Employee Benefits

Employee Benefit Plans: Impact of New Legislation

On March 31, 2014, the new Wills, Estates & Succession Act (BC) (WESA) came into force. Aside from reminding us all to update our wills, WESA has significant implications for employee benefit plans administered in British Columbia. Benefits administrators will want to review their plans and administrative procedures relating to death benefits in light of these changes.

Benefit plans are broadly defined under WESA, and include pension and retirement plans, welfare or profit sharing funds and any trust, scheme contract or arrangement created from the benefit of employees, former employees, agents or former agents of an employer or dependents of any of them or a designated beneficiary.

Part 5 of WESA addresses the designation of benefit plan beneficiaries and applies regardless of whether the plan grants the right to designate a beneficiary. This means it will override inconsistent benefit plan provisions. However, it does not override provisions or beneficiary designations authorized by another statute of BC or Canada (e.g., a designated life insurance beneficiary, made pursuant to the Insurance Act (BC)).

Additionally, participants may now designate one or more beneficiaries in their wills and may alter or revoke such designations, unless a designation has been made irrevocably. These designations must relate expressly to a benefit plan, be made in writing and signed.

Other highlights from Part 5 of WESA include:

·beneficiary designations can be made irrevocably – this can be useful for certain estate planning and marriage breakdown situations;

·legal representatives with authority over a participant’s financial affairs (e.g., under a Power of Attorney) can designate a beneficiary with court authorization – this can be useful where a representative is undertaking estate planning on behalf of an incapable participant;

·legal representatives can make a new designation of the same beneficiary without court authorization if it renews, replaces or converts a similar designation made by the participant while capable – this can be useful when a representative is simply changing financial institutions or converting one plan to another (e.g., RRSP to RRIF) on behalf of a participant;

·a trustee can be appointed to receive benefits on behalf of a designated beneficiary – this can be useful where minor children or incapable beneficiaries are to receive benefits; and

·benefit administrators who pay benefits to designated beneficiaries, or appointed trustees, are discharged in respect of those payments even if they later receive notice of change of beneficiary – this will provide administrators with a degree of protection for payments made in accordance with plan records at the time.

Part 5 also addresses beneficiary designations in a will revoked by a later instrument, as well as other administrative hazards which arise when beneficiaries are designated in a will.

WESA creates significant benefit plan administrative challenges. To address these challenges, benefit administrators should review their plans and, where appropriate, adopt amendments. In addition, administrators should develop appropriate communication strategies to educate participants, particularly on the need to advise of changes to their designated beneficiary. Finally, benefit administrators should review and update policies dealing with the payment of death benefits. The ability of participants to designate beneficiaries in a variety of written instruments, which may or may not be filed with the benefits administrator, creates potential pitfalls which need to be addressed in administrative policies.

 

Questions relating to the content in this article should be directed to Claude N. Marchessault, Counsel.