How many members of your pension plan are missing?

November 18, 2021 − by Mary Picard − in Employment and Labour, General, Ontario, pensions, Pensions and Benefits − Comments Off on How many members of your pension plan are missing?

The Ontario pension regulator wants to know

Administrators of registered pension plans wrestle with a serious challenge regarding “missing members”.  The Ontario pension regulator knows this and is trying to assist.  The regulator recently imposed a new reporting requirement that shines light on the challenge.  If you play a role in the governance of Ontario-registered pension plans you should be aware of the challenge and the regulatory attention it is receiving.

What is a “missing member”

The term “missing member” in the pension world refers to a person who has terminated employment but has not withdrawn their entitlement from their former employer’s pension plan, and now can’t be located.  Their entitlement could be the balance in their defined contribution (DC) account, or it could be a lump sum regarding their defined benefit (DB) pension.  Perhaps they weren’t legally entitled to withdraw it when they terminated employment.  Perhaps they deliberately chose to leave it behind in their former employer’s pension plan because they liked the security or investments of the plan.  Perhaps they just forgot to submit the transfer option forms that were sent to them when they terminated employment.  For whatever reason, that person is a deferred vested member of their former employer’s pension plan.

The Ontario pension regulator considers such a person to be “missing” if the plan administrator is unable to locate or communicate with the member and reasonably believes that the address on record for that person is no longer valid.

New reporting requirements for “missing members”

What happens years after this person terminates employment and leaves their pension behind, when they become old enough to start receiving pension payments from the plan?  What is the obligation of the administrator of the plan if the person is missing? 

The legal answer is unflinchingly clear:  the administrator of the pension plan must pay the pension benefit.  The administrator is not off the hook just because it doesn’t know where the person is.

That legal answer isn’t terribly helpful.  Pension plan administrators use various sleuthing techniques to try to locate missing members.  But not everyone can be found.  The Ontario pension regulator issued guidance a year ago to help administrators grapple with the challenge. The regulator has recognized that there’s no easy way for an administrator to discharge its legal obligation to pay a pension to a missing member when the trail is stone-cold.

Now the Ontario pension regulator wants to know how many members are missing in each pension plan.  As of September 1, 2021, Annual Information Returns (AIRs) filed by administrators of all Ontario registered pension plans must set out data as to exactly how many members of their pension plans are missing, and the estimated value of their pension benefits (both DC and DB). The regulator provided a mock-up for missing member questions on AIRs here.

The regulator (FSRA) has said that it is collecting the data “to inform potential future policy development initiatives and FSRA’s regulatory focus”. 

The new requirement will force administrators of pension plans to acknowledge the scope of their missing-member challenge.  It should prompt administrators to consider whether they need to more to ensure that they can locate all members of their pension plans.  

Do you have any questions about “missing members”? Feel free to reach out to any member of Dentons’ Pensions, Benefits and Executive Compensation team.

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