Canadian Payroll Reporter

6 Canadian HR Reporter, a Thomson Reuters business 2015 News September 2015 | CPR mandatory contributions from employers and employees. The plan would operate in addition to the CPP, meaning employers and employees required to con- tribute to the ORPP would have to pay into both plans. Participation would be man- datory for employees and their employers if they are employed in eligible employment in On- tario, are 18 to 70 years old and do not take part in a compa- rable workplace pension plan. All employment in the province (excluding federally regulated workplaces) would be eligible unless exempted. During the winter and the spring, the government held consultations on key design is- sues for the plan, including how it should define "comparable" when determining whether an employer's pension plan would exempt the employer and its em- ployees from contributing to the ORPP. In August, the government announced that "comparable" plans would include defined benefit (DB) pension plans, as well as defined contribution (DC) pension plans if they are subject to federal and provincial regulation and meet the follow- ing minimum thresholds: •provide a predictable stream of income in retirement for life •have pooled longevity and investment risk to help ensure people do not outlive their savings and to reduce the im- pact of market volatility •have required contributions from employers •have a target replacement rate of up to 15 per cent of an in- dividual's earnings over their career •have required "locked-in" con- tributions. In addition, the plans must have contribution levels that ensure similar benefit levels to ORPP benefits. For the govern- ment to consider a DB pension plan to be comparable, the plan must have a minimum benefit accrual rate of 0.50 per cent. For a DC pension plan to be comparable, the government said it must have a minimum an- nual contribution rate of eight per cent and require at least 50 per cent matching of the mini- mum rate from employers. The government says DC plans have different criteria than DB plans because they operate differently. For example, DC plans do not require employers to match em- ployee contributions and do not allow for pooled longevity and investment risk. For other types of plans, such as DB-DC hybrids, flat-benefit DB plans and flat-dollar DC plans, the government says it has developed a method to convert the ORPP's comparable thresh- old tests to determine if they would qualify. Business groups, such as the Ontario Chamber of Commerce (OCC), said they are encouraged by the government's decision to expand the definition of compa- rable to include some DC plans. "This means that employers who already provide certain DC pension plans for their employ- ees will be exempt from con- tributing to the new ORPP," said Allan O'Dette, the OCC's presi- dent and CEO, in a news release. O'Dette noted, however, that, "We remain concerned that the ORPP in its current form will have a negative impact on busi- ness competitiveness," adding it would raise costs for most busi- nesses that operate in Ontario. Labour groups, however, said they were disappointed the government expanded the definition of "comparable." The Ontario Federation of Labour and Unifor both say the ORPP should be mandatory for every- one in the province. "A universal and mandatory plan is the best solution for all working people in this province," said Unifor Ontario regional di- rector Katha Fortier. "This new Ontario pension should model the successful Canada Pension Plan." When it comes to implement- ing the ORPP, the government says it will phase in enrolment and contribution rates in four waves. Enrolment for large em- ployers (500 or more employees) that do not have a registered workplace pension plan would begin next year, with contribu- tions starting Jan. 1, 2017. For medium-size employers (50 to 499 employees) that do not have a registered workplace pension plan, enrolment would begin in 2017, with contribu- tions starting on Jan. 1, 2018. Small employers (with up to 50 employees) without a registered workplace pension plan would begin to enrol in 2018 and begin to pay contributions the follow- ing year. The final group to enrol would be employers with registered pension plans that do not meet the test for being comparable or who have employees who are not members of their comparable plan. They would enrol begin- ning in 2019 and start contribut- ing on Jan. 1, 2020. To administer the plan, the government has set up an inde- pendent body called the Ontario Retirement Pension Plan Ad- ministration Corporation. It will begin contacting employers ear- ly next year to verify their exist- ing pension plans and assess the coverage they offer to employees to determine if they need to en- rol in the ORPP. The contribution rate for the ORPP would be 1.9 per cent for employers and employees, for a combined rate of 3.8 per cent. However, the government says it would phase in the rate over three years for employers in the first three enrolment waves. This would mean that for large employers, the contribution rate for 2017 would be 0.8 per cent for both employers and employ- ees, for a combined rate of 1.6 per cent. The rates would rise to 1.6 per cent in 2018, for a com- bined rate of 3.2 per cent. Full rates would apply in 2019. Medium-size employers and their employees would each pay a contribution rate of 0.8 per cent (combined rate of 1.6 per cent) in 2018. The rates would rise to 1.6 per cent (combined rate of 3.2 per cent) in 2019 and full rates would apply in 2020. The contribution rate for small employers and their em- ployees would be 0.8 per cent (combined rate of 1.6 per cent) in 2019. The rate would rise to 1.6 per cent (combined rate of 3.2 per cent) in 2020. Full rates would apply in 2021. Employers in the final enrol- ment wave (meaning those with registered pension plans that do not meet the comparability test) would, along with their employ- ees, pay the full rate in 2020, their first year of contributions. Employers would be required to deduct the ORPP contribu- tion from employees' salary or wages and remit it, along with the employer's share of ORPP contributions. The annual maxi- mum earnings threshold for the ORPP would be $90,000, adjusted to reflect the percent- age increase in the annual maxi- mum pensionable earnings for the CPP between 2014 and 2017. The government has not yet announced a minimum earnings threshold for the plan. In a con- sultation paper last year, it said it favoured a $3,500 threshold, which is the same as the annual basic exemption for the CPP. "An ORPP payroll deduc- tion approach that is consistent with that of CPP would make it easier for employers to integrate ORPP contribution deductions with their existing business practices," the paper said, adding that, "An ORPP minimum earn- ings threshold that parallels the CPP could also make potential integration of the ORPP with the CPP easier if the CPP is en- hanced in the future." Another question not ad- dressed in the new ORPP details is where employers will send the remittances. Ontario Finance Minister Charles Sousa said he hoped to have the Canada Revenue Agency (CRA) collect employer and employee contri- butions, as it does for the CPP. Using CRA infrastructure to help administer the ORPP would reduce the costs of running it, he noted. The federal government, however, has so far refused, call- ing the ORPP a "job-killing tax" it will not support. Not yet clear where remittances would go from ONTARIO on page 1 To administer the plan, the government has set up an independent body called the Ontario Retirement Pension Plan Administration Corp.

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