Hugh O'Reilly is chief executive officer of OPTrust and one of Canada's foremost pension experts. With assets of $17.5 billion and more than 86,000 members and retirees, OPTrust is one of Ontario and Canada's largest public sector pension plans.
The Ontario Retirement Pension Plan took another important step forward Tuesday, but it had less to do with the details announced by Premier Kathleen Wynne and more to do with the big picture.
The ORPP is good public policy. By expanding coverage for those who don't currently have an adequate workplace pension, such as a defined benefit plan, the ORPP will ensure that significantly more Ontarians have access to a steady stream of income in retirement.
The government also outlined a reasonable phasing-in approach that gives employers the opportunity – and the time – to determine whether offering a comparable workplace pension makes the most sense for their business, or if enrolling in the ORPP would be preferable.
With many of the key design details for the ORPP now in place, the decision that remains to be made is how the plan should be implemented. Do we want to add complexity and costs for business and individual taxpayers, or take a streamlined, cost-effective approach?
I'd hope the choice we should make would be obvious. Creating a future where Ontarians have a more stable and secure stream of income in retirement is the right thing to do. The potential advantages of having fewer retirees drawing on social assistance and more retirees continuing to meaningfully participate in the economy are considerable.
There are two ways to ensure that the ORPP is implemented in an efficient and cost-effective manner. The first is the subject of the current disharmony between our federal and provincial governments: administration.
An effective system is already in place for the Canada Pension Plan administration (CPP). This system, which Ontarians have already paid for, has been tested time and again – and we know that it works. By leveraging existing Canada Revenue Agency (CRA) infrastructure for a fee, rather than developing a new system, Ontario will significantly streamline its ORPP administration costs.
The CRA has a mandate to provide administrative services for all Canadians on behalf of provincial governments. There is simply no reason to reinvent the wheel for the ORPP.
There is a strong precedent for leveraging CRA infrastructure to co-ordinate and administer provincial programs. These include things such as the harmonized sales tax, child benefits and other tax credits to assist seniors.
The province also has a role to play in making the implementation of the ORPP more efficient and cost effective.
There are ways for the ORPP to be more virtual, particularly if the province draws upon the investment expertise of some of Ontario's jointly sponsored pension plans. In other words, a bricks-and-mortar investment organization specifically for the ORPP Administration Corp. – and its associated costs – could be avoided.
Many may not realize how highly the Canadian pension system and our Ontario public sector pensions are regarded around the world. We are respected and emulated because our experience and capabilities are unmatched. Drawing on this expertise means lower costs and better outcomes from the outset.
The federal government has proposed a voluntary option that would allow Canadians to contribute more to CPP. By doing so, it recognizes that Canadians need another option to address their retirement income concerns. While this proposal is well intentioned, the pension landscape is different in Ontario than it is in the rest of Canada. Ontario voters have endorsed the ORPP, and in doing so, have made it their preferred approach.
One of the great strengths of Canadians is our ability to co-exist harmoniously despite the wide variety of ideas and ideologies we hold dear. We may argue our positions fiercely, and at times we may agree to disagree, but Canadians have a proud tradition of forging solutions and finding ways to work together. This collaborative approach was never more evident than in 1965, when parties of all political stripes put aside their differences to establish the CPP.
I believe the ORPP is the right thing for Ontario's future. So, too, is a return to the days of governments working together. I call on our provincial and federal governments to agree to disagree on philosophical matters if they must, but get down to the business of finding a co-operative solution for the administration of the ORPP that will serve Ontario's employers, employees and ultimately the entire province.