Administration Of The Plan
The Ontario Retirement Pension Plan Administration Corporation will begin contacting Ontario employers in early 2016 toverify their existing pension plans and assess the coverage offeredto employees.
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 Liberalshad noted that the government intended to work with the provincesto “enhance” the CPP.
3 Such that benefits equal or exceed the benefits beingoffered under the ORPP.
The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.
Background On The Orpp
The ORPP is a mandatory pension plan for residents of Ontariowho are employees, but who don’t have “comparable”workplace pension plans. A “comparable plan” is definedas a registered pension plan, subject to federal and provincialregulation, that meets the following minimum thresholds:
- provides people with a predictable stream of income inretirement for life
- provides people with security
- requires contributions by employers to ensure fairness
- aims to replace up to 15 percent of a person’spre-retirement income
Workplace defined benefit or defined contribution pension planswill meet the comparability test, provided that certain specificconditions are first met.3 Group Registered RetirementSavings Plans and Deferred Profit Sharing Plans will not beconsidered comparable plans for this purpose.
Employers that offer a registered workplace plan thatdoesn’t meet the above minimum thresholds will have until 2020to decide if they want to adjust their plans or enrol theiremployees in the ORPP.
How Will It Work
The ORPP will be a supplement, and very similar in design, tothe existing CPP. When fully phased in, it will require equalcontributions from employees and employers . This compares to thecurrent CPP regime which requires employer and employeecontributions of 4.95 percent each . The biggestdifference between the ORPP and the CPP is that CPP contributionscurrently max out at an income level of $54,900 , whereasthe ORPP will max out at an income level of $90,000, subject toindexation for inflation.
For both the CPP and ORPP, the basic exemption amount is set at$3,500 .
ORPP contributions will be phased in. For large employers with500 or more employees, contributions will start January 1, 2017,and will be increased each year until 2019. For medium-sizedemployers, contributions will begin January 1, 2018, withcontributions phased in to their maximum by 2020. Small employerswith fewer than 50 workers will start contributing on January 1,2019, with contributions phased in to their maximum by 2021. Othersemployers will start to make contributions on January 1, 2020.These phase-in rules are summarized in the table below.
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Phase In Of Contribution Rate By Type Of Employer
Benefits will be indexed to increases in wages and the cost ofliving, and will start to be paid in 2022. Benefits will generallystart at age 65 however, similar to the CPP, individuals will havethe option to receive adjusted retirement income as early as 60 oras late as 70.
Note: The ORPP cannot cover self-employed workers because thefederal Income Tax Act does not allow self-employed people toparticipate in a registered pension plan. Ontario has asked thefederal government to consider changing the Act to allowself-employed workers to join the ORPP.
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