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Missing Pension Plan Beneficiaries and the Federal Consultation Paper on the Financial Sector Framework

August 21, 2017

The Bank of Canada currently maintains a program for holding account balances for missing individuals, which are transferred from banks and trust companies in certain circumstances. On August 11, 2017, the federal Department of Finance released a consultation paper (Consultation Paper) indicating that consideration is being given to modernizing this program. We understand that the federal Department of Finance may be interested in whether there is support for extending the Bank of Canada program to include amounts relating to missing pension plan beneficiaries.

Pension plan administrators have a fiduciary duty to ensure that each member and beneficiary is paid the benefits to which they are entitled. In addition, the Income Tax Act (Canada) requirement that retirement income from a registered pension plan commence no later than the end of the calendar year in which the recipient reaches age 71 must be honoured. Further, increasing numbers of missing beneficiaries impose a significant administrative burden on plan administrators (particularly in light of new legislative requirements to provide biennial statements to retired and former members), imposes delays on plan wind-ups and exacerbates the risk of pensions being improperly paid (i.e., unwittingly after death of the beneficiary).

Alberta, B.C. and Quebec currently have processes for dealing with unclaimed amounts owing to pension plan beneficiaries. However, Alberta's application process is burdensome and the cost of hiring the required search providers can be significant. The processes in B.C. and Quebec also have limitations, including that transfers cannot occur prior to specific time limits.

The Bank of Canada's unclaimed balances program has proven to be effective for returning amounts to missing persons for a number of reasons, including the following:

  1. It utilizes a simple online platform
  2. It advertises the program
  3. It currently operates without fees charged to the financial institutions or individuals
  4. Canadians are familiar with this program.

The Bank of Canada program would seem to be an effective and efficient method for handling amounts for missing pension plan beneficiaries provided that the plan administrator receives a full discharge with respect to all amounts transferred.

Submissions on the Consultation Paper are due by September 29, 2017. The Blakes Pensions, Benefits & Executive Compensation group will be making submissions on this matter.

Blakes has one of the largest and highly ranked groups of pension lawyers in the country, with Partners in each of Ontario, Quebec and Alberta.

For further information, please contact a member of our Pensions, Benefits & Executive Compensation group.