LAW COMMISSION OF ONTARIO RELEASES RECOMMENDATIONS IN DIVISION OF PENSIONS ON MARITAL BREAKDOWN STUDY
FOR IMMEDIATE RELEASE
TORONTO, October 6. 2008 – “We are advocating adoption of the Immediate Settlement Method as the primary means of settling pension issues”, Patricia Hughes, Executive Director of the Law Commission of Ontario said today as the LCO released its recommendations on the division of pensions on marriage breakdown.
Dr. Hughes noted that there has been much confusion in the law about how to treat pensions on separation. Family lawyers, judges and pension plan administrators have all wanted to see some clarity in this area. If adopted, the LCO’s recommendations will settle controversies over different methods of valuing interests under defined benefit pension plans and answer the lack of an efficient and effective settlement mechanism for parties who wished to resort to a pension in order to deal with Family Law Act (FLA) equalization olbigations.
The LCO’s primary recommendation is that when a spouse who is a member of a pension plan decides to use the pension to settle an equalization obligation, the Immediate Settlement Method be used. This requires the valuation of the pension at the date of separation and a transfer out of the pension fund for the benefit of the spouse to whom the equalization amount is owed. It has the advantage of being relatively easy and straightforward.
However, the LCO is also recommending that under certain circumstances, parties have the option of using the Deferred Settlement Method. Under the DSM, the pension is divided between the spouses, generally when the spouse who is the pension plan member begins collecting his or her pension. As Dr. Hughes explained, the “spouses may feel that the DSM is more appropriate when the spouse with the pension is within ten years of the normal retirement age”, but she added “it should also be available in other cases if the pension plan administrator agrees”.
The LCO’s recommendations were developed as a result of submissions from family and pension lawyers, pension valuators, pension plan administrators and others. Final recommendations are available at www.lco-cdo.org
Launched last September, the Law Commission operates independently of government to recommend law reforms to enhance access to justice.
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Ministry of the Attorney General LCO Counsel in Residence
Law Commission of Ontario