CCPartners | Blog

Bill 56: Stage One of the Ontario Retirement Pension Plan

On December 8, 2014, in keeping with one of its major election items, Ontario’s Liberal Government introduced Bill 56, An Act to require the establishment of the Ontario Retirement Pension Plan.  The Bill has passed first reading.

In addition to Bill 56, the government also introduced Bill 57, Pooled Registered Pension Plans Act, 2014.  This blog will focus only on Bill 56.

The stated objective of Bill 56 is to provide a further mandatory provincial retirement plan to address a perceived inability of many Ontarians to adequately prepare to maintain their standard of living when they retire.  The intention of the Bill is to establish the pension plan by January 1, 2017 through the introduction of further legislation that will provide for the administration, operation and requirements of the pension plan.  It is expected that the government will now begin a consultation process to address specific proposed components of the new retirement pension plan.

Bill 56 provides for the creation of an “administrative entity” to manage the plan including the enrolment of eligible employees and employers, the collection, holding and investment of contributions, and the administration of benefits. 

While the details of the plan requirements are to be set out in further legislation, a Schedule to the Bill sets out the Basic Requirements of the plan.  These requirements include the following:

• Enrolment of “eligible” employees and employers is mandatory.
• Eligible employees are persons who are 18 or older and under 70 years of age, are employed in eligible employment in Ontario, have annual earnings above a minimum threshold (which is not yet set), and who do not participate in a “comparable workplace pension plan”.
• Similar to the Canada Pension Plan, all eligible employers must deduct contributions from salary and wages of eligible employees, and must also make employer contributions.
• The maximum earnings threshold for 2017 will be $90,000 plus a further adjustment at the same percentage rate of increase between 2014 and 2017 as is set out in the Canada Pension Plan.
• The contribution rate for employers shall be equal to the rate for employees, and the combined rate shall not exceed 3.8 per cent.Rates shall be phased in through transition rules to be set under the legislation. 

In contrast, the current combined employer and employee contribution rates into the Canada Pension Plan are 9.9% with a maximum total contribution of $4,712.40.  If the Ontario plan was immediately in place, with maximum pensionable income of $90,000 and a maximum combined contribution rate of 3.8%, the total combined contribution would be $3,420 with equal employee and employer contributions of $1,710.

“Eligible employment” is not defined in the Schedule, except that it is stated to be all employment in Ontario other than those which are exempted under the further full pension plan legislation.  The Schedule provides that exceptions “shall be similar in nature to the exemptions for employment under the Canada Pension Plan (Canada)”.  The exceptions under the Canada Pension Plan are quite specific and narrow.

An important part of the further legislation will be a description of what types of workplace pension plans are “comparable” plans as described in the Bill.  For example, will a group RRSP plan or other structured retirement plans satisfy this requirement, though not technically a “pension plan”?  There should be ample reason for employers, particularly smaller employers with no retirement plan in place for employees, to engage in the consultation process.  Moreover, as rules describing comparable plans come into focus all such employers and their employees may wish to explore the benefits of establishing their own plans in order to qualify for the exemptions.

Any of the lawyers of CCPartners would be pleased to assist employers in understanding Bill 56, to begin the process of preparing for public consultation and to assess the risks and benefits of alternative and potentially comparable pension plans.