Pension plan option for small business
VICTORIA – The B.C. government is moving ahead with a new pension option for the two thirds of B.C. workers who don't have access to a group pension plan through their employer.
Finance Minister Mike de Jong introduced legislation this week to create Pooled Registered Pension Plans (PRPP), making B.C. the first province to sign on to a new federal program. The system would allow businesses or self-employed people to set up defined contribution pension plans administered by financial institutions.
De Jong announced the program along with Ted Menzies, federal minister of state for finance, who hopes to have harmonized systems across the country so people can continue to build retirement income if they move.
Menzies said the PRPP system offers greater simplicity for small businesses that don't have employee pension plans. The new approach is designed to close a gap in tax-deductible Registered Retirement Savings Plan room that Canadian workers are choosing not to use despite the tax advantages.
Once an employer signs up, employees would be automatically enrolled. They have 60 days to opt out, after which time pension contributions would be deducted. Employers don't need any financial expertise, and employees would have to "overcome the inertia of being involved in the plan" to get out of it, Menzies said.
De Jong said B.C. decided to make employer contributions optional, after consulting with business organizations.
Mike Klassen, B.C. director of the Canadian Federation of Independent Business, said small business accounts for almost half of the private sector employment in B.C., the largest share of any province.
"Working forever is not an option," Klassen said.
Menzies said expanding the Canada Pension Plan would require two thirds support from all provinces, and that support was not offered at a recent meeting of provincial finance ministers. But there was unanimous support for the PRPP option.
Wilf Scheuer, president of Courtney-based Pro Star Mechanical Technologies Ltd., said he plans to use the new pension option and match employee contributions in order to retain skilled workers.
Pro Star retrofits buildings with geothermal heat pumps, tankless hot water systems and other specialized equipment. Scheuer said he recently lost an engineer, hired away by a large Los Angeles-based company, a sign that his and other small firms are in a global competition for top talent.