Canada: Tax Letters: The Ontario Retirement Pension Plan – Will You Be Ready?

Last Updated: September 24 2015
Article by Aaron Schechter, CPA, CA and Yufeng Ding, CPA

Details of the controversial Ontario Retirement Pension Plan ("ORPP") were recently announced by Ontario Premier Kathleen Wynne. The proposed ORPP is intended to provide additional retirement income – beyond that of the Canadian Pension Plan ("CPP"), Old Age Security ("OAS"), and voluntary savings vehicles (i.e., RRSPs and TFSAs) – to approximately 3.5 million workers in Ontario who do not have a secure workplace pension. Here, we will outline some of the finer points of the ORPP that have come out of the most recent announcement.

The Basics

Beginning in 2017, there will be a three-year phase-in to the ORPP for most Ontario employers (see Table 1 below). When fully implemented by 2021, employers and employees will each contribute 1.9% of an employee's annual earnings up to $90,000. This equates to a contribution of up to $1,710 by the employee and a matching contribution of up to $1,710 by the employer.

By comparison, employer and employee CPP contributions are currently each equal to 4.95% on up to $53,600 of an employee's annual earnings (with a basic exemption on the first $3,500 of earnings). This equates to an employee contribution of $2,479.95 and an equal employer matching contribution of $2,479.95.

Table 1 – Employer and Employee Contribution Rates

Year Type of Employer Contribution Start Date Contribution Rate – Year 1 Contribution Rate – Year 2 Contribution Rate – Year 3
2017 Employers with more than 500 employees without a registered workplace pension plan January 1, 2017 0.8% 1.6% 1.9%
2018 Employers with between 50 and 499 employees without a registered workplace pension plan January 1, 2018 0.8% 1.6% 1.9%
2019 Employers with fewer than 50 workers without a registered workplace pension plan January 1, 2019 0.8% 1.6% 1.9%
2020 Employers with a registered workplace pension plan that does not meet the ORPP's compatibility test or who have employees who are not members of a "comparable plan" January 1, 2020 1.9% 1.9% 1.9%

All Ontario employers without a workplace pension plan or a "comparable plan" will be required to enroll in the ORPP. All employees will have to participate if their employer participates.
A "comparable plan" is defined by the province as a registered pension plan subject to federal and provincial regulation. This includes certain Defined Benefit ("DB") pension plans and Defined Contribution ("DC") plans that meet the following minimum thresholds:

  • For a DB plan, the benefits under the plan must equal or exceed the benefits being offered through the ORPP. In other words, comparable DB plans must provide a benefit accrual rate of no less than 0.5%;
  • For a DC plan, it must have a minimum annual contribution rate equal to 8% of an employee's annual income, of which the employer must contribute at least 4%;

The ORPP has also adapted its "comparable plan" criteria for hybrid, flat benefit and flat dollar plans.

Cost to Employers

Employers in Ontario will incur a direct cash outflow when the ORPP is fully implemented. Table 2 shows the anticipated costs for different employers.

Table 2 – Cost of the ORPP to an Employer

Number of Employees Estimated Before Tax Cash Outflow (Note 1) Estimated After-Tax Cash Outflow (Note 2) Estimated After-Tax Cash Outflow (Note 3)
10 $12,600 $10,900 $9,300
20 $25,100 $21,700 $18,500
50 $62,700 $54,300 $46,100
100 $125,400 $108,500 $92,200

Note 1 – Assumes that 50% of the employees earn a salary between $30,000 and $70,000 with an average salary being $50,000; 40% of the employees earn a salary between $70,001 and $90,000 with an average salary being $80,000; and 10% of the employees earn a salary greater than $90,000.

Note 2 – Assumes that the employer is a Canadian-controlled private corporation with taxable income of $500,000 or less and will be eligible for the low corporate tax rate.

Note 3 – Assumes that the employer will not be eligible for the low corporate tax rate.

Retirement Benefits under the ORPP

If approved, ORPP beneficiaries who are 65 or older would start drawing on the ORPP in 2022. The amount of money an ORPP beneficiary receives would depend on the following:

  • How many years the employee contributed to the ORPP;
  • How much the employee contributed to the ORPP; and
  • The employee's salary throughout those years.

The ORPP would offer inflation-protected benefits to provide a predictable source of retirement income for life.

The table below shows the retirement benefits an individual contributor would receive from the ORPP if he or she contributes for 40 years.

Table 3 – ORPP Retirement Benefits in Today's Dollars for an Employee Contributing for 40 Years

Contributor Salary Personal Contributions Employer Contributions Retirement Benefits
Employee #1 $45,000 $2.16/day $2.16/day $6,410/year, for life
Employee #2 $70,000 $3.46/day $3.46/day $9,970/year, for life
Employee #3 $90,000 $4.50/day $4.50/day $12,815/year, for life

Self-Employed Individuals

As proposed, a self-employed Ontario worker would not be covered under the ORPP because the federal Income Tax Act ("Act") currently does not allow self-employed individuals to participate in a registered pension plan. The province has requested that the Act be amended. If the Act is not amended, the Ontario government has stated that it has a commitment to exploring other options such that self-employed individuals will be eligible to participate in the ORPP.

Criticism of the ORPP

Since its proposal in the 2014 Ontario Budget, the ORPP has met criticism. While proponents believe the ORPP could help millions of Ontarians save for their retirement years, critics consider it to be "forced" savings, held and invested by a bureaucratic entity.

An anonymous contributor to an online article published by the Toronto Sun* demonstrated that individuals would be better off if the amount of ORPP contributions were instead put into a Tax-Free Savings Account. The study suggests that, on retirement, the individual will have earned a greater return on investment and will, therefore, have a larger retirement pool of funds. In addition, the retirement benefits would be tax-free, would not claw back the individual's OAS benefits and, when the individual dies, the balance in the retirement pool could be left to a beneficiary, unlike the ORPP.

Opposition forces have blasted the Ontario government for overestimating the need for a provincial pension plan. Some have argued that Ontarians are currently saving enough for retirement on their own and the ORPP would take money from those who need it most while they are in their working years and giving it back to them in their retirement years when, arguably, they need it the least.

Critics of the ORPP have also cited the plan as an additional payroll tax on employers, especially small businesses. Employers could become discouraged from investing and creating new jobs in Ontario given the additional cost to do so once the ORPP contributions commence. Other employers, who can shift their human capital resources, could move jobs out of Ontario to other lower tax provinces or countries if the ORPP has a significant impact on their bottom line.

The ORPP will require complex administration; running it could prove costly. Putting aside the current animosity between the Ontario Premier and the Prime Minister, many argue that the Ontario government should try to find a way to "piggyback" off the CPP. By using the CPP's well-established infrastructure, the cost structure – of this smaller provincial plan that mirrors the existing and significantly larger federal plan – could be made more efficient. While there are currently no plans to do so, expanding the CPP to replace the proposed ORPP may still be an option depending on the outcome of the upcoming federal election.

What to Do Next

Employers in Ontario should start planning for the ORPP by determining when they must begin making and withholding ORPP contributions (that is if they fall into a category of being required to do so). In early 2016, the ORPP Administration Corporation will be contacting all Ontario employers to confirm whether they have an existing workplace pension plan and, if so, will it meet the qualifications of a "comparable plan". Finally, employers should evaluate the cost/benefit of implementing their own workplace "comparable plan" (or amending an existing workplace pension plan if it is not a "comparable plan") versus participation in the ORPP.

There are still additional details concerning the ORPP that will be released prior to its implementation in 2017.

If you would like more information about the ORPP and how it may affect you and/or your business, please contact Aaron Schechter or one of our tax professionals. If you are a small or medium-sized business owner and would like to learn more about how your benefits plan may be affected, please contact our HR Consulting Services Leader, Susan Hodkinson at 416.963.7172.

Download a PDF copy of this letter here.


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.

Aaron Schechter, CPA, CA
Similar Articles
Relevancy Powered by MondaqAI
Gowling WLG
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Gowling WLG
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions