Draft Information Guidance: Principles and Practices Regarding Missing Members Draft Approach: Waiver of Biennial Statements for Missing Former and Retired Members
The Multi-Employer Benefit Plan Council of Canada (MEBCO) is a not-for-profit corporation representing the interests of Canadian multi-employer pension and benefit plans.
MEBCO was established in 1992 to represent the interests of multi-employer benefit plans (MEPs) in Canada. MEBCO advocates on behalf of all stakeholders involved with MEPs, including union and employer trustees, independent and professional trustees, professional third party administrators, non-profit or “in house” plan administrators and other professionals including actuaries, benefit consultants, lawyers, investment managers, and chartered professional accountants.
MEBCO’s Board of Directors is composed of volunteer representatives of these groups, and is responsible for identifying, addressing, and advocating with respect to all issues impacting multi employer plans in Canada.
We are writing to submit our comments and suggestions with respect to FSRA’s proposed Guidance: Principles and Practices Regarding Missing Members and the Approach Waiver of Biennial Statements for Missing Former and Retired Members.
Our comments on the above documents will follow. We do comment, up front, that we think FSRA has missed an opportunity to hold a registry for missing former and retired plan members. MEBCO has recommended that FSRA establish such a registry in the past and we continue to believe that, at the present time, FSRA is in the best position to establish an Ontario registry.
Our recommendation is only that FSRA have a searchable database that would include only the appliable plan member’s name, the name of the applicable pension plan and its registration number and contact information for the plan administrator.
We are not recommending a “monetary registry” for two main reasons:
- a) the approach would likely be to deposit the commuted values with the registry holder and with Ontario’s present rules applied to commuted values for multi-employer pension plans this is financially punitive to the remaining members of the applicable plan;
- b) If a financial registry was established it should be up to the pension plan administrator to deposit the pension amount or to retain it, except perhaps in the event of a plan wind-up.
We also would like to see more emphasis in this document that members have responsibilities to keep their information current with the plan administrator. We feel that this document puts little focus on member responsibilities. We note that FRSA policy A300-200 Management and Retention of Pension Plan Records by the Administrator, is footnoted. Paragraph. 9.2 of that policy states:
It is also important for plan beneficiaries to keep the administrator up-to-date about any change(s) to their personal situation (e.g., change in mailing address, marital status, designated beneficiary, etc.).
We note that FSRA has thoughtfully added a guidance section for multi-employer pension plans. Is there no special need for guidance for other sectors?
The following are our comments regarding the Guidance:
Section 1.4 - Pension plans must be administered and their assets invested, with the care, diligence and skill-required of a fiduciary in accordance with the standard of care prescribed by the PBA, the common law and equity. Administrators are fiduciaries, and, as such, should take appropriate steps to facilitate members staying connected with their pension plan after terminating employment. This Guidance aims to help administrators fulfil their fiduciary duties.
MEBCO comment: Plan administrators should take the appropriate steps to stay connected with the plan members at all times. Not just after termination of employment. Multi-employer pension plans may find this particularly difficult as members’ work is mobile and could be short term with significant detachment between employment and plan administration especially with respect to enrolment.
Section 2.7 – With respect to how to address the issue of missing members, administrators may wish to consider, among other things, their fiduciary responsibilities, their oversight of third party service providers, and the inclusion of components in their governance documents that address keeping members connected to their pensions and missing members search processes.
MEBCO comment: As noted later in the Guidance this is not just a matter of oversight but could be one of establishing contractual obligations with the applicable delegates/service providers.
Section 3.2.1 – Pension plan members have responsibilities, including a primary role to ensure that administrators have accurate and relevant personal information (including contact information). Members should notify their pension plan administrator whenever their mailing address, email address, name, or marital status changes.
MEBCO comment: We stress that members “must” notify, not “should” notify. We suggest that FSRA add that circumstances leading to possible beneficiary changes would be a reason for members to contact their pension plan.
Section 3.3.1 – The standard of care required of plan administrators includes maintaining accurate and current member records. However, administrators must fulfil their fiduciary obligations with respect to communicating with members, maintaining records, managing the pension fund and paying benefits.
MEBCO comment: Last sentence of Section 3.2.1 should be moved to Section 3.3.1 otherwise in could be read as an “out” to plan member responsibility. Please see our earlier comments that this document does not stress enough that plan members have clear responsibilities for looking after their pension records, just as they would any other asset.
Section 3.3.2 – Administrators need accurate contact information for members, especially on and after termination. Administrators are best positioned to determine effective strategies for their plan membership.
MEBCO comment: Add the word “record keeping” so the sentence reads “…to determine effective record keeping strategies…”
Section 3.4.1 – Regularly reminding members to provide the plan administrator with any changes to their contact information and informing them that governments will do not automatically provide such updated personal information to the plan.
MEBCO comment: Change “will not automatically provide” to “do not provide”. Our experience is that there is no provision for any government to notify the plan administrator of an applicable change.
Section 3.5.2 – When to search: Administrators are best positioned to determine when to start, discontinue or re-start searching for members, taking into account relevant considerations”.
MEBCO comment: Shouldn’t the FSRA standard be to establish a regular process for searches and it would be up to the pension plan to determine what is appropriate?
Section 3.5.7 – Document it: For consistency, transparency and administrative efficiency and to demonstrate the fulfillment of fiduciary duties, plans that routinely have missing members may find it valuable to document the processes and procedures that guide their plan-specific approach to searching.
MEBCO comment: Change the phrase “may find it valuable” to “should document the processes”.
Section 3.6.1 – For multi-employer pension plans (MEPPs), responsibility for initial collection of member data often rests with participating employers or unions (or their respective agents). We expect participating employers and unions (and their agents) to demonstrate the same standard of care, skill and diligence as pension plan administrators in gathering accurate and necessary employee data and providing that data to the administrator.
MEBCO comment: There is nothing in the PBA that assigns this responsibility to unions or employers. In practice such obligations may be set out in collective agreements, trust agreements or participation agreements. We agree that employers and unions may be valuable resources for information subject to applicable privacy and other legislation and on a best-efforts basis.
Section 3.6.2 – Employers and unions that participate in MEPPs have an obligation to obtain and provide accurate and complete member information and to update the MEPP administrator when that information changes.
MEBCO comment: Please refer to our comment for 3.6.1 above.
Section 3.6.5 – MEPP administrators should communicate to members the importance of notifying their plan administrator of changes in address and other contact information.
MEBCO comment: This is already in basic Guideline 3.2.1. It does not need to be repeated here as well.
Section 3.7.1 – Some plan administrators rely on advisors or consultants to carry out many, if not all, aspects of plan administration.
MEBCO comment: Most MEPPs would be administered by contract third party administrators or in-house, salaried administrators.
Section 3.8.1 – An administrator's duties on wind up of a plan are not discharged until all entitlements are settled. As a result, plan administrators may defer the wind up of a plan or delay settlement while expending considerable resources searching for missing members.
MEBCO comment: As we noted in the opening paragraphs, we believe FSRA is missing an opportunity to establish a registry.
Appendix 1, third paragraph, second bullet – an email notification to one or more last-known email addresses.
MEBCO comment: Add “not including sensitive information”.
Appendix 1, fourth paragraph, fourth bullet – advertisements in local media. MEBO comment: Add “or national” as in “national media”.
Appendix 2, second paragraph, first bullet – Process taken on termination to better ensure members make an election.
MEBCO comment: Making an election does not ensure future contact. In the MEPP environment many missing members elect pensions and do not maintain contact.
Appendix 3, Example 3, Searches conducted to date – Internet, Social media, online phone directory, credit agency, search firm, searched for spouse and named beneficiary.
MEBCO comment: Add “death registry”.
Appendix 3, Example 4, Administrator’s proposed actions – The plan has a small benefit mandatory cash out provision and specifically permits that small benefit lump sum entitlements may be reduced by the cost of reasonable search efforts. As a result, the administrator will cease further searches given that the search costs exceed the CV.
MEBCO comment: It would be helpful, as was done for marriage breakdowns, for FSRA to establish a reasonable maximum fee that could be deducted reflecting the cost of managing searches. It is also notable that, with immediate vesting, pension amounts for unlocated members may be largely small amounts.
Waiver of Biennial Statements for Missing Former and Retired Members, Section 4.1.1, Item 3, first bullet – For defined benefits, please indicate both the pension amount and the commuted value. For defined contribution benefits or other lump sum entitlements, please indicate the account balance or lump sum that has been most recently reported to the administrator.
MEBCO comment: For some pension plans calculation of a commuted value could be a significant added expense.
Waiver of Biennial Statements for Missing Former and Retired Members, Section 4.1.5 – Administrators must notify FSRA promptly when current contact information is received for someone for whom a waiver had previously been obtained. Generally, FSRA will consider notification to have been given "promptly" in this context, if it is given to FSRA within the later of 12 months or before the next biennial statement is due.
MEBCO comment: Why would the plan administrator need to make the additional reporting if FSRA is not maintaining a registry? It is onerous and adds to the heavy cost of plan administration. FSRA has under consideration annual reporting of missing members that would provide aggregate information.
Waiver of Biennial Statements for Missing Former and Retired Members, Section 4.2.5 – FSRA may publish information concerning each waiver granted to an administrator.
MEBCO comment: Reporting of operational matters that are subject to back and forth discussions is inconsistent with a principles and outcome-based approach to regulation and creates unneeded reputational risk for the pension plan administrator and is easily misunderstood by plan members and other stakeholders.
Appendix 1 Certification of Compliance, fifth bullet – a representative of the plan administrator will advise FSRA if a former or retired member included on the list of missing members is no longer considered to be "missing".
MEBCO comment: See our comments above.
Appendix 2 Additional Information for Administrators of Multi-jurisdictional Plans, first paragraph – Applicability of section 27(2) and (3) of the PBA to Multi-jurisdictional Plans
The applicability of section 27(2) of the PBA, the requirement to send statements to former and retired members, is determined by the jurisdiction of the pension plan's registration and whether or not that province is a signatory to the 2016 Agreement Respecting Multi-Jurisdictional Pension Plans (MJPPA) or, to the extent that the treatment is provided, any successor agreement
MEBCO comment: Since the 2020 Agreement Respecting Multi-Jurisdictional Pension Plans is in effect the guidance should refer to this document.
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