Ontario’s Proposed Provincial Retirement Plan and PRPP Legislation

• Author: Yosie Saint-Cyr
• Date: January 08, 2015

Fewer than 35 percent of workers in Ontario currently have a workplace pension plan. Coverage for workers in the private sector is even lower—only 28 percent are members of a plan. Several studies have shown that, due to the limited benefits provided by the Canada Pension Plan (CPP) and Old Age Security (OAS), significant numbers of Ontarians will not have sufficient savings to maintain similar living standards throughout their retirement years.

As a result, the Ontario government has decided to establish a made-in-Ontario pension plan and to implement the federal government’s Pooled Registered Pension Plan.

Provincial pension plan

On December 8, 2014, Bill 56, Ontario Retirement Pension Plan Act, 2014, received first reading in the Ontario legislature to create a mandatory Ontario Retirement Pension Plan (ORPP) by January 1, 2017. The goal is to strengthen Ontario’s retirement income system by helping people save for retirement. If passed, the Act comes into force on royal assent.

This made-in-Ontario pension plan would:

• Offer retirees a predictable stream of income in retirement for life, and index benefits to inflation, similar to the CPP’s retirement benefit
• Require contributions to be shared equally between employers and employees, not exceeding 1.9 percent each on earnings up to a maximum annual threshold of $90,000 (in 2014 dollars), plus a further adjustment at the same percentage rate of increase between 2014 and 2017 as is set out in the Canada Pension Plan
• Aim to replace 15 percent of an individual’s earnings up to a maximum annual earnings threshold (contributions would not be required below a low-earnings threshold in order to reduce the impact on lower-income workers)
• Require benefits to be earned as contributions are made to ensure that the system is fair and younger generations are not burdened with additional costs associated with older workers’ benefits
• Offer portability, giving younger workers who are expected to change employers multiple times in their working lives a single place to accumulate savings over the course of their careers
• Be administered by an arm’s length entity with a strong governance structure and investment strategy to ensure efficient management, accountability, transparency and fairness

Enrolment of “eligible” employees and employers would be mandatory. Eligible employers would have to contribute to the plan and deduct plan contributions from salary and wages of eligible employees (using applicable contribution...