Canadian Payroll Reporter

2 Canadian HR Reporter, a Thomson Reuters business 2015 News February 2015 | CPR Broaden defi nition of 'comparable': OCC would be eligible unless ex- empted. The ORPP would be struc- tured much like the CPP, with mandatory contributions from employers and employees. Em- ployers would be responsible for remitting the contributions to an administrative body set up to manage the plan. The plan would operate in addition to the CPP, meaning that employers and employees required to con- tribute to the ORPP would have to pay into both plans. The consultation paper, called ORPP: Key Design Questions, asks for public comments on issues such as how to define a "comparable" workplace pen- sion plan. The definition of "comparable" is a key part of the ORPP and one that is proving to be contentious. Since the plan would only be mandatory for employees and employers who do not have a similar workplace pension plan, a narrower defini- tion of 'comparable' would pull in more employers and employ- ees, while a broader one would limit that number. The consultation paper says the government wants the ORPP to mirror key features of the CPP, including providing a predictable stream of retirement income for life, indexed benefits, locked-in funds, pooling of the investment risk and mandatory employer contributions. Workplace pension plans would have to include these features. As a result, the govern- ment is considering restricting the definition of "comparable" to only two types of plans: defined benefit (DB) pension plans and target benefit (TB) multi-em- ployer pension plans. The consultation paper asks for feedback on whether there would be circumstances un- der which defined contribution (DC) plans would be compa- rable, such as if a DC plan had a minimum employee/employer contribution rate that would provide for similar benefits to the proposed ORPP. The paper also asks for comments on how employers with non-comparable plans would expect their plans to work alongside the ORPP. Stakeholders say the way the government defines 'compara- ble' will have a big impact on the plan. The definition could "make or break" the vision behind the ORPP, says the Canadian Associ- ation of Retired Persons (CARP). "An exemption for employ- ers and employees with DB and TB plans wouldn't necessar- ily undermine the goal of a new pension plan providing more coverage, since DB and TB plans generally provide solid, predict- able and dependable benefits in retirement," it says. "But if the definition of 'com- parable' is allowed to be inter- preted to include defined contri- bution plans or pooled registered pension plans (PRPPs), the core goal of the ORPP may indeed be undermined." Labour groups have called for the government to make the plan mandatory for all employ- ers. Some, such as the Cana- dian Union of Public Employees (CUPE) for Ontario, have criti- cized the province for planning to allow exemptions for compa- rable plans. By not making the ORPP mandatory for all workers and employers in the province, the government is hurting the chances of future integration with the CPP, says CUPE On- tario President Fred Hahn. "It would be sad if the Liberals took a great idea like a universal public pension that benefits ev- eryone and turned it into some- thing narrow that could actually hamper expanded public pen- sions for all Canadians." Other groups would like the government to broaden the defi- nition of "comparable" to include other types of plans. The Cana- dian Payroll Association (CPA) says that besides DB plans, the government should add group RRSPs to the definition to en- sure fairness for employers and to keep the payroll compliance burden to a minimum. "When initiating any payroll or pension changes, the govern- ment should avoid regulatory and administrative complexities that hinder an employer's com- pliance," says Rachel De Grâce, manager of advocacy and legisla- tive content at the CPA. She says the association plans to make a submission to the government on its ORPP proposals, although it would prefer the focus be on improving the CPP. "While efficiencies and fair- ness will help reduce adminis- trative burden on employers, utilizing an existing structure, like the Canada Pension Plan, to enhance mandatory retirement savings would create less of a strain on employers overall," De Grâce adds. The Ontario Chamber of Commerce (OCC) would also like a broader definition of com- parable. The OCC is concerned that the government is consid- ering excluding DC and similar plans from the definition since these plans are becoming more common than DB plans, says Liam McGuinty, the OCC's manager of policy and govern- ment relations. "The issue is that fewer and fewer companies that establish themselves offer pensions. Even fewer than that would offer a de- fined benefit plan." "The unforeseen conse- quences of not making DC plans comparable raises the question, 'What's going to happen to em- ployer behaviour as it pertains to contributing to existing plans?' If I'm a DC provider and now I'm forced to contribute into the ORPP, how's that going to affect how much I am putting into my existing DC plan?" The OCC does not understand why the government would table ORPP legislation at the same time it introduced a bill to allow for PRPPs in the province, he says. "There's some cognitive disso- nance there that they are moving ahead with an ORPP and then moving ahead with a non-com- parable PRPP at the same time, because it significantly reduces the incentive for an employer to invest in a non-comparable plan when they already have a man- datory cost in the ORPP." The OCC has asked the gov- ernment to defer the ORPP until it addresses questions about how much it will cost to administer a stand-alone plan and how the plan will impact the economy. "We just don't understand the full economic impact of the ORPP in terms of job creation, investment, impact on our com- petitiveness. Our biggest con- cern is if this was CPP enhance- ment, that's still a new cost on employers, but it's a level cost on employers across Canada. This is a brand new cost exclusively on Ontario employers to the advantage of businesses and the business environment in other provinces," says McGuinty. The OCC also wants the gov- ernment to address more spe- cific questions. Will there be exemptions for small businesses that cannot afford to match mandatory contributions? What would happen to employer and employee ORPP contributions if an employee moves out of the province or if a worker changes jobs and goes to an employer with a comparable pension plan? The consultation paper also asks for feedback on a minimum earnings threshold for the ORPP. It says the government favours a minimum earnings threshold of $3,500, which is the same as the annual basic exemption for the CPP. The Ontario government says its preference is to mirror the CPP threshold because that would reduce administrative work for employers. "An ORPP payroll deduction approach that is consistent with that of CPP would make it easier for employers to integrate ORPP contribution deductions," the paper says. "An ORPP minimum earnings threshold that parallels the CPP could also make poten- tial integration of the ORPP with the CPP easier if the CPP is en- hanced in the future." from ONTARIO on page 1 see ORPP on page 4 "It would be sad if the Liberals took a great idea like a universal public pension and turned it into something narrow."

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