1. Ontario Retirement Pension Plan: Overview Tax Executive Institute – January 21, 2016 Mahmood Nanji - Associate Deputy Minister ORPP Implementation Secretariat, Ontario Ministry of Finance

2. Retirement security is an issue facing governments across Canada … “While a fairly concerning one-half (48%) of the already retired are worried about outliving their money, this anxiety is shared by three-quarters (74%) of Canadian who are not yet retired.” Angus Reid Institute (ARI), “Retirement in Canada”, July 1, 2015 In 2013, only 35 per cent of Ontario workers participated in a workplace pension plan. Pension coverage is even lower for younger workers — in 2012, only about one-quarter of workers aged 25 to 34 participated in workplace plans, compared to nearly half of workers aged 45 to 54. Statistics Canada (2015). Special tabulation based on the 2012 Longitudinal and International Study of Adults. Evidence shows that many Canadians are not saving adequately for retirement, which raises the question on the role of government (provider, enabler, something else?) Unless addressed, Canadian jurisdictions will:  See future seniors face financial hardship;  Experience serious fiscal pressure through increased government assistance to seniors (which could crowd out needed government investment in education, health care, etc.); and  Miss opportunities for stronger long-term economic growth if the current levels of retirement savings are not increased. 2

3. …Ontario is taking a direct approach to address this retirement security challenge Addressing the retirement security problem: Ontario is committed to a national solution, mandatory enhancement of the CPP, but as the former federal government was opposed to such an approach, the province moved ahead with the ORPP.  In 2014, the average CPP annual benefit in Ontario was $6,900. Mandatory vs. voluntary: Various mandatory and voluntary approaches to enhancing retirement savings currently exist.  Ontario believes that voluntary approaches are not sufficient.  The reality is that in 2013, there was approximately $790 billion in unused RRSP room in Canada, $300 billion in Ontario alone! 3

4. The major principles / elements of the ORPP are clear The government released a discussion paper at the end of 2014, to begin a dialogue about the design of the ORPP with Ontarians. Guiding Principles: ­Build on Key Features of the CPP ­Plan Sustainability ­Cost Effectiveness ­Fairness Major Elements: ­Contributions: Eligible employers and employees will each contribute no more than 1.9% of employee earnings (3.8% total). ­Benefits: Aim to replace 15 per cent of an individual’s pre-retirement earnings up to $90,000. Benefits will be earned as contributions are made. ORPP is intended to supplement the CPP ­Coverage for those without pension plans ­Adequate coverage ­Portability By 2020, all eligible employees in Ontario will be part of either the ORPP or a comparable workplace pension plan 4

5. ORPP is designed to integrate into a complex pension landscape … Current landscape of workplace pension plans in Ontario: 2/3 of Ontarians do not have access to a workplace pension plan, and the ORPP is designed to provide them with additional pension coverage.  Many of the 1/3 of Ontarians who are provided with workplace coverage are covered by generous plans – the province did not want to not adversely impact good plans Comparable Plans under the ORPP: Recognizing this reality the government developed the concept of a comparable plan. In determining what constitutes a comparable plan, the government focused on two elements ; coverage and adequacy. What constitutes a comparable plan was anchored on key design parameters of the ORPP:  Predictable stream of income in retirement for life;  Pooling of longevity and investment risk;  Require minimum contributions by employers;  Target to replace up to 15 per cent of an individual’s earnings over their career; and  Require “locked-in” contributions and accumulated benefits until retirement. Comparable pension plans would include defined benefit (DB) pension plans, defined contribution (DC) pension plans and variable plans. 5

6. … thresholds were designed to evaluate comparability, and innovative plan features introduced to provide flexibility Defined Benefit Plans DB plans, to be deemed comparable, would need to equal or exceed the benefits being offered through the ORPP, equating to a annual benefit accrual rate of at least 0.5%. This rate reflects comparative differences between the benefits offered by some DB plans and the ORPP (e.g. survivor protection, degree of post-retirement inflation protection). Defined Contribution Plans DC plans, to be deemed comparable, would need contributions of at least 8% of base salary earnings, with employers contributing at least half of the contribution (4%). These thresholds reflect comparative differences between features of the ORPP and DCs:  Diversity of investment opportunities  Relative management fees  Investment risk pooling  Longevity risk pooling ORPP Buy-back and Opt-in In order to enhance pension portability for Ontarians throughout their career, the ORPP, will, once fully established, provide options for buy-backs for eligible members. Employers with comparable plans will also be able to opt-in so their employees can participate in the ORPP. 6

7. 7 The ORPP will be phased in over three years … based on feedback from employers  A verification process will be initiated in early 2016. All employers would have to submit attestations of their workplace pension plans as of August 11, 2015.

8. ORPP will parallel the CPP’s approach to a minimum earnings threshold  Through the 2015 Fall Economic Statement, the government confirmed its intention to mirror the Canada Pension Plan (CPP) minimum earnings threshold of $3,500.  A minimum earnings threshold of $3,500 would ensure that workers in multiple jobs, part-time or temporary employment benefit as much as possible from the ORPP.  ORPP participants who meet the $3,500 threshold would start to accrue pension benefits as under the ORPP from their first dollar earned, consistent with the starting amount of accrual of benefits under the CPP. What is a Minimum Earnings Threshold?  ORPP plan members would make pension contributions on annual earnings above a minimum amount, being $3,500. The minimum earnings threshold is the minimum amount of earnings a member has to earn before they would be required to start making pension contributions and before they can accrue a benefit. 8

9. Starting fresh allows us to examine unique administrative approaches … A variety of different options for service delivery are being explored, including leveraging the infrastructure and expertise at the federal and provincial levels, as well as third-party delivery... or a combination of various partners Scope and Scale Approx. 400,000 employers Approx. 3.5 million employees More than $3-4 billion annual revenue Scope and Scale Approx. 400,000 employers Approx. 3.5 million employees More than $3-4 billion annual revenue The principles guiding the administrative design of the ORPP are that it must be simple, reliable and cost-effective  The ministry is benchmarking administrative options against other public sector pension plans, which have a range of administrative costs. 9

10. Building a leading pension organization The Ontario Retirement Pension Plan Administration Corporation Act, 2015 established the ORPP Administration Corporation (ORPP AC). The ORPP AC is an arm’s length entity to administer the ORPP. Its responsibilities will include:  Enrolling eligible employers and employees;  Collecting, investing and holding contributions in trust for members;  Administering benefits; and,  Communicating with employers, members and other beneficiaries The ORPP AC will be fully accountable to plan members for administration and investment decisions. Key features of the ORPP AC include:  An independent, professional board of directors composed of between nine and 15 members responsible for administration and investment of the plan; and  Robust accountability mechanisms including, an annual report, a Memorandum of Understanding with the Minister of Finance, annual meetings, a 10-year mandatory review, external auditing, financial controls and a comprehensive framework for privacy protection. 10

11. The ORPP Administration Corporation Initial Board of Directors  The initial board will oversee the start-up activities of the ORPP AC, including establishing the organizational structure, selecting service delivery partners and overseeing the employer verification process.  The members of the initial board were appointed in November 2015, and include:  Susan Wolburgh Jenah (Chair): Wolburgh Jenah has over three decades of experience as a regulator in capital markets and securities industry in Canada. She was formerly the President and CEO of the Investment Industry Regulatory Organization of Canada (IIROC) and Vice-Chair and Acting Chair of the Ontario Securities Commission.  Murray Gold: Gold is the Managing Partner at Koskie Minsky LLP and a leading expert in pensions and employee benefits.  Richard Nesbitt: Nesbitt is the President and CEO of Global Risk Institute with more than twenty-five years of experience in the securities industry. He was formerly the chief operating officer of CIBC, CEO of TSX Group, and President of TSX Markets. Chief Executive Officer  On January, 12 2016, the board appointed the first CEO of the ORPP AC, Saäd Rafi.  Mr. Rafi was most recently the CEO of the TO2015 Pan Am/Parapan Am Games Organizing Committee, responsible for delivering one of Canada’s largest and most successful sporting events. He has 25 years of experience as a leader in the public and private sectors, including as Deputy Minister with the Government of Ontario and an Equity Partner with Deloitte. 11

12. ORPP Sustainability  Ensuring the ORPP is sustainable over the long-term is of paramount importance to the government as this new pension plan is established.  The government is working with actuarial experts to ensure the ORPP is funded on a sustainable basis that will enhance retirement security for Ontarians for generations. 12 Sustainability means that future contributions, plan assets and investment returns are sufficient to pay all benefits and administration expenses of the plan.