Pensions in Family Law After Jan. 1, 2012

In the context of family law, Bill 133 has made the following amendments affecting Ontario registered plans:

1. There is a new method used to value all pensions.
2. 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.
3. 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.
4. 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.
5. 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 consequences that result from immediate lump-sum withdrawals.

According to the new rules, a pension division is not automatic, and it is not mandatory.

A decision regarding pension division in your family law case should be made only after canvassing all of the relevant facts and strategies in your particular case. Prior to making this decision that can greatly impact on your family law case, it is prudent to obtain expert advise.

The solicitors at Krol & Krol have experience with pensions and how they are addressed in family law in Ontario. For a consultation with one of our solicitors with respect to a family law issue involving a pension, call 905.707.3370 today.