Legal Insights

On January 1, 2012, the Ontario Legislature passed new laws with respect to the division of a spouse’s pension. The major change that affected spouses dealing with their pensions upon the breakdown of the marriage was that pensions could now be divided at source. That meant, instead of including a spouse’s pension in the net family property (and thus subject to an equalization payment), the parties would take the pension out of their respective financial statements and leave it in the hands of a third party (pension plan administrator) to evaluate and subsequently transfer the value of the member spouse’s pension in the form of a lump sum payment once the pension was payable. However, what if the spouses cannot agree on whether to divide the pension at source or include it in their financial statements? The member spouse can apply to the courts to have his/her pension divided at source. In order to obtain an order to have a pension divided at source, the judge must be satisfied that the evidence put before the court satisfies section 10.1(4) of the Family Law Act. The criteria outlined in section 10.1(4) of the Family Law Act are stated as follows: (4)...

In determining the beneficiary of a deceased member’s pension plan, Ontario’s Pension Benefits Act defines the term “spouse” as either two persons who are married to each other or are not married to each other but are living together in a conjugal relationship continuously for a period of not less than three years. Subsection 48(1) of Ontario’s Pension Benefits Act adds that when the member dies, his/her spouse is entitled to a lump-sum payment equal in value to the deferred pension. Subsection 43(3) of Ontario’s Pension Benefits Act states that Subsection 43(1) does not apply where “the member, former member, or retired member and his or her spouse are living separate and apart on the date of death.” Finally, Subsection 48(6) of Ontario’s Pension Benefits Act permits member to designate beneficiary to their deferred pension plan upon death, in cases where the member has no spouse or was separated from their spouse at the time of death. As was demonstrated in Carrigan v. Carrigan Estate, it is important for a member to understand and familiarize themselves with Section 48 of Ontario’s Pension Benefits Act, in situations where a member dies and leaves behind dual spouses. In Carrigan v. Carrigan Estate,...

In the event that you and your spouse/former spouse are both members of the same pension plan, you will both be required to make two separate applications to get Family Law Value for each pension. This will likely result in both you and your spouse paying two separate fees, if fees are required. You will fill out certain forms, issued by the Financial Services Commission of Ontario, to your Plan Administrator. After completing the required forms, the Plan Administrator will provide you with a Family Law Value. In other words, the value of the pension that relates to the period of the spousal relationship (married or common-law) for the Plan Member and the spouse/former spouse of the plan member. In Ontario, it is permitted for one to authorize another individual, who may be their lawyer, to communicate with your Plan Administrator on your behalf. The appointed individual will be allowed to both communicate and receive the information on your behalf. In order to authorize this individual to act on your behalf legally, you must complete the Contact Person Authorization (FSCO Family Law Form 3), and send it to the Plan Administrator. This form needs to be completed in its entirety...

In the context of family law, Bill 133 has made the following amendments affecting Ontario registered plans: There is a new method used to value all pensions. If asked, the pension administrator must perform a valuation based on the new rules. Financial Services Commission of Ontario (FSCO) Form 1, 2 (and 3) along with supporting documents and the required fees constitute the valuation request. The plan administrator is not permitted to implement a pension transfer/division in your family law case until he or she has prepared a valuation. In order for a division to be implemented, the spouses must have an executed separation agreement or a court order that clearly addresses this matter. If the member is not retired at the date of separation, there can be a lump sum transfer to a Locked-In Retirement Account (LIRA). This is also known as a locked-in RRSP. Funds locked in a LIRA can generally only be accessed after the spouse reaches a pensionable age (this is usually at age 55). Once the pensionable age is achieved, the LIRA only provides periodic retirement income through a RRIF, LIF or annuity. At this time, there are "financial hardship" exceptions that allow for immediate lump-sum withdrawals. However, there can be significant tax...