Canadian HR Reporter

January 13, 2014 NEWS CANADIAN HR REPORTER 3 Hold on to that pension paperwork Tribunal decision involving 30-year claim highlights importance of good records management BY SARAH DOBSON WHEN IT comes to pensions, proper administration and record-keeping are crucial — a point driven home by a recent decision involving a worker who filed a claim 30 years after he left the company. Carl Hunte was employed by Crown Life Insurance Company (now Canada Life Assurance Company) from 1970 to 1982, though he left the company for a few weeks in 1975. Thirty years later, he claimed he was entitled to a deferred pension for those 12 years of service. Hunte said he was a member of the defined benefit (DB) plan as of 1970, as part of routine processing for new employees, and he remained a member despite briefly working elsewhere. He also claimed he made basic pension contributions and additional voluntary contributions starting in 1972. But Canada Life, citing records such as microfiche files and witness testimony, said Hunte was only a plan member during the second phase of his employment and he took a cash refund benefit when he left the company. Hunte also transferred his voluntary contributions to a group RRSP in 1980, it said, which left him with no further claim on the plan. Tax records from the Canada Revenue Agency (CRA), with summaries from Hunte from 1980 to 1985, also showed "other income" amounts that coincided with company records, said the Ontario Financial Services Tribunal . In the end, the tribunal sided with Canada Life in Hunte v. Ontario (Superintendent Financial Services). While the company had "a fairly sparse documentary record" pertaining to Hunte's employment and pension history, it said, those available were consistent with the company's theory of the case, not the employee's. "We are not persuaded that the applicant's recollections of how his pension issues were processed at the time of his termination accurately reflect what occurred… it defies probability that the company would deviate so significantly from normal procedure in the absence of very special circumstances, none of which appear to be present in this case." Not uncommon It's not an unusual situation for people nearing retirement to look back to their years of employment, wondering if they have an entitlement to a pension, said Karen Tarbox, senior consultant at Towers Watson in Toronto. "It's certainly helpful for a company to retain, even when a member leaves the plan and settles their entitlement, if the plan administrator at least has sufficient documentation to demonstrate that they've settled that payment or entitlement in some fashion… and the date on which that settlement has been made and any direction the employee gave in that respect, so you can show that you did discharge your obligation on member termination." Plan administrators should keep records as long as the person has entitlement under the plan, she said. "But once a member's terminated membership and taken their entitlement from the plan, perhaps what you really need then is just proof of that discharge of payment and sufficient documentation to show how that was determined, what was paid… so that if a claim is made down the road, the plan administrator can demonstrate, 'Yes, we recognized you had this entitlement, here's how it was settled.'" ment or release from a pension plan. Of course, times — and formats — have changed. "The technology and the enhanced appreciation for governance processes that we have in the current environment would help plan administrators to perhaps be in a better position to defend themselves against entitlements and claims where benefits have previously been settled," said Tarbox. But even with the improved technology and storage mechanisms, employers should take note. "The cost of organizing, indexing and storing the information is significant given the time frame and quantity of documents that should be on file." This case reinforces the fact that claims can be made by individuals that go back a long time, including those involving beneficiaries or their spouses or children. And the organizational environment or structure may have changed several times in this period, said Gerry Wahl, managing partner and senior consultant at Ampersand Advisory Group in Vancouver. "While the likelihood of a legal challenge is likely low, the form and issue that may arise can be of many forms… making it a difficult administrative issue. The cost of organizing, indexing and storing the information is significant given the time frame and quantity of documents that should be on file." This scenario is still possible today if people don't properly keep their documents, said Mitch Frazer, partner and chair of the pensions and employment practice at law firm Torys in Toronto. "There's a good lesson here in terms of administrative management is very important, document retention is very important — have a strong document retention policy, have a written document retention policy that is posted where anyone who's actually working on pension administration knows where to find it." The potential for error is that much higher if there's a significant changeover in staff over time, with people not following policy, he said. "Have your people who are managing records well-trained. It's sort of a corollary — it's wonderful to have this policy but if not everyone knows about the policy and there are people who are working on it who are temporary workers… everyone has to be on the same page." Newer technologies but same rules apply Crown Life, according to one witness, had a document retention policy that meant personnel records, including pension records, were destroyed seven years after the date of termination of employ- "You will need to be able to access records years down the road, so you want to make sure that the format in which you're retaining those records will still be something you can access as technology changes," she said. When it comes to record-keeping, there are questions around the what and how of the data, said Wahl. For example, should emails be kept as part of the documentation when a special deal is struck with an employee, and if information is electronically stored, should that be on tape or disc? "If technology changes, the data and information on file must be upgraded as well," he said. Advantage employers? Hunte also argued Canada Life and the plan administrator had a fiduciary obligation to retain documentation — but the tribunal disagreed. "The fundamental burden of proof that an applicant has an entitlement from a pension plan is on that applicant," it said. "We are also not persuaded that there were defects in the company's record-keeping system of sufficient gravitas to raise fiduciary concerns." In this case, the sponsor had a certain amount of detailed information available to support its position, while the plan member was not able to support his claim with any substantial form of documentation, said Wahl. "It would appear to me that the advantage lies with the sponsor simply because sponsors do generally maintain at least minimal records and documentation, whereas most members  don't anticipate  making a future claim and don't have any or sufficient evidence to support their position." The case is a reminder that members have a certain responsibility in retaining their own records, said Tarbox. "Even if active employees are participating in plans, they have an obligation to keep their own information up to date with the administrator — so things like their personal information, change of name, address or marital status — it's important that they communicate that so that the benefits can be administered properly." RECORDS MANAGEMENT What information should employers keep on file for beneficiaries? When final payment has been made from a pension plan to a plan beneficiary, the administrator should retain at least a summary of the plan records relating to the beneficiary. The summary for the plan beneficiary should include, as a minimum (as applicable): • the plan beneficiary's name, employee number or social insurance number • the plan membership entry date • the retirement date • the retired member's date of death • the date of death of the retired member's spouse or her designated beneficiary • the pension amount that was paid to the retired member, spouse, designated beneficiary or estate, including any evidence that substantiates the payment information (such as payment stubs, T4A statements or other forms of evidence) • the dates when payments commenced and terminated, if periodic payments were made • the date payment was made and the amount of the payment, if a lump-sum payment was made. Source: Management and Retention of Pension Plan Records by the Administrator, Financial Services Commission of Ontario

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