In August 2015 we posted a blog entry outlining the Government of Ontario’s release of details surrounding the introduction of Bill 56, An Act to require the establishment of the Ontario Retirement Pension Plan in 2014. On April 14, 2016, the Ontario Legislature introduced Bill 186, the Ontario Retirement Pension Plan Act (Strengthening Retirement Security for Ontarians), 2016 (“Bill 186”). Bill 186 provides further details regarding the implementation of the Ontario Retirement Pension Plan (“ORPP”) which will become law provided that the Ontario Legislature passes Bill 186.
Administration of the plan is to be overseen by the Ontario Retirement Pension Plan Administration Corporation (“ORPP AC”), an arms-length body set up by the Ontario Ministry of Finance for the purposes of the implementation and operation of the ORPP.
Bill 186 provides various additional details regarding the ORPP, including:
- Who the ORPP covers: The ORPP is mandatory for all employees and office holders aged 18-70 in Ontario who have annual earnings exceeding $3,500 and to whom an exemption does not apply. A portion of all eligible employees’ earnings, up to a maximum annual earnings threshold, will be contributed to the ORPP. This maximum annual earnings threshold will commence at $90,000 and will be altered every year in accordance with the average wage in Ontario.
- Who is exempt from the ORPP: As discussed in detail in our August 2015 post, Employers with a “comparable” workplace pension plan are not required to contribute to the ORPP. Additionally, employees of the federal government are exempt from the ORPP, as are all Ontario employees under 18 or over 70 years of age. Individuals can also receive an exemption from the ORPP on religious grounds.Due to existing federal legislation, federally regulated employees in the private sector are currently exempt from the ORPP. However, the Government of Ontario has indicated that it has been in discussion with the federal government regarding the eligibility of these employees.
- Contributions: Employees and employers are each required to contribute to the ORPP at a rate of 1.9% of earnings, up to the maximum annual earnings threshold. Bill 186 allows for future changes in contribution rates should the ORPP not be sustainable. To this end, a valuation report will be prepared every three years to determine the ORPP’s sustainability.
- Comparable Pension Plans: As discussed in our August 2015 blog entry, a “comparable” plan under the ORPP refers to a registered plan that is subject to federal and provincial pension legislation and meets minimum contribution thresholds. To qualify as a “comparable” plan, a plan must meet the following minimum requirements:
- Organizations with defined benefit registered pension plans: a comparable plan has an annual benefit accrual rate of 0.5% of the employee’s annual remuneration
- Organizations with defined contribution registered pension plans: a comparable plan has a total mandatory contribution rate of at least 8% of the employee’s annual remuneration, provided at least 4% of the contribution is made by the employer
Employees enrolled in comparable plans through their employers are not required to contribute to the ORPP and their employers therefore must not pay contributions into the ORPP on behalf of the employees. Arrangements such as group registered retirement savings plans or deferred profit sharing plans are not comparable plans under the ORPP.
- Rollout: The ORPP will be rolled out in 3 stages, beginning with the largest employers in 2018:
- Large and medium employers (with 50 or more employees) without a registered workplace pension plan are required to contribute starting January 1, 2018;
- Small employers (with 50 or fewer employees) without a registered workplace pension plan will be required to contribute starting January 1, 2019; and
- Employers with a workplace pension plan that is not a “comparable” and employees who are not members of their workplace’s “comparable” pension plan will be required to contribute starting January 1, 2020.
- Duties of employers: Employers are required to remit all employee contributions from wages and remit them to the ORPP AC along with employer contributions. Employers are also required to keep all records specified in Bill 186 for the amount of time to be prescribed.
- Enforcement: Employers convicted of contravening the ORPP are subject to fines of up to $100,000 for a first conviction and fines of up to $200,000 for all subsequent convictions. Employers can also be subject to administrative penalties of up to $10,000. Additionally, a company’s Directors and Officers are jointly and severally liable for all contraventions and are therefore potentially subject to these penalties as well.Employers will be permitted to request a reconsideration of penalties levied by the ORPP AC; however, the Tribunal to which employers can make this reconsideration request has not yet been specified.
- Leaves of absence: Should a participating employee take a leave of absence under the Employment Standards Act, 2000, that employee may elect to continue making contributions to the ORPP. If an employee does elect to continue contributing, the employee’s employer shall also contribute.
- Successor employers: When an employee’s employer is succeeded by a different employer as a result of an acquisition, formation or dissolution of all or part of a business, the successor and former employers are jointly and severally liable to pay all amounts owing under the ORPP to the employee prior to the succession taking place.
- Payment of benefits: After retirement, employees are to receive their benefits, which will accrue at a rate of 0.375% of the employee’s annual pensionable earnings, in equal monthly installments. There may, however, be circumstances for which an employee will be paid his or her benefits in a single lump sum. This pension is to be guaranteed for ten years, even if the employee passes away prior to having received benefits for ten years.
As Bill 186 has not yet passed, it is expected that clarifications regarding the ORPP will be announced by the Ontario Government before the Bill receives royal assent. We will post updates to the Williams HR Law blog as any such updates are introduced.
This blog is provided as information and a summary of workplace legal issues.
This information is not intended as legal advice.
