Canada: Retirement: Update to the Ontario Registered Pension Plan
The Ontario Liberal Government recently released additional updates to the Ontario Registered Pension Plan. Here are a few details from Asinta’s Canada partner, The Williamson Group – A Cowan Company:
How does it work?
The ORPP will be funded by equal contributions of 1.9% by both, the employee and employer. Contributions will be calculated on the first $90,000 on the income – they will be based on cash and non-cash earnings, including base salary, plus bonuses and overtime. Contributions will be started in 2018 for large employers who are not considered ‘exempt’. However, large employers will have to register by January 1st, 2017. It is mandatory for all employees (full-time and part-time), above the age of 18, who work in the province of Ontario unless they are already registered in another qualified pension plan.
Who is exempt?
Registered pensions plans are only exempt where assets are locked in – RRSP, DPSP, and TFSA do not qualify for exemption. ORPP contributions will be required if there is a waiting period before employees can contribute to an eligible employer sponsored plan. Third exemption criteria would be if employers contribute a minimum of 4% of salary, with a matched employee contribution bringing the total to a minimum 8% contribution plan.
What is the implementation schedule?
Enrolment in the ORPP will be staged in four waves
Wave 1 – Employers with 500 or more employees without registered workplace pension plans. Contributions start Jan 1st, 2018
Wave 2 – Employers with 50 to 499 employees without registered workplace pension plans. Contributions start Jan 1st, 2019
Wave 3 – Employers with fewer than 50 employees without registered workplace pension plans. Contributions start Jan 1st, 2020
Wave 4 – Employers with a workplace pension plan that is not modified or adjusted to meet the comparability test as well as employees who are not a member of the workplace’s comparable plan. Contributions start Jan 1st, 2021
Details to be finalized:
Among the details yet to be finalized is how the benefit formula is to be calculated or if ORPP contributions will be increased in the future. Discussions are also underway on how the Canada Pension Plan can be enhanced.
The enrolment timeline was recently updated. You can read more about the changes to the legislation here. If you’d like more information, please do get in touch with the The Williamson Group.