Law Times

Law Times • June 20, 2011 FOCUS Pension changes imminent Provisions address concerns over division of funds BY ROBERT TODD Law Times pensions are valued and divided when couples split to good use now that the province has is- sued draft regulations to put the changes in play. "We've been waiting for the F government to reform pension division legislation on marriage breakdown for years," says Grant Gold of McCague Borlack LLP. "It's excellent that they're fi nally moving forward with the draft regulations that will do that." Th e amendments were con- tained in Bill 133, which received Royal assent in 2009. Key as- pects of the bill include the pro- vision of immediate settlement of pension benefi ts when mar- riages end and the elimination of deferred settlement methods, which practitioners said were leading to unfair outcomes. In cases where the pension plan member is still working on the date of valuation, payment could be made through a lump sum taken from the plan. Should the member be retired before the valuation is carried out, retire- ment income from the pension plan will be divided. Meanwhile, the legislation also instructs plan administra- tors to calculate pension val- ues, a service for which they may levy a fee. Th e government issued the fi rst draft of its regulations in March and accepted pub- lic comments until mid-April. Notable provisions include the elimination of individual adjust- ment for poor health and a move not to recognize increased value for excess contributions over the course of the marriage. Lawyers say the new regula- tions and the bill itself could be in place by the end of 2011. "Th e purpose of this pen- sion reform is to allow there to be more certainty in valuing and dividing pensions and also to provide a mechanism for the part of the equalization payment that must be paid on account of the pension," explains Barbara Th ompson of Ottawa's Th omp- son Summers. She notes that the diffi culty up to this point has been with provincial pension plans as those covered under federal legislation previously had mechanisms permitting rollout of lump-sum payments. "Th is act allows a payment to be made from the pension plan itself," she says. "Th e pay- ment will be made by way of a lump-sum rollover, so it's basi- cally a rollover from the spouse that has a pension into the non- pension-member spouse." Th e process can get quite complex as part of the equalization pay- ment but it can essentially be locked into an RRSP or divid- ed by way of an income stream, depending on the timing of amily law practitioners in Ontario are eager to put amendments to the way the marriage breakdown. Th ompson notes the Fam- ily Law Act and its regulations previously failed to outline how pensions would be valued. How- ever, there was development of jurisprudence under the act to determine that. "One of the big arguments right now is around at what age the pension holder will retire," says Th ompson. "Th e value of the pension will change based on the assumed age of retirement. It seems counterintuitive, but the earlier you retire, the more valu- able your pension plan is." Th e draft regulations don't include a specifi c age of retire- ment. Rather, a set of formulas allows a weighing of the value based on years until the pen- sion member can retire with an unreduced pension. "If you look at the regula- tions, it's really complex," notes Th ompson. Meanwhile, Gold says the old system proved diffi cult for pen- sion plan members who were still working yet found them- selves forced to issue a payout to their spouse upon marriage breakdown. Many were obliged to fi nd ways to make large pay- ments even though they weren't yet able to access the funds their pensions were valued at. "If you look at the assets the average person has — a house, if they're fortunate enough, and a pension — those are people's biggest assets, I think, if you took a cross-section of the On- tario population," Gold notes. "Th e house at least is something tangible that has value. You can mortgage it but you couldn't do that with the pension." Th at approach is contrasted by federal pensions that allow for division at source. Th at means the ex-spouse not hold- ing the pension receives half of the funds divided as of the date of separation. Th ere has been resistance to that approach from the pension plan industry. "Th e reason some of the pen- sion plan administrators didn't like that, understandably, is it created way more work for them," notes Gold. "Th ey sud- denly had a new plan member that they hadn't anticipated, and that came with all kinds of re- sponsibilities, including getting hold of them, tracking them, and providing this information." Th at's why the proposed amendments are so benefi cial, says Gold, because they allow for the provision of a lump sum from the plan to the non- member spouse or the collec- tion of half of the member's pension that had accrued dur- ing the marriage. Overall, Gold says there's widespread support within the 'This act allows a payment to be made from the pension plan itself,' says Barbara Thompson. profession for the new legislation and amendments. "I don't believe there's any family law lawyer in the prov- ince who would say this is a bad idea," he remarks. PAGE 11 ESSENTIAL FORMS AND PRECEDENTS TO SAVE YOU TIME O'BRIEN'S ENCYCLOPEDIA OF FORMS ELEVENTH EDITION – ONTARIO – FAMILY LAW, DIVISION VI EDITOR: JAMES HERBERT PENSIONS CONSULTANT: BEN DIBBEN FOUNDING EDITORS: THE LATE H. DOUGLAS STEWART, Q.C. AND THE HONOURABLE JUSTICE MARY LOU BENOTTO INTERNET VERSION INCLUDED WITH YOUR PRINT SUBSCRIPTION Handle a broad range of family law issues more efficiently with O'Brien's, Ontario — Family Law, Division VI. Compiled by family law and pension experts, this classic resource will provide you with valuable commentary to help you customize precedents and modify forms to meet your clients' needs and save you time. BENEFIT FROM: • Domestic contracts with detailed commentary regarding particular clauses • A section on the division of pensions • Fillable court documents • Commentary on procedures in family law cases • Table of claims which provides a valuable synopsis of what might be sought and what should be pleaded under the Divorce Act and the Family Law Act O'Brien's, Ontario – Family Law, Division VI on the Internet, is included as part of your print subscription. 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