Ontario delays implementation of Ontario Retirement Pension Plan in light of agreement with Federal Government

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In a news release dated February 16, 2016, the Ontario Ministry of Finance announced that the federal and provincial governments have reached an agreement to collaborate towards the implementation of the Ontario Retirement Pension Plan (ORPP).  In light of this agreement, initial contributions to the ORPP, originally scheduled for January 1, 2017 for employers with more than 500 Ontario employees, has been delayed until January 1, 2018.  Please see Ontario unveils additional details on the Ontario Retirement Pension Plan for more information on the ORPP.

The collaboration between the federal and provincial governments would streamline the implementation and operation of the ORPP, by piggybacking the ORPP on the foundations of the Canada Pension Plan (CPP), sparing the province significant start-up costs.

At the same time, the Governments of Ontario and Canada announced that they will work together with other jurisdictions to explore a “range of potential CPP enhancements.” To that end, the two governments intend to work with other provinces and territories to develop options to enhance the CPP. This is set to be completed by the end of May 2016, in time for the Federal-Provincial-Territorial Finance Ministers meeting in June 2016.

Nevertheless, the Ontario government remains committed to moving forward with the ORPP, should no agreement be reached. The federal government has agreed to facilitate plan registration and data sharing arrangements, and will collaborate with the Government of Ontario regarding key elements of plan administration, including the collection of employer and employee contributions. Notably, the Ontario government is also seeking to extend the reach of the ORPP to include federally-regulated employers in the Plan.

In light of ongoing discussions, the implementation of the ORPP, slated to begin with the collection of premiums as early as January 1, 2017, has been delayed by one year. Under the original ORPP implementation structure, large corporations, those with 500 employees or more, faced a deadline of January 1, 2017, to begin collecting premiums under the first stage of the phased implementation. With the proposed federal-provincial collaboration, this first wave of the plan’s implementation will be delayed by one year, to January 2018. The start dates for medium and small businesses, January 2018 and January 2019, respectively, appear to remain unchanged. This change provides large employers with additional time to review existing plans, and determine appropriate next steps.

In making the announcement, Ontario’s Minister of Finance, Charles Sousa, stated:

The Government of Ontario remains committed to finding a solution which will allow the needs of Ontario employees to be met under a national framework. Our main objective is to intensively look at ways to meet the goals of the ORPP in an enhanced CPP framework, while preserving our ability to implement the ORPP, should that not be possible.

Bill Morneau, Canada’s Minister of Finance stated that the federal government would “continue to work with Ontario on ORPP administration while pursuing our ultimate goal of one national uniform enhancement to the CPP.”

Employers can take advantage of the announced delay to ORPP enrollment by preparing their businesses for its implementation.   For example, employers may want to consider creating or amending registered pension plans in order to become exempt from the ORPP.  Employers with non-comparable registered pension plans, or those with Group RRSPs could alternatively consider altering those plans in order to implement the ORPP on a cost-neutral basis.  Unionized employers will need to begin developing strategies for collective bargaining to account for increased costs related to the ORPP.

Continued amendments to the plan are likely, and employers should remain up to date regarding developments. Given the significant implications that may flow from both the implementation of the ORPP and changes to the CPP, organizations that have not already done so should inform themselves of the potential repercussions to their businesses and employees.

For further information please contact Mark Newton at 416-846-6855 or Adam Gamwell at 613-940-2736.