In August, the Canadian Broadcasting Corp. reported that the U.K. Department for Works and Pensions cut off state pension payments to several expatriate pensioners living in Canada due to their failure to complete and return forms to prove they were still alive.
However, the report also found many of these retirees never received the forms and the U.K. government — which initially blamed postal delays — later backpedaled and reinstated impacted retirees with backdated payments.
While administrators of Canadian pension plans haven’t been featured in a similar dust-up, there’s no uniform or legislated process as to exactly how and when administrators of Canadian plans should request proof that pensioners are still alive and what they should do if they don’t receive it.
Some administrators request confirmation of existence twice a year, while others send out proof-of-life forms every few years. Many administrators take the position that, if a retiree doesn’t return the requested form, their pension will be suspended.
The Office of the Superintendent of Financial Institutions has been chiding administrators of federally regulated pension plans about this practice for years. In May, the OSFI issued a newsletter referencing its 2013 guidance on survivor audits, in which it said, “A retiree’s or survivor’s failure to complete a form requested by the plan administrator or respond to a series of letters should not be considered sufficient evidence or reasonable basis to conclude that the retiree or survivor is deceased.”
In its most recent newsletter, the OSFI stated it expects plan administrators to establish a “sufficient and reasonable basis on which to conclude that a retiree or survivor is deceased.”
Other pension benefits regulators across Canada have echoed the OSFI’s position. Several regulators’ websites set out actions they describe as “best practices” that administrators should carry out before cutting off a pension.
These best practices include sending letters by registered mail, attempting to reach retirees and their families by phone, contacting unions, reviewing obituaries and conducting searches of publicly available databases. In August, New Brunswick’s pension regulator described such best practices as actions that administrators can take to “establish concrete evidence that the retiree or survivor is deceased.”
The concrete evidence test is tough. Administrators have a legal obligation to stop paying pension benefits upon the death of a retired plan member. The assets of a pension plan — and the benefits security of the remaining plan members — are improperly reduced if monthly payments continue to be paid while the administrator searches for proof of a plan member’s death.
In the absence of prescribed requirements, pension administrators should act reasonably. In addition to adopting a written policy, they should also consider establishing an age at which pensions will be terminated if there’s no response to a mailing or phone call. Pension administrators should also inform plan members that once they start receiving pension benefits, they’ll be asked periodically to confirm information.
Administrators should also consider whether the relevant pension regulator has issued guidance on this matter and whether or not it’s appropriate — and if they’re not adhering to what the regulator has suggested, they need to be prepared with an explanation.
Finally, pension administrators need to keep meticulous records of all mailings, electronic communications and phone calls, while responding promptly to retiree concerns.