Ontario’s decision to move ahead with creating the Ontario Retirement Pension Plan (ORPP), a mandatory provincial plan that will offer a retirement benefit on top of the Canada Pension Plan (CPP), drew both praise and criticism when the province unveiled its budget on Thursday.
Canada’s largest union in the private sector, Unifor, welcomed the decision for the pension plan, which is expected to launch on Jan.1, 2017.
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“Given the failure of the Harper Conservatives to reform the CPP, the importance of the ORPP cannot be understated,” says Katha Fortier, Unifor Ontario regional director, noting that more than 60% of Ontario employees don’t have a workplace pension.
“To be most effective, the ORPP must mirror the CPP as a universal, defined benefit plan that is indexed to inflation,” Fortier adds.
The ORPP will require equal contributions from employers and employees that amount to no more than 1.9% each on annual earnings of up to $90,000. The ORPP aims to provide a replacement rate of 15% on a person’s earnings, up to a maximum yearly threshold of $90,000.
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But the Toronto Financial Services Alliance (TFSA) says many Ontario employers that already offer pension plans won’t be able to afford the additional costs associated with the ORPP. The mandatory provincial pension plan will undermine these existing pension plans, says Janet Ecker, president and CEO of the TFSA.
The Ontario Chamber of Commerce (OCC) has echoed this sentiment, arguing that the ORPP will hurt job creation, foreign direct investment and the economy in general.
According to a recent OCC survey, only one in four Ontario businesses can afford the costs associated with the ORPP, while 44% of respondents believe they will have to reduce payroll or cut back on hiring.
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The OCC has also expressed concern about Ontario’s debt and deficit. The deficit for 2014/15 is expected to reach $10.9 billion, increasing the province’s debt to $284 billion, or $20,772 of debt for every Ontarian.
“We’re concerned that this government will not be able to meet its deficit reduction targets,” says Allan O’Dette, OCC president. “This budget is short on details and appears to push much of the heavy lifting down the road.”
Ontario plans to balance its budget by 2017/2018.
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