Health insurance industry experts say the Ontario government’s consultation paper on ORPPs suggests existing workplace plans, such as defined contribution plans, won’t be considered “comparable” to the ORPP.
That’s disappointing, says Frank Swedlove, president and CEO of the Canadian Life and Health Insurance Association, who adds, “This stance [c]ould negatively impact [defined contribution] plans and savings rates not only in Ontario, but across the country.
“Employers who […] established these types of plans for their employees [may] now also be obliged to participate and contribute to ORPPs. [And], in too many cases, we fear that they will either cut back the benefits of their DC plans or abandon them entirely.”
Swedlove notes that, to date, DC plans have proven to be an effective way for Ontario workers to save for retirement. More than 600,000 Ontarians have DC plans at their workplaces, and many more will be offered this opportunity through the proposed PRPPs. Further, the average employer contribution for DC plans is 6.5%, and the average employee contribution is 4.5%.
Swedlove says, “The Ontario government says their objective is to [help] Ontarians better [plan for] retirement. [But] they could be undermining the future well-being of hundreds of thousands of workers who [already] have DC plans, and leaving them worse off in retirement.”