Ontario reveals plans for pension plan, says it can be integrated with CPP

TORONTO – Ontario released a blueprint for a homegrown pension plan in its spring budget Thursday, but left the door open to expanding the program to other provinces and even suggested it could be integrated into the national Canada Pension Plan in the future.

The Ontario Retirement Pension Plan is Premier Kathleen Wynne’s response to the federal government’s refusal in December to expand the CPP at the request of several provinces.

While Wynne’s minority Liberal government said a CPP enhancement was still Ontario’s “preferred approach” to strengthening the retirement income system, the new provincial plan was touted as the next best thing as governments deal with aging populations and people who aren’t saving enough for the future.

“Since the federal government won’t lead, Ontario will lead by developing a ‘made-in-Ontario’ solution,” Finance Minister Charles Sousa said as he delivered the budget in the legislature.

“We have a duty and must do more to ensure that people have adequate savings in their retirement years.”

While some observers see the plan as yet another way in which the provinces are pressuring the federal government to expand CPP, Ontario’s opposition Progressive Conservatives have already condemned the program as a “job-killing payroll tax.”

Improving retirement income is, however, an idea that Ontario’s New Democrats have championed in the past.

The NDP has to decide whether it will prop up the minority Liberal government, but even if it doesn’t, the provincial pension plan is likely to become a key part of the Liberals’ election platform.

The ORPP was billed Thursday as a mandatory plan that will be modelled on the CPP and could be absorbed into the national program if the federal government agreed to a CPP enhancement in the future.

The CPP, established in 1965, currently provides retirement benefits to contributing workers up to a maximum of about $12,500 annually — an amount that critics have said isn’t enough for many in retirement.

Ontario’s plan, however, won’t apply to all the province’s workers — those with “comparable” workplace pension plans, federally regulated employees and those with income below a yet-to-be-determined threshold would be exempt.

The government said it is still consulting on how it can help self-employed individuals, who currently aren’t part of the plan, to better save for retirement.

The exemptions mean the plan will initially involve about three million Ontario workers when it launches in 2017.

The Canadian Labour Congress welcomed Ontario’s program and the fact that other provinces could potentially join it in the future.

“There’s a recognition by a lot of the provinces that a lot of people are going to retire with inadequate pensions and they’re going to have to do something about it,” said president Ken Georgetti, adding that workers his group spoke to supported a provincial pension plan.

“They know they have to save, they don’t know how to, and they know that deductions from your paycheck are largely the only way that this thing works.”

The Canadian Federation of Independent Businesses, however, said the ORPP would have a “disastrous effect” on small- to medium-sized businesses.

“We find that whenever there’s an increase in payroll taxes, there’s a decrease or reduction in jobs to be able to cope with the added cost,” said senior policy analyst Nicole Troster.

Rather than a provincial plan, the CFIB supported voluntary programs, like Pooled Registered Pension Plans, for enhancing retirement savings. Ontario plans to move ahead with a legislative framework for PRPPs in the fall of this year.

The ORPP would require equal contributions not exceeding 1.9 per cent each to be shared between employers and employees, on annual earnings up to a maximum of $90,000.

Enrolment in the plan would take place in stages, beginning with the largest employers, while contribution rates would be phased in over two years.

The plan would be publicly administered at arm’s length from the government and be responsible for managing investments associated with annual contributions of about $3.5 billion.

While currently an Ontario-specific plan, the ORPP could be expanded “to enhance the retirement income security of those living outside Ontario,” the government said.

That option meant Ontario was setting a precedent in a way, said Susan Eng, a spokeswoman for CARP, a national seniors advocacy group.

“If Ontario shows them a way that would work, then it’s nothing for them to go ahead and parallel it,” Eng said. “And if all the provinces pass parallel legislation with reciprocal provisions then we have in effect what we would have had if (the federal government) had increased the CPP.”

A number of provinces, including Nova Scotia, Prince Edward Island and Manitoba, indicated they’re certainly watching Ontario.

Having other provinces consider their own plans, or contemplate joining Ontario’s could push the federal government to reconsider enhancing CPP, said one observer.

“Ottawa isn’t really keen, I think, on having the provinces all start up their own pension plans because it starts to break up the federation a bit, it starts to create barriers to people going from one province to another looking for employment,” said Thomas Klassen, a York University political science professor who studies pensions.

Klassen noted, however, that the lack of political consensus on the pension plan in Ontario, weakened its case with Ottawa.

“I think that problem is going to be taken care of when there’s a provincial election and the people are going to have the ultimate say about this.”