The federal government is launching a consultation on draft amendments to pension legislation pertaining to the transfer of unclaimed benefits for missing plan members.
Under the Pensions Benefits Standards Act, plan administrators can transfer pension assets of missing members to a ‘designated entity.’ The draft amendments specify who qualifies as a missing member or beneficiary, as well as the information plan administrators must provide to the designated entity regarding unclaimed pension balances. As well, the amendments clarify the information the designated entity must publish to assist individuals in identifying the pension balances they’re owed.
“The government’s regulatory impact statement estimates that there are currently more than 500 unclaimed pension balances in terminated federally regulated plans with an estimated value of $10 million dollars,” said Jordan Fremont, a partner at Bennett Jones LLP, in an emailed statement to Benefits Canada. “The impact statement further indicates that approximately 25 per cent of terminated plans consist wholly of the unclaimed pension balances of unlocatable beneficiaries.”
With the current regime, pension balances that remain unpaid due to missing members represent ongoing liabilities, which can prevent an impacted plan from fully winding up and lead to ongoing administrative expenses, he said, adding this has long been a pain point for plan administrators.
The amendments stipulate that plan administrators can hold pension assets of missing members for up to 30 years if the amount is less than $1,000 and up to 100 years for amounts more than $1,000, after which time the assets must be transferred to the Crown.
Once the amendments come into force, the changes will provide a vehicle for plan administrators to use to discharge the plan’s obligations to missing members in a more timely manner, thereby reducing the administrative burden and related costs, said Fremont.
However, he noted the amendments stop short of addressing missing member issues faced by ongoing plans. “I expect that a solution for ongoing plans will become a focus for the industry and that we might see this addressed in future legislative amendments.”
The Department of Finance is welcoming comments and submissions on the proposed amendments until July 24.