# ORPP for people half way through their careers?



## kork (Jun 9, 2012)

So a question I can't seem to find answers on.

What happens to a 40 years old with the new ORPP if they retire at 60? Is that 20 years of contributions or do they get more? Being 37 myself and not planning on working until 65 (let's say I semi-retire at 50 and work for the next 10 years part-time to pay they bills, but still allow the investment nest egg to grow.)

Will ORPP make a big deal in my world?


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## 0xCC (Jan 5, 2012)

Apply some logic. ORPP is supposed to be a contribution supported system (like CPP, unlike OAS). It is going to have maximum pensionable earnings of around $90k. There are two variables that should determine how the payouts will work at age 65 - pensionable earnings and years of contributions.

You are asking about years of contributions. What if you took the same sort of question and asked it about pensionable earnings? "I worked my whole 40 year career at a $45k salary level, will my ORPP income when I turn 65 pay out like I worked my whole career at $90k?"

Money for nothing and, wait, how does that line go?

Edit: And just understand that the ORPP has absolutely nothing to do with Kathleen looking out for the average Ontario Joe or Jane that might need a little extra income boost in retirement to "maintain their standard of living".


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## kork (Jun 9, 2012)

From what I've read, when CPP started, a full pension was achieved after only 10 years of contributions.

_"Retirement benefits would be 25 per cent of the average pensionable earnings a worker earned in his or her lifetime. These earnings were adjusted to inflation, and benefits would be paid monthly. The higher the earnings, the higher the ultimate benefits. In the beginning, for an individual to qualify for a full pension, he or she had to have made contributions for at least ten years. Therefore, although the first benefits would start on January 1, 1967, full pensions would not be available until 1976. If a person took the pension before that time, he or she would receive an amount proportionately below the 25 per cent that had been established as the level in the legislation."_

http://www.historymuseum.ca/cmc/exhibitions/hist/pensions/cpp-a52-wcr_e.shtml

So what I'm curious about is "In the beginning with ORPP, how will it work?"


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## 0xCC (Jan 5, 2012)

Again, the motivation for the ORPP has nothing to do with actually providing a sustainable retirement for the Ontario public. For a hint as to what the main motivation behind the creation of the ORPP is look at where/how the contributions will actually be used by the Ontario government. You might have to go back to the actual budget to figure that out (I think the 2014 budget)

From what I can see there is nothing in the bill that created the ORPP that says there will be any special consideration for workers that will be in the first decade or so of beneficiaries.


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## gardner (Feb 13, 2014)

0xCC said:


> For a hint as to what the main motivation behind the creation of the ORPP is look at where/how the contributions will actually be used by the Ontario government.


As far as I can see from both the 2014 and 2015 budget information, the ORPP is meant to be a garden variety arms-length pension scheme. You're insinuating that it's not. Where can I read specific info that indicates it its other than a legitimate pension?


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## Beaver101 (Nov 14, 2011)

Who is Wynne, the McSQuinty-shoo-in kidding about helping future retirees in the private sector in Ontario?

http://news.nationalpost.com/full-comment/andrew-coyne-ontario-pension-plan-not-about-helping-retirees-but-financing-infrastructure



> ...
> What, then, explains the premier’s obsession? A line buried in a recent budget perhaps holds a clue. *By “encouraging more Ontarians to save through a proposed new Ontario Retirement Pension Plan,” it reads, “new pools of capital would be available for Ontario-based projects such as building roads, bridges and new transit*.” It’s not about “helping” retirees: it’s about financing the premier’s infrastructure ambitions. How strange they do not make this point clearer. ...


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## 0xCC (Jan 5, 2012)

Beaver101 hit the nail on the head. Look for information on the Infrastructure Fund to see where ORPP contributions will be going. The Wynne government needed a way to increase spending without outright admitting they were increasing taxes and they were running out of things to sell (Hydro One, the 407, etc...) so they needed a new source of funds.


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## gardner (Feb 13, 2014)

So we think that a supposedly "arms length" ORPP would in fact take an unhealthy interest in Ontario bonds, crown corps and public/private partnerships and so forth. Therefore putting pensioners at risk to further tangentially or unrelated infrastructure projects.

I guess you'd have to look at who is actually hired to operate it and what their remit winds up being, to figure out if this could happen. It feels like tea-leaves reading.


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## Ag Driver (Dec 13, 2012)

Here is a fun ORPP question.

Federally regulated employees are exempt.

I am a commercial pilot, hold a commercial license which is federally regulated, and require this license for my employment. Am I exempt? I never have and never will like this additional tax grab.


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## Davis (Nov 11, 2014)

By the law passed by the Legislative Assembly to implement the ORPP, the plan must be operated at arm's length from the government. Legislation trumps Budget wording. ( Toronto Star article). 

In August 2015,  Sousa said  “They’ll invest where they see fit … the effect is to provide the best return for the members and for those retirees. And that’s not up to the government, that’s up to the independence of the management.” Sousa reiterated that  yesterday. 

In order to cause confusion, the Tories keep promoting their interpretation of the Budget wording despite the law and despite what Sousa is saying. There is nothing to it anymore.


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## Davis (Nov 11, 2014)

As far as a public pension plan being a "tax grab", I wonder why the Harper Tories -- who used this line -- didn't take the opportunity to eliminate the federal version of this tax grab when they were in power for nine years. that was nine years during which they could have scrapped the much bigger "CPP tax grab".

They probably didn't do it because most people see CPP as a pension, not a tax. Especially those receiving CPP benefits.


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## Eclectic12 (Oct 20, 2010)

kork said:


> ... So what I'm curious about is "In the beginning with ORPP, how will it work?"


CPP had to be changed to make it sustainable. Lots of DB pensions are having cash infusions from the employer coupled with cuts in benefits to keep the benefits funded.

By what magic wand is the gov't going to be able to service a large debt and in the current investment environment provide anything like "full pension on ten years"?


I doubt that there will be much straying from CPP type benefits but have not investigated.


Cheers


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## Ag Driver (Dec 13, 2012)

Davis said:


> As far as a public pension plan being a "tax grab", I wonder why the Harper Tories -- who used this line -- didn't take the opportunity to eliminate the federal version of this tax grab when they were in power for nine years. that was nine years during which they could have scrapped the much bigger "CPP tax grab".
> 
> They probably didn't do it because most people see CPP as a pension, not a tax. Especially those receiving CPP benefits.


I find CPP a tax grab as well. Regardless of it being a Liberal or Conservative push, I don't like either of them. Nice attempt to politically label me though.


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## Eclectic12 (Oct 20, 2010)

0xCC said:


> ... From what I can see there is nothing in the bill that created the ORPP that says there will be any special consideration for workers that will be in the first decade or so of beneficiaries.


Why would there be?

In theory ... would there not be a benefit from having a plan which includes having employer contributions versus nothing at all?




Beaver101 said:


> Who is Wynne, the McSQuinty-shoo-in kidding about helping future retirees in the private sector in Ontario?


Where the pension contribution are mandatory ... several studies say it will be a benefit. 

Other studies show that despite education that "participate, the employer matches for free money" still results by and large, in the now informated employee walks away from the free money. What seems to make the difference is making participation "opt out" versus "opt in" (you didn't think private companies in days gone by chose negative marketing on a whim, did you?).

While the proactive DIY types here are not likely to walk away from free money, the general public is estimated to be walking away from billions ($25 billion in the US and I seem to recall a large Canadian insurance company saying just for the pensions *they* administer, approximately $3 billion of employer matching was being unused).


Cheers


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## Davis (Nov 11, 2014)

Ag Driver said:


> I find CPP a tax grab as well. Regardless of it being a Liberal or Conservative push, I don't like either of them. Nice attempt to politically label me though.


A tax is used to provide services to the whole population. CPP and ORPP create a specific benefit for those who contribute. Those who do not contribute don't get benefits. It is just a question of using the wrong word to describe the program. Something that creates a specific entitlement to a future benefit is not a tax. An employer pension plan isn't a tax either. 

I didn't refer to you. I referred to the Harper Tories. I don't know what your political inclination is.


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## Eclectic12 (Oct 20, 2010)

Ag Driver said:


> I find CPP a tax grab as well.


I call the my property taxes going up while garbage collection goes from weekly to bi-weekly a tax grab.

Until there is documentation showing money being siphoned out for other purposes, costs way out of line with what is paid or pension benefits being suspended ... where is the tax grab?




Ag Driver said:


> Regardless of it being a Liberal or Conservative push, I don't like either of them. Nice attempt to politically label me though.


I don't read it as applying to whatever your personal political favourite ... or lack thereof, is.

I read the comments as questioning the contrast of the provincial Conservatives claiming it is a tax grab at the same time as the "low taxes" Federal Conservatives did nothing about the Canada-wide version.

Or are you saying that like the Feds, the provincial Conservatives will line up at the alleged pension tax grab?


Either way, until there is some proof that there is some political interference or showing the "at arm's length" is a sham ... I am not seeing how it is a tax grab.

As I understand it, pension contributions are tax deferred, deductible or an employer expense reducing income so I don't follow how dropping today's tax revenue stream is a tax grab. Group RRSP matching contributions, I believe don't have this status.


Cheers


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## NorthernRaven (Aug 4, 2010)

In lieu of political blather:



> The benefit accrual rate for the ORPP would be 0.375% per year. The ORPP is designed to provide plan members a 15% income replacement rate after contribution to the plan over 40 years.





> Benefits would start in 2022; however, some plan members may retire before benefits would be paid. During the transition period (2017-2022) only those members who turn 70 would receive a benefit, and it would be in the form of a lump-sum payment equal to what they put into the plan. Benefit payments for all other plan members would be deferred to 2022.





> The ORPP would provide for small pension amounts to be paid to members in a lump sum. If a member retires and their pension entitlement is less than $480 per year (in 2017 dollars, indexed to CPI), the ORPP would pay the member the value of the pension entitlement in the form of an actuarial equivalent lump sum rather than a pension benefit for life.


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## Eclectic12 (Oct 20, 2010)

Ag Driver said:


> ... I never have and never will like this additional tax grab.


Interesting ... since CPP and ORPP are tax grabs, one wonders why private industry over the last thirty years or so has been increasing getting rid of this cash cow. For private companies, DB pensions used to account for 78% of those with RPP where as of 2011, this is 53%. 

Where private industry seems to have no difficulty coming up with ways to get their customers to work for them for free or to convince customers to pay a flat fee for services that currently are free or other revenue boosting moves ... they seem to be missing the boat on this alleged area. 

They define the plan/contributions in a similar way so the alleged opportunity should be available to them as well.


Saskatchewan seems to have missed the boat as well as they converted the public sector DB pension to a DC pension for new employees in 1977. 


Cheers


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## Eclectic12 (Oct 20, 2010)

NorthernRaven said:


> In lieu of political blather ...


Cool idea ...



NorthernRaven said:


> > During the transition period (2017-2022) only those members who turn 70 would receive a benefit, and it would be in the form of a lump-sum payment equal to what they put into the plan.


I am not sure I like this wording ... though I suppose it depends on what "they put into the plan" means. The private plans I've seen the details for or participated in defined such a payout as including employer + employee contribution + growth.

This is one area where I could potentially see an advantage if the plan can co-opt employer contributions plus growth but unless there's some form of withdrawal. The benefit would to other pension plan members and/or administrators instead of the provincial gov't.


Cheers


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## Davis (Nov 11, 2014)

If pension contributions are a "tax grab", are pension benefits a future "tax break"?


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## sags (May 15, 2010)

Regardless of the politics, it is better to have people fund their own retirements than have them rely on increasing social benefits.

The Liberals will be increasing the GIS benefit for low income seniors. It is a warning sign of what is to come if they don't act now.

Employers have had the opportunity to set up their own equivalent pension plan, but have failed to do so despite expressing interest in doing so.

My son's employer developed a sudden interest in a pension plan for his employees, as they face the ORPP or enhanced CPP. They have also been losing valuable employees to employers with pension plans.

The employer is paying the employer share and giving the employees a raise to cover their contributions as well.

The downside is that it is a DC type of plan with investment options limited to Great West Life mutual funds.

Given the fees, I am not sure they won't end up paying their contributions out in fees and getting nothing in the end.........but that would be a class action lawsuit for another day.


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## gibor365 (Apr 1, 2011)

Do employees of big 5 Canadian banks will be charged ORPP?
I'm working in company that belongs to India, I have GRRSP, will I be charged ORPP?
Is ORPP mandatory or voluntary?

If I'm forced to contribute into ORPP when i'm 52 and I retire at 55, do I get something ? at what age?


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## Eclectic12 (Oct 20, 2010)

gibor said:


> Do employees of big 5 Canadian banks will be charged ORPP?


I doubt it as I expect the bank pensions to fit the "comparable" threshold. 

For a DB pension, the accrual threshold is 0.5% per year. Most of the DB pensions I have had access to the details for accrue in the range of 1.35% to 2.0%. Unless it is an odd ball DB pension (ex. employer only contributions), it looks like most DB pensions should meet the "comparable" threshold.

For a DC pension, employer + employee must be 8% of income where the employer is paying at least 50%.
http://www.theglobeandmail.com/news...ario-retirement-pension-plan/article25943866/

I don't know enough details about the bank pensions though.




gibor said:


> I'm working in company that belongs to India, I have GRRSP, will I be charged ORPP?


I expect you would. Even if there is employer matching, I'm doubting the contribution totals would be enough. 

The next question would be size as while the 500+ employee companies have a delay, the 50 to 499 employee ones are still on the 2018 start and the 1 to 49 are still on the 2019 start.
http://www.cbc.ca/news/canada/toronto/ontario-pension-plan-1.3450336




gibor said:


> Is ORPP mandatory or voluntary?


I am sure I saw the G&M summary said that employer participation meant mandatory employee participation.




gibor said:


> If I'm forced to contribute into ORPP when i'm 52 and I retire at 55, do I get something ? at what age?


Post #17 says anyone turning 70 before 2022 would get a lump sum payout. It looks like the earliest start date for benefits in your case would be 2024. 

This looks like it would put you as receiving a benefit in 2024. The short time in the pension may mean the selected start of age 60 might trigger the "pension entitlement in the form of an actuarial equivalent lump sum rather than a pension benefit for life."

You'd have to play with the numbers to see if there is any lifetime payment possibility.

Cheers


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## gibor365 (Apr 1, 2011)

> I expect you would. Even if there is employer matching, I'm doubting the contribution totals would be enough.


 Employer not only matching, I pay 6% and employer 9% ... 



> I am sure I saw the G&M summary said that employer participation meant mandatory employee participation.


 If all this mandatory, i don't understand why they wasting our tax money to have so many commercials on TV


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## Eclectic12 (Oct 20, 2010)

gibor said:


> Employer not only matching, I pay 6% and employer 9% ...


Interesting ... the way I read the link, the employer/contribution levels are okay so as long as there is no item barring Group RRSPs from consideration, it might mean the company / employees would be exempt.

There might be a though that since there is no restriction on the employee withdrawing from the Group RRSP well before retirement, it may not be viewed as a suitable alternative.




gibor said:


> If all this mandatory, i don't understand why they wasting our tax money to have so many commercials on TV


I presume it is the same reason(s) all other new programs are advertised (ex. TFSA). Let the public know and should the public support it, the program has a shot at surviving a change of gov't.


Cheers


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## gibor365 (Apr 1, 2011)

> There might be a though that since there is no restriction on the employee withdrawing from the Group RRSP well before retirement, it may not be viewed as a suitable alternative.


 it can be withdrawn ONLY if I leave the company....


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## NorthernRaven (Aug 4, 2010)

Eclectic12 said:


> Interesting ... the way I read the link, the employer/contribution levels are okay so as long as there is no item barring Group RRSPs from consideration, it might mean the company / employees would be exempt.
> 
> There might be a though that since there is no restriction on the employee withdrawing from the Group RRSP well before retirement, it may not be viewed as a suitable alternative.


Group plans are usually voluntary, I think; they are generally a way to steer employees to save, and for employers to contribute matching. But they are pretty much personal RRSPs, and aren't an RRP (DB or DC). It looks like this sort of Group RRSP is NOT a comparable, and I wouldn't be surprised if some of these don't morph into DC plans, while others may get their match rates altered since the employer will be kicking in 1.9% to ORPP. 

It looks like DC plans have to have an 8% rate (with 4% from employer) to be considered a "comparable" plan to avoid mandatory ORPP.


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## Eclectic12 (Oct 20, 2010)

Davis said:


> If pension contributions are a "tax grab", are pension benefits a future "tax break"?


A break from having to pay full OAS I'd expect ... :biggrin:


Though that would be the Feds so I'm not sure what the Ontario gov't would be avoiding paying. Maybe they'd have less "health care premium" to collect?


Cheers


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## Eclectic12 (Oct 20, 2010)

sags said:


> Regardless of the politics, it is better to have people fund their own retirements than have them rely on increasing social benefits.


So far, the research says voluntary funding is only working for a few, proactive types ... such as CMF readers.

This matches up to my co-workers complaint that figuring out staying in the old DB versus moving to the new DC was too complicated (duh ... 6+% contributions with a formula payout versus 2% contribution with an unknown future value made it an easy decision for me). 

Her solution was "I'll be a bag lady on Yonge street if I end up short of money in retirement". 
And that's from a semi-proactive type as her eyes did not glaze over at the mention of retirement/pensions.




sags said:


> Employers have had the opportunity to set up their own equivalent pension plan, but have failed to do so despite expressing interest in doing so.


Not so sure on this one ... from what I recall, there is now until Jan 2017 to contract for a suitable DC plan with a financial institution. I doubt that takes ten months.




sags said:


> The employer is paying the employer share and giving the employees a raise to cover their contributions as well.


I doubt this will be what most that decide to setup a DC pension will do. Those companies looking for the cheap version would go with the 4% employer contributions and whatever the fee is to the financial institution. I believe both are business expenses reducing income.




sags said:


> The downside is that it is a DC type of plan with investment options limited to Great West Life mutual funds.


What downside for the employer?

They avoid future ORPP obligations that may vary and get a predictable expense. If GWL decides to charge too much, there are lots of other choices to move to.


Cheers


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## gibor365 (Apr 1, 2011)

> Group plans are usually voluntary


 Our plan is not...if you don't want to contribute at all, employer still will contribute 3%, and after this employer is matching employee contribution.



> I presume it is the same reason(s) all other new programs are advertised (ex. TFSA).


 It's completely different as TFSA is 100% voluntary.... Doing comercials for ORPP is the same like to do commercials for Ontario Health tax ... as usual Liberals just wasting our tax money.... ridiculous!


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## Eclectic12 (Oct 20, 2010)

NorthernRaven said:


> Group plans are usually voluntary, I think; ...


My experience as well ... though as usual, posts on CMF dig out the exotic ones that are different.
See post #30.




NorthernRaven said:


> ... they are generally a way to steer employees to save, and for employers to contribute matching. But they are pretty much personal RRSPs, and aren't an RRP (DB or DC). It looks like this sort of Group RRSP is NOT a comparable ...


Never having had the opportunity of Group RRSP employer matching ... there was not much "steering" IMO.
It was there ... some employees used it and some didn't.

The only advantage I could see for me was that using the company Group RRSP, the full $1 was invested from day one instead of waiting for the tax return to be filed.


I didn't expect that a Group RRSP would be acceptable to the Ontario gov't ... and I see a DPSP is not acceptable either.




NorthernRaven said:


> ... and I wouldn't be surprised if some of these don't morph into DC plans, while others may get their match rates altered since the employer will be kicking in 1.9% to ORPP.


If it were me as the employer, I'd jump into the DC plan as it would whittle costs to 4% plus a small fee to the financial institution. The market/demand might force adjustments to salaries and/or where the employee contribution comes from but at least there is a nice dependable cost that can be expensed. 

I have never inquired but as I seem to recall articles saying a Group RRSP is not an allowed expense, I suspect the ones provided by my employers have been an add-on. With so much business already built in to the DB or DC pension, it might a bundle in for almost nothing.


DB and DC comparable contribution rates to exempt ORPP membership were noted in post # 23.


Cheers


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## Eclectic12 (Oct 20, 2010)

gibor said:


> Our plan is not...if you don't want to contribute at all, employer still will contribute 3%, and after this employer is matching employee contribution.


Another new wrinkle to the Group RRSP universe ... 




gibor said:


> It's completely different as TFSA is 100% voluntary....


I meant the reasoning of "lets get the word out there" ... not specifics of mandatory versus voluntary.
Or perhaps a better example is that I seem to recall ads about the time limit before non-photo OHIP cards being rejected for medical services.




gibor said:


> ... Doing comercials for ORPP is the same like to do commercials for Ontario Health tax ... as usual Liberals just wasting our tax money.... ridiculous!


If there is this many questions in the interested CMF arena, I suspect there are a lot of regular people who the commercials at least give a bit of a framework to.

Where there are more cost effective ways is a different question. I can recall lots of advertising from the Mike Harris, Bob Rae, Bill Davis Ontario gov'ts so it is not a new thing.


Cheers


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## NorthernRaven (Aug 4, 2010)

gibor said:


> Our plan is not [voluntary]...if you don't want to contribute at all, employer still will contribute 3%, and after this employer is matching employee contribution.


That makes it voluntary for the employee, and only a 3% for certain being put in, so it would have to be modified to avoid ORPP.

Do you get RRSP contribution receipts for all of that contribution (employer+employee)? What happens when you leave the company? Is the money available as a regular RRSP, or does it come out as a locked-in LIRA?


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## Davis (Nov 11, 2014)

Actually, Wynne changed the law so that the government could run ads liked those. McGuinty brought in legislation to prevent the government buying advocacy ads like those. The king of using our money to sell their policies to us was Harper, though. I hope Trudeau doesn't start up the propaganda machine again. 

There would be some merit in explaining this new program to people even if it is mandatory, but doing so so far in advance makes it pretty clear that the intent was political, not informational.


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## gibor365 (Apr 1, 2011)

> There would be some merit in explaining this new program to people even if it is mandatory, but doing so so far in advance makes it pretty clear that the intent was political, not informational.


 Probably for the 1st time I agree with Davis . Those ads give no useless info and obviously the political ones... I watch TV maybe 2 hours max per week, and about 4-5 times seen this comercial last week ...


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## gibor365 (Apr 1, 2011)

NorthernRaven said:


> That makes it voluntary for the employee, and only a 3% for certain being put in, so it would have to be modified to avoid ORPP.
> 
> Do you get RRSP contribution receipts for all of that contribution (employer+employee)? What happens when you leave the company? Is the money available as a regular RRSP, or does it come out as a locked-in LIRA?


Yes, contr receipt are for all contributions.....When I quit/laid off, it will be regular RRSP (not LIRA)


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## 0xCC (Jan 5, 2012)

gibor said:


> Yes, contr receipt are for all contributions.....When I quit/laid off, it will be regular RRSP (not LIRA)


That is likely a group RSP then, not a pension.


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## Eclectic12 (Oct 20, 2010)

^^^^

*giggle* .... post #22 identified it as a Group RRSP (though that was mixed in with questions about other pensions).

Interesting that withdrawals are banned until leaving the company but once the layoff/quit occurs, there is no locking in for the employer contributions.


Cheers


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## gibor365 (Apr 1, 2011)

While I'm working I cannot tpuch even my contributions even though everything is vested right away


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## 0xCC (Jan 5, 2012)

Oops, I missed that gibor identified it as a GRRSP. I would expect that would not qualify (as others have also noted) as a pension in the eyes of the Ontario government and the employer would be required to contribute (and take contributions from the employee) to the ORPP.

I am in a similar situation, we have a GRRSP at work. The company matches employee contributions up to 5% of salary. Employer contributions are locked in until no longer employed by the company but employee contributions can be withdrawn/transferred once per calendar year. Enrollment is voluntary and if you don't contribute the company doesn't either. 

We haven't been given any information yet on what to expect (ORPP should start in 2017 for us based on company size) but I won't be surprised to see changes to the GRRSP matching contributions next year.


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## gibor365 (Apr 1, 2011)

> We haven't been given any information yet on what to expect


 We also didn't get any info.... I work in the giant Indian company and we have about 200 employees in ON, so it will be interesting to see that changes .... umless all of us wii be laid off before 2017


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