[*] These are the LCO’s final recommendations in relation to this project. The full final report will be released later in Fall 2008.


[1] R.S.O. 1990, c. F.3.

[2] Section 4 of the FLA defines “valuation date” as the earliest of the separation date, the date of divorce, the date the marriage is declared a nullity, the date an application is made for an order based on a danger of improvident depletion of family property under subsection 5(3) and the day before the date of a spouse’s death.

[3] See the definition of “net family property” in subsection 4(1) of the FLA.

[4] FLA, subsection 4(5).

[5] See for example, section 56 of British Columbia’s Family Relations Act, R.S.B.C. 1996, Chapter 128.

[6] The specific inclusion of pension rights in the FLA definition of “property” may be contrasted with the situation that had prevailed under the former FLRA, where pension rights were not mentioned in the definition of “family assets” and the courts had concluded that they were not subject to the FLRA provisions requiring equal division of such assets. (See, for example, St. Germain v. St. Germain (1980), 14 R.F.L. (2d) 186 (O.C.A.).) Whether the FLRA case law on this point was in fact sound seems doubtful, however, in light of the later Supreme Court of Canada decision in Clarke v. Clarke (1990), 73 D.L.R. (4th) 1, which held that a right under a pension plan was “matrimonial property” for purposes of Nova Scotia’s family law legislation, even though that legislation did not expressly address the question of pensions.

[7] See, for example, Nix v. Nix (1987), 11 R.F.L. (3d) 9 (O.H.C.)

[8] James MacDonald and Ann Wilton, The 2008 Annotated Ontario Family Law Act (Thomson Carswell, 2007), p. 71. See, for example, Ward v. Ward (1988), 13 R.F.L. (3d) 173 (O.H.C.); Flynn v. Flynn (1989), 20 R.F.L. (3d) 173; Bascello v. Bascello (1995), 26 O.R. (3d) 342, [1995] O. J. No. 2989 (O.C.[G.D.]); and Green v. Green (2007), 38 R.F.L. (6th) 378, [2007] O.J. 454 (O.S.C.J.). Interestingly, the latter case shows that the question of whether unvested rights are property can still loom large despite the relatively short vesting period for post-1986 service provided for in the PBA, as Green dealt with a supplementary employee retirement plan which had vesting requirements that were much stricter than those set out in the PBA.

[9] See Berend Hovius and Timothy G. Youdan, The Law of Family Property (Carswell, 1991), p. 478, n. 34.

[10] One expert has suggested that a pension in a defined benefit plan is frequently worth two to two and one-half times the contributions; see Thomas G. Anderson, “Pensions” in Federation of Law Societies of Canada 2006 National Family Law Program, p. 32.

[11] Jack Patterson, Pension Divison and Valuation: Family Lawyers’ Guide (2nd ed.) (Canada Law Book Inc.), p. 21.

[12] Patterson, note 11, pp. 21-22.

[13] This will usually be an actuary or someone with training in property valuation.

[14] The Canadian Institute of Actuaries Standards of Practice (2008) contain “recommendations” that Fellows of the Institute are generally required to follow. (There is a presumption that a deviation from a recommendation is a deviation from accepted actuarial practice.) Section 4330 of the Standards sets out rules governing the choice of interest rates and provides that actuaries (subject to some qualification) “should assume death rates in accordance with a mortality table prescribed by the Institute’s Practice Standards Council”. The currently-prescribed tables are “GAM-83” (the 1983 Group Annuity Mortality Table), Male or Female as applicable, which was developed from insurance industry data and was until fairly recently commonly used for valuation in solvency and going concern reports filed with pension plan regulators. The LCO understands that both the rules governing the choice of interest rates and the use of GAM-83 are currently under review.

[15] Boston v. Boston, [2001] 2 S.C.R. 413, at para. 32. It should be noted that while solvency valuations of a defined benefit pension plan must be performed by a fellow of the Canadian Institute of Actuaries (see section 14 of the General Regulation under the PBA [R.R.O. 1990, Regulation 909] and the definition of “actuary” in section 1 of the Regulation), there is no requirement in Ontario that a valuation of a spouse’s interest in a pension plan for family law purposes be performed by a fellow of the Institute, and some such valuations are in fact performed by non-actuaries.

[16] Some cases decided shortly after the coming into force of the FLA used the contributions approach in valuing rights under a defined benefit plan, but expert opinion seems to be unanimous in holding that that approach is generally inappropriate; see Hovius and Youdan, note 9, pp. 494-497; Ian J. McSweeney and Douglas Rienzo, Pensions and the Family Law Act: Valuation and Settlement of Pensions and Similar Employee Benefits on Marriage Breakdown (Law Society of Upper Canada (Bar Admission Course), 2005), p. 485; Patterson, note 11, p. 58. One may infer that the Supreme Court of Canada is of the view that the present value approach is the preferred approach for defined benefit pensions from the discussion of the differences between defined contribution plans and defined benefit plans at paragraphs 29 to 33 of the Court’s decision in Best v. Best, [1999] 2 S.C.R. 868 and from its approval of the termination method and (as an alternative in some situations) the retirement method, both of which are present value approaches.

[17] R.S.O. 1990, c. P.8

[18] Section 56 of the General Regulation under the PBA (R.R.O. 1990, Regulation 909) prescribes a method of valuation for purposes of the “fifty per cent” rule in subsection 51(2) of the PBA, but while this can be relevant to the question of how the equalization requirement should be satisfied once the net family properties of the spouses have been determined, it is not prescribed as the method for determining value for net family property purposes and generally has not been used for such purposes.

[19] See, for example, Ari N. Kaplan, Pension Law (Irwin Law, 2006), p. 305.

[20] Best v. Best, note 16, paras. 88-93. In discussing the possibility that the retirement method might be used in some cases, the Court seemed to suggest that it would be appropriate where the likely retirement date was fairly close at the time of valuation, as there would be a lesser degree of speculation than in the case where retirement would probably only occur at a more remote date.

[21] Humphreys v. Humphreys (1987), 7 R.F.L. (3d) 113, at p. 121 (O.H.C.J.).

[22] This seems to be the point being made by certain judicial authorities and other sources cited in Hovius and Youdan, note 9, p. 501.

[23] Humphreys v. Humphreys, note 21, at p. 121.

[24] The member may die without having retired and come into receipt of a pension. E. Diane Pask and Cheryl A. Hass, state in Division of Pensions (Carswell, 1990), p. V-9, state that mortality can be ignored for valuation purposes if the pension plan in question provides a death benefit equal to 100 per cent of the commuted value of the pension to which the member is entitled. In that regard, section 48 of the PBA requires a pre-retirement death benefit equal to the commuted value of the pension, but requires the value to be determined as of the termination (death) date; this of course means that it provides 100 per cent of the value of the pension only if one is applying a strict termination method which, as is discussed below, is not what courts purporting to apply the termination method are typically doing when determining a value for rights under a defined benefit plan.

[25] Note 8.

[26] The real interest method takes its name from the fact that it allows for inflation by employing a discount based on the difference between nominal interest rates and nominal rates of inflation, which over the long term has been relatively constant despite whatever fluctuations were occurring in the nominal rates. See Patterson, note 11, pp 127-128.

[27] Ironically, the Bascello court used the real interest retirement method even though the case before it involved a private sector plan that was not indexed. The court’s reasoning was that the plan sponsor would have to fund the plan at a level sufficient to ensure ability to pay pensions based on the plan members’ highest years of earnings; however, as Patterson, note 11, p. 175 and p. 194, observes, actuarial valuation for plan funding purposes is not based on the same principles as valuation of the interest of an individual member for marriage breakdown purposes. In the case of the latter, for plans that are not indexed, actuaries would typically use a higher discount rate reflecting predicted market rates rather than the real interest rate, which results in a lower value than a discount based on real interest rates: see Patterson, note 11, p. 173.

[28] Her age and years of service at valuation date adding up only to sixty-six, with her years of service treated as frozen, the employee would not achieve factor ninety for another twenty-four years, at which time she would be sixty-nine years old, four years past the normal retirement date.

[29] The employee’s age and years of service at valuation date add up to sixty-six; if she continues in her employment to age fifty-seven, she will at that time have thirty-three years of service.

[30] See, for example, Deroo v. Deroo (1990), 28 R.F.L. (3d) 211 (O.S.C.).

[31] See, for example, Weise v. Weise (1992), 99 D.L.R. (4th) 524, 12 O. R. (23d) 492 (O.C. [G.D.]. Such a discount might not be allowed where the possibility of pre-retirement termination is viewed as remote: Alger v. Alger (1989), 21 R. F. L. (3d) 211 (O.S.C.).

[32] Patterson, note 11, p. 216.

[33] [1995] O. J. No. 4147, 27 O.R. (3d) 255, affirming [1993] O. J. No. 2093, 15 O. R. (3d) 521.

[34] The seeming contradiction in selecting the date on which the employee would first qualify for an unreduced pension as the likely date of retirement, but valuing the pension as if it were a reduced pension, was not explained. The decision is strongly criticized as doing “a real disservice to the non-member spouse” in Patterson, note 11, p. 309.

[35] Best v. Best, note 16, paras 88-93.

[36] Alastair Bissett-Johnson, Winifred H. Holland, Matrimonial Property Law in Canada (Burroughs, 1980), p. O-65.

[37] Pask and Hass, note 24, p. VII-7.

[38] There are some exceptions to this; see subsection 67(5) of the PBA.

[39] See section 9 of the FLA.

[40] Note 15.

[41] The PBA permits this subject to certain restrictions; see discussion below.

[42] Ontario Law Reform Commission, Report on Pensions as Family Property: Valuation and Division, 1995, p. 37.

[43] “If and when” agreements, unlike orders, do not attract the same objection, as subsection 2(10) of the FLA provides that domestic contracts generally prevail over the FLA requirements.

[44] Julien D. Payne and Marilyn A. Payne have remarked (in Canadian Family Law [2nd ed.], 2006, p. 462), that

[i]n theory, it remains open to question whether an “if and when” order for the sharing of pension benefits upon maturity is consistent with a strict interpretation of the express provisions of the Family Law Act. However, necessity is the mother of invention and an “if and when” approach may be essential in order to facilitate equitable and practical discharge of an equalization entitlement.

[45] Less, of course, the present value at marriage where the member spouse had joined the pension plan prior to marriage.

[46] For a dramatic illustration of this, see Pask and Hass, note 24, pp. III-23 to III-28. The authors posit a hypothetical fact situation in which the marriage lasted for the first fifteen of the thirty years during which the member spouse was employed by the plan sponsor; if time ratios were used, the “if and when” approach would give the non-member spouse twenty-five per cent of the pension benefits when the pension came into pay, while use of value ratios would give the non-member spouse only a little over four per cent.

[47] See Neil Campbell, “Division of Pensions Under the Ontario Family Law Act: A Comment on Marsham v Marsham and Humphreys v. Humphreys” in (1988) 7 Can. J. Fam. L. 79-92, at 89. In Marsham, Walsh, J. of the Ontario High Court of Justice had held that an “if and when” approach that bypassed the valuation step was contrary to the FLA. Somewhat ironically, he ultimately ordered that the pension benefits be shared when the pension came into pay using a ratio of time rather than value; while he raised the question of whether this gave the non-member spouse a share of benefits that were earned after the marriage breakdown, he indicated that he was ordering as he did only because the member spouse had submitted that the other spouse’s share should be calculated on the basis of a time ratio (which would have been less advantageous to the member).

[48] There was no need for the Court to do so since it agreed with the trial judge’s decision that the equalization obligation should, in light of the particular facts of the case, be satisfied through payment by installments: note 16, para. 117.

[49] R.R.O. 1990, Reg. 909, s. 56.

[50] Ontario Law Reform Commission, note 42, p. 44. This, of course, eliminates one of the advantages of an order or agreement that imposes a trust on the plan administrator rather than on the member-spouse, that being that the spouses would not be required to have further dealings with each other on pension issues.

[51] Ontario Law Reform Commission, note 42, p. 44.

[52] Presumably the limit would be set at the point at which the member spouse’s equalization debt would be satisfied. This type of arrangement is more consistent with what the FLA presumably intended than other types of “if and when” arrangements, but could be more burdensome for plan administrators.

[53] This was pointed out by the Ontario Municipal Employees Retirement System in its Submission to the Ministry of the Attorney General on the Ministry of Finance/Ministry of the Attorney General Discussion Document “Valuing and Dividing Pensions at Relationship Breakdown”, April 5, 2006, pp. 3-4.

[54] This was asserted in Submission of the Ontario Bar Association to the Ministry of the Attorney General on Pension Division Reform, November 30th, 2007, p. 6. It clearly would be the case where the pension rights have not vested. However, while a former spouse as such is not entitled to a pre-retirement death benefit under section 48 of the PBA, he or she could be designated as a beneficiary if there is no subsequent spouse. (Even if the member spouse remarries, an agreement or order assigning part of the death benefit to the former spouse would seem to be enforceable and binding on the surviving current spouse: Stairs v. Ontario Teachers’ Pension Plan Board, [2004] O.J. No. 331.)

[55] McSweeney and Rienzo, note 16, p. 488.

[56] R.S.C. 1985, Chapter C-8.

[57] See Hovius and Youdan, note 9, p. 488; Ontario Law Reform Commission, note 42, p. 265.

[58] This was recommended by the Ontario Law Reform Commission, note 42, at p. 267.

[59] Hovius and Youdan, note 9, p. 492.

[60] Some had argued that the exclusion of so-called “common law spouses” was unconstitutional as being in conflict with the equality provisions of the Canadian Charter of Rights and Freedoms (The Constitution Act, 1982, Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11); see, for example, Gary S. Joseph, Section 15 of the Charter – Equality Rights and Marital Status Discrimination: Rights of the Unmarried Cohabitant Upon Breakdown of the Relationship (1990) 26 R.F.L. (3d) 235. However, in Nova Scotia (Attorney General) v. Walsh, [2002] S.C.J. No. 84, [2002] S.C.R. 325; 221 D.L.R. (4th) 1, 32 R.F.L.(5th) 81, the Supreme Court of Canada rejected that view.

[61] A common law spouse may have a claim to share in property under the general law of unjust enrichment; see Barbro E. Stalbecker-Pountney and Winifred H. Holland, Cohabiation: The Law in Canada (Carswell, 1990), p. 2-6 and Bigelow v. Bigelow, [1995] O. J. No. 2395 (O.C.A.) where a constructive trust was imposed in respect of a pension.

[62] This example is a variation of an example provided by the Ontario Law Reform Commission, note 42, p. 170.

[63] Hovius and Youdan, note 9, p. 478.

[64] Consider the example of a pension plan with a factor ninety unreduced early retirement option and a normal retirement date of age 65, and a member who joins the plan at age 30 after she is already married and who divorces at age 50. She will achieve factor ninety at age 60, but only because the service credits earned while she was married are counted; without those credits, she would not achieve factor ninety before reaching the normal retirement age in the plan.

[65] Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick and the territories all use a version of the ISM; it is also the method used under the federal Pension Benefits Division Act, which applies to federal government employees, and (presumptively, where provincial legislation does not address the issue) under the federal Pension Benefits Standards Act, which applies to private sector employees of employers working in federal labour and employment law jurisdiction.

[66] The DSM was conceived by the Canadian Institute of Actuaries Task Force on the Division of Pension Benefits Upon Marriage Breakdown, which published its report, Division of Pension Benefits Upon Marriage Breakdown, in 2003. British Columbia, Nova Scotia and Newfoundland and Labrador use a DSM approach.

[67] With one exception, pension division regimes in Canada that have adopted the ISM approach use commuted value. The exception is under the federal Pension Benefits Division Act (PBDA), which applies to employees of the federal government. One might speculate that the sponsor of plans to which the PBDA applies can afford the risks inherent in using a method of valuation more favourable to the non-member spouse than the commuted value approach.

[68] Regulations under the PBA currently prescribe the types of retirement vehicles that are permitted for transfer purposes.

[69] R.S.C. 1985 c. 1 (5th Supp.).

[70] In some cases, the amount that would otherwise be transferred into one of the four vehicles described above may exceed the amount that is tax-sheltered under the Income Tax Act. In such cases, the excess would be paid directly to the non-member spouse in cash.

[71] It is for that reason that a deferred member does not have the right under the PBA to require a transfer from the plan fund to another retirement vehicle if he or she is within ten years of eligibility for an immediate pension unless the plan provides a right to such a transfer.

[72] The member’s pension might be subject to an adjustment for age, depending on the terms of the plan. Some plans may provide for an increase where the member retires after normal retirement date, while others may not.

[73] R.S.C. 1985, c. 32 (2nd Supp.).

[74] S.C. 1992, c. 46, Sch. II.

[75] While the double dipping aspect is more obvious where the member has transferred cash or other assets, double dipping could also be said to exist where no such transfers occur because the net value of the member’s pension and other family assets does not exceed the value of his or her spouse’s net family property and the spouse later applies for support on the basis of the pension income.

[76] Christine Davies, The Ever-Changing Picture of Support and Other Developments (2002-2003), 20 C.F.L.Q. 213-241, at 237.

[77] Boston v. Boston, note 15.

[78] This point was made in Walker v. Walker, [2001] O. J. No. 4081 (Ont. Sup. Ct. Just.), discussed in G. Edmund Burrows, Disability Benefits and Other Assets (2004-2005), 23 C.F.L.Q. 145-198, at 173.

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