ONTARIO RETIREMENT PENSION PLAN: At last.

Canada and Ontario have a strong foundation of retirement benefit programs, namely the Canada Pension Plan, Old Age Security, the Guaranteed Income Supplement and the Ontario Guaranteed Annual Income System. 

When the Province of Ontario held hearings in the 1980s with respect to mandatory retirement, I spoke at one of the hearings. In my presentation, I also expressed in part my concerns about retired employees not getting their company pensions when the companies went bankrupt. The member of the Ontario Legislature holding the hearings subsequently asked me to send him a report of my concerns in greater detail. This I did and in my report I listed many companies that went bankrupt and the employees who had company pensions suddenly learned that their pensions would be used to pay off other creditors instead. I suggested that the Province of Ontario have a mandatory pension plan for all employees in Ontario. I was later told that my report was sent to the Ministry of Labour. I immediately thought’ “My report will never again see the light of day.”

Earlier this year, (2015) I and everyone else heard about the Ontario government’s plan to implement an Ontario Retirement Pension Plan (ORPP) for Ontario workers and its potential implications for employers.                             

Briefly, the ORPP would be a defined benefit (DB) type of plan with an employee/employer contribution rate of up to 1.9% each that would be requiring mandatory participation, subject to exemptions for workers who already participate in a “comparable” workplace pension plan.  While the meaning of comparable workplace pension plan is yet to be finalized, the Ontario government has indicated that its preference is for only DB plans and target benefit multi-employer pension plans to be considered comparable.  Under this approach, employers with defined contribution plans and/or group registered retirement savings plans would not be exempt.

I have mixed feelings about the possibility of employers having comparable pension plans having to participate in the ORPP while they still have the comparable pension plans. However, I believe that the current decision by the Government of Ontario to let some company pension plans be considered comparable to the Ontario Retirement Pension Plan is a positive move forward.

As I mentioned at the beginning of this article, when I wrote my report on my proposal of the creation of a provincial pension plan to the government, I expressed concern that many employers who had a pension plan for their employees and the employers later went bankrupt; the employees would get nothing from their pensions. I still have that concern. However, if there is a law created that states that if an employer goes bankrupt, the company pensions will not go to any other creditors other than the employees for their retirement years, then there will be no need for the employees (and employers) to pay anything to the ORRP while the employees are still working for their employer. Alas, that would require federal legislation to protect the company pensions since it would come under the Bankruptcy law which is federal and not a provincial law.

                   

Bill 56, which sets out the framework legislation for the ORPP, passed second reading and had been referred to the Standing Committee on Social Policy (the Committee).  

The provincial government says the ORPP is needed because Ontarians aren’t saving enough. Ontario’s Finance Minister, Charles Sousa said as he delivered the budget in the legislature, “We have a duty and must do more to ensure that people have adequate savings in their retirement years.”  I agree with that statement. However, like the federal pension plan, the ORPP will be expensive for the provincial government to operate, especially with workers moving in or out of the province.

Some pundits will also say that four-fifths of workers already have sufficient savings for adequate retirement benefits. You will be amazed how those funds can be used up quickly when a financial emergency crops into their lives. At least with the ORPP, the retirement benefits will be still there when they reach the age of retirement.

Further, two-thirds of Ontario workers do not participate in workplace pension programs. None of the companies I worked for in the fifty five years I worked in Canada had any pension plans for their employees. If it wasn’t for the fact that I inherited money and wisely invested it, I would not be reaping the benefits of my investments during my retirement years. I wish the ORPP was in force when I was employed before I retired at age 75. I would be then getting a minimum of least $6,900 every year from the ORPP for the rest of my life and added to my other sources, I would live even more comfortably than I am now.

Other pundits will say that there is a better option available to Ontarians such as telling them to put their own contributions into a pension plan voluntarily. That option will hold about as much water as a sieve will. Telling the average adult to voluntarily pay his own premiums on his own for his retirement benefits that he will get decades away is like telling a toddler that the cookies he sees on the table are not be eaten until the following week.

Private sector organizations (employers) say they are worried about the unintended consequences while public sector groups (employees) think the plan should be universal.

Some employers’ and business groups’ concerns are as follows;

(1) Employers say that their company contributions will bankrupt them. That’s hogwash. Admittedly, the ORPP will place new costs on employers regardless of their profitability. However, some of those CEOs are getting millions of dollars a year in salaries and benefits from their companies and yet they want to nickel and dime their employees by not wishing their companies to pay their share of the ORPP contributions towards their employees’ pensions. I have about as much sympathy for such CEOs as a dog gets when it carelessly wanders into a flea convention.

(2) Business groups strongly oppose enhancing universal pensions, either provincially or nationally. They argue that the accompanying payroll tax increases will cause employers to pull back on hiring and other growth initiatives that will hurt Canadians and the economy.

That’s more hogwash. Why should the accompanying payroll expenses increases cause employers to cease hiring more employees? If a company is successful and wants to expand, it would be outright stupid in its part to not hire more staff simply because the employers have to pay their share of the employee’s pensions.

These business groups are trying to scare us with their bogeymen—entities that don’t really exist. It really comes down to greed on the part of these business groups that supersedes the best interests of their firm’s employees.

Stephen Harper (Prime Minister of Canada) is standing in the way of an Ontario pension plan and says that he’s happy to block what he calls “an enormous tax hike.” Federal finance minister of state for finance, Kevin Sorenson went further, calling the planned Ontario pension a “tax hike on workers and businesses” that “will disadvantage Ontario and kill jobs.”

Now there is a stupid remark if there ever was one. Think about it. He claims that the ORPP is a tax hike. What is a tax hike?  It occurs when a government increases taxes to pay for government services and expenses such as building roads, schools etc. That is not what the money received from businesses and their employees and applied to ORPP will be used for. I will refer you to Bill 66 and specifically to sections 2(3) and 2(4) of Bill 66 which state;

Investing contributions: The administrative entity shall be responsible for investing the collected contributions for the benefit of the members and other beneficiaries of the Ontario Retirement Pension Plan.

Holding contributions: The administrative entity shall hold the contributions, and any accruals from the investments, in trust for the members and other beneficiaries of the Ontario Retirement Pension Plan.  The contributions and the accruals shall not form part of the Consolidated Revenue Fund.

In order to explain what is meant by a Consolidated Revenue Fund, I will give you the definition of the Federal Consolidated Revenue Fund. It is payments to and from the Consolidated Revenue Fund of Canada and are made by the Receiver General. Cheques distributed by the Government of Canada to citizens and organizations are made in the name of the Receiver General, just as payments to the Government are made out to the same. It is a fund into which tax revenue is paid in order to meet standing charges especially interest payments on the national debt.

There you are. Kevin Sorenson’s bogeyman isn’t hiding under your bed anymore. So why did this man try and scare us away from the ORPP? 

He works for that political twerp, Stephen Harper, the Prime Minister of Canada. Harper knows that his attempt to win his election again will be an uphill effort on his part. He is not unlike a stalled car—trying to run on empty. Actually, with him at the helm, his efforts at winning the upcoming election is is like trying to climb a steep cliff with only one leg. So what does he do to try and win votes for the next election being held in October of this year?  He criticizes Premier Wynne’s efforts to bring in a provincial pension plan so that retirees can live better after they retire. How does he do it? He calls the provincial pension plan a tax—which it is not. It is an investment for the benefit of employees working in Ontario.

What does he do to make matters worse in his efforts in attempting to climb a steep and difficult cliff with only one leg? He refuses to increase the federal pension benefits that Canadian workers have paid for (as suggested by the premier and at the same time, he attempts to shoot down the Premier Wynne’s provincial pension plan so that workers in Ontario will not have a provincial pension to assist them in their old age after they retire.  He yelps that the ORPP is simply an increase in their taxes. He even said, and I quote; ““I am delighted to see, quite frankly, that our refusal to co-operate with the imposition of this tax is making it more difficult for the Ontario government to proceed.” 

“Imagine this scenario if you will. A climber with only one leg attempts to climb a cliff. A female fellow climber suggests that the one-legged climber can take an easier route. What does he do? He tells the fellow climber to get lost. When he discovers that the fellow climber is taking an easier route to arrive at her goal, he throws a rock at the fellow climber in hopes of dislodging her and as a result, the one-legged man loses his balance and ends up on the valley floor. Meanwhile, the fellow climber reaches the top of the cliff with little difficulty.

Ohh. Don’t you just love that story?  Could Aesop have done better with his tale of the dog with the bone in its mouth? 

I hope you have enjoyed this article as much as I have enjoyed writing it.