Publications

  • Increase font size
  • Decrease font size
  • Print
Normandin Beaudry

Revenu Québec and its application of the Unclaimed Property Act

LinkedIn

There, in black and white

NB Bulletin Vol. 17 N. 12, December 2014

On April 1, 2006, the Curateur public transferred the administration of unclaimed financial property to Revenu Québec (RQ). Since then, RQ has been auditing pension plans to determine whether or not unclaimed property and penalties, if applicable, have been remitted. These audits target notably small amounts whose commuted value represents less than 20% of the Year's Maximum Pensionable Earnings (YMPE) for the year in which the member ceased to be an active member.

RQ recently sent a document entitled "Unclaimed Property: Applying Legislation to Specific Situations " to defined benefit and defined contribution plan administrators in an effort to clarify this application.

Interpretation

Basically, among other things, RQ considers small amounts with commuted values representing less than 20% of the YMPE for the year of termination of membership to be unclaimed property if they have not been claimed after three years following the date on which the pension committee notified the member (for instance by sending a termination of membership statement).

The accrued value of the unclaimed benefits must be remitted to RQ in the first quarter following the end of the year in which the benefits became unclaimed property. If the unclaimed property is not remitted within this time period, penalties will be charged by RQ.


For example, if a termination of membership statement is sent in July 2014, the property becomes unclaimed in July 2017
and the amounts must be remitted to RQ by March 31, 2018.


Given the ambiguity in relation to the application of the Unclaimed Property Act (the "Act") in this type of situation, RQ has temporarily eased its position, but only concerning the application of penalties payable in certain circumstances.

Application for past cases

An audit must be conducted by the administrator to determine whether or not the plan has held benefits for members entitled to a refund of a small amount for three years or more. If this is the case, the pension committee must refer to the termination of membership statement sent to these members and identify which of the following situations is applicable:

A. The termination of membership statement contains a conclusive statement

The termination of membership statement explicitly mentions (conclusive statement) that the member cannot refuse the refund. RQ provides four examples of conclusive statements1 in its document. According to RQ, this situation is not ambiguous when it comes to applying the Act and the easing of penalties does not apply. The penalties set out in the Act therefore apply as soon as the unclaimed property must be remitted to RQ. The actions outlined below must be taken as soon as possible to limit penalty amounts.

(1)Refer to the "There are no grounds to waive or cancel interest under section 8 of the Unclaimed Property Act" section of Unclaimed Property: Applying Legislation to Specific Situations document issued by RQ.


Actions

  • For traceable members: a written notice must be sent to the member. This notice must describe the unclaimed property and indicate that, unless the member comes forward within the three-month period to make his or her choice (refund or transfer to an RRSP), the property will be transferred to RQ.
    • If the member has not come forward by the end of the three-month period, the property is remitted to RQ.
    • If the member comes forward within the three-month period, the administrator must comply with the member's choice.
  • For untraceable members: after the administrator has applied reasonable search measures, the notice mentioned above is not required and the unclaimed property can thus be remitted to RQ.

B. The termination of membership statement does not contain a conclusive statement

Although the member cannot actually refuse the refund, the termination of membership statement does not explicitly state this (no conclusive statement). The ambiguity in relation to the application of the Act in this type of situation has prompted RQ to introduce the following temporary easing measures:

  • For plans that have already been audited by RQ, the administrator has until March 31, 2015 to take action and to make representations to RQ to recover penalties already paid to RQ, if applicable. The case presented to RQ must demonstrate the absence of a conclusive statement. Penalties can be recovered if the statement does not contain a conclusive statement.
  • For plans that have not yet been audited by RQ and that could have members with unclaimed property, the administrator also has until March 31, 2015 to make the appropriate remittances to RQ without penalties for late payment. After this grace period, late payment penalties will be applied by RQ. The actions outlined above must therefore be taken as quickly as possible to comply with the grace period ending on March 31, 2015.


C. The termination of membership statement contains a deferred pension option

If a deferred pension option is offered to the member in the termination of membership statement, and if the member elected this option, he or she explicitly refused the refund in favour of another settlement option. In this case, the member's benefits would not be considered unclaimed property until the end of the three-year period following the date on which payment of the deferred pension must begin.

Application for future cases

Three approaches are available to the pension committee to comply with the Act:

1) Force the refund at the end of the 30-day period following the sending of the related notice. There are many benefits to this approach, including a reduction in fees associated with the annual information return, annual update and annual statements, and the reduction in the number of potential untraceable members.

2) Do not force the refund and carry out the proper follow-up for members likely to have unclaimed property by taking the actions outlined above, keeping in mind that the three-month written notice intended for traceable members must be produced within the six months preceding the date on which the property must be remitted to RQ.

3) Offer the deferred pension in addition to the standard refund options. However, this approach does not offer the benefits outlined for the first approach listed above.

If approach 2 or 3 is selected, additional efforts may be required, especially in the case of possible audits conducted by RQ.

 

Please feel free to contact us for additional information.

514.285.1122
 
630, René-Lévesque Blvd. West, 30th floor
Montreal, Quebec, H3B 1S6