While the Canada Pension Plan deal has effectively cancelled the Ontario Retirement Pension Plan, the provincial Liberal party is still tallying up its total costs “because the agreement was just reached [on Monday],” Premier Kathleen Wynne said in a statement.
Julia Munro, Ontario PC pensions critic, pointed to “the substantial unnecessary costs of the Wynne Liberals proceeding with the ORPP,” which she said includes “millions of dollars on advertisements” and now severance pay for those who were hired to run the fund’s administrative body.
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“…Our government is committed to being open and transparent,” Clancy Zeifman, a spokesperson for Associate Minister of Finance Indira Naidoo-Harris, told Benefits Canada in an email. “We will be reviewing and disclosing the ORPP expenses to date and make them public.”
Wynne also noted “the largest cost has not yet been incurred, and that was the setting-up of the administrative entity to administer the ORPP… This is why it’s so important that we have the [CPP] agreement at this point before we actually move into that expenditure.”
As for Ottawa, it doesn’t yet know how much the CPP expansion will cost the treasury because details from the Working Income Tax Benefit increase still have to be worked out, Department of Finance spokesperson David Barnabe told Benefits Canada.
He also said that beginning in 2024, both employers and employees will pay a separate premium for earnings above the current earnings range. This premium, which is separate from the 5.95 per cent paid for income within the earnings range, is expected to be four per cent for both employers and employees.
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Manitoba, which abstained from the CPP expansion vote on Monday, criticizes the expansion for not encouraging Canadians to set aside their own retirement savings, Premier Brian Pallister said Tuesday.
“I guess what I’m talking about is making sure we don’t lose sight of individual responsibility in the hoopla around debating the CPP augmentation here,” said Pallister, who worked for decades in insurance and financial planning.
“I want to make sure that all Canadians understand that their management of their discretionary incomes, and their willingness to set aside today’s spending for tomorrow’s investments in their own future, is the key way that they’re going to secure their financial future.”
Pallister also cited a desire to leave people with more discretionary income for their own savings plans following tax increases in Manitoba under the previous NDP government. The enlarged CPP would remove even more discretionary income through higher premiums.
Pallister said another part of the reason Manitoba abstained is because his Progressive Conservative government was elected only two months ago and is still studying the issue.
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Employers that have existing retirement programs will have to decide whether they will change their pension plan design to integrate the enhanced CPP, says Ian Edelist, principal of the Toronto pension practice at Eckler.
“This enhancement isn’t as large as the CPP benefit that was introduced in the mid-60s,” he says. “But plan sponsors still have to decide if their employees have adequate pensions with CPP plus their own plan, in which case they may decide to reduce plan contributions or look at the adequacy of plan member retirement benefits.”
Either way, Edelist says the expansion will “close the gap in retirement savings for plan members,” though younger workers will benefit more from the enhancement than those nearing retirement.
In light of the provinces planning to finalize the agreement on July 15, Edelist notes that Canadians and businesses should stall their activities until further details about the agreement come forth.
However, news of the ORPP’s discontinuation halted any progress made by employers who were already acting in anticipation of the plan’s launch.
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Employers who have submitted amendments to the Ontario regulator in anticipation of the ORPP will have to submit another amendment that cancels their initial plan change, notes Edelist. As well, those who received positive feedback from announcing changes to their private retirement plans may decide to stick to their plans despite the demise of the ORPP.
Edelist says there probably won’t be many employers in this situation. “I didn’t get the sense that many submitted their amendments especially since ORPP was pushed out for another year. Those affected are the minority instead of the majority.”