ORPP or CPP?
On October 19, 2015, Canada elected a majority Liberal federal government. The Liberal Party indicated during the election campaign that it would be prepared to consult with the provinces about expanding the Canada Pension Plan (“CPP”). While the Ontario government has announced implementation details for the Ontario Retirement Pension Plan (“ORPP”), it has stated that an expanded CPP is its preferred method of addressing the retirement income gap for employees in Ontario.
CPP Expansion Takes Time
CPP expansion is not easy to achieve. In order for the CPP to be amended, the following conditions must be satisfied:
- the federal government and 2/3 of included provinces must agree; and
- the included provinces in agreement must constitute 2/3 of the population.
This is no small feat. Even if the new federal government initiates consultations in late 2015 or early 2016, it is reasonable to expect that the consultation process could take years. Accordingly, there may not be agreement before the first wave of the ORPP is scheduled to take effect on January 1, 2017.
Morneau to Meet With Provinces ASAP on Changing CPP
Prime Minister Justin Trudeau has told Finance Minister Bill Morneau to meet with his provincial and territorial counterparts as soon as possible to start working on enhancing the CPP. The instruction was one of the top priorities Trudeau listed in his mandate letter to Morneau, which was made public Nov. 13.
ORPP Legislative Commitment
Following the election, Ontario Premier Wynne indicated that her government is optimistic that CPP enhancement is possible. However, in light of the provincial support required to achieve expansion, she also confirmed that Ontario will proceed with the ORPP for now. The Ontario government has emphasized that one of these options – CPP expansion or the ORPP – must come to fruition. While the prior federal government refused to cooperate with Ontario on the implementation of the ORPP, the new government appears to be more accommodating and prepared to consider amendments to the Income Tax Act (Canada) and sharing of the existing CPP infrastructure, regardless of the status of CPP expansion. Such cooperation would further assist the Ontario government with the implementation of the ORPP.
Time to Prepare
Given these developments, employers will likely want to continue to prepare for ORPP implementation which is set to start as early as January 1, 2017, depending on which wave they fall into. If employers wait until the ORPP is in effect, it may be more difficult to make changes at that time.
For More Information
We will continue to monitor the progress of the ORPP initiative in Ontario. If you have any questions about the impact of the ORPP in your workplace and on your existing retirement plans, please contact Sam Spada, Retirement Consultant at 647-207-9416.