Pension plan administrators are implementing electronic tools as part of their administration processes with increasing frequency. This can be attributed to factors such as the prevalence of technology in society generally, the efficiency of using electronic processes and shifts in member demographics such that today many members expect to have the ability to communicate with their administrator through electronic means, or to process transactions or have access to plan information electronically. Increased regulatory attention is also being paid to electronic communications in the pension industry, as reflected in the Canadian Association of Pension Supervisory Authorities (CAPSA) Guideline No. 2, Electronic Communication in the Pension Industry (CAPSA Guideline No. 2), a revised draft of which was published for consultation in November 2018 and the recent focus in CAPSA’s strategic plan (released in April 2019) on cyber-security, artificial intelligence, “Fintech” and “RegTech”. Most recently, on April 11, 2019, the Ontario Government released its 2019 budget in which it stated that it is considering future legislative changes to the Ontario Pension Benefits Act (PBA) that would permit pension plans to use electronic communications as the default method of providing information to members. In keeping with the increasing emphasis on electronic communications and transactions, on December 6, 2018, section 30.1.1 of the PBA came into force. This section provides that, despite anything to the contrary in the Succession Law Reform Act (Ontario) (SLRA), a pension plan administrator may permit members to designate beneficiaries electronically. In doing so, the administrator is required to comply with any prescribed requirements respecting the electronic designation of beneficiaries.
Impact of Section 30.1.1 of the PBA
Prior to the enactment of section 30.1.1 of the PBA, pension legislation in Ontario did not address the manner in which beneficiary designations under pension plans were to be effected. The addition of section 30.1.1 is therefore a significant development in the pension industry, where administrators have long had well-developed, reliable electronic systems that allow members to access information about their pension benefits, communicate with the plan administrator, process certain transactions and update personal information electronically. While legislation existing prior to the introduction of section 30.1.1 (namely, the SLRA and Electronic Commerce Act (Ontario) (ECA)) may be reasonably interpreted to already permit electronic beneficiary designations in pension and certain other contexts, it did not contain an express provision addressing the point. While the SLRA may be interpreted not to preclude electronic beneficiary designations, the new PBA provision should provide comfort to plan administrators that they can implement electronic beneficiary designations under pension plans. We therefore expect this new provision to support more efficient and member-friendly processes for designating beneficiaries under Ontario-registered pension plans. That said, a number of questions and issues remain.
Practical considerations for implementation
When considering the implementation of electronic beneficiary designations, plan administrators should ensure that they can do so prudently and in keeping with their fiduciary obligations to members. Plan administrators should think about a number of key questions and issues: