OTTAWA — While one business leader took a relatively soft tone towards the Ontario Retirement Pension Plan in remarks at a pension event yesterday, another group took aim at the pension scheme this week as it called for a delay in implementing it while discussions about enhancing the Canada Pension Plan continue.
During a session at the Canadian Pension & Benefits Institute’s 2016 Forum in Ottawa on Wednesday, Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said that while the ORPP remains a concern for many producers in his industry, it won’t necessarily have a major impact given that labour expenses represent a small share of overall costs in many cases. And he noted that with manufacturers struggling to find employees with the right skills, many employers will likely see a benefit in keeping and enhancing their own pension plans in order to make them comparable to the ORPP rather than scaling them back.
“We are reaching a cliff for skilled labour,” he said during a session on preparing for the ORPP that also featured deputy minister Mahmood Nanji of the ORPP implementation secretariat and pension lawyer Randy Bauslaugh of McCarthy Tétrault LLP.
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While Volpe suggested the ORPP isn’t as big of a concern as some critics have maintained, he did note that remaining competitive with neighbouring U.S. states is a critical issue for the auto-parts sector. And while he said many firms appear able to handle the increased costs posed by the ORPP, it does remain a concern for some companies. “This is a real issue for the medium-sized firms,” he said.
The comments come as the Canadian Manufacturers & Exporters called on the Ontario government to further delay implementing the ORPP while governments work out what they’ll do about CPP enhancement. “While we recognize that the government has made certain commitments respecting the ORPP, the stated preference has always been a revision to CPP,” the organization said in submissions to the Ontario government on legislation setting out the framework for the ORPP this week.
“Under the circumstances, we feel strongly that proceeding with the ORPP would be potentially duplicative and result in significant unnecessary additional expense to individuals and businesses.”
The group referred to a recent survey of its members that found the ORPP would increase payroll costs by $1,074 per employee for those companies without comparable plans. Sixty-eight per cent of those surveyed said they’d deal with the increased costs by eliminating wage increases and bonuses while 35 per cent said they’d lay off staff or cut wages.
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Besides calling for an ORPP pause pending the CPP discussions among the provincial and federal governments, the group wants the Ontario government to expand the definition of comparable plans exempt from participating in the Ontario plan. It would like to see more defined contribution as well as other types of capital accumulation plans deemed exempt from the ORPP.
During the ORPP session at the event in Ottawa, Nanji addressed some of the criticisms and the question around CPP enhancement. Asked about including group registered retirement savings plans, he noted they’re not pensions and they don’t necessarily provide a predictable stream of income. “The option for you is to do the integration,” he said in response to a question about group RRSPs. Employers with such plans can reduce their group RRSP contributions in order to account for the ORPP premiums, he noted.
On CPP enhancement, Nanji noted the major hurdles facing finance ministers set to meet about the issue in June. “It’s complicated to get this deal,” he said of the requirement to have at least seven provinces representing two-thirds of the Canadian population on board. “It’s like amending the Constitution.”
And on the ORPP itself, Nanji said the government had largely worked out the major issues. “I’d like to say at this point we’re done with plan design,” he said.
“Fundamentally, the policy is completed,” he added.
Nanji noted the ORPP is essentially a target-benefit pension plan given provisions in the legislation to reduce benefits in the event of a funding shortfall. For employers, he said they can expect the verification process to begin later this year in which they’ll determine their comparability to the ORPP. The government will start sending them letters this summer about the process. “To administer that is a herculean task,” he said of the work ahead for the ORPP.
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