Under the current regime in Ontario, upon marriage breakdown a
non-member spouse cannot access any portion of the member's
pension until the member terminates employment or retires. Under
the new regime, if the member has not yet retired on the valuation
date, the non-member spouse can receive a lump sum payment from the
pension plan. If the valuation date is after the member's
retirement, then the non-member spouse can receive a portion of the
member's monthly pension payments.
On March 3, 2011, after much delay, the Ontario government
finally released draft regulations that contain most but not all of
the content required to implement the new pension-splitting regime
under the PBA (click here to view the government's
announcement). In particular, the draft regulation outlines the
pension valuation methodology, including rules for calculating both
the "preliminary value" of the member's pension (the
total value of the pension up to the "family law valuation
date"), and the "imputed value" of the member's
pension (the portion of the preliminary value attributable to the
period of marriage).
The formula for determining the preliminary value of an active
member's pension is quite complicated. In essence, the formula
takes the average of three calculations of the commuted value of
the pension benefit:
the commuted value for termination purposes;
the commuted value assuming the member's pension starts at
age 65; and
the commuted value assuming continued employment to the
earliest date the member could receive an unreduced pension,
including the value of any bridge benefits.
The three components of the average are assigned different
weight depending on how far away the member is from the earliest
unreduced retirement date, assuming continued employment. The
further the member is from retirement, the more weight is assigned
to the commuted value for termination purposes and the less weight
is assigned to the other two calculations, etc. The formulae for
calculating the commuted value of the benefits of a deferred vested
or retired member are much simpler.
The regulations also contain details on the impact on the
calculation if the member is not vested or has applied for a
withdrawal of benefits based on shortened life expectancy, or if
the pension plan has been wound up in whole or in part, or a
payment of plan surplus to the member is pending.
Once the preliminary value of the member's pension has been
calculated, then the imputed value is determined as a portion
thereof, based on the period of pension membership during the
marriage period versus the entire period of pension membership.
Interestingly (and perhaps controversially to some), this pro
rata method is to be used for calculating the imputed value
not only of defined benefits but also of defined contribution
The draft regulations are not yet in force. When the draft
regulations were released, the Ontario government also published a
consultation paper seeking comment on
several outstanding issues, including a valuation methodology for
"hybrid" (combination defined benefit/defined
contribution) plans. The period for comments on the draft
regulations and the consultation paper has closed. Given that the
legislation was first introduced in 2008, it is hoped that final
regulations will be passed soon so that the legislation may be
brought into force.
Douglas Rienzo practises exclusively in the
area of pensions and employee benefits, with a particular focus on
pension surplus issues and family law issues related to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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