Employers would be required to contribute to the ORP as long as an employee remains in the Plan. In other words, the ORP is voluntary for the employee but compulsory for the employer should an employee choose to participate in the plan. After the initial phase-in period (see below), employees and employers are required to contribute to the new plan equally. There would be a minimum default contribution rate in the range of 2-3% for both employers and employees. The current CPP rate is 4.95%
The default contribution rate would be phased in over 5 years starting in Year 1 of the plan. Depending upon economic circumstances, phasing in contributions from small business employers and their employees might be done over a somewhat longer period.
The 2-3% contribution rate would be levied against a band of income of “pensionable earnings” lying between $15,600 – $70,000. The present CPP pensionable earnings band of income is $3,500 – $47,200 (2010 dollars). The ORP would utilize the existing CPP payroll deduction system.
Finally, the ORP would operate within the current three Canadian pension pillars and the current tax/regulatory regime regarding pensions. So, for example, ORP contributions would be subject to the current maximum tax deductibility rule of 18 percent of earnings.
Keywords: pension reform, seniors