CPP and Credit Splitting

Depending on where spouses got married, more often than not, they will not be able to contract out of the obligation to split the member-spouse’s Canadian pension upon separation.

“Credit splitting” is the term that the Canada Pension Plan refers to when dealing with the splitting of a member’s pension for matrimonial purposes.

The section in the Canada Pension Plan that deals with credit splitting of a member’s pension is section 55.2. In section 55.2(2), the Canada Pension Plan explains that spouses may not contract out of the credit splitting of a member’s pension:

“Except as provided in subsection (3), where, on or after June 4, 1986, a written agreement between persons subject to a division under section 55 or 55.1 was entered into, or a court order was made, the provisions of that agreement or court order are not binding on the Minister for the purposes of a division of unadjusted pensionable earnings under section 55 or 55.1.”

However, the Canada Pension Plan does allow for the parties to contract out of section 55.2 and waive their spouse’s CPP credits in certain circumstance. Section 55.2(3) conveys the circumstances by which a contract stating that the parties waive their rights to each other’s CPP credits will be upheld. It states as follows:

“Where:

(a) a written agreement between persons subject to a division under section 55 or 55.1 entered into on or after June 4, 1986 contains a provision that expressly mentions this Act and indicates the intention of the persons that there be no division of unadjusted pensionable earnings under section 55 or 55.1,

(b) that provision of the agreement is expressly permitted under the provincial law that governs such agreements,

(c) the agreement was entered into

(i) in the case of a division under section 55 or paragraph 55.1(1)(b) or (c), before the day of the application for the division, or

(ii) in the case of a division under paragraph 55.1(1)(a), before the rendering of the judgment granting a divorce or the judgment of nullity of the marriage, as the case may be, and

(d) that provision of the agreement has not been invalidated by a court order,

that provision of the agreement is binding on the Minister and, consequently, the Minister shall not make a division under section 55 or 55.1.”

Currently, the only Canadian provinces to pass clear legislation that allows for parties to waive their rights to each other’s CPP credits are Quebec, Saskatchewan, and British Colombia.

To learn more about credit splitting as well as the services provided by Krol & Krol, call 905.707.3370 today.