New Brunswick’s new unclaimed property regime, which came into force on Jan. 1, 2022 and is the fourth such provincial regime in Canada, will finally allow defined benefit pension plan sponsors with unlocatable or missing members to fully windup their plans.
The governing legislation, the Unclaimed Property Act, received Royal Assent in March 2021, but the implementing rules were only adopted by the New Brunswick Financial and Consumer Services Commission in December.
“Without the [Unclaimed Property Act] rule, pension plans with unlocatable or missing members aren’t able to distribute all their assets and, therefore, aren’t able to have the pension plan registration revoked,” wrote Andrew Nicholson, the commission’s director of unclaimed property, in an email to Benefits Canada.
Christopher Marr, a partner in Stewart McKelvey LLP’s Saint John office, says his pension plan sponsor clients are welcoming the new regime. “Clients have asked me more than once what to do with unclaimed pension assets, but there was no system in place that would allow for a definitive answer. That was unfortunate, because a member who cannot be located places a practical burden and expensive fiduciary obligation on plan administrators that need to hold on to funds and determine what to do with them, for what could be an indefinite period of time.”
However, in its initial phase, the unclaimed property program applies only to wound-up plans. “Commission staff have heard from stakeholders that one of the biggest issues they are currently faced with in New Brunswick is the difficulty with unlocatable or missing members in relation to pension plans that are winding up and not active plans,” said Nicholson.
But as Marr sees it, excluding ongoing plans limits the new regime’s benefits. “At first glance, it’s hard to tell whether the rules as they stand would suffice for ongoing plans, but at the same time there’s nothing that’s obviously lacking.”
Still, the FCNB hasn’t ruled out broadening the rules’ application. “As the program evolves, the commission may consider other types of property to which the program might apply,” said Nicholson.
Under the rules, wound-up plans with unclaimed assets will be required to hold on to the assets for three years after approval of the windup report. They must also give notice to the last known address of the owner. If no claim is made, the plan must remit the property to the director of unclaimed property.
“Once the holder fulfills its duties under the act, the holder is relieved from liability and the director becomes the custodian of the property,” says Marr. “The director will maintain a searchable directory, allowing owners to identify and claim any unclaimed property held in their name.”
Notwithstanding the new regime, Marr recommends administrators still consider the following measures to limit potential problems associated with unclaimed property: implement a plan records management policy to ensure plan member information remains accurate, including reminders in member communications; establish a missing members policy that sets standards for searching for members; and establish procedures to address late commencement of pensions after missing persons are found.