In April of this year, the provincial government passed legislation to create the Ontario Retirement Pension Plan (ORPP) for the three million people who do not have a workplace pension. The pension problem is not an Ontario-only problem but rather a Canada-wide one. The under-saving of earners without workplace pension coverage puts these workers at a strong risk once they enter retirement, however the ORPP as proposed is not a resolution to this issue.
As such, Ontario’s initial blanket solution came rightfully under great criticism from the business community due to the high costs to small and medium-sized organizations.
Earlier this week, Ontario Premier Kathleen Wynne announced that she plans to expand the comparability rules under the proposed ORPP to include some Defined Contribution (DC) plans. Therefore, employers who already provide certain DC pension plans for their employees will be exempt from contributing to the new ORPP. In addition, a longer phase-in period was announced to help Ontario businesses transition into the plan.
In its current form, the ORPP hinders the success of businesses and hurts our economic competitiveness. Here are some of the many challenges:
Being an Ontario-only plan means that the administration cost for collecting payroll contributions and paying benefits will be astronomical, not to mention it will be challenging to handle the Ontario workers and retirees moving in and out of this province.
As this plan does not work hand-in-hand with a federal plan, contributors will not receive a fair tax treatment.
Since the announcement of the ORPP, businesses have urged the government to redefine the plan’s comparability to take into consideration plans like group RRSP’s. This has not taken place yet. Instead, in its current format, the ORPP will raise costs for most businesses in Ontario.
Ontario employers are faced with a number of rising costs and the cumulative impact is not sustainable. The rising electricity prices (our province has one of the highest rates in North America), the introduction of a cap and trade system to limit greenhouse gas pollution and an increased minimum wage (second highest wage in Canada), will all increase the cost of doing business. And this is not mentioning Ontario’s growing debt, a factor which economists have identified as the single biggest threat to Ontario’s economy.
No economic impact study has been done on the cumulative impact that the proposed changes will have on businesses.
A recent study by the Ontario Chamber of Commerce indicates that as a result of the ORPP’s employer contribution, 44 per cent of businesses would plan to reduce their current payroll or hire fewer employees. This is truly not the direction that we want or could afford to go in Niagara and in this province.
And therefore, with each decision like the one earlier this week, business confidence is reaching an all-time low.
Fortunately, this plan is not being launched until 2017. There is still time for these issues to be addressed. Pensions are an important issue to Niagara residents, but the ORPP in its current format is flawed. We have TFSA, RRSP and CPP capabilities as employees and employers. Bringing in another mandatory option is not the answer.
Mishka Balsom is the CEO and President of The Greater Niagara Chamber of Commerce.