The Ontario Retirement Pension Plan
- The Ontario Retirement Pension Plan (ORPP) aims to replace 15 per cent of an individual’s earnings, up to $90,000. The estimated pension for an individual with $90,000 in annual earnings is $12,815, based on 40 years of service.
- Employees and employers will contribute 1.9 per cent each (3.8 per cent combined) on an employee’s annual earnings up to $90,000.
- The ORPP would not apply to those currently in a comparable plan. Comparable plans would need to meet a minimum contribution threshold, be locked-in and be regulated by existing provincial pension standards. As a result, other capital accumulation plans, such as deferred profit sharing plans (DPSPs) and group RRSPs, are not considered comparable.
- To meet the comparability test, defined benefit (DB) plans must meet a minimum benefit accrual rate of 0.50 per cent. Defined contribution (DC) plans must have a minimum annual contribution rate of eight per cent with at least 50 per cent matching of the minimum rate from employers. Hybrid plans will be evaluated to determine if they meet threshold levels for comparability.
- The Government is looking at developing “buy back” mechanisms for employees to buy past service credits when they were unable to contribute to the ORPP. The Government is also examining ways to allow employers with comparable plans to opt-in and participate in the ORPP.
- Contributions would be phased in, reaching 1.9 per cent each from employers and employees by the third year of participation (waves one through three only)*see chart below
- Benefits would be paid starting in 2022 and earned as contributions are made. Benefits will be indexed to inflation.
- The Ontario Retirement Pension Plan Administration Corporation will start contacting employers in early 2016 regarding their existing plans and coverage for employees.
- Ontario has appointed David Dodge, Claude Lamoureux and Gail Cook-Bennett to a Nominating Council to help select the initial Board of Directors for the ORPP Administration Corporation.
If you have any questions about the ORPP, feel free to reach out to us!Source: Government of Ontario