TORONTO—Ontario’s Liberal government introduced legislation December 8 to create a mandatory provincial pension plan, which the Opposition and business groups slammed as a job-killing payroll tax.
The bill clears the way for the introduction on Jan. 1, 2017 of the Ontario Retirement Pension Plan, which will be mandatory for workers who do not already have a company pension plan, said Finance Minister Charles Sousa.
“The reality is that a significant number of today’s workers are simply not saving enough to maintain their standard of living when they retire,” said Sousa.
The bill would require employers and employees to each contribute 1.9 per cent of a worker’s salary to the ORPP, up to $1,643 a year, which the Ontario Chamber of Commerce warned will result in fewer jobs.
“Employers worry that by making it more expensive to hire, the new pension plan will negatively impact job creation and hurt Ontario’s competitiveness,” said Chamber president and CEO Allan O’Dette. “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.”
The Canadian Federation of Independent Business warned that forcing every Ontarian without a workplace pension and their employers to pay new premiums will result in higher unemployment and lower wages.
Nearly 70 per cent of small business owners say they would freeze or cut salaries and 53 per cent would reduce the number of jobs to cope with the added costs, said CFIB spokesman Plamen Petkov.
“Business owners tell us the main reasons for currently not offering a pension plan are high costs and administrative complexities,” he said.
The Progressive Conservatives also warned that Ontario’s weak economic recovery could be stalled by mandatory pension contributions from employers.
“When you’re looking at a very fragile manufacturing economy in this province today, it hardly seems the right time to include a payroll tax,” said PC critic Julia Munro.
People who call the Ontario Retirement Pension Plan a payroll tax are expressing “an extreme view,” said Sousa.
“They made the same argument today as they made about CPP in the 1960s no less,” he said. “They were wrong then and they’re wrong now.”
Ontario would still prefer to see improvements to the Canada Pension Plan instead of having to create its own retirement plan, but can’t get the federal Conservative government to agree, admitted Sousa.
Federal Minister of State for Finance Kevin Sorenson said Canadians don’t want to pay higher payroll taxes, and warned that Ontario’s mandatory pension plan could force a two-worker family to pay up to $3,200 in premiums each year.
“Given the inability of the Wynne government to manage its finances and control the size of its deficit, one wonders whether the money collected through higher taxes will ever be there for pensioners in Ontario,” Sorenson said in a release.
Sousa dismissed suggestions that the Ontario bill was designed to stall real progress on the issue until after next year’s federal election in hopes a new government in Ottawa would be open to improving the CPP.
“Unless we take the proper steps now, we won’t be ready,” he said. “If they see fit to provide for CPP (enhancement) we’ll be able to move forward to that, but failing that determination, we must do what we are doing.”
The Liberals introduced a second bill Monday to create Pooled Registered Pension Plans, which Sousa described as a voluntary savings tool for employers, employees and the self-employed.
“This is an alternative, especially for mobile workers who may be in and out of jobs, and they want to take advantage of a pooled system that is at much lower cost and of greater benefit to them,” he said.
However, the New Democrats criticized the pooled pension plans because they will be administered by the private sector, and said they doubted the Liberals really intend to proceed with a mandatory provincial pension plan.
“There is either a public plan or a private plan, and the one the Liberals are running with is the Harper-style private plan, and the public plan that they talked about during the election campaign may or may not roll out over time,” said NDP Leader Andrea Horwath. “It’s a wait and see.”
The Tories also questioned the Liberals’ commitment to implementing an Ontario Retirement Pension Plan, saying there was very little in the legislation except a call for more government consultations on the issue.
“I liken it to the hanging of the Christmas stocking, but it’s empty,” said Munro.
Two-thirds of Ontario workers do not have a company pension plan.