The Power of Perspectives

The Canadian Bar Association

Kim Covert

National registry makes sense for unlocatable pension plan members

August 23 2018 23 August 2018

 

What do you do with pension benefits when you can’t find the plan member?

That’s a question the Canadian Association of Pension Supervisory Authorities is trying to answer with its Guideline No. 9, Searching for Un-locatable Members of a Pension Plan.

The CBA’s Pensions and Benefits Section recently responded to the consultation on CAPSA’s proposed guideline by, among other things, repeating its call for governments to create a fund for unclaimed pension benefits, and to establish internet-based tools through which former pension plan members and beneficiaries can search for that money.

“We urge the federal government to create a consolidated financial registry of all retirement buckets, including provincial registered pension plan entitlements, RRSP entitlements, and so on,” the Section writes, adding, “As the CBA stated in its 2017 submission, this could be accomplished by transferring unlocatable members’ entitlements to the Bank of Canada.”

In most parts of Canada, and that includes areas of federal jurisdiction, there is no process for pension plan administrators to transfer money out of the plan, the Section says. The issue of unclaimed pension monies is particularly problematic where the pension plan is being wound up, or the missing member reaches the age of 71, at which time the Income Tax Act requires pension benefits to be transferred out of the plan.

The fact that the responsibility of keeping track of members is shared between the plan administrator and other stakeholders, such as employers, bargaining agents, payroll service providers – not to mention members and beneficiaries themselves – should be reflected in the Guideline, the Section says, with their roles and responsibilities spelled out. For example, the Guideline “could go much further than it currently does in setting CAPSA’s expectations that members and beneficiaries report changes to their contact information as soon as they can.”

Moreover, while sometimes, as the draft Guideline states, “inadequate record keeping may result in loss of member and beneficiary information,” administrator error is not the only reason people become unlocatable. The Section notes that sending former and retired members regular benefits statements is one way of remaining alert to stale contact information, but not every jurisdiction requires this.

The Section advises encouraging, to the extent possible, a standard approach across jurisdictions for administrators to ensure up-to-date member information, and search for members if they can’t confirm the information.

“Standardization would be particularly beneficial for a common understanding of what constitutes a missing member. When or at what point in a process can a pension plan member be considered missing or unlocatable? … It would be useful if the Guideline articulated the kinds of circumstances in which a plan member is most likely to be considered missing (e.g. deferred vested members) and recognized the validity of a staggered or more nuanced approach.”

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