Although the legislation for the new Ontario Retirement
Pension Plan (ORPP) received Royal Assent in May of last
year,1 there was some indication that the federal
Liberal majority win last October could put a hold on the
plan's rollout.2 Recently, however, Ontario Premier
Wynne announced that, notwithstanding the new federal
government's desire to expand the Canada Pension Plan (CPP),
Ontario still intends to go ahead with the ORPP as scheduled.
Background on the ORPP
The ORPP is a mandatory pension plan for residents of Ontario
who are employees, but who don't have "comparable"
workplace pension plans. A "comparable plan" is defined
as a registered pension plan, subject to federal and provincial
regulation, that meets the following minimum thresholds:
provides people with a predictable stream of income in
retirement for life
provides people with security (they won't outlive their
requires contributions by employers to ensure fairness
aims to replace up to 15 percent of a person's
Workplace defined benefit or defined contribution pension plans
will meet the comparability test, provided that certain specific
conditions are first met.3 Group Registered Retirement
Savings Plans and Deferred Profit Sharing Plans will not be
considered comparable plans for this purpose.
Employers that offer a registered workplace plan that
doesn't meet the above minimum thresholds will have until 2020
to decide if they want to adjust their plans or enrol their
employees in the ORPP.
How will it work?
The ORPP will be a supplement, and very similar in design, to
the existing CPP. When fully phased in, it will require equal
contributions from employees and employers (not exceeding 1.9
percent each, or 3.8 percent in total). This compares to the
current CPP regime which requires employer and employee
contributions of 4.95 percent each (9.9 percent total). The biggest
difference between the ORPP and the CPP is that CPP contributions
currently max out at an income level of $54,900 (in 2016), whereas
the ORPP will max out at an income level of $90,000, subject to
indexation for inflation.
For both the CPP and ORPP, the basic exemption amount is set at
$3,500 (this is the amount a plan member can earn before they begin
ORPP contributions will be phased in. For large employers with
500 or more employees, contributions will start January 1, 2017,
and will be increased each year until 2019. For medium-sized
employers, contributions will begin January 1, 2018, with
contributions phased in to their maximum by 2020. Small employers
with fewer than 50 workers will start contributing on January 1,
2019, with contributions phased in to their maximum by 2021. Others
employers will start to make contributions on January 1, 2020.
These phase-in rules are summarized in the table below.
Phase in of contribution rate by type of employer
Benefits will be indexed to increases in wages and the cost of
living, and will start to be paid in 2022. Benefits will generally
start at age 65; however, similar to the CPP, individuals will have
the option to receive adjusted retirement income as early as 60 or
as late as 70.
Note: The ORPP cannot cover self-employed workers because the
federal Income Tax Act does not allow self-employed people to
participate in a registered pension plan. Ontario has asked the
federal government to consider changing the Act to allow
self-employed workers to join the ORPP.
Administration of the plan
The Ontario Retirement Pension Plan Administration Corporation
(ORPP AC) will begin contacting Ontario employers in early 2016 to
verify their existing pension plans and assess the coverage offered
1 Ontario Bill 56, Ontario Retirement Pension Plan Act,
received Royal Assent on May 5, 2015.
2 As part of its federal election platform, the Liberals
had noted that the government intended to work with the provinces
to "enhance" the CPP.
3 Such that benefits equal or exceed the benefits being
offered under the ORPP.
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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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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