The Ontario Finance Ministry, in its 2014 budget announced Thursday, proposed creating a mandatory pension fund for the province.
The Ontario Retirement Pension Plan would supplement the C$201.5 billion (US$182.6 billion) Canada Pension Plan, Ottawa, expanding pension coverage to 3 million people in Ontario who now rely on the CPP, social security and personal savings for retirement, according to the budget.
The ORPP would pool longevity and investment risk, index benefits to inflation similar to the CPP and require equal employer and employee contributions of up to 1.9% of pay each up to an annual threshold of C$90,000.
The maximum earnings threshold would rise each year, consistent with increases to those of the CPP.
The ORPP would be publicly administered by an external board that would be responsible for managing investments associated with annual contributions of about C$3.5 billion.
Talks in December between provincial finance ministers and the federal government failed to reach agreement on a supplemental plan, spurring Ontario Finance Minister Charles Sousa and Premier Kathleen Wynne to pledge to create a provincial plan.
The budget states the province “could leverage” the governance and management expertise of its current public-sector plans, including the C$140.8 billion Ontario Teachers’ Pension Plan and the C$65.1 billion Ontario Municipal Employees Retirement System, both of Toronto. It did not elaborate, but in the past OMERS, for one, has indicated its willingness to manage external assets as a third party.
“The province is not prepared to wait for the federal government to step up to address the retirement income challenge currently faced by today’s working Canadians,” according to the budget. “Given the federal government’s decision to shut down discussions on an enhancement to the CPP, Ontario is proposing to move forward with a new mandatory provincial pension plan.”
The proposed pension fund “could later be integrated with the CPP should negotiations on an enhancement be successful in the future,” according to the budget.
As part of the budget, the proposal requires provincial legislative approval.