ORPP Update: April 2016
It has been a while since Ontario gave us some ORPP love, so my heart warmed when the April 14, 2016 news release about ORPP legislation hit my desk.
The legislation covers many of the things we know: comparable plans, exempt workers, benefit levels, survivor benefits and more. I am not going back over what we already knew.
Exciting new information
- Employees on unpaid leave under the Employment Standards Act can still contribute resulting in a requirement for employers to contribute also.
- Employers remit contributions to the Administration Corporation.
- Normal retirement is age 65 but you can retire 5 years early or 5 years late – actuarial equivalent both directions.
- Pre-retirement death benefit is greater of the commuted value and employee contributions with interest.
- A member can get a lump-sum equal to the greater of the commuted value and employee contributions if they are expected to live less than two years.
- A member will get a lump-sum instead of a pension if the amount of pension is below the ‘prescribed threshold’.
- Messy rules on marriage breakdown
- For valuations, an independent actuary (Fellow of the Canadian Institute of Actuaries) who is not an employee of the Administration Corporation.
As fast as they can answer questions that we have been asking – they open the door to more questions:
- “remit contributions to the Administration Corporation” – whatever that means? I am sure they will ‘prescribe’ more specifics one day – otherwise I am going to deliver my contribution in loonies and toonies in an environmentally friendly grocery bag.
- Ontario requires the private sector to let people retire as early as 55 – why only allow early retirement at age 60?
- Have you ever seen an actuarial equivalent calculation for an early retirement pension that MIGHT be indexed if we have enough money?
- Pre-retirement death – ok, let’s be honest, young people get their money back when they die and their employer contributions go to pay expenses or someone else’s pension. No need to fuss with the messy 50% rule forced onto employers in 1988.
- What is the commuted value of a pension that won’t last more than 24 months? – what kind of doctor’s note is required? How about just say people can elect a lump sum equal to a year’s pension payments and move on – we don’t need doctors and actuaries making this complicated and expensive.
- Lump sums for pensions below a prescribed threshold – the way I see it when they set a reasonable threshold they are going to be paying lump sums to everyone until about 2030 – sounds more like a DC plan doesn’t it?
- Independent Actuary – they are planning an Office of the Chief Actuary. This is actually a win for our profession if the actuary gets to look over everything the government is doing and speak out like the Auditor General does. But don’t bet on it working that way. Of course, we could just pay the CPP actuaries to do it for us at likely a fraction of the cost.
That is all I have for this round – stay tuned.