The real solution for missing pension plan members is the establishment of a regime that allows plan sponsors to turn over unclaimed balances to a public agency, according to the Pension Investment Association of Canada.
“The inability of a plan sponsor to discharge its fiduciary duty for un-locatable members is a function of a public policy framework that is well-intentioned but ultimately impractical in a modern economy with a high degree of personal and labour mobility,” wrote Brenda King, chair of the PIAC, in a letter to the Canadian Association of Pension Supervisory Authorities in response to its draft guidance on searching for missing pension members.
“As such, we believe it is incumbent on policy-makers to offer practical solutions for responsible plan sponsors.”
The letter suggested that CAPSA encourages its members to follow the leads of British Columbia, Alberta and Quebec, and more recently the federal government, in establishing unclaimed balance regimes. Ideally, these would accept funds not only from plans undergoing a windup but also ongoing plans, noted the letter.
It also recommended that those provinces currently not prepared to establish an unclaimed balance regime should come to an arrangement with the federal government so that plan sponsors in those jurisdictions can access the federal regime. In addition, the PIAC noted it’s supportive of legislation that introduces a minimum amount for which pensions can simply be written off by the plan administrator.
“This approach could be similar to the small benefit cash-out rules that exist in various provincial pension benefits acts where the pension and commuted values are tested against a percentage of the years’ maximum pensionable earnings,” wrote King, in the letter. “Of course, the thresholds for writing off entitlements would be much smaller than those that exist for small benefit cashouts.”
The PIAC also supports the establishment of a public missing beneficiary registry, as proposed by the Ontario government. However, it noted that a registry isn’t likely to alleviate the fundamental issue around missing members — the inability of plan sponsors to transfer balances to a public agency.