Ontario workers are having a hard time saving enough for retirement in the context of a tough economy and the disappearance of workplace pension plans. Nonprofit sector workers are no exception, especially those who work on part-time, casual, and short-term contracts and those who have no workplace pension plan. To address the need for improved retirement income security for workers, the Ontario Government has passed Bill 56, which provides a legal framework for an Ontario Retirement Pension Plan (ORPP).

 

In early 2015, ONN and other nonprofits met with Associate Minister of Finance, Mitzie Hunter, about how the plan would affect the nonprofit sector. Read our submission to Minister Hunter here. Bill 56 has received Royal Assent. So what happens next with the ORPP?

 

The short answer is: nothing, at least not right away. Bill 56 is framework legislation: it commits the government to introducing a future bill that will set out the details of the ORPP.

(Why do it this way? Given the effort the Ontario government spent trying to get the Canada Pension Plan expanded before launching their “made-in-Ontario” solution, we suspect it has to do with the upcoming federal election).

 

At this time, there are still many details to be worked out. The ORPP will be rolled out over two years, starting in 2017 with larger employers, but we don’t know the exact timeline. Workplaces with “comparable” pension plans will be exempt- but we don’t yet have a definition of “comparable” although it looks like defined benefit plans are in and defined contribution plans are out.

 

For a quick guide to these terms, check out ONN Backgrounder: Pension Basics.

 

The self-employed will be excluded from the ORPP entirely unless the federal government amends the Income Tax Act, even though this group of workers participates in the Canada Pension Plan (CPP) and has been identified by the Ontario Government as at risk of under-saving. We will be monitoring developments over the coming months to confirm these elements.

 

ONN’s position on the ORPP: “Yes, but…”

 

Based on what we know about the ORPP so far…

 

  • Mandatory in most workplaces, starting in 2017 for large employers
  • Similar in design to the CPP– providing a steady income upon retirement, based on earnings (up to a ceiling)
  • Costs employers and workers (each) up to 1.9% of earnings– that’s $855 per year for a worker with a salary of $45,000
  • Provides that same worker with a retirement benefit of about $6,410 per year, indexed to inflation, until death (after contributing for 40 years)

 

… ONN has come out in favour of the introduction of the ORPP. We know it will increase compensation costs in the sector, but we also know that our sector’s workers deserve retirement income security after dedicating their working lives to serving the public good. To help mitigate the impact, we are making the case on all fronts that agreements between funders and the nonprofits that deliver services on their behalf must reflect the true cost of operating—including the increased compensation costs associated with the ORPP.

 

ONN is assembling a task force to work through ORPP implementation issues for our sector and to consider broader pension reforms.

 

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