Ontario Retirement Pension Plan

Transcription

1 in partnership with: Ontario Retirement Pension Plan The impact on Ontario s manufacturers and their 750,000 employees Canadian Manufacturers & Exporters September 2015

2 Table of Contents Executive Summary and Key Findings 1 Introduction and Background 2 Types of Pensions and ORPP Eligibility 3 ORPP Survey Results and Analysis 5 Respondent Profile and Overview 5 Pension Plan Coverage: Do you have a pension plan? 6 Pension Eligibility 6 Coverage by Company Size 6 How will Companies Respond to ORPP? 7 Responses by Company Size 8 Impact of the ORPP On Manufacturers in Ontario 9 On Workers in Ontario 10 Conclusion 11

3 Executive Summary and Key Findings The impact on Ontario s manufacturers and their 750,000 employees Manufacturing remains Ontario s largest business sector and most important driver of economic growth. Ontario manufacturers sold $287 billion in goods in 2014 and accounted for 12 per cent of provincial GDP and 81 per cent of Ontario exports. Just under 750,000 Ontarians are directly employed in manufacturing. Over the past decade, Ontario manufacturers have struggled to remain globally competitive, invest in new products and processes and grow their sales and workforce. This is due to a variety of factors including the impact of the Canadian dollar, global competition, mounting regulatory burdens, and higher input and energy costs, among others. Today, manufacturing production in Ontario is $1.7 billion lower than it was 10 years ago, and there are 315,000 fewer people employed in the sector. A struggling manfacturing sector has had a direct and negative impact on the economic health of the province of Ontario and on Ontario workers and families. There is, however, reason to be optimistic about the future of manufacturing in Ontario. Notwithstanding the recent decline in major customer bases in Canada s energy and mining sectors, conditions in other markets have improved significantly, especially in our most important export market, the United States. Along with a lower Canadian dollar that makes Ontario exports more competitive and the province more attractive for business investment, manufacturing should be set for a major rebound in Ontario. But, that depends on ensuring a favourable business environment that can attract and retain investment. Recently, the Government of Ontario released additional details of their plan to implement the Ontario Retirement Pension Plan (ORPP). The Plan would require a contribution from employers and employees alike of 1.9 per cent of current wages. To date no analysis on the cost of the ORPP has been conducted and there has been no attempt to detail the direct impact on Ontario s manufacturers and their competitiveness. To determine the potential impact of the proposed ORPP on Ontario industry, Canadian Manufacturers & Exporters, along with our partners in the Canadian Manufacturing Coalition, conducted a survey of Ontario manufacturers between August 17 and September 12, Three key conclusions can be drawn from an analysis of the survey results: 1. A very large number of companies do not understand what the ORPP means for them or how it will work. 2. Manufacturers pension plans are generous, but not comparable: The majority of manufacturers responding to the survey offer a variety of pension plans to their employees. Despite generous pension plans, only nine per cent believe they would exempt them from the ORPP under the current comparable pension plan definitions. Less than three per cent of small manufacturers have a pension that will qualify for an ORPP exemption. 3. ORPP is a $2,149 per capita payroll cost that employees will pay for: Based on expected average wages in manufacturing, once implemented, the ORPP will cost manufacturers with non-comparable plans more than $1,074 per employee, per year. Each employee would pay an additional $1,074 per year for an average cost of $2,149 per employee. About Canadian Manufacturers & Exporters (CME) Since 1871, we have made a difference for Canada s manufacturing and exporting communities. Fighting for their future. Saving them money. Helping them grow. The association directly represents more than 10,000 leading companies nationwide. More than 85 per cent of CME s members are small and medium-sized enterprises. As Canada s leading business network, CME, through various initiatives including the establishment of the Canadian Manufacturing Coalition, touches more than 100,000 companies from coast to coast, engaged in manufacturing, global business and service-related industries. CME s membership network accounts for anestimated 82 per cent of total manufacturing production and 90 per cent of Canada s exports. 1

4 The ORPP would increase payroll costs on average to $9,231 per employee, or more than 15 per cent of total wages in manufacturing. 68 per cent of companies will recover costs imposed by the ORPP by eliminating wage increases and bonuses. That figure rises to 76 per cent for small businesses. 35 per cent will lay off staff or cut wages to compensate for ORPP costs. That figure rises to 47 per cent for small businesses. There is serious and widespread concern that this mandatory additional payroll cost will further undermine the confidence of an already fragile manufacturing sector. Simply put, as currently structured, the ORPP adds one more reason not to invest or employ more workers in Ontario. While CME and our members are very concerned about the impact of the ORPP as currently proposed, there is still time to adjust and improve on the proposed ORPP to meet the desire of the government to provide income security in retirement without imposing an additional cost burden on manufacturing or other business sectors. For that reason, CME recommends that the Government of Ontario: In partnership with employers, conduct a full economic analysis of the effect that ORPP implementation will have on business in the province, and in particular on the implications for the global competitiveness of the province s manufacturing sector, to determine impacts on investment and employment. Reform the existing pension system to encourage more private sector solutions by: Levelling the playing field in pension plans between the private sector and the public sector (which has special allowances), including for example the introduction of multi-employer pension plans. Allowing for going concern valuation of defined benefit pension plan liabilities, rather than the current solvency basis. If the ORPP plan moves ahead, limit potential negative impacts by: Conducting additional detailed consultations with employers to ensure they understand the cost and administration implications on their existing pension plans and their employees; Broadening the definition of comparable private sector pension plans to include a wider range of plans and different payment thresholds; Conducting a more detailed review of the cost and administration of the ORPP to ensure that it will be properly funded at the proposed cost levels of 3.8 per cent; Building in additional protections and limits on any future cost increases to cover plan shortfalls; and, Ensuring that employees understand that the ORPP will result in decreased private sector benefits such as wages, bonuses, and contributions to their existing pensions and savings. Introduction and Background The Government of Ontario is planning to introduce the Ontario Retirement Pension Plan (ORPP) in 2017 to supplement existing federal retirement benefits. Companies with existing comparable pensions in place would not be required to enroll in the ORPP. However, enrolment would be mandatory for those without a pension, or with one deemed to be non-comparable based on the definition set by regulation. Companies that must enroll in the ORPP, along with their employees, would be required to make matching contributions of 1.9 per cent of employee earnings (up to $90,000), for a total contribution of 3.8 per cent. Canadian Manufacturers & Exporters (CME) supports retirement income security for Ontarians. However, we are concerned about the impact that the ORPP and its mandatory employer contributions will have on manufacturing competitiveness, jobs and the economy. Our initial estimates suggest that the impact is significant. Ontario businesses without a qualifying pension will be required to pay nearly $1,100 in additional costs per employee. The Ontario government argues that the ORPP will be introduced at the same time as Employment Insurance (EI) premiums are reduced, thus minimizing the impact on business. However, even after accounting for planned EI reductions (if implemented), the ORPP will still add an extra $793 in payroll cost per employee every year. Our concerns are magnified by the fact that there is very little information available about how many companies would be affected by the ORPP. There is no reliable data available on the number of Ontario manufacturers with a pension, how many existing pensions would be exempt from participating in the ORPP, or what impact the pension plan would have on business activity in the province. 2

5 Types of Pensions and ORPP Eligibility Companies offer a wide range of plans to help their employees save for retirement. While some of these plans are generous, they do not constitute a pension in the strictest sense of the term. There are generally considered to be two basic types of pension plans: defined benefit (DB) plans and defined contribution (DC) plans. Some plans also offer a combination of the two. To better understand these impacts, CME conducted a survey of Ontario businesses about their existing pension plan coverage, and how they plan to absorb the additional costs associated with the proposed plan. This survey, combined with our own economic analysis, paints a worrying picture about the impact the ORPP will have on the provincial economy. Our survey results suggest that the program will disproportionately affect small businesses in the province, will result in job layoffs and/or slower income growth, and could result in businesses leaving Ontario for a more competitive jurisdiction. I am not sure how to calculate [the cost of the program] because the definition is vague. But for sure this is going to be very, very expensive. - Medium-size business respondent 1. Defined Benefit Pension Plans A defined benefit plan is one in which the employee receives a defined monthly income stream upon retirement. The amount of that benefit is fixed regardless of the returns made on investments in the pension fund. It is determined based on a formula that typically reflects factors such as the employee s years of service, age and average earnings. Assets in the pension fund are managed by the company on behalf of the employee. Defined benefit plans may be funded entirely through employer contributions or through a combination of employer/employee contributions. From the employee perspective, the chief advantage of a DB plan is that it provides a secure, guaranteed income stream upon retirement. For employers, aside from the significant administrative costs, the main problem with a DB plan is that they bear all the risk associated with funding the plan, as well as maintaining fund solvency. Many companies with DB plans solvency contributions will exceed capital expenditures. Companies with a DB plan in place would not be required to participate in the ORPP if their existing plan is sufficiently generous. Specifically, earnings-based DB plans will need to offer an annual benefit accrual rate (the rate at which benefits are built up) of at least 0.5 per cent. 2. Defined Contribution Plans In a defined contribution plan, employers make predetermined contributions into a pension fund but do not guarantee a specific income stream upon retirement. The final amount of benefit to be paid out depends on the investment performance of the fund. Like a DB plan, contributions can be made by employers alone or, more commonly, by both employers and employees. 3

6 As with a DB plan, companies with a sufficiently generous DC plan would not have to participate in the ORPP. To be exempt, companies DC plans would need to have a minimum annual contribution of eight per cent of base salary earnings. At least half that total would have to come from employers. For employees, DC pension plans offer slightly more risk, but also more potential reward. While the benefits of a DB plan are fixed, the income from a DC plan depends on how well the pension fund performs. If it does well, it could generate higher retirement benefits than a comparable DB plan. If it does poorly, however, incomes could be lower. In addition, DC plans are more easily transferred from one employer to the next, which is an important consideration given that workers change jobs at a much higher frequency than in decades past. 3. Hybrid Pension Plans These plans include both a DB and a DC component. They are considered eligible under the ORPP provided that, when added up, the two components of the plan together meet the conditions described above. If, for example, the DB segment of the hybrid plan is less generous than required under the ORPP (0.5 per cent benefit accrual rate), the DC component must be more generous by an equivalent amount. 4. Group Registered Retirement Savings Plans A group RRSP is identical to a personal RRSP, only it is set up by the employer and operates through automatic payroll deductions. Employees choose how much to contribute to their plan and, in many cases, employers match those contributions up to a certain limit. All contributions to the plan are tax-deductible and all investment earnings are tax sheltered. The main benefit of group RRSPs is that employees have more control over the fund. They usually have greater flexibility about how much they choose to contribute. They also have more control over how the money is to be invested; typically, workers can pick from within a (limited) range of investment options for their portfolio, depending on the financial institution involved and their tolerance for risk. Individuals also own the proceeds of the fund. That also makes group RRSPs easily portable when an employee changes jobs. For employers, group RRSPs are attractive because they do not have to worry about the risks and long-term liabilities associated with a DB pension. Matching RRSP Why Are Defined Benefit Pension Plans in Decline? Over the last 10 years, the number of Canadians with a defined benefit pension has been in steady decline as employers have been transitioning away from these plans towards other retirement savings options. This shift is taking place not because employers are unwilling to provide retirement benefits. Several other factors make DC plans and other retirement savings options more practical and more attractive. The first of these factors is risk. Under a defined-benefit plan, the employer bears all the risk associated with funding the plan. These risks have become prohibitive in the face of recent market volatility. More importantly, in Ontario there are restrictive regulations facing single-employer defined-benefit plan sponsors. The liabilities under DB plans are currently assessed on a solvency basis as if the company were going out of business tomorrow. This generates an onerous financial burden that does not reflect the realities of business or market fluctuations from year to year. Other jurisdictions have moved to a valuation which assesses liabilities on a longer term basis and provides more time for plan sponsors to achieve funding sufficiency. The cost of administration and associated regulatory costs (eg. Pension Benefit Guarantee Fund costs) are also significant. By comparison, DC pension plans and other retirement savings vehicles offer a lower risk profile, much greater control for plansponsors, and greater flexibility for plan participants. contributions are predictable and fund solvency is not an issue. Strictly speaking, group RRSPs are not pension plans because there is no common investment fund and risks are not pooled. As such, group RRSPs are not eligible under the ORPP. Companies with such a plan will be required to join the ORPP. 5. Deferred Profit-Sharing Plans A Deferred Profit-Sharing Plans (DPSP) is an employer-sponsored profit-sharing plan. Companies share business profits with their employees by investing in the plan on a periodic basis. Employees do not contribute to such a plan. There is no minimum contribution level; businesses may not contribute to a DPSP when profits are low. There is, however, a maximum contribution limit as set out by the Canada Revenue Agency (CRA). 4

7 DPSP contributions are tax-deductible for the business. Employees pay tax on their benefits upon withdrawal. DPSPs are often offered in conjunction with a group RRSP. In such cases, employees contribute to the group RRSP and the company contributes to the DPSP. For employees, the advantages of a DPSP are essentially the same as for group RRSPs. Employees benefit especially when the company does well. For businesses, DPSPs allow the flexibility to contribute more when profits are high and act as a buffer in leaner times because there are no obligatory contributions required. Like group RRSPs, DPSPs are not eligible under the ORPP. Companies with a DPSP will be required to join the provincial pension plan. Respondent Profile and Overview The survey produced an excellent representative sample of companies by size in Ontario. More than 42 per cent of respondents were small businesses having fewer than 50 employees. Those meeting the Ontario government s definition of a medium-sized company (with employees) accounted for about 40 per cent of respondents, while large companies made up the remaining 18 per cent. ORPP Survey Results and Analysis Available data on pension coverage in Ontario is insufficient to allow for a meaningful analysis of the potential impact of the ORPP on businesses in the province. For this reason, CME conducted a survey of Ontario manufacturers, asking them about their existing pension plan coverage, and how they expect to adjust to the ORPP once it is rolled out. The survey took place between August 17 and September 12, In total, 272 companies participated We contribute 7.5 per cent for each employee; our employees are not required to make any contribution to our DC plan, which allows them the flexibility to contribute to their own retirement vehicles. Our DC plan does not meet the comparability test under the ORPP, notwithstanding that it is almost twice the contribution rate of 3.8 required by the ORPP. - CME Member 5

8 Pension Plan Coverage: Do you have a pension plan? The survey began with a simple question: do you have a pension plan? In total, 60.7 per cent of respondents stated that they offered some form of retirement savings plan. Only about 3.7 per cent of those surveyed had a DB plan, 21.5 per cent had a DC plan, and just under three per cent had a combination of the two. The most common retirement savings benefit offered in Ontario is a group RRSP. A full 26.6 per cent of respondents offered this benefit to their employees. The remaining 6.1 per cent of those surveyed offered a DPSP or some other combination of plans. Many of those companies who do not currently offer pension plan claimed that their corporate policy was to pay above market rate for salaries which allowed employees to invest into private pension plans independently for greatly flexibility, control and portability. Pension Eligibility According to the survey results, only 9.3 per cent of respondents believe their pension or retirement savings benefits would qualify for exemption under the ORPP. About 8.4 per cent were unsure if their program would qualify or not, and a full 43 per cent offered a retirement benefit that was ineligible. When that 43 per cent is added to the number of survey respondents without any retirement benefit at all, the potential impact of the ORPP becomes much clearer. We estimate that between 82 and 91 per cent of Ontario manufacturers will be required to participate in the ORPP based on the existing definition of a comparable pension plan. Drilling deeper into the numbers, it appears as if many companies with a DB, DC or combination plan believe they will also need to participate in the ORPP. As noted above, the Ontario government only considers those types of pensions to be an appropriate substitute for its own program. However, only 33.9 per cent of companies with a DB, DC or combination plan believe their pension program would be exempt from the government plan. Just under a quarter are unsure and over 42 per cent believe their registered pension plan would not qualify for exemption. Coverage by Company Size Far more concerning than the fact that between 82 and 91 per cent of companies will be affected by the ORPP, is the impact the proposed provincial plan will have on small businesses. Breaking down the responses by company size reveals a wide gap in retirement benefit coverage between small companies and large corporations. Only 31.8 per cent of small businesses (those with fewer than 50 employees) reported that they offer any kind of retirement benefit at all. As company size grew, so too did coverage. More than 91 per cent of businesses with at least 250 employees offer their workers a pension or other retirement savings plan. Making matters worse from the perspective of small companies is the question of pension eligibility. While close to 32 per cent of small businesses offer some kind of retirement benefit, most of those benefits are in the form of group RRSPs and therefore would not qualify for exemption under the ORPP. In fact, only 2.3 per cent of small businesses surveyed have a pension plan they believed would exempt them from paying into the ORPP. A similar share were unsure if their pension would qualify for an exemption or not. As a result, according to the survey results, between 95 per cent and 98 per cent of small businesses those most sensitive to higher operating costs would be required to join the Ontario pension program. 6

9 Even for larger companies, the ORPP would have a significant impact. Only 21 per cent of Ontario s largest manufacturers (250+ employees) have a sufficiently generous pension to avoid paying into the provincial program. More than 60 per cent either have no pension at all or believe their existing plan would not qualify for an exemption under the ORPP. Several of those surveyed pointed out that payroll savings could come in more indirect ways, including reductions to employer benefits such as drug plans or by reducing their group RRSPs by an equivalent amount. In a handful of cases, companies stated that the ORPP would be enough to cause them to shut down their operations altogether and relocate to other provinces or the United States. Finally, 30 per cent of respondents plan to adapt to the ORPP by abandoning their own pension or retirement benefit plans altogether. Other respondents commented that they intend to reduce their group RRSP contributions to offset ORPP costs. This is a particularly important finding. According to the Government of Ontario s website on the ORPP, the plan is being designed to complement existing retirement savings arrangements, not to replace them. This survey clearly shows that, in spite of the Ontario government s intentions, a significant percentage of businesses would do exactly that: replace or downsize their existing plans to meet ORPP cost realities. How will Companies Respond to ORPP? The final question in CME s survey asked companies how they were planning to adapt if and when the ORPP were to be implemented. More than two-thirds of respondents stated that they would recover costs by slowing future wage growth and/or reducing future bonus payments to recoup the costs. More than 35 per cent stated that the ORPP would require them to lay off staff or reduce payroll immediately. 7

10 We will have to look at cancelling the group RRSP and contribute to the ORPP on a $9.5 million payroll, the increase is about $100,000. -Medium-sized business respondent Responses by Company Size There are important differences in how smaller and larger companies plan to address the cost increases associated with the ORPP. Larger companies tend to be better able to absorb such increases because they have relatively more financial flexibility to do so. By contrast, smaller companies often operate with tight margins and do not have the advantage of economies of scale in their operations. This limits their ability to simply accept additional costs imposed by policy changes. These differences between large and small companies are reflected in our survey results. Businesses without a qualifying pension already in place were asked how they planned to address the added costs from enrolling in the ORPP. For the largest companies (500+ employees), 69 per cent plan to absorb ORPP costs aspart of their operating budget. Meanwhile, only 31 per cent of small businesses plan to simply soak up the extra costs and continue normal operations. Instead, smaller companies indicated that they are far more likely to make wage and staff adjustments to compensate for higher pension costs. A full 76 per cent of small-business respondents (those with fewer than 50 employees) plan to replace ORPP costs by slowing future wage growth and/or bonus payments, including contributions they make to employee savings. However, this is not to say that wage growth in larger businesses will be unaffected by the ORPP. Even among the largest companies, 63 per cent indicated that future growth in wages, benefits or bonus payments would be clawed back to compensate for additional pension costs. Smaller companies are also more likely to lay off staff or reduce wages immediately. Nearly half of small-business respondents indicated that the ORPP would result in immediate job losses or reduced wages. By contrast, only 25 per cent of larger companies felt that the pension plan would result in immediate job/wage cuts. This will cause the company to shut its doors and [our] entire staff to be unemployed! - Small-business respondent 8

11 Does the Ontario government want to encourage small business development and bring back some of the lost manufacturing jobs or do they just want to give these businesses another reason to relocate and shut down operations in Ontario? For a small business, this is going to have a huge negative impact. -Small-business respondent Impact of the ORPP On Manufacturers in Ontario The ORPP will have a significant negative impact on manufacturing companies and workers in Ontario. According to CME calculations, for businesses without any retirement benefits plan in place, the ORPP will cost an estimated $1,074 per employee per year. Their employees would pay an additional $1,074 for the ORPP. For companies that do have an existing plan, the impact is less clear. Our survey results indicate that nearly 51 per cent of businesses are either uncertain if their existing retirement benefits plan qualifies for ORPP exemption, or know for a fact that it does not. The cost of compliance for these businesses depends on how they respond to ORPP implementation. What we do know from our survey is that businesses with existing retirement benefits will take steps to ensure that the ORPP is as expenditure-neutral as possible. They will either look for ways to offset the extra costs by reducing existing or future employee compensation, cutting jobs, or simply canceling their existing retirement benefits plan and replacing it with the ORPP. For companies with no retirement benefit at all, however, the costs of the ORPP will be significant. Those costs can be estimated using Statistics Canada data on employment by company size and our survey results on pension coverage. In total, the ORPP will cost Ontario manufacturers an estimated $182 million per year. At present-day salaries, that is equivalent to nearly 3,300 manufacturing jobs in the province. Our robust DC Plan and Employee Savings Plan totals more than 17 per cent in total contributions. It will not meet the ORPP comparability test. The details are: Employer contributes six per cent of employees salary/wages to a DC plan. Employees do not make any contributions to the pension plan. Employer also provides a matching savings incentive plan to all employees. This is referred to as an ESP (employee savings plan). This is a profit based plan by which an employee can contribute up to six percent of his/her salary/wages annually. The employee can direct his/her savings towards company stock purchase or RRSPs. The company contributes up to $0.85 for every dollar that the employee contributes. This rate of contribution has been in place for over 10 years. This works out to an additional 5.1 per cent contribution by the company for a total of 11.1 per cent. When you add in the employee contribution, this works out to 17.1 per cent of employee salary/wages (six per cent company per cent company + six per cent employee). If the Province of Ontario moves forward with their current plan (ORPP) relative to company employee contribution it would cost our company an additional $810,000 annually. - CME Member 9

12 Most concerning, the impact will be disproportionately felt by small businesses. Small manufacturing companies in Ontario employ close to 148,000 people. Since 68 per cent of small businesses surveyed have no pension or retirement savings plan at all, that implies that small businesses will be required to bear the costs of financing the ORPP for more than 100,000 workers in the province. That alone will impose $108 million in extra costs to small manufacturers every year. On Workers in Ontario By comparison, the impact of the ORPP on Ontario workers is more straightforward. Far from gaining additional retirement savings, Ontario workers will lose twice. First they will see a reduction of 1.9 per cent in their take-home pay as above, estimated to be about $1,074 per person per year. Our labour and benefit costs are already higher in Ontario than the US before this, so the ORPP will basically limit any future investment and possibility of expanding the size of this plant and its workforce. -Large-business respondent By contrast, the impact on larger companies is much less severe. Even though large companies employ far more Ontarians, they are also far more likely to have some retirement benefit already in place. According to our survey results, only about 11 per cent of large businesses have no pension, group RRSP or other program in place. For those 11 per cent, the ORPP will add about $31 million in additional costs every year. The remaining 89 per cent of large companies have greater flexibility as to how they adapt to higher business costs from the ORPP. It needs to be emphasized that even though relatively few large companies will have to pay the full cost of ORPP compliance, the impact of the program could be severe. Large companies typically operate in several jurisdictions across Canada and/or around the world. Their future investment decisions are based on a number of factors, one of the most important of which is the cost of doing business in a given jurisdiction. The ORPP only adds to a number of other recent provincial policy decisions that are driving up the cost of doing business in Ontario. The longer-term result will be lost opportunities for investment and growth in the province. Second, our survey results clearly indicate that the ORPP will result in businesses reducing existing or future compensation, whether in the form of lower wages/benefits immediately, or limiting future wage growth to say nothing about several warnings that the ORPP will also result in outright job losses. Employees that now benefit from Group RRSPs or DPSPs will lose control of their savings to government. We were in the process of expanding our company by hiring on another 15 personnel. As a result of this decision by the current Ontario government, we are going to move a large part of our manufacturing capabilities to another province that offers companies incentives and financial assistance to set up manufacturing facilities. We will be laying off employees in Ontario and hiring in the other province where small businesses get great support. This pension requirement is a job killer and not helpful to small business already struggling in a recession. -Small-business respondent 10

13 In other words, the ORPP will immediately lower takehome pay for Ontario workers and reduce their ability to determine how their money should be saved, while also promising fewer jobs and lower benefits and salaries down the road. No idea [of the cost]. However, if forced, I would eliminate positions by outsourcing to recover cost. -Small-business respondent It is also worth noting that workers benefit from business investment and expansion, especially when it comes to attracting large companies and large-scale investments to the province. Large businesses not only employ far more Ontarians than do small companies, but as our survey clearly indicates, they are also more likely to offer attractive retirement benefits to their workers. Dissuading large companies from growing in Ontario will create fewer jobs in the province and, ironically, will likely result in worse pension coverage for Ontarians. Conclusion While the attempt to improve retirement income security in Ontario is laudable, the current approach will have a significant net negative impact on the economy, manufacturers and their employees. Ontario manufacturers are competing on a global basis for customers and new product mandates. Notwithstanding the government s intent to expand the definition of what constitutes a comparable retirement benefits plan under the ORPP, these measures fall well short of what is needed to avoid damaging the economy. Ontario remains a relatively high cost jurisdiction in which to manufacture. In the current environment, every dollar counts. Therefore, bold changes to the ORPP are needed that start with creating a more conducive environment for manufacturing investment. Converting the ORPP to an incentive-based, voluntary program to assist companies in providing additional coverage would help to increase retirement income security without creating significant new costs and economic damage. In addition, steps to streamline regulations would reduce barriers and provide an incentive to smaller employers to provide pensions from within the existing private-sector framework. The Ontario government needs to expand the definition of comparable to include any type of capital accumulation plan that meets a minimum threshold of 3.8 per cent. Offsets should also be put in place to help companies with this new cost of business. It is imperative that the government examine the economic implications of the ORPP in more detail and explain why there is such a significant gap in comparability (3.8 per cent ORPP v. eight per cent DC). Finally, it is critical to note that the most effective way to increase pension coverage and other worker benefits is to put in place policies that allow businesses to be profitable and to grow. As our survey makes clear, larger companies tend to provide more and better benefits compared to smaller businesses, simply because the latter often cannot afford to do so. Encouraging business growth will help the provincial government achieve its goal of greater retirement security for Ontario workers. About the Canadian Manufacturing Coalition The Canadian Manufacturing Coalition is comprised of more than 50 major industry groups, united by a common vision for a world-class manufacturing sector in Canada. The Coalition speaks with one voice on priority issues affecting manufacturers, and what must be done to ensure all Canadians continue to enjoy economic growth, high-value outputs and high-paying jobs. The Canadian Manufacturing Coalition s member organizations represent roughly 100,000 companies and 1.7 million workers, coast to coast. 11

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