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Law Times • February 2, 2009 FOCUS Pension changes: the devil is in the details BY IAN HARVEY For Law Times been warmly received in prin- ciple, the number crunchers say some parts of the Ontario Fam- ily Law Act under Bill 133 may be "unworkable" in practice. "I think most people support W the idea," says David Wolgelerenter, whose DSW Actuarial Services Inc. specializes in pension valuation for divorces. "But what they're suggest- ing — and we haven't seen the for- mula yet — is really unworkable. "I know the pension bar and the family law bar are all for it as a good idea, and it is," says Wolgeler- enter who has presented Attorney General Chris Bentley with a brief outlining concerns. "This isn't a case of self-preservation or turf protection because obviously I do a lot of these valuations. But no one has consulted with actuaries from what I can see, and I hope our voice isn't ignored because there are some problems here and there are only a few of us special- izing in valuations for divorce." The proposal calls for the pen- sion plan and sponsor to provide a valuation based on an as-yet- undecided formula. It is intended to stop the bickering over pension values and allow the spouse with the bigger pension to transfer half the valuation to the other spouse as part of the equalization. "This is the government de- ciding without taking advice of hile the concept of reforming how pen- sions are valued has actuaries that this is a good idea," he says, "The pension lawyers think it's a good idea but I'm sure their own actuaries are saying, 'Oh my God, what are we going to do?' How are they going to handle this set-up process?" Currently spouses with robust pensions often end up having to walk away from their homes be- cause they cannot raise the cash to satisfy the equalization and must use their share of the equity to off- set the value of their pension. "The current rules do not allow transfer of a pension under Ontar- io jurisdiction and I think everyone agrees that's unfair," says Andrew Feldstein, a family law specialist. "Those hardest hit are usually the OMERS pensions, the firefight- ers, police, teachers," says Feldstein. "They have wonderful pensions but it's hard to tell someone after 20 years of marriage they have to walk away from their house." Among the changes is an allow- ance that if the pension is already being paid out as of the valuation date, the former spouse will be able to get an entailment to a por- tion of the pension. Otherwise a lump sum can ei- ther be transferred to a pension plan, RRSP, or something defined as "another arrangement." If the existing plan administrator agrees, the money can be left in that plan. Like his colleagues in the family law bar, Feldstein says the proposal is long overdue but is a little reserved until the full for- mula is disclosed. "How do you value it for early retirement, for later than 65? There are many variables," he noted. However, if it's done prudent- ly, he says, it will start to free the judges at family court from the case conferences, case manage- ment meetings, and other prelimi- naries which tie up the system. It'll also cut client costs since pension valuation is one of the major sticking points in hammer- ing out a divorce agreement. "These matters rarely go to trial," he says. "But it takes a lot of time to resolve." The Canadian Pension Plan is never an issue because of its simplicity, he says. Meanwhile federal employees' pensions are covered by federal legislation and this has created a two-class system, says Tom Dart, of Burgar Rowe Professional Corp. in Barrie and chairman of the On- tario Bar Association family law section which has been lobbying for the change for some time. The move is in keeping with the trend to dismantle points of conflict and to minimize litigation in divorce proceedings. "We're hoping it will be fair to both parties," says Dart. "Other jurisdictions have had this for a while and Ontario has quite a bit of catching up to do." Still, for all the earnest effort of the province, it's a Pandora's box, says Wolgelerenter. "It costs maybe $400 to $600 in 95 per cent of cases to get an actu- ary like me to value a pension," he says. "Which in terms of costs in a divorce is not that much money. I 'The current rules do not allow transfer of a pension under Ontario jurisdiction and I think everyone agrees that's unfair,' says Andrew Feldstein. get calls from lawyers who say they need one by Monday. And in most cases I can do that. Now, they have to call the pension plan, so how long is that going to take. And the plan will incur costs and how much will they charge?" Calculating tax is another potential hurdle, he says. "Take a teacher who is getting divorced," he says. "I can give you three numbers based on his date of retirement. Is it, say $100,000, $200,000, or $300,000? And since you have to figure out what the value is after tax, which tax rate do you use? If they're young and not making a lot, is it 20 per cent, or if they're making a lot, 40 per cent or more? Which pro- jected tax rate do we use?" The numbers arrived at risk becoming arbitrary, he says, "And for federally regulated employ- ees, will [the administrators of] their pension plans comply with [requests for] valuation? They could just say they're not covered by the Family Law Act." Finally, he says, there's some issues of privacy: "Many clients — and this happens a lot — don't want you calling their employ- ers to get the pension details and saying it's because of a divorce. They don't want their employer to know. It's a privacy issue." LT Many parents give up Continued from page 10 relative's home, residential care, or boarding school. "At least there there's time to concentrate on themselves, their studies, and that psychotherapy may work," he says. Given the strain, though, many parents may give up before the matter is settled, especially if it drags on through numerous ap- peals, says Warshak. The greater risk for the children is that they miss bonding with the estranged parent, the associated love of that parent, and the ex- tended family of uncles, aunts, cousins, and grandparents, which leaves a mark on their development. LT PAGE 11 Travelers Guarantee Company of Canada and Do Process Software Ltd. are pleased to provide another valuable link in state of the art technology by empowering lawyers to apply on-line and receive electronically the following surety bonds: Administration Bonds Guardianship Bonds Lost Instrument Bonds Waiver of Probate Bonds If you require a surety bond, please visit www.lawyercentric.com for instructions and your on-line application forms. Travelers Guarantee Company of Canada Commercial Surety (416) 360-8183 Untitled-5 1 www.lawtimesnews.com 1/26/09 2:38:45 PM