1. Which Approach is Essentially Fairer to the Parties?
We want to know which model you prefer, the ISM or the DSM (or some other model), and why. Implicit in this is the question of whether pensions should continue to be dealt with under the FLA valuation and equalization provisions or whether they should instead be divided outside that regime. The DSM does not seem compatible with the valuation and equalization regime[53] (although if it is simply made available as an option, pensions would not have to be excluded from the regime where the parties did not choose it). On the other hand, the ISM would seem to be workable either within the valuation and equalization regime or outside it. We want to know whether you think the ISM is unfair to the non-member spouse or creates a windfall for the pension plan, and if so, whether it can be modified in such a way as to alleviate these problems. Similarly, we seek your views on whether the DSM gives the non-member spouse a share in increases in pension plan value that truly are attributable solely to the post-breakdown period, and if so, whether it can be modified to reduce or eliminate any injustice to the member spouse.
2. To What Extent Should the Parties Be Bound by the Regime?
Whichever approach is favoured, a decision will have to be made as to the extent to which parties should be bound by it. Should there be a presumption that the approach will be used unless certain exceptional circumstances exist, and if so, what are those exceptional circumstances? (For example, if the DSM approach is chosen, should it generally be mandatory where the marriage exceeded a certain length or where the date on which the member spouse can take an early retirement pension without penalty is within a certain period of time?) Might it instead simply be a default regime, which applies only if the parties cannot agree to some other means of settling their affairs? Or should it apply in all cases, without exception?
3. Retroactive or Prospective Application
A decision will also have to be made about temporal application, i.e., should the new regime apply where the valuation date under the FLA falls on or after the day on which the legislation creating the regime comes into force (even though, in the case of the DSM, pensions would no longer be subject to the equalization requirements), or should some other date be chosen?
4. Taxation Issues
Tax implications will have to be addressed. Since both the ISM and the DSM will result in the non-member spouse receiving a benefit at source, he or she will pay income tax on that benefit. Some might suggest that this is unfair in the case of the ISM if pensions are to remain subject to the FLA equalization regime, in that an equalization payment should be tax-free.[54] Is it unfair, and if so, is there a way to reduce or eliminate the unfairness? The DSM divides the pension outside of the equalization provisions, but does this mean that there is no unfairness in the non-member spouse being taxed on what he or she ultimately receives? In the case of either model, if there is a tax-related unfairness, is there a way that it can be reduced or eliminated?
5. ISM and Valuation
If the ISM approach is adopted, should a particular valuation method be required as a matter of law, and if so, what should that method be? Should the valuation be performed by the plan administrator, as under Quebec’s Supplemental Pension Plans Act[55] (which essentially adopts an ISM approach), rather than by actuaries retained by the spouses, with the hope of reducing disagreement and litigation?[56]
6. DSM, Non-member Options and Valuation
If the DSM approach is adopted, should a non-member spouse who elects to take a pension from the member spouse’s pension plan have the option of having his or her pension commence at a time other than actual retirement of the member spouse? Should the non-member spouse have the option of transferring his or her share to a retirement vehicle other than the member’s plan? If the answer to either question is yes, should a particular valuation method be required as a matter of law, and if so, what should that method be? Where valuation is required under the DSM, should the valuation be performed by the plan administrator rather than by actuaries retained by the spouses?
7. The Fifty Per Cent Rule
Should the fifty per cent rule be changed or dropped entirely? If it is to be retained, should the currently-prescribed method of valuation be changed?
8. Reducing Burdens on Plan Administrators
Either approach, but particularly the DSM, would impose burdens on pension plan administrators. Are there ways of minimizing those burdens? Should administrators have the option of charging fees to member or non-member spouses so as to offset their additional costs?
9. DSM: Structuring Alternatives
If the DSM is adopted, are there ways to structure the division other than creation of a separate pension for the non-member spouse that would be more advantageous? If there are, should these be available as options, and if so, at whose option would they be?
10. Possibility of Subsequent Spouses
There is a possibility that the member spouse will have entered into spousal relationships with one or more individuals between the date of marriage breakdown and the date that the pension comes into pay. Does the DSM need modification so as to deal with this possibility?
11. Pre-Retirement Death Benefits
If the DSM is adopted, should the non-member spouse, in the event that the member spouse dies before retiring, be entitled to a pre-retirement death benefit (or to a share of it if the member spouse acquired another spouse or spouses following marriage breakdown)?
12. Pensions in Pay
What rules should apply where payment of pension benefits had already commenced before the spouses separated?
13. Plans other than Defined Benefit Plans
Is the current law satisfactory insofar as defined contribution plans, RRSP’s and RRIF’s are concerned? What about supplementary health plan benefits and dental plan benefits that an employer makes available to retirees? Are special rules needed in the case of pension plans that combine elements of a defined contribution plan and a defined benefit plan?
14. Where Both Spouses Have Pensions
Are special rules needed for this situation? What if one pension is a defined benefit pension and the other is a defined contribution pension?
15. CPP Credits
Should credits under the CPP be excluded from the definition of “family property” under the FLA? Is legislation needed to address whether and how such credits are to be taken into account under either the ISM or the DSM? Should Ontario enact legislation allowing spouses to agree to opt out of the equal division of credits provisions of the CPP?
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