Effective Start Date of ORPP Delayed

In a previous Slaw blog post, we discussed the Ontario government’s establishment of the Ontario Retirement Pension Plan (ORPP) by January 1, 2017 with enrollment starting in 2016. On February 16, 2016, the Ontario government announced that they have decided to delay the effective start date of the Ontario Retirement Pension Plan (ORPP) after entering into an agreement with the federal government that would allow for time to find a solution to individual Canadian pension shortfalls and a possible enhancement to the CPP. This entails:

• Ontario starting ORPP enrollment in January 2017, one year later than the original start date, and by starting the first phase of contributions in January 2018.
• If an agreement on CPP enhancement is not reached by June 2016, the federal government acknowledges the government of Ontario’s objective to move forward with the ORPP. As such, the federal government has agreed to facilitate plan registration and data sharing arrangements and will work with Ontario to ensure that key elements of plan administration, such as the collection of employer and employee contributions, are completed efficiently and cost-effectively.

Katha Fortier, Unifor’s Ontario director stated that “Under their agreement, the federal government will facilitate registration, share data, and administer ORPP contributions on behalf of Ontario. The support from Ottawa will eliminate duplication and allow the province to piggyback on the existing infrastructure of the Canada Pension Plan.”…”In addition to a huge cost saving for Ontarians, this should enable a smoother, more efficient rollout of the ORPP.”

In the meantime, Ontario, the other provinces and territories and the federal government will be working to exploring a range of potential CPP enhancements designed to improve Canadians’ retirement income security. They expect to be done by the end of May 2016, in time for the Federal-Provincial-Territorial Finance Ministers meeting in June, 2016.

The delay seems to be good news for businesses according to advocacy organizations like the Association of Canadian Pension Management, Canadian Taxpayers Federation, the Canadian Federation of Independent Business and the Ontario Chamber of Commerce, who all believe that employment will be hurt if the government increases the costs of operating a business with the implementation of the ORPP.

Recommendations for CPP enhancement suggested by the Association of Canadian Pension Management to Finance Minister Bill Morneau include:

• Treating CPP contributions as tax deductions rather than credits to align them with pension plans and registered retirement savings plans;
• Increasing the RRSP contribution limit by 20% to encourage savings in a volatile market;
• Providing incentives to employers to start or boost their retirement programs; and,
• Exempting investment management service fees from the goods and services tax;
• Introducing tax incentives to spur participation in pooled retirement pension plans through, for example, an employer/employee retirement savings grant.