Employees, employers dinged by proposed Ontario pension

pension-retirement

The Ontario government has been scurrying to add new taxes.  The latest is a payroll tax to fund the proposed Ontario Registered Pension Plan (ORPP).  Liberal messaging croons that “when we share a little, we gain a lot”, thus creating yet another phrase for tax.

The reality is the ORPP will be a mandatory pension plan that will see employees and employers pay matching payroll taxes of 1.9 per cent of the total salary of an employee to a general pool.

Employees will see less money in their pockets as they will be forced to pay the payroll tax of 1.9 per cent of their salary into the pension plan, meaning their take-home pay will decrease.  This will impact their spending priorities such as paying off a student loan and paying down a mortgage, as well as discretionary spending.

Public hearings were held in late March about Bill 56, the legislation that will bring in the plan. Employers told committee members they saw the mandatory 1.9 per cent employer contribution as a payroll tax they could not afford.  Many presenters said high electricity prices, increased WSIB rates, increased minimum wage and red tape all contributed to an increased cost of doing business.  The ORPP will make Ontario less competitive and force some employers to reduce hours or cut staff.

Even Ministry of Finance documents estimate Ontario will lose 18,000 jobs with every $2 billion collected by the ORPP payroll tax.  It seems hard to believe the government would introduce a payroll tax, disguised as a pension scheme, that would threaten jobs in Ontario, but that is the dangerous reality.

A new arm’s-length agency will administer the ORPP. We’ve seen other agencies of this government – ORNGE and College of Trades come to mind – severely erode the trust of the public.

As Official Opposition, we are asking the 2015 budget demonstrate a commitment to abandon any thoughts of an Ontario Retirement Pension Plan altogether.  There hasn’t been a public cost-benefit analysis and there is no business plan to ensure it makes sense.  The present government has floated an idea without a plan – they haven’t thought it through.

In Ontario, many employees participate in defined contribution pension plans, group RRSPs and tax-free savings accounts, as well as other retirement savings vehicles.  Some defined contribution plans have higher rates than the ORPP will, which could cause employers to reduce contributions or abandon their existing plans altogether.

We, as Opposition, aren’t alone in our stance.  The Ontario Chamber of Commerce publicly lambasted the government for its lack of evidence-based decision making, saying, “At a minimum, the Government of Ontario must conduct and publicly release an analysis of the impact of the new pension plan on foreign direct investment, job creation and Ontario’s competiveness.”

I question how the government can still be considering its plan.  Logic says people are better off working and saving something towards their retirement than not earning anything.  It’s impossible to save for retirement if you don’t have a job.

The ORPP is expected to collect $3.5 billion in annual contributions.  The fact that many public-sector pensions currently have billions of dollars in unfunded liabilities does not instill confidence in those who would be paying into the fund.

ORPP could well be another boondoggle waiting to be implemented.

Toby Barrett is a Progressive Conservative member of the Legislative Assembly of Ontario representing the district of Haldimand—Norfolk.  Follow Toby Barrett on twitter: @TobyBarrettMPP

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