2. The FLA be amended to indicate that rights under a pension plan that have not vested are also “family property”.
3. The FLA be amended to provide that for purposes of valuation, rights under a defined benefit pension plan should be assessed using the hybrid termination-retirement method.
4. Subject to the other recommendations in this section, where a member of a defined benefit pension plan is an equalization debtor to his or her spouse and wishes to satisfy the equalization debt through resort to his or her interest in the pension plan, legislation provide that the immediate settlement method of division applies, under which the member could require the plan administrator to transfer a pro rata share of the commuted value of the member’s pension as of the separation date from the fund of the member’s plan to
(a) the fund of a plan of which the non-member spouse is a member, if the administrator of that plan agrees;
(b) a retirement savings arrangement of the type prescribed for purposes of clause 42(1)(b) of the Pension Benefits Act;
(c) the fund of the member’s plan (that is, for credit to the non-member spouse’s account), if the administrator of the member’s plan agrees; or
(d) if the government considers it appropriate to establish a provincial retirement fund, that fund (see Recommendation 10, below).
Where the amount that would otherwise be transferred exceeds the member’s equalization debt, the amount to be transferred shall be reduced to the amount of the equalization debt. If the amount that is transferred is less than the member’s equalization debt, the member remains liable for the difference.
Under specified circumstances, the DSM would be available, as set out in Recommendations 6 and 7.
5. Where the immediate settlement method applies, the non-member spouse’s pro rata share shall be based on the formula
½ X A/B X CV
where A is the pensionable service accrued while the parties were married, B is the member’s pensionable service and CV is the commuted value as of the separation date.
6. If on the date of separation the member spouse is within ten years of the normal retirement date established under the plan, the parties may agree, as an alternative to settlement using the ISM, to have the member’s pension entitlements divided between the member and the non-member spouse so that each is entitled to receive a separate pension. The non-member spouse would become a quasi-member of the plan, with an ability to enforce his or her entitlements under the plan and a right to receive from the plan administrator information concerning the member’s pension and his or her share.
Generally, the non-member spouse would begin receiving a pension when the member retired and began receiving his or her pension, but where the member did not retire by the normal retirement date established under the plan, the non-member spouse would have the option of having his or her pension commence on the member’s normal retirement date.
Where the non-member spouse will be commencing his or her pension at the same time as the member, the member’s service credits shall be divided according to the formula
½ X A/B
where A is the pensionable service accrued while the parties were married and B is the member’s total pensionable service at retirement. The member’s pension would be calculated using the benefit formula provided by the plan and his or her service credits as reduced. To determine the amount of the non-member spouse’s pension, there would be an initial calculation using the benefit formula provided by the plan and the service credits transferred to him or her; that amount would then be adjusted to ensure that the actuarial present value of his or her pension, when added to the actuarial present value of the member’s pension, equals the actuarial present value of the member’s total pension before adjustment.
Where the member does not retire or otherwise begin receiving his or her pension by the normal retirement date established under the plan and the non-member spouse elects to have his or her pension commence without further delay, the non-member spouse’s pension shall be based on the accrued amount of pension computed as at the normal retirement date, using the formula
½ X A/C
where A is the pensionable service accrued while the parties were married and C is the member’s pensionable service as of the normal retirement date. There could be an actuarial adjustment for the non-member’s age.
When the member retires, he or she will receive a pension based on the plan’s benefit formula calculated at the actual retirement date less the dollar amount of the pension payable to the non-member spouse.
Where the DSM option is selected, no survivor pension shall attach to the non-member spouse’s pension.
The election of the DSM option (and any election by the non-member spouse to commence his or her pension before the member retires) shall be accomplished using forms prescribed in regulation. Plan administrators could not be held liable for any loss resulting from an action taken by them in good faith in reliance on a form submitted to them. They would also be allowed to charge a fee to offset the initial and ongoing costs incurred by them as a result of the election of these options.
Legislation would provide that where this option is selected, the member’s equalization obligation, to the extent that it was based on the value of the pension, is deemed to have been satisfied (that is, even if the total amount that is ultimately paid out to the non-member spouse is less than the member’s equalization debt). It should also provide that the non-member spouse’s estate will owe nothing to the member or his or her estate if the total amount ultimately paid out to the non-member spouse exceeds the member’s equalization debt.
7. Where the member is not yet within ten years of the normal retirement date, the parties may elect the DSM option if the plan administrator agrees.
8. Recommendations 4 to 7 apply to
(a) a defined benefit pension plan, other than any class of defined benefit plan that is prescribed by regulation;
(b) subject to the regulations, a hybrid plan, insofar as it provides a defined benefit;
if the pension is not in pay and
(c) the plan is registered under the Pension Benefits Act or the substantive provisions of that Act apply to it;
(d) the plan is registered under the federal Pension Benefits Standards Act;
(e) the plan is not registered under the Pension Benefits Act but it is supplemental to a plan that is so registered and
(i) it provides for the accrual of pension benefits in a gradual and uniform manner, and
(ii) neither the formula for the employer’s contributions to the plan fund nor the pension benefit provided is at the discretion of the employer; or
(f) the plan is a member of such other class of defined benefit plan as is prescribed.
9. The ISM option discussed in Recommendations 4 and 5 also be available where a spouse is a member of a defined contribution plan, but the DSM option should not be available.
10. Ontario may wish to consider establishing a retirement fund into which non-member spouses who are entitled to a transfer pursuant to a pension division (see Recommendation 4, above) may place the transferred amount. The plan could also receive transfers from pension plans that wish to divest themselves of their “lost members”. The plan would be a capital accumulation fund, that is, the benefit ultimately paid out to the individual would be based on the amount originally paid into the fund plus the yield on the fund’s investment of that amount.
11. A settlement that is in accord with the ISM or DSM settlement regime be deemed to comply with the 50 per cent rule.
12. Ontario enact legislation permitting parties to waive the right to a split of CPP credits.
13. Where a common law relationship ends and one or both spouses is a member of a defined benefit pension plan, they may agree to have one or both pensions divided in accordance with the regime described in recommendation 4 to 8.
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