A few months ago, I wrote a blog post setting out the five things to know about the Ontario government’s proposed Ontario Retirement Pension Plan (ORPP).
Last month, the Ontario government released its 2016 budget and provided updated information that all provincially regulated employees and employers ought to know about the ORPP.
The ORPP Administration Corporation
In November, the government started appointing Board members for the ORPP Administration Corporation and, in January, it announced it had appointed the Administration Corporation’s first CEO. Ontario will continue to appoint Board members throughout this upcoming year.
This may be one of the most critical steps the government takes as it creates the ORPP. The Administrative Corporation is going to operate independent of the government to manage and invest the pension plan funds. Having a strong management team will be important to ensure the ORPP meets employees’ retirement needs.
Collections will start in 2018
Previously, the government announced that it was going to begin collecting funds from employees and employers in January 2017. However, in the 2016 budget, it announced that it will not start collecting until January 2018. The province has heard from the business community that it needed “more time” to prepare for the ORPP. While this is disappointing for employees who currently have no workplace pension plan and stand to benefit from the ORPP, it sounds like what the province did not say is that it also needed more time to prepare.
As set out above, the ORPP Administrative Corporation is still in its infancy – it is nowhere near ready to start collecting, managing and investing billions of dollars in contributions. It still needs to hire board members and staff, and also needs to develop a collection and investment strategy to ensure that the pension fund is properly managed. Had it started collecting funds without these necessities in place, the ORPP may have been dead on arrival.
Also, the province has still not legislated what it will consider to be a “comparable plan”, which will determine employers’ eligibility for exemption from the ORPP (although, there is a technical bulletin found here that explains what Ontario expects to do). Employers with a “comparable” pension plan will be exempted from the ORPP. Therefore, employers who currently have some form of pension plan will likely want some time to consider what changes, if any, it must make to its pension plan to make it comparable with the ORPP.
Registration will start January 1, 2017
While premium collections will start in 2018, large companies (500 or more employees) without comparable plans will need to begin registering for the ORPP by January 1, 2017.
The Federal Government will make collections
The Ontario government has secured the federal government’s commitment to collect ORPP contributions through its CPP collections mechanisms. This seems like a practical way of facilitating this: why reinvent the wheel, when CPP has been collecting payments for 50 years?
The Office of the Chief Actuary
Ontario is also planning to create an independent Office of the Chief Actuary. The Chief Actuary will provide the Administration Corporation with expert actuarial advice and guidance, which would be made public. For those who are unfamiliar with what pension actuaries do: they assess economic factors and risk, to make assumptions about and determine the financial health of a pension.
Will the ORPP actually happen?
One of the biggest questions people have raised about the ORPP is whether the new federal government will be willing to enhance the CPP, in a way that renders the ORPP unnecessary. Because the ORPP is meant to mirror the CPP, if the federal government decided to enhance the CPP, it would seem redundant for Ontario to invest resources in the ORPP.
For now, there does not seem any immediate desire on the part of the federal government to enhance the CPP, and the Ontario government has announced that it intends to push ahead with the ORPP. However, one cannot help but wonder if some of the reason for the delay is that Ontario is still hoping the federal government will commit to enhancing the CPP. Indeed, in the budget, Ontario announced it intends to go to the Federal-Provincial-Territorial Financial Ministers’ meetings in June with a view of pushing for CPP enhancement.
Be sure to check back here for updates as Ontario continues to unveil the ORPP.
