After much deliberation, the Ontario Retirement Pension Plan (ORPP) is coming. Starting in January 2018, large employers (those with more than 500 employees) will be required to contribute to the ORPP or have a comparable, qualifying registered pension plan. By 2020, the ORPP (or a comparable plan) will be mandatory for all employers in Ontario – big or small.
Although changes are a few years away for small- and medium-sized businesses, now is the time to begin planning and preparing.
What Is the Ontario Retirement Pension Plan?
The ORPP is intended to provide employees with guaranteed financial security in their retirement. Similar to the Canada Pension Plan, it requires matching employer and employee contributions of 1.9% of annual earnings (up to $90,000). Contributions will be gradually phased in for small- through medium sized businesses between 2018 and 2020.
All employees who meet the following eligibility requirements must be covered by your ORPP or a “comparable” plan:
- Age 18-70
- Earn a minimum of $3,500 per year
- Work in an establishment of the employer that is located in Ontario (i.e. if the company is not an Ontario company but has employees in Ontario, they must be covered) OR paid by an Ontario company (i.e. physically works in another province but the company’s payroll department is in Ontario, they must be covered)
How Should My Business Prepare for the ORPP?
Beginning this year, the Ontario Pension Plan Administration Corporation (ORPP AC) will start to contact employers to assess the coverage they offer to their employees and verify existing plans. It’s important to start preparing early so that you can discuss your options without panic and take effective action.
An important first step is to assess your existing plan to determine whether or not it’s comparable. If it is not, your business must:
- Adjust the current plan so that it meets the requirements to make it compatible
- Choose to participate in the ORPP and continue offering the existing pension plan
- Participate in the ORPP and discontinue the existing pension plan
If your company’s pension plan excludes coverage of some employees, you will need to either change your plan to include all eligible employees (as is required by the ORPP) or choose to participate in two pension plans (enrolling excluded employees into the ORPP).
An Experienced Benefits Advisor Can Build a Qualifying Registered Pension Plan that Works for Your Business
A benefits partner can help you build a better solution:
- Design a customized workplace pension plan to give you control over how your pension plan will work.
- Look at the big picture to assist small- and medium-sized businesses create a plan with stability built in.
- Alleviate concerns about costs by helping you find hidden savings in your benefits plan and identifying areas to cut back, so you won’t have to give up your benefits plan entirely.
- Create a sustainable solution that won’t place undue burden on your company’s finances.
- Guide you on implementing changes gradually over the next few years, letting you make modifications in stages.
It is important to work with an experienced benefits partner who can help you explore your options and implement a stable, predictable, cost-effective workplace pension plan that meets ORPP requirements.
HFG offers benefits solutions for small- and mid-sized businesses. Our advisors are ready to help you prepare for the ORPP and discuss your group insurance needs, goals, and budget. Contact an HFG advisor today to get started!
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