Canadian Life and Health Insurance Association
(CLHIA) is urging the Ontario government to proceed with caution over the Ontario Retirement Pension Plan (ORPP).
The government brought forward legislation on Monday that would pave the way for the ORPP to be implemented in Ontario.
The association voiced concerns over the potential implementation of ORPPs, noting so far very few details are available and caution will be needed as the government fleshes out those details.
An important consideration in the implementation of the ORPP is what will happen with existing pension plans that people have at the workplace.
"A balanced approach will be needed to ensure that the ORPP doesn't undermine existing plans and disadvantage Ontario workers. The very real risk is that Ontario workers will be worse off if employers with already attractive plans find themselves unable to continue those plans if they are required to offer the ORPP," cautioned CLHIA President and CEO Frank Swedlove
The CLHIA’s comments come hot on the heels of Ontario’s businesses urging the province to defer legislation that would pave the way for the ORPP.
The business group wants the province to answer questions about the impact the plan could have on the province's economic competitiveness. Businesses are also concerned that the proposed pension plan will lead to job losses in the province.
"The retirement income challenge is a real one," said Allan O'Dette, President & CEO of the Ontario Chamber of Commerce. "However, we need to ensure that any changes to the pension system are made with a full understanding of the impact they will have on Ontario's business climate. We are not satisfied that these questions have been fully answered."
The ORPP, which aims to supplement the Canada Pension Plan (CPP), will require employers to match employee pension contributions, increasing the cost of doing business. For example, in the case of a business that employs 10 people who earn $45,000 each, the employer will be obligated to pay almost $8,000 per year in additional pension contributions.
According to a recent survey conducted by the Chamber, only 23 per cent of the nearly 1,000 responding businesses could afford the costs associated with increased employer pension contributions.
The outpouring of employer’s dissatisfaction with the new scheme could have ramifications for advisors in wait and see mode over acceptance towards the new plan.