Make the ORPP voluntary, or enhance the CPP

Kathleen Wynne seems hell bent to introduce an Ontario Retirement Pension Plan by the year 2017. The idea is if a company doesn't have a pension plan or deferred profit sharing plan of its own, it will be required to pay a payroll tax of 1.9%, to be matched by its employees from their paycheques. This would be on top of the nearly 6.7% we already pay for the CPP and EI.

I wouldn't necessarily mind paying the extra levy, provided there actually was a pension at the end of the line. There really is no guarantee that there would be.

I don't understand, however, why the plan can't be made voluntary. The Saskatchewan Pension Plan is a good example of this. You don't have to contribute, but you can up to $2500 per year. The caveat is that it reduces your RRSP contribution room for that year. No indication if the same would be the case for the ORPP.

Far better of an approach would be for the feds and the provinces to ensure the long term sustainability of the CPP.  In 2012, it had an unfunded liability of just over $829 billion (the last year for which we have numbers). While it is claimed the 9.9% payroll tax (split between employers and employees) is enough to make sure the plan makes future obligations, a liability of that size is enough to make one wonder.

Certainly, a plan that guarantees that you will be paid only 25% of the best five years of income isn't enough to live on. Even when you add in Old Age Security which is funded through general revenues, it's not close enough either. Many Canadians simply do not have the means to save.

I happen to think the ORPP should be voluntary. Given the right marketing, I think most people in the province would sign on regardless. But it should work more like a group RRSP rather than a pension plan. Whatever the case, it will require a team of very smart managers on the par of the Caisse de dépôt in Quebec.

But we also need to fix the CPP to make sure that there is a secure income for everyone, at least a livable one. And the cap on which contributions are collected from needs to go up - way up. Here in Canada, you stop making contributions at $51,100. In the States, FICA dues caps out at USD 118,500. This would mean people with higher incomes get higher pensions, to be sure, but it would also give the plan a much needed cushion to ensure the long term viability of the trust. I simply do not believe that the plan won't run out in 75 years, it will be much sooner than that. (It should be noted that the Wynne plan would call for payroll deductions up to $90,000 - better, but it should be aligned with improvements to the CPP rather than on a separate track.)

Would it mean higher payroll taxes? Sure it would. Is the security of our elder and disabled population a priority? You're damn right it is. If we can get this right, Wynne's plan could easily be discarded. Even she has said as much. Trudeau should sit down with the premiers and come up with something that will benefit all Canadians. The status quo just doesn't work.