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 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 into 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.

Employer Contribution Roll-Out

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 Wray James LLP. We are ready to help.