Unclaimed property funds benefit both pension plan administrators and beneficiaries

  • December 21, 2020

Unclaimed pension entitlements are a problem both for the intended beneficiaries, who aren’t getting their money, and for plan administrators, who are burdened by regulatory requirements and extra administrative costs.

That’s why the CBA has long advocated for government to create funds for unclaimed entitlements and to establish internet-based tools to help former pension plan members and other beneficiaries search for them – something New Brunswick’s Financial and Consumer Services Commission sets out in its proposed rules Unclaimed Property-General and Unclaimed Property-Fees, which establish a framework to implement the province’s unclaimed property regime.

Asked to comment on these proposed rules, the CBA’s Pensions and Benefits Law Section said New Brunswick has the opportunity now to harmonize its rules with other jurisdictions – notably British Columbia and Quebec – “which supports efficiency in pension administration, reduces regional inequities and encourages broader pension coverage.”

Overall, the Section applauds the proposed General Rule, which recognizes the unclaimed entitlements in plans that have been wound up. The rule doesn’t, however, address unclaimed entitlements in ongoing plans, which the Section says are also problematic, causing concerns under the Income Tax Act and requiring plan administrators to conduct periodic and sometimes costly searches for beneficiaries. It suggests New Brunswick adopt Alberta’s approach, which allows administrators of both ongoing and wound-up plans to transfer benefits to the unclaimed property fund.

“Expanding the unclaimed property regime to support unclaimed entitlements from ongoing pension plans will also benefit former members and beneficiaries, who are often unaware of the unclaimed pension entitlement,” or might have difficulty contacting the plan administrator, particularly in cases where the sponsor has changed, the Section says in its submission.

“In these cases,” the Section says, “it is clearly easier for the owner of unclaimed entitlements or their beneficiaries to search the database of the unclaimed property fund rather than track down the plan administrator.”

New Brunswick’s proposed rules also set out a three-year timeline before benefits are considered to be “unclaimed.” The Section notes that time periods in existing legislation range from 90 days in Alberta (provided that efforts have been made to prove the beneficiary is indeed missing) to five years in B.C.

“In our view, the three-year period in the proposed General Rule is too long for unclaimed entitlements to be held in wound-up plans before they can be transferred to the unclaimed property fund,” the Section says, noting that as long as unpaid amounts remain in the fund the provincial law requires an administrator to continue to oversee the funds and search for the missing members. The Section says three years works as a limit after which the funds must be transferred from a wound-up plan, but recommends that plans be given the flexibility to transfer the funds earlier, after a reasonable effort has been made to find the plan members or beneficiaries.

It recommends a similar timeline for transferring unclaimed funds in ongoing plans.

“In our view, adopting a shorter period before which unclaimed entitlements are presumed to be unclaimed property would enhance cross-jurisdictional harmonization (especially with Alberta), significantly reduce ongoing administration costs incurred by both wound-up and ongoing plans, make it easier for former members and beneficiaries to access their entitlements, and allow administrators of ongoing plans to comply with the requirements of the ITA,” the Section writes.