As we reported in 2015, the Ontario government intends to
introduce the Ontario Retirement Pension Plan (ORPP) as a
supplement to the Canada Pension Plan. On January 26, 2016, the
Ontario government released further information on the ORPP and
renewed its commitment to implement the ORPP, beginning on January
The ORPP will apply to every Ontario employee who is not a
member of a "comparable" workplace pension plan and will
be phased in between January 1, 2017 and January 1, 2020.
Participating employees and employers will be required to
contribute an equal amount to the ORPP. The required contribution
rate for both employees and employers will be 1.9% of an
employee's annual earnings up to $90,000, subject to a minimum
earnings threshold of $3,500. Prior to January 1, 2020,
contribution rates will be phased in.
In the January 2016 announcement, the Ontario government
released additional design details on the ORPP that will be of
interest to employers, including the following:
Employees will be considered to be employed in Ontario if they
report to work at an employer's establishment that is located
in Ontario. If they do not report to work at an establishment of
their employer (e.g., employees who work from home), they will be
considered to be employed in Ontario if they are paid from an
Ontario based establishment. As a result, employees located in
other provinces may be subject to the ORPP.
Pensionable earnings for the purposes of the ORPP will include
both cash and non-cash earnings.
The question of whether or not a plan is "comparable"
will be assessed at the "level of a subset of employees."
As a result, if a plan provides different benefits to different
groups of employees, the question of whether or not the benefits
are comparable will be assessed against each group of
employees. For employers that participate in a multi-employer
pension plan (a plan with more than one unaffiliated employer), the
comparability test will be applied to the employer's collective
bargaining or employee agreements. A plan may, therefore, have both
comparable and non-comparable elements at the same time.
If an employee is eligible to participate in a comparable plan
after completion of a waiting period, the employee, and the
employer on behalf of the employee, will be required to contribute
to the ORPP, during that waiting period.
A defined contribution registered pension plan will not be
considered comparable if contributions are voluntary. Only defined
contribution registered pension plans with a mandatory 8%
contribution formula, 4% of which must be employer contributions,
will be considered comparable.
Employers with comparable workplace plans will be able to
opt-in to the ORPP as of January 1, 2020 or anytime
Unless an employee is exempt from tax under a tax treaty, the
ORPP will include non-resident workers who earn above the minimum
threshold ($3,500) and have taxable income for Ontario and Canadian
As a reminder, the start date for contributions to the ORPP will
vary depending on the size of the employer's workforce and
whether the employer had a registered workplace pension plan in
place (it does not have to be a "comparable" workplace
pension plan for these purposes) as of August 11, 2015. Large
employers (defined as employers with 500 or more employees) without
a registered workplace pension plan will be required to contribute
to the ORPP as of January 1, 2017.
What should employers do now?
In light of the Ontario government's most recent
announcement, it appears that the ORPP will soon be a reality for
Ontario employers and employees. As discussed previously, in
anticipation of the roll-out of the ORPP, employers should review
existing retirement savings arrangements sooner rather than later.
Will your plan be considered a "comparable" workplace
pension plan or will you be required to contribute to the ORPP?
If an employer's plan is not a "comparable"
workplace pension plan or has elements that are not
"comparable" (i.e., a waiting period for eligibility),
employers would be well advised to take time now to consider the
impact of the ORPP on their overall compensation and benefits
package and whether any changes should be made. Employers in
unionized sectors should also consider discussing the ORPP in
current or upcoming negotiations in order to ensure that the ORPP
is properly addressed in any collective agreement.
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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