The Ontario Retirement Pension Plan: A Primer

Feb 9, 2016

The Ontario Retirement Pension Plan: A Primer

As I reported in December 2014, the Ontario government intends to introduce the Ontario Retirement Pension Plan (ORPP) for some employers effective January 1, 2017.

The ORPP is Being Phased In

The ORPP will be phased in over 3 years. Contributions for employers with 50 to 499 employees without registered workplace pension plans start January 1, 2018, and contributions for employers with 49 or fewer employees without registered workplace pension plans start January 1, 2019.

More details concerning the ORPP have recently been released

On January 26, 2016, the Ontario government released a Technical bulletin on the ORPP.

At the same time, the Ontario government published a guide to the ORPP for employers.

Required Employer and Employee Contributions to the ORPP

By 2021, the required contribution rate for both employees and employers will be 1.9% of an employee’s annual earnings up to $90,000, subject to a minimum earnings threshold of $3,500 unless an employee is a member of a “comparable” workplace pension plan.

Most Employers Will Be Required to Join the ORPP

According to the National Post, two out of every three Ontario employees are not currently enrolled in a pension plan. This means payroll costs will be going up for many small & medium size employers.

Five (5) Frequently Asked Questions about the ORPP

This blog answers 5 questions about the ORPP.

  1. Which employees are covered by the ORPP?

Employees will be considered to be employed in Ontario if they report to work at an employer’s establishment that is located in Ontario. If they do not report to work at an establishment of their employer (e.g., employees who work from home), they will be considered to be employed in Ontario if they are paid from an Ontario based establishment.

  1. Are Defined Contribution Registered Pension Plans considered “Comparable” plans?

A defined contribution registered pension plan will not be considered comparable if contributions are voluntary. Only defined contribution registered pension plans with a mandatory 8% contribution formula, 4% of which must be employer contributions, will be considered comparable.

  1. What are the Age and Contribution Limits?

The minimum age of participation is 18 years old and the maximum age of participation is 70 years of age.

  1. Are there Survivor Benefits?

Survivor benefits under the ORPP will be payable to the surviving spouse of a member or his or her beneficiary or estate where the member’s death occurs pre-retirement.

  1. When can an employee start collecting ORPP benefits?

ORPP benefits will begin to be paid out in 2022 (except where the Income Tax Act requires payments earlier). Ontarians who retire after making contributions to the ORPP would be eligible to begin receiving a pension at age 65, with options to receive adjusted benefits as early as age 60 or as late as age 70.

For more than 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship including changes to Ontario’s employment legislation. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

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