What the New Federal Government Has Planned for Unclaimed Assets

With the federal election behind us, the minority Liberal government is now turning its attention to fulfilling its campaign promises. One item on the agenda is to update the federal unclaimed property regime.

In the federal budget tabled last April, the Liberal government proposed to “modernize” the federal unclaimed assets regime and expand the scope of the program by including unclaimed balances from terminated federally-regulated pension plans. While no concrete details on the government’s plans are available, a 2018 consultation paper on draft guidelines for updating the federal unclaimed assets regime provides some useful insights on the direction Ottawa might go.

Currently, the Canadian government’s unclaimed assets program is limited to unclaimed accounts held by federally regulated banks. This program is administered by the Bank of Canada, which maintains an online searchable database of unclaimed bank funds. A bank account is designated as “unclaimed” if there has been no activity for ten years or more. The Bank of Canada retains unclaimed balances of less than $1,000 for 30 years. Balances of $1,000 or more are held for 100 years. At the end of the retention period, any outstanding balances are transferred to the federal government’s coffers as general revenues.

The BC Unclaimed Property Society (BCUPS), in contrast, does not manage unclaimed bank funds. BCUPS only administers unclaimed funds from provincially-regulated financial institutions, companies, and organizations, such as credit unions, as well as unpaid wages, outstanding insurance payments, overpayments to debt collectors, proceeds from courts, pension funds, estates, and real estate deposits. There is also no expiration period for unclaimed funds held by BCUPS.

The federal unclaimed assets program dates back to the 1940s when the Bank of Canada was first designated the federal custodian of unclaimed bank balances. In 1944, the federal cabinet set the interest paid on unclaimed bank accounts at 1.5 per cent for the first ten years of custody – a rate considerably higher than the one currently paid on ordinary saving accounts.

Finance Canada wants to cut or eliminate the interest paid on these balances. And small balances of less than $100 would be held for an as of yet unspecified period much shorter than the 30 years before reverting to general revenues. The finance department also wants to add dormant foreign-denominated accounts to the federal unclaimed assets regime.

Ottawa is proposing to expand its unclaimed assets program to include unclaimed pension balances by amending the Pension Benefits Standards Act, 1985. Unclaimed pension balances arise when the beneficiaries are “unlocatable” and therefore cannot be informed or reminded that their benefit is supposed to be paid.

The federal government is looking at designating the Bank of Canada as the administrator of unclaimed federally-regulated pension plans. These unclaimed monies would be included in the Bank’s searchable online registry that claimants could check, similar to unclaimed bank accounts.

Unclaimed pension balances would be held for 100 years for amounts of $1,000 or more, and 30 years for balances of less than $1,000. Consideration will also be given to establishing a third threshold for “small balances” with a shorter applicable retention period.

Eligible claimants of pension funds will include the owner of the plan, but also their designated beneficiaries if the owner is deceased.

The federal government is also looking at taxing unclaimed pension fund transfers and plans on paying no interest on the balance. The transfer would be made on a “pre-paid tax basis,” meaning that income tax would be withheld and submitted to Canada Revenue Agency.

To cover costs, the government is also considering charging a one-time fee for submitting a claim for outstanding pension funds.

The proposed new framework applies only to terminated pension plans, but the consultation paper noted that consideration may be given to expanding the program to ongoing pension programs at a later date.

These are early days in the new Liberal minority government’s tenure, so what specific changes will be made to the federal government’s unclaimed assets program remains to be seen.

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