Will federal legislation open doors to provincial legislation for transfer liability?
If all goes well, pension plan sponsors may be able to get regulatory relief from responsibility for missing members by the end of 2023 and the federal legislation might even become incentive for provincial governments to follow suit and develop similar legislation.
In November 2020, the government of Canada released a consultation paper for changes to the Pension Benefits Standards Regulations, 1985, for potential solvency funding relief options and measures to further strengthen the framework for federally regulated pension plans. In June 2023, the department released a 30-day (until July 24) consultation paper for comments on the draft legislation.
Once approved and finalized, the legislation might even come into force by the end of the year, says Stephanie Kalinowski, a partner in the Pensions and Benefits group at Torys LLP.
“This development is quite exciting. For a number of years now, missing members have become more and more of a challenge as plans look into their membership and realize they have missing members and they're spending time and money on trying to locate them,” she says.
“Sometimes these members have very small balances because they've terminated 30 years ago and completely forgotten that they had this little pension entitlement at their former employer.”
Delayed wind up
“And missing members can delay the completion of the wind up which, unfortunately, many DB plan employers are pursuing and have been pursuing over the last number of years.”
Kalinowski adds there hasn’t been much regulatory relief, with the exception of Quebec, which has developed a process. The draft legislation would “help plan administrators deal with these missing members.”
The legislation is designed so a liability can be transferred to another entity and who will assume responsibility. The legislation suggests the Bank of Canada (BoC) will be designated at that entity. The BoC has mechanisms in place for dealing with unclaimed property.
“If [this legislation] goes forward, initially it would only be applicable to federally regulated plans, but there's always the hope that other provinces might be able to piggyback on to this. Once there's a system in place, then it makes it a little easier to open it up to other jurisdictions.”
Once the legislation is in place, it will simplify plan wind ups for plans sponsors. “It will be useful because winding up a plan can, in some cases, be delayed for years due to a small handful of members who have a couple of thousand dollars worth of benefits. “Being able to wrap up the wind up faster and not being held up by a handful of missing members will be valuable for employers who are trying to get out of the DB business.”
