Electronic communications for defined benefit pension plans
By Geneviève Larouche and Jennifer Welch
Insights – April 2021
All views expressed are the author’s own and do not necessarily reflect the official position of any agency, organization, plan sponsor or company.
COVID-19 has brought significant change to all corners of our lives, both personal and professional. It has increased our use of technology and provided opportunities for changes in the way we communicate. Even in the slow-changing world of defined benefit (DB) pension plans, for many DB plan administrators, work-from-home requirements have exposed the challenges of the standard paper-based employee communications and highlighted the advantages of electronic communications. In March 2020, for example, as the economic impact of the pandemic began to unfold, many plan administrators sought to reach out to active and retired plan members about the financial security of their plan. DB plan administrators with electronic communication processes already in place were able to connect with their membership quickly and easily, while those without realized the many challenges of conventional paper communication under a work-from-home environment.
The communication in March 2020 wasn’t the last hurdle, however. With personalized statement season fast approaching, plan administrators also struggled to coordinate printing and mailing. Many regulators acknowledged this struggle and provided relief by extending the usual 180-day deadline, with extensions from 60 days to six months. While the extensions helped them meet their obligations to plan members in 2020, a long-term solution is still required. Although some regulators also amended regulations related to electronic communications, many DB plan administrators have yet to adopt the practice – whether due to lack of time, lack of clear guidance from regulators, or more pressing priorities.
With the new year underway, DB plan administrators have a renewed opportunity to embrace electronic communications for their plan membership and address two critical areas: how to effectively communicate with plan members while ensuring privacy and confidentiality, and confirming what content can be communicated via electronic means.
Change is here – and more is on the way
Technology has improved the world of DB plans – many DB plan administrators offer an online member experience in the form of a website that includes general plan information and an online retirement calculator. It is now also typical for members to be able to communicate with plan administrators via email.
Over the coming years, the basic websites described above are likely to evolve into plan member portals for several important reasons:
- Plan members’ expectations that information be accessible quickly, easily and at any time of day;
- Increased pressure to adopt more environmentally sustainable practices;
- Ease and efficiency of communication to the DB plan membership;
- Centralized location for all pension information; and
- Cost savings derived from eliminating printing and postage expenses.
A member portal is also highly leverageable – it can be integrated with other aspects of the total rewards offer, providing members with a seamless digital experience in accessing information about all the benefits available to them.
Reaching members electronically while ensuring data security
DB plan administrators have an obligation to fulfill their fiduciary duties through plan member communication and to protect their members’ confidential information. The obvious, and arguably easiest, way to reach plan members electronically is by email. However, doing so while also ensuring data security poses a significant challenge. For active members, communicating through a work email likely eliminates these challenges with data security protocols already in place through the plan administrators technology platform. But for deferred and retired members, who no longer have a work email address, or for organizations who do not have work email addresses to begin with, challenges remain:
- A personal email account is likely not secure (and may easily be accessible by others);
- There is no way of knowing if the member regularly monitors email to their personal account(s);
- There is often no process in place to ensure plan member contact information is current.
Enabling and managing the transition to electronic communication
While providing access to personalized pension information through a secure web portal eliminates some data security concerns, plan administrators need to think through all aspects of the transition to electronic communication. Regardless of the approach taken, a smart change management strategy should be developed that considers all audience groups affected by the change and the best way to reach members within each group – is it via direct mail to home, email, the plan sponsor’s intranet, regular updates at work, etc. (it’s often tactically different by audience group). Regardless of the delivery method, the initial communication advising of the transition should include:
- Key, consistent messaging positioning the transition from paper to electronic communication;
- The benefits of the transition to the plan members;
- Details about the types of information that members will find on the portal website;
- What they need to do (registration instructions), what they need in order to register (specific personal details, including an email address), and the timing for completion; and
- If consent or deemed consent is required under pension legislation, the required legislative disclosures.
Creating a centralized communication resource: the member portal
There are three main groups that must be communicated to within DB plans: active members, deferred members (members who have terminated their employment and have deferred the start of their pension) and pensioners (retired members or survivors). A member portal can help to successfully meet the communication needs of each group. It is a secure, online environment in which to post personalized and plan-level information such as:
- annual pension statements for active members;
- annual or biennial pension statements for deferred/retired members (as required);
- contribution holiday notices;
- amendment or general notices;
- plan booklets;
- guides or FAQs.
A portal is also an effective way to provide members with enrolment materials needed to join the plan, or termination/retirement statements and applicable forms when they are terminating their membership. Portals can also provide a secure place for other plan-related activities such as:
- retiree audits;
- letters to deferred members approaching normal retirement age;
- retirement calculator for active and deferred members to plan for their retirement.
What can be communicated electronically according to pension legislation
The Canadian Association of Pension Supervisory Authorities (CAPSA) had already laid out an updated framework in May 2019 for plan administrators in their Guideline No. 2 – Electronic Communication in the Pension Industry – which many regulators specifically refer to when discussing electronic communications. The table below provides a summary of current legislation (as of January 2021) for each jurisdiction.
Summary of current legislation for each jurisdiction*
|Are electronic communications allowed?||Notes|
|Section 37 of the Pension Benefits Standards Act specifies that information may be sent electronically if members have consented to accept electronic delivery of the prescribed information.|
(legislation amended in 2020)
|Alberta amended Section 156.1 of the Employment Pension Plans Regulation in June 2020 via Order in Council 190/2020 to provide clear authority that statement/notice/document may be sent to members by electronic means in accordance with Alberta’s Electronic Transactions Act, as communicated in
EPPA Update 20-04. Alberta further amended the Wills and Succession Act to permit electronic beneficiary designation in December 2020, as communicated in EPPA Update 20-07.
|The requirements in The Pension Benefits Act, 1992 and Regulations to provide information to members may be complied with by providing the information in electronic form.
Plan administrators should apply the recommended guidelines set out in CAPSA Guideline No. 2 Electronic Communication in the Pension Industry and should ensure that they are in compliance with The Electronic Information and Documents Act, 2000 and other relevant legislation governing electronic communication and personal information.
|Manitoba||Yes||Section 3.30 of the Pension Benefits Act Regulation specifies that information to members may be sent via ordinary mail, e-mail to the member or another manner approved by the superintendent.|
(prior notice and deemed consent required; legislation amended in 2019 and 2020; further guidance outstanding)
|Ontario amended Sections 30.1 and 112 of the Pension Benefits Act (Ontario) in December 2019 via Bill 132 to enable plan administrators to send certain documents to members by electronic means in accordance with Electronic Commerce Act, 2000 (Ontario) based on deemed consent.
A notice must be sent to members by mail (and an additional notice to retiring members) prior to delivering documents through electronic means, and members are deemed to have consented to receiving documents electronically unless they instruct the plan administrator otherwise.
Ontario further amended the Succession Law Reform Act (Ontario) to permit electronic beneficiary designation in May 2020.
|Quebec||Yes||Information and documents may be sent electronically. Plan administrators follow the recommended guidelines set out in CAPSA Guideline No. 2 Electronic Communication in the Pension Industry.|
|Section 44 of the Pension Benefits Act specifies that information may be sent electronically if members have consented and the electronic means used by the plan administrator must comply with the Electronic Commerce Act.|
|Newfoundland & Labrador||No|
|Federally regulated private pension plans||Yes
|Subsection 31.1(1) of the Pension Benefits Standards Act, 1985 specifies that information may be sent electronically if members have consented and an information system is designated for the receipt of the electronic documents.|
* Current as of January 2021
A call to action
The pandemic may have highlighted some of the challenges inherent with paper-based communications, but a decline in this type of communication started long before. In many jurisdictions, electronic communications are already an acceptable way to provide information to DB plan members. Not all jurisdictions currently accept electronic communications, and there is still some guidance needed to appropriately apply the pension legislation in some jurisdictions that do. However, plan administrators who want to prepare for the likely regulatory approvals – while lessening some of the expense and effort required of print communication – can start the transition from paper to electronic through a phased approach that includes developing a website portal, or offering access to an existing portal, and beginning the change management process by driving members to a secure site for general pension information, financial literacy resources and retirement planning tools.
Some jurisdictions amended legislation in 2020, recognizing electronic communications more and more, and this trend is likely to continue across the country. DB plan administrators can now establish their electronic communication processes, allowing members to receive their pension information securely, and in a sustainable and timely manner.
Transition support for plan administrators
DB plan administrators can reach out to their pension consultants. At Eckler, we support our clients with portal implementations through strategic recommendations on portal development, integration with administrative systems, and change management communication. Visit eckler.ca to learn more.
This issue of Insights has been prepared for general information purposes only and does not constitute professional advice. Should you require professional advice based on the contents of this notice, please contact an Eckler consultant.