The Canadian life and health insurance industry is extremely disappointed with the suggestion in the Ontario government’s consultation paper on the Ontario Retirement Pension Plan (ORPP) that existing workplace plans, such as DC plans, would not be considered “comparable.”
The consultation paper says restricting the definition of “comparable” plan to DB and target benefit multi-employer pension plans would expand the number of employers offering the ORPP to employees and allow the ORPP to be available in a broader range of workplaces.
Read: ORPP consultation paper released
“This stance would negatively impact DC plans and savings rates not only in Ontario but across the country,” says Frank Swedlove, president and CEO of the Canadian Life and Health Insurance Association (CLHIA).
“Employers that took the responsible approach and established these types of plans for their employees would now also be obliged to participate and contribute to ORPP,” he adds. “In too many cases, we fear that they will either cut back the benefits of their DC plans or abandon them entirely.”
Contrary to the impressions left by the Ontario government’s paper, the CLHIA says DC plans have proven to be an effective way for Ontario workers to save for retirement, and more than 600,000 Ontarians have DC plans at their workplace.
Read: ORPP falls short: CUPE
The CLHIA says the average employer contribution for DC plans is 6.5%, and the average employee contribution is 4.5%.
“The Ontario government says that their objective is to make Ontarians better off in retirement,” Swedlove says. “The truth of it is that they could be undermining the future well-being of hundreds of thousands of workers who have DC plans and leaving them worse off in retirement.”