The decision by the Government of Ontario to let some DC plans be considered comparable to the Ontario Retirement Pension Plan (ORPP) received divided reactions from consultants.

“The fact they have decided that DC plans that meet certain criteria are exempt is very important,” says Scott Clausen, a Mercer partner and senior retirement consultant.

Read: ORPP design details announced

On Tuesday, the government said DC plans will be considered comparable if they are locked in, are regulated by existing provincial pension standards and meet a minimum contribution threshold (an annual contribution rate of 8% and require at least 50% matching of the minimum rate from employers).

He says many DC plans already meet that criteria, so it won’t be an issue for them.

Janice Holman, a principal and leader of Eckler’s DC practice, disagrees.

“To require an 8% total contribution is going to be a significant increase for both some employers and employees,” she says.

Read: Mixed reaction to ORPP announcement

For companies that offer a lower contribution rate, they might decide to increase contributions, scale back their contributions or go into the ORPP.

“It won’t be worth it to redesign the plan to have some money go to the ORPP and then an even smaller portion go into their existing plan,” Holman explains.

However, employers with workers across Canada may want to have one retirement plan instead of one for Ontario and one outside of Ontario.

“That may give some incentive to prefer to maintain an arrangement where you are able to be exempt from the ORPP so you can have one plan,” Clausen notes.

But if there’s an eligibility or waiting period for employees to join a DC plan, it will cause administrative complexity, she says.

Read: Harper, Wynne lock horns over ORPP

“Employers will have to first contribute to the ORPP and then into their own plan,” Holman explains. “Employees could have minuscule contributions to the ORPP.”

Clausen believes the phase-in approach for the ORPP will be beneficial for many employers.

The plan will be rolled out in four separate waves beginning in 2017, starting with employers with 500 or more employees without registered workplace pension plans.

“Phasing in by employer size will help employers, especially the smaller employers where the administrative burdens may be higher,” he says.

But many details still need to be worked out, says Holman.

“There’s still a lot of confusion on the rules of how the ORPP would be implemented and how exemptions would be granted,” she explains.

Also read:

Copyright © 2020 Transcontinental Media G.P. Originally published on

Join us on Twitter

See all comments Recent Comments


Own a 20 employee business and this is very disappointing.
Government can not handle our pension plan in the past .
Now starting another one. We have a in house pension plan if our employees want to join it.

Thursday, August 13 at 2:10 pm | Reply

Randy Bauslaugh:

I think the “comparable DC plan” is going to wake people up to the fact that DC plans are roughly twice as expensive as DB plans to deliver the same level of retirement income. Wynne may be doing employers a favour by providing a lower cost alternative to their existing high cost DC arrangements.

Monday, August 17 at 3:23 pm | Reply

Add a comment

Have your say on this topic! Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. Thanks!

* These fields are required.
Field required
Field required
Field required