Ottawa is putting Queen's Park on notice that it will not help set up a provincial pension plan.
Finance Minister Joe Oliver wrote to his provincial counterpart on Thursday afternoon saying that Ottawa would not help collect contributions or make the legislative changes the province would likely require.
"The Ontario Government's proposed [plan] would take money from workers and their families, kill jobs, and damage the economy," Mr. Oliver wrote in the letter, which was obtained by The Globe and Mail.
"Furthermore, it would impose a one-size-fits-all scheme on Ontarians and their families, without consideration for their age, family situation or financial circumstance."
The province is running government ads promoting its Ontario Retirement Pension Plan, which it has promised to launch in 2017.
Pension reform is shaping up as a key political and policy divide among federal parties before the federal election expected in the fall. The Conservative Party says new pension initiatives should be voluntary so they do not impose new costs on businesses. The NDP and the Liberals say the Canada Pension Plan works well, but does not provide enough benefits in retirement.
They propose a mandatory increase in premiums to pay for more generous benefits in retirement.
Ontario's proposal fits into this debate because the province was a leading advocate for expanding the CPP. Such a move requires the support of Ottawa and at least two thirds of the provinces representing two thirds of the population.
When Ottawa decided to reject a mandatory expansion after years of study, Ontario said it would launch its own plan.
Mr. Oliver's announcement follows the official launch of consultations by Finance Canada on the idea of a voluntary expansion of the CPP.
The government is asking Canadians to e-mail their thoughts on having the option to make additional pension contributions that would be invested and managed independently, potentially by the Canada Pension Plan Investment Board, which manages the funds contributed to the CPP.
According to Mr. Oliver's letter, Ontario officials have approached federal civil servants in recent months to discuss the possibility of having the federal government involved in the administration of the new provincial plan.
"We will not assist the Ontario government in the implementation of the ORPP," Mr. Oliver wrote to Ontario Finance Minister Charles Sousa.
"This includes any legislative changes to allow the ORPP to be treated like the Canada Pension Plan for tax purposes, or to integrate the ORPP within the [registered retirement savings plan] contribution limits. Administration of the ORPP will be the sole responsibility of the Ontario Government, including the collection of contributions and any required information. We will be pleased to discuss with the Ontario Government the potential for voluntary contributions to the CPP, which we believe would better serve the interests of Ontarians and all Canadians."
The province has said a new independent body called the Ontario Retirement Pension Plan Administration Corporation will set up the plan and manage contributions independently of government revenue.
University of Toronto pension expert Keith Ambachtsheer said Ottawa's move would make Ontario's task more difficult given the integration of provincial and federal tax issues.
"I think it is a big deal, but it's part of an ongoing story," he said, in reference to the competing visions of how to encourage Canadians to save more for retirement.
Mr. Sousa described Ottawa's position as "incredibly disappointing" and said it will mean higher costs for business.
"The ORPP is a central part of our government's platform that is supported by a majority mandate from Ontarians. Our proposal to use existing infrastructure would have ensured cost-effective delivery of the ORPP, while minimizing compliance costs for employers," said Mr. Sousa in a statement to The Globe.
Mr. Sousa said Ontario had proposed to enter into a service agreement with the Canada Revenue Agency or Service Canada with the province paying for any additional administrative costs.
"The federal government's refusal to work with Ontario puts politics ahead of practicality. It is especially disappointing given that co-operation would have resulted in lower costs to business," he said. "We are committed to moving forward with the ORPP. After a lifetime of working hard and contributing to the economy, Ontarians deserve a secure retirement."