Small Errors can Lead to Big Problems in Pension Plan Text

Partner and chair of the Pensions and Employment Practice Mitch Frazer has been quoted in Benefits Canada discussing how pension plan sponsors’ heightened attention to detail can save them money.

Benefits Canada used Mitch’s comments from his speaking spot at the pension and benefits fundamentals program in Toronto on May 11. The program was held by the International Society of Certified Employee Benefits Specialists, Toronto chapter.

Mitch said small errors in communication could lead to larger problems and said it was important “pension materials must truthfully and accurately disclose everything about the plan.”

“People administer things a certain way, and then the plan text reads another way. That happens all the time,” he said.

“One that comes up a lot is you don’t put people into your plan right away.”

A small excerpt from the article is below.

A pension plan text doesn’t always indicate a period between when employees start with a company and when they can join the plan. “Once they join your company, they don’t have to be put in the plan right away. You’ve got two years for that period. Some plan texts don’t say that. They say you put them in immediately, but then they hold off the two years.”

When an error like that comes to light, it can be an unexpected expense for plan sponsors. “You have to fix it, by law,” he says. “And that could often cost you a lot of money. And even so, if someone sends you a demand letter and then you have to engage lawyers in the discussion, you could end up paying additional legal fees, actuarial fees, consulting fees to figure out if there really was an error and how this came about.”

You can learn more about Torys’ Pension and Employment Practice by heading to its practice page.