Division of Pensions Upon Marriage Breakdown Final Paper Backgrounder – January 2009

///Division of Pensions Upon Marriage Breakdown Final Paper Backgrounder – January 2009
Division of Pensions Upon Marriage Breakdown Final Paper Backgrounder – January 20092017-03-03T18:30:50+00:00
The Law Commission of Ontario (LCO) released its
Final Report on the division of pensions on marriage breakdown on
December 22, 2008 concluding work on a project that began in March of
2008. (Available in English and French on the LCO’s website:
http://www.lco-cdo.org.)

Launched on September 7, 2007, the LCO has a mandate to recommend law
reform measures to increase the legal system’s relevance, effectiveness
and accessibility; to clarify and simplify the law; consider technology
as a means to enhance access to justice; stimulate critical debate about
law and promote scholarly legal research.

Bill 133, which received first reading in November of 2008, and which
included amendments to Ontario’s Family Law Act and the Pensions
Benefits Act relating to pension division, incorporates many
recommendations from LCO’s report on the division of pensions on
marriage breakdown.

Although the Family Law Act requires that pensions be included in the
valuation and division of family property, a pension is inherently
difficult to value and divide. The various settlement mechanisms for
determining value have been fraught with difficulties. Ontario law in
this area has long been widely acknowledged to be complex, confusing and
problematic, leading to unnecessary stress and expense for the parties,
as well as substantial burdens for pension plan administrators.

The need for reform in this area was obvious and the LCO took the
following steps:

• In May of 2008 issued a Consultation Paper setting out the problems
and issues and asking for submissions on how the law might be changed;

• Undertook research and reviewed submissions from over twenty
organizations and individuals;

• Released recommendations in early October.

Among the most important of the LCO recommendations is the establishment
of the “Immediate Settlement Method” (ISM) as a means of dividing a
pension to resolve family property issues on marriage breakdown. This
requires the valuation of a pension at the date of a couple’s separation
and a transfer out of the pension fund for the benefit of the spouse to
whom an equalization amount is owed.

Other key recommendations include

• continuing to treat rights under a pension plan as family property;

• amending the Family Law Act to ensure that pension rights that have
not yet vested are also treated as family property;

• specifying use of the “hybrid” valuation method for determining the
value of rights under a defined benefit pension plan;

• availability of the “Deferred Settlement Method” (DSM) — division of
pension upon pension plan member’s retirement — as an alternative option
to the ISM under certain conditions.

The final report

• includes primers on pensions and Ontario family property law;

• discusses choice of pension valuation methods and related issues:

• considers problems arising when a spouse’s only asset of significant
value is a pension;

• refers to the double dipping problem;

• examines whether pension division has gender implications; and

• critically analyses the arguments in favour of both the ISM and the
DSM.

For further information, please contact:

John D. T. Hill
Law Commission of Ontario
416-650-8401
lawcommission@lco-cdo.org