Both labour and businesses say there are flaws with the Ontario Retirement Pension Plan (ORPP) in its current form.

Labour organizations believe the ORPP should be universal for all workers.

Unifor Ontario regional director Katha Fortier said DB plans and multi-employer pension plans shouldn’t be exempt from ORPP participation. She made the comments before the Standing Committee on Social Policy at Queen’s Park on Tuesday.

Read: Who should be exempt from the ORPP?

“We’re concerned that if Ontario creates a plan with exemptions it could create a model for any future enhancement,” Fortier explained. “That would be a step backward for Canada’s retirement income system.”

She said that DB plans aren’t always secure, noting companies such as Nortel, which had an underfunded pension plan when it filed for bankruptcy.

“Most workers would feel more secure if their pension is funded through the ORPP rather than relying wholly on their employer,” Fortier said, adding that universality is essential to the ORPP’s success. “CPP works because it is a universal plan.”

The Ontario Public Health Association also has some concerns about the plan and wants the government to assess the health impacts of the new legislation before it’s implemented.

Executive director Pegeen Walsh said employers might favour contract and part-time work, and reduce hours or positions to limit their expenses and the number of workers eligible for the new plan.

She also wants the government to consider how to reduce the burden on low-income workers where a minimal wage deduction to make a pension contribution can make a difference in getting dental or vision care.

Walsh also recommends there should be a review after the plan is implemented to determine whether there have been any unintended consequences that negatively affect people’s health and whether modifications to the plan are needed.

Still, she believes the ORPP can help Ontarians.

“We believe that increasing people’s income security in their retirement will be beneficial for people’s health as well as the economy,” Walsh said.

Read: Business, labour groups divided over ORPP

Businesses also have concerns about the ORPP structure and think it may impact their ability to hire new workers.

Retailers will have annual premiums of more than $300 million before annual offsets for existing workplace pension and savings programs, said Gary Rygus, director of government relations with the Retail Council of Canada. He added that employees would see their disposable income reduced by an additional $300 million annually.

“The challenge will be to balance the importance of long-term pension income adequacy against the near-term effect on growth, jobs and investment,” Rygus said.

The Insurance Brokers Association of Ontario (IBAO) said the additional costs of the ORPP would be difficult to absorb without affecting employment and current benefits.

“This policy will likely end up affecting employment and hiring decisions negatively particularly for smaller brokerages with average revenue of less than $1 million,” said IBAO president-elect Doug Heaman.

Read: Businesses say ORPP will have negative economic effects

He noted that many brokers offer group RRSPs where the funds are locked in until retirement, many of which should be considered comparable and exempt from the ORPP.

Heaman also said the full effect of the government’s mandated 15% decrease in auto insurance premiums will hit just as the ORPP is slated to begin in January 2017.

“The hit to expenses from the ORPP combined with the hit to revenues from lower auto premiums could be onerous to many brokers across Ontario,” he explained.

Joe Nunes, president of Actuarial Solutions, also expressed his concerns about the ORPP.

He said the current proposal requires contributions from low-income workers, who aren’t in dire circumstances in retirement relative to their working years.

Nunes also noted the ORPP requires full funding, which will require either a 40-plus year phase in of full benefits or an acceleration towards full benefits where older workers benefit at the expense of future generations.

And he also said an Ontario-only solution with exemptions means the ORPP won’t have as much critical mass.

Read: The problem with an Ontario pension plan

To make the ORPP successful, Nunes suggested that the province work with the federal government to gain tax-assisted treatment for the program consistent with the treatment of the Canada Pension Plan, set the earnings level covered to reflect the identified need for increased retirement savings, seek an outsourcing arrangement for administration and investment with the federal government, and eliminate all exemptions for comparable plans.

He noted that not all DB plans are created equal and it would be ill-advised to create an exemption based upon plan type.

“Likewise, not all DC plans are created equal, and some DC plans are patently better than some DB plans at delivering adequate retirement benefits,” Nunes said.

The committee is scheduled for clause-by-clause consideration of Bill 56, An Act to require the establishment of the Ontario Retirement Pension Plan, on April 13, 2015.

Looking for related articles? Read more stories about the ORPP.

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See all comments Recent Comments

Ellen Brightman:

We have paid into a pension plan since our first jobs at 13 years old and it is that money that the government has spent unwisely and now wants us as a small business owner and employee to fix this ? The rate at which we send millions and billions to help other countries needs to stop and make sure our own people have their pension plan that is righfully ours !

Tuesday, April 07 at 9:44 am | Reply

Ray Northey:

Business people do not need another trail of paper to deal with. Enough is enough.
Instead get a handle on the pension plan we have now or give people a larger tax free benefit to save there own money like the TFSA. Great idea ! Its not only for the rich but the “rich” do put a lot of money back into employment and the economy.

Thursday, April 09 at 5:41 pm | Reply

Lance Schwerdfager:

Excellent idea. Introducing an Ontario Tax Free Savings Account would be great. Allowing people to direct their own money in a sensible way for their own benefit and preventing spendthrift politicians from wasting that hard-earned income in vote buying is the way to go.

Thursday, April 30 at 3:25 pm

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