Draft CAPSA guidance offers limited help with missing plan members

The Canadian Association of Pension Supervisory Authorities has published draft guidance for plan administrators and third-party consultants to help them search for missing pension members.

The task of locating members and beneficiaries has often placed a significant burden on pension plan administrators. They can’t complete plan windups (including partial terminations) until they’ve distributed all pension benefits to members and beneficiaries. Moreover, the employer can’t access surplus assets arising from such events, even when it has obtained regulatory consent, until it has met the condition of making all surplus payments due to the affected plan members.

Read: Pension industry hamstrung in efforts to find missing plan members

While some of the blame may be due to plan administrators’ failure to maintain adequate records, the situation is often complicated by factors beyond their control. They include legal or regulatory developments that create entitlements long after an employee has terminated employment and received a benefit from the plan and members’ failure to keep their contact details up to date or respond to the plan administrator’s requests for information. The result is increased costs for plan administrators and delays during the windup process. Unfortunately, very few pension benefits statutes provide any mechanism for dealing with the issue.

While CAPSA’s draft guideline does provide some useful guidance, it fails to provide a real solution to the issue, something that requires legislative action. It raises the following points:

  • The importance of records retention and management:

The draft guideline suggests plan administrators should retain records for members and beneficiaries for at least as long as they have an entitlement under the pension plan. That may include information related to plan enrolment, beneficiary designations, pension statements and court documents relating to marriage breakdown.

Read: Could Bank of Canada framework help find missing pension members?

It also emphasizes the importance of having a comprehensive records management and retention policy, something already advocated by most pension regulators. The policy should include a component setting out how the administrator can maintain contact with former and retired members, such as requesting updated contact information in the periodic statements now required in a number of jurisdictions.

  • Searching for missing members:

When the plan administrator can’t locate plan members through their last known address, the draft guideline says it’s the administrator’s responsibility to search for them. CAPSA suggests using all possible methods, including government databases and other public records, professional search organizations, registered letters to the member’s last known address, newspaper advertisements, union contacts and professional organizations, social media channels and retiree associations. If those efforts prove unsuccessful, the plan administrator should consider using the Canada Revenue Agency’s letter-forwarding service to locate missing individuals and review the options available to them under other provincial frameworks, such as unclaimed personal property legislation.

Finally, the draft guideline suggests that, where feasible, plan administrators should establish a database or registry of missing members on their website, subject to applicable privacy laws. Such an endeavour could entail significant cost and result in potential legal exposure around ensuring compliance with privacy laws and implementing appropriate security measures.

Read: FSCO issues policy on missing pension plan members

Overall, the draft CAPSA guideline reiterates much of the existing guidance on records retention and sets out many of the existing methods used by plan administrators to locate missing plan members. It isn’t a road map for an effective solution to the issue, which would involve legislative action. In fact, Ontario has already proposed a legislative fix through recent amendments to the Pension Benefits Act, which aren’t yet in force. They would require the superintendent of financial services to create and maintain an electronic registry of missing plan beneficiaries. 

Ontario’s pending changes will require the superintendent to maintain a missing beneficiary registry based on the information provided by plan administrators, and individuals will be able to apply for a determination of their status as beneficiaries of an Ontario-registered pension plan. Such a regime represents a welcome development for plan administrators as it creates a single cost-effective and efficient mechanism for dealing with the entitlements of missing members.