Franchisees and the Ontario Retirement Pension Plan Act (ORPP)


Jul 15, 2016

As reported by CBC News, Ontario just passed the Ontario Retirement Pension Plan Act at the beginning of June ( . If you're planning to buy a franchise in the Ontario area, here's what you should know. 

What does the act do?

This act is meant to help workers in Ontario retire with a better financial net and will create a common pension plan to be used throughout the province. It's mandatory for all employers who don't have a similar plan in place already, and according to the Canadian Franchise Association, it applies to all employers who have received a Business Number from the Canada Revenue Agency ( Going by that definition, the franchisee—not the franchisor—will be considered the employer.

How does it work?

Once an employee between the ages of 18 and 70 makes more than $3,500 in a year, both the employee and his or her employer will start making contributions toward the plan, according to the Ontario Minister of Finance ( The maximum contribute rate is 1.9 percent, and the maximum salary level is $90,000.

When does it start?

No contributions will be required before 2018. In 2017, the process of enrolling businesses and determining who is exempt because they have a comparable plan in place will begin. Large employers with 500 or more employees and medium employers who have between 50 and 499 employees will begin making contributions on January 1, 2018. Small employers, defined as having 49 employees or fewer, will begin making their contributions on January 1, 2019.

Lastly, any employer who has a registered pension plan that doesn't meet Ontario's compatibility test will have to start making contributions on January 1, 2020. The contribution rates increase over time, with all employers set to meet the maximum 1.9 percent by the year 2021.

What is a comparable plan?

The criteria for a comparable plan is complex and varies by plan type. For example, the comparable defined benefit plan must be subject to provincial and federal regulation and offer the same benefit as the ORPP or more. If it's a plan that is based on the employee's earnings, the yearly benefit accrual rate must be 0.5 percent or more. If it's a defined contribution plan in which the employer and employee contribute money to a set account for the employee, at least 8 percent of the employee's salary must go toward it every year. Of that 8 percent, the employer has to contribute at least 4 percent.

More is still to come on the ORPP. If you're interested in an Ontario franchise, make sure this plan is part of your consideration.