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Preparing your Business for the Ontario Retirement Pension Plan

The Ontario Government has begun the roll-out of the Ontario Retirement Pension Plan (“Retirement Pension Plan”) which is intended to provide a predictable source of retirement income for Ontarians. The costs associated with the Retirement Pension Plan may come as a sudden shock to employers and employees absent informed financial and legal planning. The Retirement Pension Plan is meant to address the reality in the modern workplace of reduced long-term employment and a corresponding reduction of enrollment in workplace pension plans. The Retirement Pension Plan will represent a significant additional payroll cost to employers and reduce employees’ take home pay. The government hopes to offset some of the costs of the Retirement Pension Plan to employers and employees through a simultaneous reduction in Employment Insurance premiums.

Under the Plan, employees and employers will contribute an equal amount, capped at 1.9% each on an employee’s annual earnings up to $90,000.  For an employee earning $90,000 annually, the Retirement Pension Plan will cost the employer and the employee $1,710 each on an annual basis. This additional cost will have to be factored in to employers’ balance sheets and employees’ household budgets. Employees already participating in a comparable workplace pension plan would not be enrolled in the Retirement Pension Plan.

Employers will be obligated to contribute to the Retirement Pension Plan in four waves.

Wave 1

  • “Large” employers (500 or more employees) without registered workplace pension plans. Contributions to start: January 1, 2017.

Wave 2

  • “Medium” employers (50- 499 employees) without registered workplace pension plans. Contributions to start: January 1, 2018.

Wave 3

  • “Small” employers (50 or fewer employees) without workplace pension plans. Contributions to start: January 1, 2019.

Wave 4

  • Employers with a workplace pension plan in place that does not meet the Ontario Government’s minimum standards.

Contributions to start: January 1, 2020.

Employers who do not currently provide pension plans to their employees are well-advised to start planning for a long-term increase in payroll costs. If you have any questions or require advice regarding the Ontario Retirement Pension Plan or any other workplace law related matter do not hesitate to contact James Lawyers, we are ready to help.

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