Toronto, – The Canadian Federation of Independent Business (CFIB) is very concerned with the provincial government’s decision to introduce enabling legislation for a mandatory Ontario Retirement Pension Plan (ORPP) today. Once in place in 2017, the ORPP will require every Ontarian without a workplace pension plan to pay up to $1,643 in mandatory pension premiums per year. Employers will be asked to match the contribution amount for each of their employees.
“Business owners tell us the main reasons for currently not offering a pension plan are high costs and administrative complexities,” said Plamen Petkov, CFIB’s Ontario vice-president. “A recent CFIB survey found that 86% of small business owners are opposed to a new mandatory pension plan, with nearly 70% saying they would freeze or cut salaries and 53% would reduce the number of jobs to cope with the added costs.” CFIB’s economic analysis also confirms that the ORPP would increase the province’s unemployment rate by 0.5% by 2020, and reduce wages in the longer term.
Given ORPP’s largely negative impact on job creation and economic growth, CFIB maintains its call for voluntary retirement savings arrangements. “We welcome today’s introduction of The Pooled Registered Pension Plans Act, 2014, which will bring forward a voluntary, low-cost and administratively-simple savings plan for Ontarians,” said Nicole Troster, CFIB’s senior policy analyst for Ontario. “By taking this initial step, Ontario joins the federal government and a growing list of provinces that have already introduced or passed such legislation.”
PRPPs will be an excellent addition to the retirement savings options for small business owners and their employees. Unlike other pension plans, PRPP contributions will not be subject to payroll taxes, the administrative fees are expected to be lower and more small firms will be able to make better arrangements for their employees’ retirement. CFIB survey data reveals that a third of Ontario’s small businesses would consider offering a PRPP in their workplace, and that number is expected to grow once the PRPP framework is implemented in the province.
“We expect PRPPs to make it easier for small businesses to contribute to a retirement plan,” said Petkov. “We see the PRPP as being a more affordable tool for enhancing retirement savings, but we caution the province that implementing a mandatory ORPP would significantly diminish the financial capacity of Ontarians to contribute to voluntary options, as well,” concluded Petkov.
