Electronic Communications In Pension Plan Administration
By: Sonia Mak
The Canadian Association of Pension Supervisory Authorities has released a guideline on electronic communication in the pension industry and the Financial Services Commission of Ontario has issued a policy on electronic communications between pension plan administrators and plan beneficiaries. Sonia Mak, a partner at Borden Ladner Gervais LLP, discusses various practical issues which may arise from the use of electronic communication in pension plan administration in Ontario.
The Pension Benefits Act (Ontario) (PBA) requires a pension plan administrator to communicate with the beneficiaries of the pension plan by providing information and notices. The administrator must also file various reports and other documents with the Financial Services Commission of Ontario (FSCO). The PBAspecifies that member communications and reporting be made in writing and in prescribed forms in some instances. The PBA neither prohibits nor expressly permits the use of electronic communication in complying with these requirements.
Sources Of Information
The Electronic Commerce Act, 2000 (Ontario) is the legislation that permits electronic communication and electronic signatures in Ontario.
In general terms, the Electronic Commerce Act allows electronic documents to be as effective as paper documents.
The Canadian Association of Pension Supervisory Authorities (CAPSA) has issued Guideline #2, ‘Electronic Communication in the Pension Industry.’ FSCO recently issued ‘Electronic Communications Between Pension Plan Administrators and Plan Beneficiaries.’ The purpose of the CAPSA Guideline is to assist pension plan administrators and plan members to apply the applicable electronic commerce legislation to communications required under pension benefits legislation. The FSCO policy endorses the use of electronic means for communication between a plan administrator and plan beneficiaries in Ontario, subject to compliance with the requirements of the PBA, the Electronic Commerce Act, and the CAPSA Guideline.
Electronic communication, in the pension administration context, is permitted if:
- the beneficiary consents, or is deemed to have consented, to the use of electronic communication at the time the communication is made
- the plan administrator informs the beneficiary of his or her rights at the time of each communication, including the right to revoke his or her consent
- the electronic communication is capable of being retained by the plan beneficiary so as to be subsequently usable. In other words, the electronic communication can be opened, viewed, printed, downloaded, or saved to a file
The Electronic Commerce Act and the CAPSA Guideline contain the detailed requirements for electronic communication. However, none of the Electronic Commerce Act, the CAPSA Guideline, or the FSCO policy specifies the technologies or implementation approaches for electronic communication. These issues are left to the parties using electronic communication.
Is electronic communication appropriate for your pension plan? Although it may save costs and time, it may not be appropriate in all circumstances. In determining whether to adopt electronic means of communication, a plan administrator should bear in mind that communications with, and documents to be filed with, FSCO are still required to be made in the traditional hard copy format. Electronic communication is an alternative to the traditional hard copy form of communication. It is entirely optional. Plan administrators are not required to provide information to plan beneficiaries by electronic means and plan beneficiaries are not required to consent to the use of electronic means for communication with plan administrators.
Electronic communication is available only if a plan beneficiary consents, or is deemed to have consented, to such communication at the time of communication and if certain conditions are satisfied. The CAPSA Guideline provides that consent is deemed to be given if an information system has been designated to the administrator by a plan beneficiary. It appears that ‘negative option’ consent will not suffice. Since a beneficiary may subsequently revoke the consent, and electronic communication is available only if consent exists at the time of communication, the administrator is subject to the burden of confirming whether a beneficiary’s consent exists at the relevant time. The administrator may wish to consider the desirability of including a form of consent for such purpose in a new employee’s employment letter for administrative convenience.
Electronic communication will not necessarily reduce paperwork. An electronic communication will be validly given only if it is capable of being opened, viewed, printed, downloaded, or saved to a file by a plan beneficiary. In addition, a plan administrator is required to provide a hard copy version of such communication on a beneficiary’s request.
There are certain risks inherent in electronic communication such as reliability, authenticity, and privacy issues. None of these issues are addressed by the CAPSA Guideline or the Electronic Commerce Act. Although electronic signatures are permitted by the Electronic Commerce Act, issues as to what constitutes an electronic signature or how to determine the authenticity of an electronic signature are left to the decision of the parties.
The CAPSA Guideline is not intended to replace the law. It facilitates electronic communication where permitted by law. Electronic communication is permitted in Ontario. However, if a pension plan has beneficiaries in other jurisdictions, the plan administrator must determine whether electronic communication with plan beneficiaries is permitted in each of such other jurisdictions, and the rules for such communication. If only some jurisdictions permit electronic communication, the administrator may find it administratively onerous to use electronic communication for beneficiaries in some jurisdictions and to communicate in the traditional hard copy format with beneficiaries in other jurisdictions.
Not all plan beneficiaries have the means to receive electronic communication or prefer electronic communication. The administrative complications of using electronic communication for some plan beneficiaries, coupled with the need to confirm that a beneficiary’s consent is available at the relevant time, may make electronic communication less attractive and may outweigh the costsaving advantages of electronic communication.
Sonia Mak is a partner at Borden Ladner Gervais LLP.
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