Why a federal Liberal or NDP win could put Ontario pension plan at risk

Click here to read ‘Why a federal Liberal or NDP win could put Ontario pension plan at risk’ by Bill Curry – The Globe and Mail, September 23, 2015

Ontario is playing down the significance of timing its new pension plan to coincide with scheduled reductions in Employment Insurance premiums amid a heated federal election debate over the benefits and risks of payroll taxes.

The province has argued that 2017 is a good time to start a new pension plan because the federal government announced plans to dramatically reduce EI premiums that year, meaning Ontario workers and employers would see the new pension premiums offset in part by lower EI deductions.

But the national campaign is complicating those plans as the federal Liberals say they will not cut premiums by as much as the Conservatives, while the NDP announced this week that they won’t cut premiums at all so that they can promise more generous EI benefits.

Observers say it is possible the Ontario pension plan may never see the light of day should either the Liberals or NDP form government given that both parties are promising to meet with the provinces to negotiate a national expansion of the existing Canada Pension Plan.

Conservative Leader Stephen Harper has campaigned hard against the positions of Ontario and his federal rivals, warning that higher payroll taxes will cost jobs.

Ontario Premier Kathleen Wynne has long said the proposed Ontario Retirement Pension Plan was a second-best option to a national expansion of CPP, which did not proceed primarily because of opposition from the federal Conservative government. But provincial planning is now well under way.

Mitzie Hunter, Ontario’s minister responsible for the new pension plan, is minimizing the significance of the federal Liberal and NDP positions on EI premiums.

“We’re moving forward with the ORPP because the current federal government has refused to discuss the possibility of working towards CPP enhancement, not because EI premiums are going down,” she said in a statement, noting that the province will be phasing in the plan over several years and small business won’t be affected until 2019.

“Reduction in EI premiums would help businesses adjust to the ORPP. That said, it’s not the only measure we’re taking,” she said.

Ms. Hunter was vague as to what a Liberal or NDP federal government would mean for the ORPP.

“We’ve been clear that we need a change in government in Ottawa,” she said. “One reason for that is so that we can work together on retirement income security for Canadians.”

The Harper government announced on the eve of the federal election campaign that it would not allow Revenue Canada to co-operate with the province in collecting premiums for a new pension plan, meaning the ORPP would run into much higher costs if the Conservatives are re-elected.

Both the Liberals and NDP are promising to work with the provinces to expand CPP and both parties told The Globe and Mail they hope Ontario will change course and work with other provinces and a new government on a national CPP expansion.

The Conservatives have announced plans to lower premiums in 2017 from the current $1.88 per $100 of insurable earnings to $1.49. Liberal Leader Justin Trudeau has said he would only lower premiums to $1.65 in order to fund more generous benefits. NDP Leader Thomas Mulcair announced his plan this week, saying he would freeze premiums at the current rate and put all of the revenue back into EI benefits and job training.

Dan Kelly, President of the Canadian Federation of Independent Business that opposes the ORPP, said he is concerned that businesses will lose the cushion of lower EI premiums.

“Essentially this would be a double payroll tax hike if that were to happen,” he said. “If the EI reduction isn’t taking place or is much smaller than anticipated, that’s just going to make that sting a lot greater.”

Mr. Kelly is of the view that Ontario would put its plans on hold should either the Liberals or the NDP form government. But not all business advocates agree.

Allan O’Dette, President and CEO of the Ontario Chamber of Commerce, said he sees the province moving full speed ahead. Mr. O’Dette wrote an open letter to the Premier Wednesday asking for more detail on the program, including an estimate of how it would impact growth in the province.

“I don’t think the federal election is having any impact on this file,” he said. “I think they’re moving ahead regardless of what happens on the federal scene.”

Susan Eng of the seniors advocacy group CARP said even if the Liberals or NDP form government, Ontario will likely wait to see if a deal on national CPP expansion can be reached with the provinces.

“They won’t automatically drop the ORPP just because one or the other wins the election,” she predicted.