Part-time workers, the self-employed and independent contractors in Ontario are attracting the attention of those that want to help them have retirement income through a sponsored plan.
"The access for non-full-time workers to a high-quality pension plan is low and getting lower," said Alex Mazer, founding partner at Common Wealth, a Toronto-based plan record keeper and administrator that assists labor and professional associations in creating retirement plans for part-time and low- to middle-income workers. "In the do-it-yourself world, investing produces poor results. How can we make sure these workers can get access to the same high-quality pension plan as traditional full-time workers?"
In Ontario, 19% of the workforce was part time and 16% is independent contractors or the self-employed as of Oct. 31, according to Statistics Canada data.
"The flight of the permanent full-time job is real," Andrew Cash, co-founder and president of Urban Worker Project, a Toronto-based advocacy group for independent workers, told participants at an Association of Canadian Pension Management conference in September. "Most of our labor laws are rooted in the premise of full-time stable employment."
All workers — including part time, self-employed and independent contractors — are covered by the C$328.2 billion ($258 billion) Canada Pension Plan. But because they have no full-time employer, workers must pay both the employer and employee shares of the combined 9.9% contribution required by law. That total contribution will increase to 10.9% by 2025 under an enhancement to the CPP approved in 2016. The CPP benefit by itself is not enough to retire on, experts say.
Rather than leave non-full-time workers to create individual retirement savings plans, Mr. Mazer said, unions, professional organizations and sector-level groups of retail workers or those in the arts are looking to become sponsors for those workers by creating multiemployer plans that combine the portability and investment selection of defined contribution plans with a defined benefit-style governance, administration and distribution system that helps create a steady stream of post-retirement income for these workers, he said.
In early 2018, the Service Employees International Union is expected to launch a multiemployer retirement plan for home health-care workers in Ontario. Common Wealth assisted in creating the plan and will serve as the plan's record keeper and administrator, Mr. Mazer said.
The plan will be categorized under Canadian law as a tax-free savings account to avoid the loss of other post-retirement income for many of these workers, Mr. Mazer said. For example, in standard defined benefit and defined contribution plans, workers who would qualify for the Guaranteed Income Supplement, an additional social security benefit for low-income residents, would lose 50 cents from the supplement on every C$1 they receive in retirement income. Tax-free savings plans are not under similar requirements, he said.
The investments in the plan will be a suite of Vanguard Group target-date funds; no other options are provided. The default option is the age-appropriate target-date fund, although participants may switch to other target-date funds based on risk tolerance, Mr. Mazer said. The SEIU as plan sponsor holds the fiduciary responsibility for the plan.