Business warns against Wynne’s pension plan

Ontario’s largest business group is warning of the “unintended consequences” of Premier Kathleen Wynne’s new provincial pension plan on thousands of employers and their millions of workers.

Thestar.com
June 2, 2015
By Robert Benzie

Ontario’s largest business group is warning of the “unintended consequences” of Premier Kathleen Wynne’s new provincial pension plan on thousands of employers and their millions of workers.

In a letter to Wynne to be sent Tuesday, the Ontario Chamber of Commerce urges the government to allow more employers to be exempt from paying into the public pension plan that takes effect in 2017.

The Liberals have yet to formally announce which type of employee retirement benefit programs would not be impacted by the Ontario Retirement Pension Plan (ORPP).

While it’s expected companies providing defined benefit plans, which pay a guaranteed amount, would not have to also contribute to the ORPP, businesses are concerned about other types of retirement saving schemes.

“The ORPP penalizes employers who are already investing in their employees’ retirement savings,” wrote Allan O’Dette, president and CEO of the Ontario Chamber of Commerce.

“Many employers already contribute to their employees’ retirement savings through a variety of plans, which include defined contribution (DC) plans, group registered retirement savings plans (group RRSPs), and group tax-free savings accounts (group TFSAs), among others.”

Under the proposed Ontario scheme - modelled on the Canada Pension Plan that Wynne argues must be enriched - employees and employers will each contribute 1.9 per cent of a worker’s annual income up to $90,000.

In an interview Monday, O’Dette said businesses wants “the government to understand the unintended consequences of this public-policy decision that they’re taking.”

“What we really want them to do is understand the comparability of other benefits that are being offered,” he said, stressing different companies offer a wide range of retirement benefits for their employees.

“At the moment, it appears as though they want to acknowledge defined benefits only.”

O’Dette’s missive to Wynne was co-signed by the heads of most of Ontario’s local chambers of commerce as well as by employers like General Motors Canada, Ford Motor Company, Vale Canada, Canadian Tire, Siemens Canada, Magna International, IBM Canada, Sun Life Financial, and scores of other major firms.

But associate finance minister Mitzie Hunter, who is in charge of implementing the ORPP and recently completed public consultations, emphasized that nothing has yet been set in stone.

“We are hearing that we should focus that definition and include ... DC plans. We know that there are good DC plans that are out there and at the same time we also have to think about that fact that many people don’t have workplace-based coverage,” said Hunter.

“We want to make sure that we get this right the first time,” she said, adding the government would “soon” be announcing its definition of “comparability” to give employers and employees greater certainty.

“Businesses and individuals need lead time ... in order to plan so we want to be respectful of that.”

1. ORPP: The cornerstone of Premier Kathleen Wynne’s June 2014 re-election was the Ontario Retirement Pension Plan, which complements the Canada Pension Plan. Almost everyone without a workplace pension plan would be required to contribute 1.9 percent of their annual income up to $90,000 with employers matching that. With two-thirds of Ontarians having no employer pension plan and CPP benefits maxing out around $12,000 a year, Wynne is worried about future retirees not having enough to live on.

2. OCC: The Ontario Chamber of Commerce is a non-partisan organization that represents 60,000 businesses that employ 2.5 million workers in every part of the province. The OCC has been leading the charge against the ORPP and has rallied scores of employers, including General Motors Canada, Ford Motor Company, Vale Canada, Canadian Tire, Siemens Canada, Magna International, IBM Canada, Sun Life Financial, among others. They are worried about the impact on businesses’ bottom line.

3. Next steps: The enabling legislation for the ORPP was passed April 29. Associate finance minister Mitzie Hunter has recently completed public consultations on the plan and will announce the definition of “comparability” within weeks to determine who would by exempt from paying into new plan that takes effect in 2017. The mandatory contributions will be phased in over two years after that with large companies being forced to participate before small businesses.