The British Columbia Supreme Court's recent decision
in Jarman v. Jarman raises important
jurisdictional issues for administrators of supplemental retirement
plans (SRPs), confirming that these plans may be subject to
provincial family law legislation in circumstances involving the
marriage breakdown of a member of the plan.
Mr. Jarman was an Air Canada pilot who participated in two Air
Canada pension plans, a defined benefit registered pension plan and
an SRP. It appears from the judgment that the SRP was a
non-registered supplemental plan. At issue in this case was whether
the payment due to Jarman's former spouse from the SRP was
subject to provincial family law legislation, and consequently
payable directly from the Air Canada SRP.
Air Canada took the position that the Air Canada SRP was not
governed by the British Columbia Family Relations Act
(the FRA) and that their administrative policy should apply. This
administrative policy placed the onus on the plan member, or
potentially his/her new spouse in the case of survivor benefits, to
pay a former spouse his/her entitlement (i.e., the former spouse
would not be paid directly from the Air Canada SRP).
The B.C. Supreme Court began its analysis by noting that the
definition of "pension plan" in the federal Pension Benefits Standards Act,
1985 (the PBSA) (being the statute applicable to Air
Canada's registered pension plans) includes a
"supplemental pension plan". The Court then noted that
under the PBSA, pension plan benefits are "subject to the
applicable provincial property law". Since "provincial
property law" is defined in the PBSA to include property
division on marriage breakdown, the FRA was held to apply to Air
Canada's SRP. As a result, Mr. Jarman's former spouse was
entitled to have her share of the SRP paid directly to her by Air
What Does This Case Mean for Administrators of
Section 28.5 of the regulations to the PBSA
(the PBSR) states that an SRP is exempt from the application of the
PBSA if the terms of the pension plan to which the SRP is
supplemental entitle all members of the SRP to benefits at least
equal to the maximum benefit or contribution limit under the
federal Income Tax Act (the ITA). SRPs are typically
established as "top-up" plans for higher-earning
individuals who are limited by the ITA in the amount of benefits
they can receive out of the registered plan. If the SRP only
provides top-up benefits for such individuals, then it will be
exempt from the PBSA, and thus the applicability of provincial
family law legislation in circumstances involving marriage
breakdown of a member of the plan will not flow from the
requirements of the PBSA.
Despite certain SRPs being exempt from the application of the
PBSA by virtue of section 28.5 of the PBSR, however, plan
administrators should still review their obligations under the
applicable provincial family law legislation itself. For example,
the FRA appears to apply to all supplemental plans provided to
employees in B.C.. Therefore, even if an SRP provided to B.C.
members is not subject to the federal pension legislation,
nevertheless the administrator will be required to administer the
pension split pursuant to the requirements of the provincial family
property legislation itself.
Jon Marin advises on legal and regulatory
issues affecting all aspects of provincially and federally
regulated pension plans and other employee benefit plans.
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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