Friday, February 26, 2016

The Ontario Retirement Pension Plan

The following provides an overview of recent government decisions on the proposed plan design of the Ontario Retirement Pension Plan (ORPP). The plan has been modelled based on the strengths and principles of the existing Canada Pension Plan (CPP). To view the technical bulletin released by the Ontario Ministry Of Finance, click here.

ORPP Plan Design a brief overview

Comparability Thresholds

Defined Contribution (DC) Plans or Registered Pension Plan (RPP)
  • A Defined Contribution plan is a registered pension plan that specifies the amount of contributions from employers and employees. Benefits are provided from accumulated contributions plus the return on the investment of these monies.
  • An analysis was conducted and it was determined that the minimum comparability threshold for a DC plan would be a total contribution of eight per cent of base salary earnings. Employers will also be required to contribute at least 50 per cent of the total minimum contribution, being at least four per cent.
Comparable Plans and Phase-In of ORPP Enrollment
  • The Ontario Retirement Pension Plan Administration Corporation (ORPP AC) will contact all Ontario employers in early 2016 in writing to verify their existing pension plans and assess the coverage offered by employers to their employees.
  • Any employer with a registered workplace pension plan that exists on August 11, 2015, or that has begun the process of registering one, will be assigned to Wave 4. If the plan meets comparability thresholds by the time Wave 4 begins, the employer will not be required to enroll in the ORPP‎. (See below to reference the four waves)
  • Any employer that does not have a workplace pension plan, but sets up a comparable plan prior to its entrance Wave, will not be required to enroll in the ORPP.
  • Employers with a workplace pension plan who have employees who do not participate will be placed in Wave 4. By 2020, they will be required to have all employees participating in a comparable workplace pension plan, or have employees who are not in the comparable workplace pension plan, enrolled in the ORPP.
Enrollment in the ORPP will be staged in four waves

Wave 1 – Jan. 1, 2018: Employers with 500 or more employees without registered workplace pension plans
Wave 2 –Jan. 1, 2019: Employers with 50 to 499 employees without registered workplace pension plans
Wave 3 –Jan. 1, 2020: Employers with fewer than 50 employees without workplace pension plans
Wave 4 –Jan. 1, 2020: Employers with a workplace pension plan that’s not modified or adjusted to meet the comparability test as well as employees who aren’t member of the workplace’s comparable plan

Waiting Periods 

If a workplace pension plan has a waiting period provision before an employee can join the plan, both the employer and employee would be required to participate in the ORPP for the duration of the waiting period. To make things as easy as possible, you will likely want to consider a “No waiting Period” on the RPP.

Employee Eligibility

Definition of Employment and age
  • This definition of employment in Ontario is consistent with the Pension Benefits Act (PBA), and aligns with the definition of “province in which person deemed employed” under the Canada Pension Plan (CPP). So if the employee falls under CPP, they will also have to be part of the RPP or ORPP.
Testing Comparability Threshold at Subset Level
A single pension plan often covers more than one group of employees and provides different benefit formulas, contribution rates and accrual rates for different groups of employees. A pension plan may provide for differences in contribution rates or benefit structures based on:
  • The nature of the member’s employment;
  • The terms of employment, years of service;
  • Whether or not the member belonged to a union; and/or other objective distinctions.
Members who belong to a subset would be subject to the same contribution or benefit structure, a total contribution of eight per cent of base salary earnings. Employers will also be required to contribute at least 50 per cent of the total minimum contribution, being at least four per cent.

To help put into perspective how the new ORPP differs from existing RPP's Continuum II has put together a chart that compares the two savings plans. To view the chart, click here.

Want more information on the new ORPP and how it affects your retirement plan, contact us today.

Monday, February 8, 2016

Transferring your life insurance it right for you?

Are you a Shareholder thinking of transferring your life insurance policy to a Private Corporation? Before taking action, you may want to consider the following..


As financial advisors, one of the most common question we get around this time of year is whether a TFSA or an RRSP is a better.  There isn’t any hard and fast answer. Both have pros and cons, but overall it depends on your own financial situation. Below is a chart that compares the two.

Primary Purpose
Saving for any purpose
Retirement savings, home purchase or education

Annual contribution limit
$5,500 PLUS amounts withdrawn in previous years
18% of previous year’s earned income (Max limits apply), less any pension adjustments

Not tax-deductible
Tax- deductible
Unused contribution room
Carried forward
Carried forward
You are not taxed on withdrawals.

Withdrawals do not affect federal income-tested government benefits such as Old Age Security
Withdrawals are taxed as income at your marginal rate.

Withdrawals are counted as income and may affect federal benefits such as Old Age Security

Withdrawn amounts
Added to contribution room in future years
Contribution room is lost for the amounts you withdraw

Plan maturity
None; no upper age limits on contributions

End of year when you turn 71
Spousal plan
You can contribute directly to a spousal RRSP

Eligible investments
You can hold savings accounts, GIC’s, mutual funds, segregated funds, stocks, bonds
You can hold savings accounts, GIC’s, mutual funds, segregated funds, stocks, bonds

Age Minimum

Want a better idea of which is better for you? Try TaxTips TFSA vs. RRSP calculator. This calculator can help give you a better idea of which is right for you based on your unique financial situation. The calculator can be found here: TFSA vs. RRSP calculator.

If you need advice on your savings plan, reach out to us today!

Thursday, February 4, 2016

Year End Tax Tips 2015

It is that time of year again, tax time. As your financial advisors, and tax payers ourselves, we realize that no one likes to pay too much tax, if any. Luckily, there are many different tax savings strategies that can help both individuals and businesses save. The following outlines some of the suggested tax saving strategies from Grant Thornton LLP. While reading these strategies, compare them to your own financial plan and see if any could benefit you.

Advice for businesses: 

- Salary and bonus are both considered earned income which is used to calculate your RRSP contribution limit for the subsequent year.
- The first $500,000 of federal active business income of CCPCs receives preferential tax treatment by qualifying for the small business deduction.
- The previous tax rate for small businesses was 11% on the first $500,000, but is decreasing to 10.5% in January of 2016.

Advice for employees:
- Does your employer provide you with a vehicle? If so you will have a taxable benefit included in your income related to the personal use of the automobile
- If you are an employed tradesperson, you may be entitled to a tax deduction of up to $500 for the cost of new tools as a condition of your employment.

Advice for investors:
- If it makes sense, consider selling investments with accrued losses.
- If you are concerned about having to pay tax on your investments, consider buying investments that pay interests annually.
- Structure your loans correctly and deduct the interest.
- Analyze your stocks accordingly.

Advice for individuals:
- Consider income splitting through loaning funds.
- Consider all of the possibilities of contributing to your RRSPs.
For example: Consider delaying contributions if you expect to be in a higher tax bracket in the near future or considering withdrawing funds if you are in a year of low income.
- First time home buyer? Don't forget about the Home Buyer's Plan.
- Maximize your tax benefits by giving to charities. Donations over $200 result in tax savings at the highest marginal tax rate.

Sales tax advice:
- Remember to self-asses and remit GST/HST with respect to employee taxable benefits.
- Business owners should make sure they keep all invoices where GST/HST was paid.

 For the full article, download the PDF version here.
(Click: Get a head start on your year-end tax planning)

Tuesday, February 2, 2016

"Will" Power

Many people, despite good intentions do not plan for their own death. Mark Goodfield reports to The Globe And Mail about his experience on the topic and why having an updated will is more important than one may think.

While, as Mark notes, no one wants to think about their own death, having a professionally reviewed, and updated, will is inevitably important and here is why. 
A will helps to protect your assets:
  • Many assume their assets will automatically transfer to their spouse. However, unless the assets are held jointly with right of survivorship (except for Quebec), this will not be the case. If you pass away without a will, you are considered to have died intestate and the rules of your province of residence will determine how your estate is divided. As result, your assets may be distributed in a manner you did not anticipate or wish.
  • Many families transfer assets haphazardly for income tax, asset protection and family law reasons. Where the assets are capital in nature, such as stocks or real estate, the transfer frequently creates an income-tax liability that is often blissfully ignored by the parent making the transfer. As a consequence, your estate and/or executor may become liable for the income tax not paid when those transfers were undertaken.
  • Some people enter into handshake deals with lifelong friends in an attempt to avoid paying income tax, or to keep assets hidden away from spouses or certain family members. (Typically this relates to real estate). The obvious issue here is that you and/or your family are reliant on the honesty of your family friend to give back your share of the proceeds on the sale of the property.
While it can be expensive, hiring an expert to help build, and review, your will is worth every penny.
  •  Legal and accounting advice can be expensive, so you may avoid getting it or hire a low-cost alternative. This is penny-wise and pound-foolish thinking. 
  • Without proper advice, the estate can be left with a legal and income-tax mess and the professional fees to untangle everything often end up three to five times higher than it would have been had proper professional advice been obtained from the start.
In all, while the topic of death is never an easy one, it’s always better to be prepared. 
  • Imagine how hard it is to file a return when someone has passed away and documents relating to share or real estate purchases have long since been destroyed. As your executor or accountant will not have documentation of the cost base of certain properties, your estate may end up paying excess income tax.

To read the full article, click here.
Need help reviewing your will (or getting started on one)? Call us today, it is never too late to start planning!