An agreed-upon enhancement to Canada's national pension plan likely means a quick death for Ontario's planned defined benefit pension program.

Canada's finance ministers have agreed in principle to work on a Canada Pension Plan enhancement starting Jan. 1, 2019, that would increase income replacement from one quarter to one third of pensionable earnings, according to a statement issued by the Department of Finance Canada on Monday. This means that a Canadian citizen with CA$50,000 ($38,780) in constant earnings throughout his or her working life would receive a yearly pension benefit of around CA$16,000 ($12,410) instead of the CA$12,000 ($9,307) they currently receive, according to the statement. The agreement would also increase the maximum amount of income subject to the federal program by 14% — projected at roughly CA$82,700 ($64,142) in 2025.

Ontario adopted the Ontario Retirement Pension Plan Act (Strengthening Retirement Security for Ontarians) on June 2, which would have made it mandatory for employers and employees without a comparable workplace defined benefit or defined contribution plan to participate in the plan. However, Ontario officials delayed implementation to give federal, provincial and territorial finance ministers time to reach agreement on enhancing the federal program.

“Ontario has always favored a national solution to strengthening retirement security,” Ontario Minister of Finance Charles Sousa and Associate Minister of Finance Indira Naidoo-Harris, said in a statement. “Since 2013, we have been calling on the federal government to enhance CPP because a national solution provides many benefits to Ontarians, including portability and cost effectiveness, while providing coverage to more people.”

Once the agreement in principle to enhance the Canada Pension Plan is approved by all signatories by July 15, Ontario will work with the provincial plan's board of directors and senior management to determine the most appropriate steps to wind down the plan in a responsible, fair and accountable manner, according to a statement by the Ministry of Finance.

The agreement includes British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador, with Quebec and Manitoba agreeing to remain part of the discussions moving forward, according to the department.

Pension experts believe the agreement in principle will likely lead to an official announcement that Ontario will scrap its planned defined benefit pension program, assuming that the agreement survives potential hurdles such as Quebec's required stamp of approval. Quebec has a say in discussions about the federal plan even though the province maintains a separate, but similar pension plan for its residents.

“I think it's pretty clear that it's dead,” said Michel St. Germain, Montreal-based vice chair of the Association of Canadian Pension Management's national policy committee. “The bottom line is Quebec cannot stop what the other provinces will do to the Canada Pension Plan. I would be flabbergasted if it doesn't go through.”

“I think that the ORPP is on 'life support' at best,” Natasha vandenHoven, a Toronto-based partner at Stikeman Elliott L.L.P., said in an email. “The focus now will be on enhancing the Canada-wide CPP rather than 'going it alone' in Ontario. This approach has always been the Ontario government's preference and, quite frankly, makes much more sense. This is actually a big deal as very few countries are in a position to improve defined benefit pension benefits for their citizens (or have even done so).”