Ontario Retirement Pension Plan

On July 14, 2014, the Ontario Government reintroduced its budget originally tabled in May 2014.  The budget included a number of pension reforms including the announcement of a mandatory pension plan, the Ontario Retirement Pension Plan (ORPP).  Below are some key features from the ORPP, as outlined in the budget; more details will be released in the later part of 2014 before legislation is introduced.

  • The ORPP will be introduced in stages starting in 2017, beginning with larger employers. 
  • Employers and employees will each be required to make contributions of 1.9% (3.8% combined) on earnings up to a maximum of $90,000 annually. These contributions will be phased in over 2 years.
  • Similar to CPP maximum earnings, the maximum earnings threshold for the ORPP will increase annually.
  • If an employer currently offers a “comparable pension plan” and the employee is participating in this pension plan, they will not be required to enroll into the ORPP.
  • The Ontario government will consult on an exemption threshold for low income earners; it may be similar to the Canada Pension Plan (CPP).
  • The ORPP will be put in place to target an income replacement rate of 15% of an individual's earnings, to the maximum earnings threshold (see illustration below). 
  • The ORPP will operate at arm’s length from the Ontario government.
  • Delivery of the retirement benefit will be similar to the CPP.
  • The Ontario government will continue to consult on how to best support self-employed individuals save for retirement.

Some questions that still need to be answered by the government:

  • What would happen if an employer offers a voluntary group retirement savings plan, but the employee chooses not to participate? Would the employee have to join the ORPP, obligating the employer and employee to contribute to the ORPP?  
  • Can an employee opt to enroll into the ORPP when they are members of an existing plan?  
  • Will contributions to an individual Registered Retirement Savings Plan (RRSP) exempt an individual from participating in the ORPP?

Please visit the Ontario Ministry of Finance website for more information on the ORPP, click here to view the 2014 Ontario Budget or contact your Pension Consultant at 1-866-912-6926.

(IIlustration from the Ontario Ministry of Finance website)

Illustration from the Ontario Ministry of Finance website