William Khalilieh, CPA, CA
Providing Accounting and Tax Solutions to Small Businesses in the GTA

On August 11, 2015, the Ontario government released more details regarding the Ontario Retirement Pension Plan (“ORPP”). As it is my job as an Oakville Chartered Professional Accountant to understand the ways that the ORPP and other government initiatives can affect my clients, I have been asked to clarify the consequences and details of the ORPP. Some of the details that were released to the public include:

  • Self-employed individuals will not be covered under the ORPP; the government looking for options to allow self-employed individuals to participate
  • For businesses to be exempt from the ORPP they will either need to:
    • Provide a Defined Benefit (DB) plan with a minimum benefit accrual rate of 0.5% (for instance, OMERS’ rate is 1.85%)
    • Provide a Defined Contribution (DC) plan with minimum contribution of 8% with at least 4% coming from employers
    • Provide a pension plan that meets the ORPP’s comparable threshold tests
  • Companies with 50-499 employees that currently do not have a plan and who are not exempt will start making contributions on January 1, 2018:
    • 1.6% (50% from employer, 50% from employee) in 2018
    • 3.2%(50% from employer, 50% from employee) in 2019
    • 3.8%(50% from employer, 50% from employee) in 2020
  • Companies with 50 or fewer employees that currently do not have a plan and who are not exempt will start making contributions on January 1, 2019:
    • 1.6% (50% from employer, 50% from employee) in 2019
    • 3.2%(50% from employer, 50% from employee) in 2020
    • 3.8%(50% from employer, 50% from employee) in 2021

Some have viewed this as a “job-killing” tax, similar to the Canada Pension Plan (CPP) and Employment Insurance (EI). Like the CPP and EI, the cost increases as the number of employees increase (discouraging new hires) and as salaries increase (discouraging raises). There is also time and/or monetary costs in dealing with the administrative burden of the ORPP or the equivalent setup by the company. 

However, as an Oakville Chartered Professional Accountant, I can help you find the benefits of the ORPP for your company. Companies can use the introduction of the ORPP to:

  • Introduce/amend pension plans to attract/retain employees to remain with their organization
  • For companies with multiple owners, allow owners to have their own pension plan as part of their overall savings strategy

Given these new requirements, it is important you think of your pension strategy in the coming months in order to be ready for when the changes take effect in either 2018 or 2019.  Please contact me to discuss your situation with an Oakville Chartered Professional Accountant. 

William Khalilieh is an Oakville Chartered Professional Accountant, based in Oakville, Ontario, who provides practical tax and accounting solutions to individuals and their businesses in the Greater Toronto Area.

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