Employer preparations for CPP reform off to slow start, survey finds

Despite the federal government’s plan to move ahead with reforms to the Canada Pension Plan, a recent survey by Aon Hewitt has found only 35 per cent of employers will be preparing for the changes this year.

Only 13 per cent of 250 Canadian employers surveyed in October had already started planning for the CPP reform, the consulting firm found. Another 46 per cent didn’t know when they’d start preparing for the changes.

The slow start on the preparations makes sense considering the federal government’s timeline on implementing the enhancement, says Andrew Hamilton, a partner at Aon Hewitt in Toronto. “There’s this long pause when nothing changes, and even in the first couple of years, the additional contributions are reasonably modest,” he says. “Employers may not feel pressure to make changes right away.”

Read: Federal government introduces CPP legislation

Read: Quebec unions call proposed QPP reform far weaker than CPP changes

Still, companies should plan in advance as the CPP enhancement will  be significant by the time it’s fully effect in 2025, says Hamilton. By that point, employers and employees will both have to pay an additional one per cent in premiums.

Indeed, the survey found more than half of employers (65 per cent) are worried about increased costs, while 36 per cent expressed a concern about increased administrative complexity and 22 per cent about negative employee reaction.

Read: CAP Suppliers Report: What’s next after this year’s landmark CPP deal?

Hamilton suggests employers use the preparation period to reassess their total rewards. “Organizations need to ask themselves if this is where they want to spend the additional one per cent of pay,” he says. “Is this where employee and employer money is best spent or are the existing retirement programs adequate and those costs maybe should be offset?”

According to the survey, only seven percent of respondents said they’re using the CPP enhancement as an opportunity to reassess total rewards strategies and 18 per cent intend to do so. But more than half (57 per cent) have no plans to do so yet.

Read: Actuarial report on enhanced CPP contains some interesting tidbits for plan sponsors

As well, the survey found that two-thirds of respondents don’t know how to address increased costs. The rest have different ideas, including absorbing the increases (27 per cent), making changes to current retirement plans (eight per cent) and changing other aspects of employee compensation (six per cent).

What’s key is to plan ahead, says Hamilton, pointing specifically to organizations that have collective bargaining agreements.

Read: Government increases CPP pensionable earnings and adds new disability standards

“You want to make sure you have those conversations with the appropriate bargaining agents, because if you don’t have those conversations now, you could be past 2019 before you have the opportunity to have them again and you’re going to have to start implementing the program at that point,” he says.