[2020-005] Peter Waite - PIAC
[2020-005] Erin Reiss - OPTrust
[2020-005] Simon Laxon - Willis Towers Watson
[2020-005] David D'Agostini - LiUNA Pension Fund of Central and Eastern Canada
FSRA Response:
L’ARSF est reconnaissante des suggestions et commentaires relatifs à la création d’un nouveau registre des participants manquants. Les membres du Comité ont échangé à ce sujet pendant un certain temps. En fin de compte, l’ARSF a l’intention de collecter les données sur le nombre de participants manquants et la valeur de leurs prestations ainsi que d’autres points de données qui la guideront dans la création du registre éventuel à venir. L’ARSF est reconnaissante de la réflexion sérieuse dont ce sujet a fait l’objet, notamment la volonté de pousser l’idée du registre jusqu’à la création d’une sorte de caisse où seront déposées les prestations ciblées.
[2020-005] Robert Blakely - MEBCO
[2020-005] Rupe Prasad - PBI Actuarial Consultants Ltd.
[2020-005] David D'Agostini - LiUNA Pension Fund of Central and Eastern Canada
[2020-005] Marianne Nguyen - Sun Life
[2020-005] Erin Reiss - OPTrust
[2020-005] Simon Laxon - Willis Towers Watson
[2020-005] Sarah Hobbs - ACCAP
FSRA Response:
L’ARSF est également satisfaite des arguments présentés sur l’utilité d’exiger certains renseignements (notamment, les C.V.) ou l’obligation d’aviser l’ARSF après qu’on a trouvé un participant pour lequel une renonciation aux déclarations bisannuelles avait déjà été obtenue. Toutefois, ce sont des obligations légales pour lesquelles l’ARSF ne jouit pas du pouvoir discrétionnaire lui permettant de les modifier ou de ne pas en tenir compte. L’ARSF a néanmoins porté ces commentaires à l’attention du gouvernement.
L’ARSF reconnaît la valeur des commentaires portant sur le choix qu’a l’administrateur d’appliquer ou non la renonciation après avoir rempli son obligation fiduciaire de rétablir la communication entre les participants et leur régime de retraite. Par la présente Directive (approche), l’ARSF exprime clairement son approche de surveillance qui vise à faciliter, aux administrateurs de régimes qui choisissent d’y recourir, le processus de demande et d’approbation de renonciations à l’exigence de remettre les déclarations bisannuelles aux participants manquants.
[2020-005] Adela Mall - ABO
[2020-005] Peter Waite - PIAC
[2020-005] Rupe Prasad - PBI Actuarial Consultants Ltd.
[2020-005] Simon Laxon - Willis Towers Watson
[2020-005] David D'Agostini - LiUNA Pension Fund of Central and Eastern Canada
FSRA Response:
L’ARSF est reconnaissante des commentaires et les avis que les acteurs du secteur ont fournis sur les problèmes entourant les participants manquants auxquels la présente Directive ne s’applique pas. Ces exemples comprennent certains des points discutés lors de réunions du Comité, mais ces points nécessiteraient que des modifications législatives ou réglementaires soient apportées. Parmi ces points, on trouve la question sur la possibilité d’éteindre le droit aux prestations, ou celle sur la déduction des frais liés aux recherches directement des prestations, réduisant ainsi le droit à des prestations du participant.
Les solutions comme l’établissement d’un partenariat avec le gouvernement figuraient parmi la rétroaction que le Comité consultatif technique a fournie. L’ARSF continue de travailler en ce sens.
[2020-005] Robert Blakely - MEBCO
[2020-005] Rupe Prasad - PBI Actuarial Consultants Ltd.
[2020-005] David D'Agostini - LiUNA Pension Fund of Central and Eastern Canada
FSRA Response:
L’ARSF est un organisme de réglementation fondé sur des principes et axé sur les résultats. Nous aspirons, dans les deux directives, à confirmer qu’il incombe aux administrateurs, en tant que fiduciaires, d’administrer leur régime dans l’intérêt supérieur des participants à ce régime. L’ARSF demeure fidèle à son opinion selon laquelle les administrateurs, à titre de fiduciaires, sont les plus à même d’établir les méthodes de recherche appropriées et la fréquence idéale de ces recherches, en fonction des faits, des circonstances et des caractéristiques qui sont propres au régime qu’ils administrent. L’ARSF n’émet donc aucune recommandation ni exigence quant au nombre minimal ou maximal de recherches, aux méthodes utilisées, aux coûts ou à la fréquence de ces recherches.
[2020-005] Robert Blakely - MEBCO
FSRA Response:
L’ARSF est reconnaissante des commentaires et les suggestions du MEBCO.
Nous avons étudié tous les commentaires reçus, ce qui nous a amenés à modifier la Directive pour donner suite aux précisions énumérées dans la réponse envoyée dans le cadre de la consultation. Par exemple, l’ARSF a remplacé par d’autres mots les termes qui semblaient évoquer une obligation alors qu’il n’y avait aucune exigence législative.
[2020-005] Adela Mall - OBA
FSRA Response:
L’ARSF est reconnaissante des commentaires de l’ABO et c’est avec bonheur qu’elle y trouve un écho à son approche fondée sur les principes.
L’ARSF a étudié tous les commentaires et les a abordés lorsque cela était possible.
[2020-005] Peter Waite - PIAC
FSRA Response:
L’ARSF est reconnaissante des commentaires sur la Directive ainsi que de la prise en considération du fait qu’on y exige des administrateurs qu’ils administrent leurs régimes dans l’intérêt supérieur de tous les participants.
[2020-005] Rupe Prasad - PBI Actuarial Consultants Ltd.
FSRA Response:
L’ARSF remercie PBI d’avoir fourni des avis et des commentaires sur la Directive. Nous avons apporté des modifications visant à clarifier certains éléments lorsque cela était possible.
[2020-005] David D'Agostini - LiUNA Pension Fund of Central and Eastern Canada
FSRA Response:
L’ARSF est reconnaissante des commentaires émis par LiUNA. Nous les avons révisés, puis, si cela était possible, nous avons modifié la Directive de manière à y incorporer ces propositions et à mettre certains éléments au clair. Toutefois, la Directive (information) a pour but d’indiquer les pratiques et les principes dont les administrateurs de régimes, les employeurs et les participants devraient tenir compte. Elle ne comporte donc pas de précisions supplémentaires sur les méthodes de recherche et sur leur efficacité dans différentes provinces.
[2020-005] Erin Reiss - OPTrust
FSRA Response:
L’ARSF remercie OPTrust de ses commentaires sur la Directive et sur les questions liées aux participants manquants de manière générale.
[2020-005] Rossana Di Lieto - RREO
FSRA Response:
L’ARSF remercie le RREO de ses observations. Elle a apporté des précisions à la Directive en réponse au problème mis en évidence.
[2020-005] Sarah Hobbs - ACCAP
L’ARSF remercie l’ACCAP de ses propositions et ses commentaires concernant la Directive et les questions liées aux participants manquants. Le Comité consultatif technique s’est affairé à étudier la possibilité de faire référence à des situations où les participants refusaient de participer plutôt que d’être manquants. L’ARSF s’est fiée au Comité, qui était d’avis qu’il s’agissait d’une question distincte, dont les incidences et les outils éventuels pourraient être différents. Elle a donc décidé de ne pas en tenir compte dans la présente Directive.
[2020-005] Simon Laxon - Willis Towers Watson
FSRA Response:
L’ARSF remercie Willis Towers Watson de ses commentaires favorables sur les directives. L’ARSF a examiné attentivement les commentaires sur la Directive, de même que l’importance de transmettre l’information aux participants. Elle abordera les questions y ayant été soulevées en apportant des corrections aux directives et en insérant les renseignements pertinents dans les sections de ses sites Web qui sont axées sur les consommateurs.
[2020-005] Elizabeth Boyd - Blake Cassels & Graydon LLP
FSRA Response:
L’ARSF remercie Blakes de ses commentaires. Nous avons modifié la directive traitant de la renonciation de remettre une déclaration bisannuelle aux participants manquants (approche), de manière à clarifier les sujets mentionnés dans la lettre de l’entreprise.
[2020-005] Marianne Nguyen - Sun Life
FSRA Response:
L’ARSF remercie Sun Life de ses propositions et de ses commentaires concernant la Directive. Nous avons étudié attentivement les propositions, puis modifié la Directive de manière à tirer certains éléments au clair.
[2020-005] Danelle Parkinson & Ric Marrero - ACPM
FSRA Response:
L’ARSF remercie l’ACARR de ses propositions concernant les directives. Nous avons étudié les commentaires et les sujets pour y apporter des précisions. Nous les avons abordés dans la Directive si cela était possible.
Plus particulièrement, nous avons tenté d’améliorer la cohérence sur le plan des renseignements personnels ou délicats et des renonciations à des exigences ayant été accordées avant que la législation soit modifiée à la fin de 2019.
De plus, nous avons porté les propositions à l’attention du gouvernement, par exemple, celles touchant la question des participants inscrits aux régimes de retraite interentreprises, mais n’ayant pas mis à jour les renseignements de base et aux relevés annuels.
Nous remercions l’ACARR d’avoir attiré notre attention sur les éléments liés à la collecte de données. Nous avons remédié à la situation.
[2020-005] Jason Vary - Actuarial Solutions Inc.
FSRA Response:
Thank you for sharing your input on this topic, including on FSRA’s consultation drafts. The committee also considered the idea of a centralized database including the unproclaimed registry in the Pension Benefits Act. That discussion included alternative models, such as the Bank of Canada’s. FSRA intends to collect data over the next few years to help determine the size and scope of the issue of missing beneficiaries. That data will help inform future initiatives, including supporting any policies the government may wish to introduce.
A summary of the outcomes and recommendations from the committee is published on FSRA’s website at: Summary of Missing Member Committee Outcomes and Recommendations.
Comments from Jason Vary, Actuarial Solutions:
Link: http://www.actuarialsolutionsinc.com/hide-and-seek-with-financial-consequences/
Hide and Seek with Financial Consequences
Unlocated pension plan members have long been a problem for virtually every pension plan and unfortunately this problem will never really go away. The best that a plan administrator can do is take their fiduciary duties seriously and employ various strategies to reunite wayward former pension plan members with their hard-earned benefits.
On that note, the Financial Services Regulatory Authority of Ontario (FSRA) is currently conducting public consultations on two draft guidance documents: Principles and Practices Regarding Missing Members, and Waiver of Biennial Statements for Missing Former and Retired Members. The deadline for comments is September 20, 2020 and I imagine that these policies will be finalized soon thereafter. At that point, pension administrators will be on notice to make sure that they have a robust process in place to address unlocated members.
Old Problems
Unfortunately, the primary responsibility to keep contact information up to date rests with pension plan members, many of whom have a human tendency to be inattentive to financial matters, especially those that don’t impact their day-to-day living.
Of course, pension plan administrators also have a responsibility to track their former members. While recordkeeping systems and practices have continuously evolved and improved, the fact that pension promises last for many decades provides ample time for things to go amiss. Although this problem has continued to grow over time, thankfully the options available to find lost members has also increased largely thanks to online social networks, so many plan administrators do have policies in place to search for former members.
The problem with unlocated members came to the forefront a few years ago with the introduction of annual or biennial statements to deferred vested and retired members. It’s probably not good fiduciary practice to send out a document filed with private and confidential information to an address you suspect is no longer valid!
Current Solutions
Ironically, the relatively new requirement to send out regular statements to deferred vested and retired members is part of the solution to frequently communicate with former pension plan members to remind them of the need to keep the plan administrator apprised of any address changes. I predict that we will ‘lose’ far fewer former members going forward, given that we will find out much sooner that we’ve lost them and can potentially start searching immediately.
As FSRA helpfully points out in their new missing member guidance, terminating pension plan members deserve extra attention when they’re being presented with paperwork as they exit:
- Reminding them to promptly notify the administrator of any changes in address.
- Letting them know that governments will not automatically provide updated contact information to the administrator on behalf of the former member.
- Obtaining advance consent from the former member (or even existing active members) to publish their personal information and authorize government departments to release personal information should they become unlocated in the future.
- Immediately contacting former members who do not complete their termination paperwork, and therefore get defaulted to a deferred pension, to confirm the default election and again remind them about providing updated contact information.
- Forcing immediate cash-outs of any benefits that fall under the ‘small amount rules’.
- Re-engaging with former members as they approach retirement eligibility.
With respect to retirees, we highly recommend the periodic performance of ‘pensioner audits’ to help uncover updated contact information or unreported deaths. These audits require a positive response from every single pensioner, and if there is still no response after a number of follow-ups and other attempts to contact the pensioner, plan administrators will usually presume the retiree has died and cease pension payments. This will sometimes cause the missing retiree to resurface in a hurry with updated contact information (and the resumption of pension payments, with a catch-up payment if necessary).
Despite best efforts, the reality is that former members will continue to go missing. At that point a good fiduciary will take reasonable measures to locate the former member. They key here is ‘reasonable’ and that will be up to the plan administrator to decide based upon a number of factors such as:
- How long has the former member been missing, since the chance of success will decrease with the passage of time.
- The age of the member, since it may be easier (and more rewarding) to find the former if they’re eligible to commence their pension. On the other hand, if the member is calculated to be at an advanced age then it may be worth checking obituaries in order to make contact with the heirs and pay out the death benefit.
- The cost and effort to perform the search. FSRA helpfully lists a number of search tactics in Appendix 1 of their guidance on missing members. Some items will require little effort (e.g. searching LinkedIn or Facebook), some will require a modest cost (e.g. sending a registered letter to a last known address), and some will cost real money (e.g. engaging a professional search firm).
- The size and value of the monthly pension, since more effort should be expended to find former members with larger benefits.
- The number and frequency of unlocated members, since it may be more efficient to search for a larger number of members at one time.
Plan administrators are encouraged to document their processes and procedures that will be followed when members become unlocated. In addition, any efforts undertaken in an attempt to locate former plan members should be thoroughly documented to demonstrate the fulfillment of fiduciary duties and to aid in future searches.
Current Distractions
Now let’s turn our attention to the guidance document on waivers that was also released for consultation.
While I’m totally in favour of increased communication with former and retired pension plan members by requiring regular member statements to be sent out, it seems idiotic that you would need an official waiver from FSRA to not be forced to send a statement to an address that you know is incorrect. Hello privacy breach!
FSRA’s draft guidance on waivers goes into excruciating detail on how you would apply for a waiver, the criteria for FSRA’s approval, and the continuous need to apply for new waivers for missing members and revoke existing waivers when members are found; however, near the beginning of their guidance, FSRA very helpfully points out that there is no requirement for a plan administrator to apply for the waiver.
Hallelujah! What should be obvious to any fiduciary is a duty to conduct reasonable searches for unlocated members in an effort to deliver the promised benefits. So, as long as the plan administrator can demonstrate that they have conducted appropriate search activities they will be off the hook if anyone asks. Only those administrators who wear belts and suspenders at the same time will feel the need to go through the waiver process.
Future Remedies
Given that the problem of unlocated pension plan members will never go away, I was happy to see some of the other longer-term recommendations from FSRA’s advisory committee on missing members.
In particular, FSRA will begin to collect information on the scope of the problem and will continue to consider additional solutions, such as:
- Establishing information sharing arrangements with other ministries, departments and agencies of the government of Canada and the provinces to improve the ability to locate missing members.
- Creating an optional search tool hosted by FSRA to help reunite missing members with plan administrators.
- Increasing the small benefit thresholds.
- Providing a mechanism for a discharge for unlocated former pension members at a very advanced age.
However, what’s really missing in Ontario is someplace for plan administrators to send money on behalf of unlocated members, thereby transferring the responsibility for these benefits to a government entity. The Bank of Canada does this for unclaimed bank balances and some provinces such as Quebec, Alberta and B.C. have unclaimed property departments which will accept pension benefits. To me, the obvious answer in Ontario would be to transfer the unclaimed pension benefits to the Pension Benefit Guarantee Fund (PBGF), which presumably could use the extra funds as they always seem to be running a bit low.
Today’s Homework
Pension plan administrators should take stock of the number of unlocated members in their pension plan and ensure that they have a reasonable and well-documented search process that works to reunite former members with their long-lost pension benefits.