by Leanne Standryk and Alexandra Delvecchio
In our March 2016 Corporate Bulletin, we introduced you to the Ontario Retirement Pension Plan (ORPP), a mandatory pension plan for Ontario resident employees who do not enjoy a comparable plan through their employment. The goal of the ORPP was to ensure that every employee in Ontario will benefit from either the ORPP or a comparable plan by the year 2020. Implementation was set to begin as early as January 1, 2018.
On June 20, 2016, the Federal government and the Provincial governments reached an agreement in principal to enhance the Canada Pension Plan (“CPP”). According to the statement released by the Federal Minister of Finance, Bill Morneau (“Morneau”), the enhancements to CPP aim to help Canadians achieve their goal of a safe, secure and dignified retirement. Morneau indicated the plan will do this by working with the nation’s provinces and territories to enhance the CPP in order to ensure future generations of Canadians can count on a strong public pension system during their retirement years. Several aspects of the enhancements are still under consideration with a deadline to finalize and approve the plan by July 15, 2016. For now, we understand that the agreement in principle regarding the Canada Pension Plan Enhancement has been summarized by Morneau as follows:
- The plan will begin January 1, 2019 but will be introduced using a gradual 7-year phase-in, to allow time for businesses to adjust.
- It will increase the existing income replacement of pensionable earnings from one quarter to one third.
- It will increase the maximum amount of income subject to CPP, also referred to as the upper earnings limit, by 14%.
- It will increase the Working Income Tax Benefit (WITB) in order to offset the impact of increased contributions on low income earners.
- It will provide a tax deduction for employee CPP contributions.
As a result of the foregoing agreement, the Provincial government announced that the ORPP is no longer needed and will not be launched. Premier Wynne stated “This is a good morning in Ontario, a good morning in Canada … it is the nature of this beautiful country of ours that we find compromise”, acknowledging that the agreement to enhance the CPP eliminates the need for the ORPP.
The province’s Finance Minister, Charles Soussa, has also explained that nationwide applicability will allow the plan and its benefits to be portable from province to province, a positive feature that would not have been available under the provincial scheme.
Lancaster Brooks & Welch Labour and Employment Department may be reached for consult on any Labour or Employment issue at 905-641-1551. Visit our website at lbwlawyers.com