Canada: New ORPP Legislation Introduced But Many Questions Still Unanswered

Last Updated: April 26 2016
Article by Natasha A. VandenHoven

Bill 186, the Ontario Retirement Pension Plan Act (Strengthening Retirement Security for Ontarians), 2016  (Bill 186) was introduced on April 14, 2016 and we expect it to be passed before the legislature rises for the summer in June.  The Bill sets out the framework for the Ontario Retirement Pension Plan (ORPP); however, much of the detail relating to the ORPP has yet to be set out in future regulation. Please see our previous ORPP blog posts here and here.

Key highlights are:

Coverage. Generally, unless an exemption applies, the ORPP will be mandatory for  employees and office holders employed in Ontario. Surprisingly, federal government employees are expressly excluded from participation in the ORPP as well as certain judges and federal politicians, however, Bill 186 does not purport to exclude private sector federally-regulated employees from the ORPP although they may be excluded by future regulation. 

Employees aged 18 through 70, with annual earnings which exceed $3,500 are covered to a maximum annual earnings.  The maximum annual earnings threshold for 2017 was $90,000, and it will be increased for 2018 (the first year of contributions) and annually thereafter for changes in the average wage.

Contributions and Funding. The employee contribution rate is set at 1.9% (the employer rate is an equal amount); however,  Bill 186 does contemplate that it could be changed.  For example, if the ORPP is not funded on a sustainable basis, certain remedial measures affecting benefits and/or contribution rates will be allowed.  

Comparable Workplace Pension Plan.  Bill 186 confirms that employees  who participate in a comparable workplace pension plan, and their employers, will not be required to contribute to the ORPP. Further details about comparable workplace pension plans, including how the rules will be applied to different subsets of pension plan members within the same plan will be set out in regulation.

Successor Employers. When one employer immediately succeeds another as the employer of an employee as a result of the formation or dissolution of a corporation or the acquisition of all or part of a business, similar to Canada Pension Plan (CPP),  the successor employer may take into account the amounts paid, deducted, remitted or contributed by the former employer in respect of the ORPP. Bill 186 also provides that a successor employer is jointly and severally liable with the former employer to pay all amounts owing by the former employer immediately before the succession. These provisions seem to be an amalgam of the successor employer rules under the Ontario Workplace Safety and Insurance Act (WSIA) and CPP. Unlike the WSIA, the ORPP does not purport exempt a trustee in bankruptcy, receiver, liquidator or person who acquires a business pursuant to a Companies' Creditors Arrangement Act arrangement from successor employer liability. As well, it is not clear whether purchase certificates will be issued by the ORPP Administration Corporation to prove that a seller has remitted all contributions owing to the ORPP. This new liability could lead to additional financial uncertainties in transactions.

Deemed Trust and Many Penalties. The employees' and employers' contributions are subject to a deemed trust, and the ORPP Administration Corporation has a lien and charge on the property of the employer relating to such amounts. The ORPP Administration Corporation may impose an administrative penalty on an employer who fails to remit required contributions or who contravenes certain provisions of the legislation, etc. The maximum administrative penalty is $10,000. Employers will be able to ask for a reconsideration of administrative penalties. A reconsideration may be appealed to a tribunal which has not yet been determined. A director of a corporation may be held jointly and severally liable with the corporation for unremitted contributions and any interest or administrative penalties imposed for the failure to remit. It is an offence for an employer not to remit required contributions and keep required records, etc. Directors and officers of a corporation can also be guilty of an offence. The maximum fine is $100,000 on a first conviction and $200,000 for each subsequent conviction.

Benefits.  ORPP benefits will be paid in equal monthly instalments, provided that small amounts (to be prescribed) will be payable in a lump sum. If the member has a spouse and is not living separate and apart from that spouse on the day that the first instalment of payment is due, the spouse will be entitled to joint and survivor benefits at the death of the member unless the spouse waives that right. If the member does not have a spouse, the ORPP pension will be paid as a life pension guaranteed for 10 years. Other provisions allow for payment of a lump sum when a member's life expectancy is shortened.

Leaves of Absence. Employees who participate in the ORPP can elect to contribute during statutory leaves of absences under the Employment Standards Act, 2000 (i.e. pregnancy or parental leaves). Whether an election to contribute to the ORPP during any such leave must be made before or after a leave begins shall be set out in regulation. It is unclear how federally regulated employees who are on leaves under the Canada Labour Code might be dealt with.

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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