Plan administrators are eyeing the Bank of Canada’s current system that holds unclaimed bank balances for individuals as a possible solution to dealing with missing pension plan members.
As the federal Department of Finance launches a consultation on modernizing the bank’s program, law firm Blake Cassels & Graydon LLP sees promise in extending its approach to unclaimed bank accounts as a potential solution to the issue of missing pension plan members.
Finding missing plan beneficiaries is a nagging problem for administrators and the lack of a national system exacerbates the challenge.
“Alberta, B.C. and Quebec have some sort of regime of where to put money for unlocated beneficiaries. All the other jurisdictions have nothing,” says Kathryn Bush, a pension lawyer at Blakes.
“We’re gathering input from our clients at this point, seeing what people are particularly concerned about,” she adds. And according to a new release by the law firm, the number of missing individuals is on the rise.
Read: Pension industry hamstrung in efforts to find missing plan members
Immediate vesting is likely causing the rise, says Bush, noting employees who only spend a short time in a position are walking away leaving money behind. “When they leave, they may not even think they have a pension entitlement and yet they do. It’s a small amount of money but it’s owing to them,” she says.
As well, plan administrators often find searches expensive and unsuccessful. “Some clients have scores of people, especially with these small balances in a DC plan, where people don’t take their money and then they have no forwarding address and they don’t find them. It often kicks up on a plan windup where you have to find everybody,” says Bush.
“We’ve used, I think, four different search firms,” she adds, noting one of them was the Canada Revenue Agency. “If they have an address for an individual, they will send a letter out if you give them the letter to send. We thought that would be great and we have not had good luck.”
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That route is only partially effective since “serious privacy laws are such that they can’t tell you who they can send a letter to and who they couldn’t. So, all they can say is, ‘We sent a letter to 10 per cent of the people that you gave us a letter in respect of.’ They can’t tell you which 10 per cent. It’s been tremendously frustrating, because we thought we’d find people that way and we didn’t,” says Bush.
She adds search firms will also often charge a fee of up to $125 per name whether they end up finding the individual or not.
As a result, the Bank of Canada’s system looks attractive, according to Bush.
“It’s actually a really neat system. People can plug in their name and they can see if they ever had a bank account that they forgot about and the money ended up coming towards the Bank of Canada. And then it’s a very simple process to get the money out. You have to fill out a form, you have to prove who you are and then request a refund,” says Bush.
“We think it would be great if it were that easy for pension plan beneficiaries to find the monies that they’re owed through a central registry,” she adds.
Read: New CAPSA reviews to look at decumulation, missing members