Ontario Pension Plan Will Raise Cost For Majority Of Businesses

August 11, 2015: Today, the Government of Ontario announced that it will expand the comparability rules under the proposed Ontario Retirement Pension Plan (ORPP). However, business owners remain concerned about the introduction of a new pension plan and the impact it would have on the cost of doing business.

The Greater Oshawa Chamber of Commerce (GOCC) is encouraged by the government’s decision to expand the definition of comparability under the ORPP to include some Defined Contribution (DC) plans. With this change, employers that already provide certain DC pension plans for their employees will be exempt from contributing to the ORPP.

“Today’s announcement to expand the definition of compatibility is encouraging,” said Bob Malcolmson, CEO & General Manager. “However, the concern remains that the ORPP in its current form will have a negative impact on business competitiveness.”

 Key Details of the Announcement
1. Businesses who offer a Defined Contribution (DC) plan with a total combined contribution rate of 8%, where at least 4% is contributed by the employer, will not have to pay into the ORPP.
2. Those businesses who offer a non-comparable type of pension plan or do not offer any type of pension plan will have to contribute to the ORPP.
3. Large employers (500 or more employees) will start contributing in 2017, medium sized employers (approximately 50-499 employees) in 2018, and small employers (50 or fewer employees) in 2019. Any employer that offers a non-comparable Defined Benefit (DB) or DC plan will begin to make contributions in 2020.

In June, the GOCC and the Ontario Chamber of Commerce (OCC), and a coalition of over 150 businesses, sector associations, Chambers of Commerce, and Boards of Trade came together to urge the government to expand its definition of pension plan comparability to include capital accumulation plans, including, but not limited to, Defined Contribution plans (view letter).The OCC is heartened by the longer phase-in period announced today, which will help many Ontario businesses transition into the plan.
Despite today’s announcement, the GOCC warns that in its current form, the ORPP will raise costs for the majority of businesses who operate in the province, including those employers that offer non-comparable plans like Group RRSPs. Recent OCC survey data indicates that if faced with mandatory increased contributions under the ORPP, 44 percent of businesses would reduce their current payroll or hire fewer employees in the future.

“The Chamber remains deeply concerned about the cumulative burden facing Ontario employers,” said Malcolmson. “Rising electricity prices, the introduction of a cap and trade system, and the ORPP will further add to the cost of doing business in Ontario. This is why we, along with the OCC, have asked the government to conduct and publicly release the results of an economic impact analysis of their proposed pension plan.”
Following considerable advocacy efforts by a coalition of businesses led by the Ontario Chamber of Commerce, the government committed to releasing a cost-benefit analysis of the ORPP before the end of the year.
“Our Chamber, along with the OCC, is committed to continuing to work with government in order to ensure they have a full appreciation of the potential impacts of the ORPP,” stated Malcolmson.