEPPs that allow accrued benefits, including pensions in pay to retirees, to be reduced to address funding shortfalls. The PBA currently allows for this type of MEPP. Many MEPPS currently in place allow for the reduction of accrued benefits.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.