What employers need to know to comply with the ORPP act

When the Ontario government announced its proposed new legislation enshrining the framework for the Ontario Retirement Pension Plan (ORPP) on April 14, it also shared some significant new aspects of the ORPP, including its compliance and enforcement mechanisms.

Bill 186 moves the provincial government one step further in its stated commitment to proceed with the implementation of the ORPP in the absence of a national consensus on Canada Pension Plan enhancement.

The government also announced it would release ORPP regulations containing additional plan design details this summer.

Read: Ontario Budget: The ORPP pushes ahead, more details to come in spring

The new bill — together with recruitment efforts currently underway to staff the new ORPP Administration Corp. —demonstrates the provincial government’s commitment to implement the ORPP. By creating a legislative framework designed to administer and enforce compliance with the ORPP, the government has signaled to employers that the march towards the plan continues and they had better get moving to the beat.

What’s new in the ORPP legislation?

The bill introduces a number of new features to the statutory framework for the ORPP. From a benefits administration perspective, many of those statutory provisions parallel those found in the Ontario Pension Benefits Act. Others are unique to the ORPP, including provisions relating to ORPP coverage and participation, as well as those dealing with the ORPP Administration Corp. around issues such as the collection and disclosure of personal information and the funding and sustainability of the plan.

From an employer perspective, some of the most important new provisions relate to the compliance and enforcement mechanisms that apply to all stages of the ORPP, from the employer verification process to the collection of contributions and payment of benefits.

Significantly, in addition to potential fines against employers that fail to comply with the rules for remitting contributions to the plan, the ORPP Administration Corp. would also have the power to levy administrative penalties of up to $10,000 for contraventions of the ORPP legislation and regulations. Employers that fail to deduct or remit contributions would also be subject to interest on late payments.

Read: Employers face up to $10K penalty for not complying with ORPP

Additional new details in Bill 186 include:

  • ORPP participation isn’t mandatory when it comes to tax-exempt First Nations employment unless the employer and employee elect otherwise. In addition, ORPP participation will be required on behalf of those who receive a fixed or ascertainable stipend or remuneration as office holders, such as directors of a corporation or holders of judicial or political office.
  • Certain foreign pension and other prescribed plans (in addition to pooled registered pension plans that meet certain criteria once they’re available in Ontario) may also be considered comparable workplace pension plans as determined by regulation.
  • ORPP contributions are not required during periods of statutory leave of absence under the Employment Standards Act unless the employee elects to participate during the period in question. Such an election would require both employee and employer contributions during the leave.
  • The form of pension payable will be a lifetime pension with a 10-year guarantee unless the member has a spouse at the time of retirement, in which case a joint and survivor pension will be payable unless this form of pension is waived. A preretirement death benefit will also be payable.
  • Employers will have to remit the employer’s contributions and deduct and remit the employee’s premiums to the ORPP Administration Corp. and maintain the prescribed records.
  • The ORPP Administration Corp. will establish a trust into which contributions made under the new legislation and any accruals from investing them will be held and invested for the beneficiaries of the plan and remain separate from government revenues.
  • ORPP contributions are deemed to be held in trust by the employer until it remits them to the ORPP Administration Corp, which will have a lien and charge on the property of the employer in the amounts deemed to be held in trust (similar to the deemed trust under the Pension Benefits Act).
  • Money payable under the ORPP will be exempt from execution, seizure or attachment (subject to an order for support enforceable in Ontario to a maximum of one-half the money payable), and pensions may not be commuted or surrendered during the member’s lifetime (similar to the Pension Benefits Act), except in cases of shortened life expectancy or small benefits.
  • Regulations may address the division or reallocation of contributions to the ORPP upon spousal breakdown; however, no such division will be permitted before Jan. 1, 2022.
  • The new ORPP legislation establishes a formal funding policy that will serve to guide the actions of the ORPP Administration Corp. and the Ontario government in the event of a funding shortfall or excess (which may include adjustments to contribution rates). An office of the chief actuary will be established and actuarial reports will be required.
  • The ORPP will also be reviewed five years after its full implementation to help ensure the plan is meeting its intended objectives. Subsequent reviews will occur every 10 years.
  • The ORPP Administration Corp. will have broad powers to collect personal information for the purposes of carrying out its objects and shall not disclose it except in certain limited circumstances. Individuals may request access or corrections to their own personal information, with a right of appeal to the information and privacy commissioner.
  • The ORPP Administration Corp. will also have power to conduct examinations, audits and inquiries relating to the plan or any workplace pension plan for the purposes of carrying out the new legislation.
  • If employers don’t remit contributions or pay a penalty, interest or other amount owing, the ORPP Administration Corp. may issue a default certificate under the bill setting out the amount owing that may be filed with and enforced by the court. The amount set out in the certificate is a first lien on the property of the employer. Directors will generally be jointly and severally liable with the corporation to remit that amount and pay any interest and administrative penalties.

What are the implications for employers?

The new ORPP legislation is a complete statutory scheme for the administration, enforcement and sustainability of the new plan. Employers in Ontario should familiarize themselves with their obligations since the penalties for non-compliance will be significant. Changes to the employer’s payroll systems will be necessary. The new act’s provisions may also affect the terms of an employer’s credit facilities.

Employers should also understand how the ORPP will affect their workplace and, in particular, determine whether their existing plans will exempt them from participation in it with respect to all or some of their employee groups or whether they can amend them to achieve that result. Other options may include amending the employer’s non-comparable workplace pension plan to offset the required contributions to the ORPP.

Employers may also anticipate demands to opt into the ORPP by employees and their collective bargaining agents even where they’re already in a comparable workplace pension plan.

Given the range of issues, employers should prepare themselves as the march towards ORPP implementation continues.

Read: ORPP education for employers to come this summer