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.
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.
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. On May 7, 2009, the Legislative Assembly of Ontario enacted changes to how pensions are divided when couples separate and divorce, based in part on the recommendations in the Law Commission of Ontario’s Report on Division of Pensions Upon Marital Breakdown. The Family Statute Law Amendment Act, 2009, received Royal Assent on May 14, 2009. For a history of the proceedings and the legislation, click here.