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Member, Beacon International Group, Ltd.
Ontario has passed legislation to establish a provincial defined benefit plan.
The Ontario Retirement Pension Plan Act (Strengthening Retirement Security for Ontarians), introduced April 14 and adopted on June 2, would be mandatory for employers and employees without a comparable workplace pension plan. Both parties would be required to contribute a maximum of 1.9% of the employee’s annual earnings up to $90,000 Canadian dollars ($69,093).
The legislation stems from government concerns that employees are unprepared for retirement, since two-thirds of provincial workers do not participate in a workplace pension plan, according to the Ontario Ministry of Finance.
“This is an important change for the pension system in Ontario because currently an employer is not required to provide any pension plan to its Ontario employees,” said Sonia Mak, a Toronto-based partner with Borden Ladner Gervais L.L.P. “But when this act comes into effect, an employer of an Ontario employee will either have to contribute to the ORPP for that employee or provide a comparable pension plan for that Ontario employee. This will be a very unique feature in the pension system for Ontario.”
The provincial government will issue regulations to guide employers and employees as they prepare for the launch of the pension plan — a crucial step toward the government’s commitment to ensure that every eligible employee is part of the plan or a comparable pension plan by 2020, according to the ministry. Enrollment will begin in January 2017, with phased-in collection of contributions starting a year later.
Certain employers and employees are currently ineligible or exempt from mandatory participation, including those working for the federal government or in a federally regulated sector such as banking, while religious or First Nations employers could opt in or out.