Canada: No Divorce From Spouse #1? Common Law Spouse #2 Not Entitled To Pre-Retirement Death Benefits

In the recent case of Carrigan v. Carrigan Estate, the Ontario Court of Appeal has effectively re-written the law on pre-retirement death benefits under the Ontario Pension Benefits Act (the PBA).

Up until now it has been commonly accepted that if a pension plan member dies prior to retirement, then the member's spouse on the date of death is entitled to the pre-retirement death benefit, unless the member and spouse were living separate and apart. The Ontario Court of Appeal has decided, however, that if the member has a common law spouse potentially entitled to the pre-retirement death benefit, but the member had separated from and never divorced a prior spouse, the common law spouse will not be entitled to the death benefit (and neither will the first spouse – more on that below).


Section 48 of the PBA, which governs the payment of pre-retirement death benefits, provides, in part, as follows:

48.(1) If a member or former member of a pension plan who is entitled under the pension plan to a deferred pension described in section 37 (entitlement to deferred pension) dies before commencement of payment of the deferred pension, the person who is the spouse of the member or former member on the date of death is entitled,

(a) to receive a lump sum payment equal to the commuted value of the deferred pension; or

(b) to an immediate or deferred pension the commuted value of which is at least equal to the commuted value of the deferred pension.

(2) If a member of a pension plan continues in employment after the normal retirement date under the pension plan and dies before commencement of payment of pension benefits referred to in section 37, the person who is the spouse of the member or former member on the date of death is entitled,

(a) to receive a lump sum payment equal to the commuted value of the pension benefit; or

(b) to an immediate or deferred pension the commuted value of which is at least equal to the commuted value of the pension benefit.

(3) Subsections (1) and (2) do not apply where the member or former member and his or her spouse are living separate and apart on the date of the death of the member or former member.


(6) A member or former member of a pension plan may designate a beneficiary and the beneficiary is entitled to be paid an amount equal to the commuted value of the deferred pension mentioned in subsection (1) or (2) if,

(a) the member or former member does not have a spouse on the date of death; or

(b) the member or former member is living separate and apart from his or her spouse on that date.

(7) The personal representative of the member or former member is entitled to receive payment of the commuted value mentioned in subsection (1) or (2) as the property of the member or former member, if the member or former member has not designated a beneficiary under subsection (6) and,

(a) does not have a spouse on the date of the member or former member's death; or

(b) is living separate and apart from his or her spouse on that date.

The term "spouse" in s. 48 is defined in the PBA as follows:

"spouse" means, except where otherwise indicated in this Act, either of two persons who,

(a) are married to each other, or

(b) are not married to each other and are living together in a conjugal relationship,

(i) continuously for a period of not less than three years, or

(ii) in a relationship of some permanence, if they are the natural or adoptive parents of a child, both as defined in the Family Law Act; ("conjoint")

Prior to the Ontario Court of Appeal decision in Carrigan, the universal understanding of these provisions was that the PBA established a priority scheme for the payment of pre-retirement death benefits:

  • they would be paid to the spouse of the member, if any, unless the member and spouse had been living separate and apart on the date of death (or the spouse had waived entitlement to the benefit);
  • if there was no qualifying spouse on the date of death, then the named beneficiary would receive the death benefit;
  • if there was no named beneficiary, then the death benefit would be paid to the member's estate.

The facts in Carrigan were as follows: Melodee Carrigan married Ronald Carrigan, the pension plan member, in 1973. They remained legally married until Ronald's death in 2008. Melodee and Ronald had separated by 2000, at which time Ronald was living in a conjugal relationship with Jennifer Quinn. In 2002, Ronald designated Melodee and their daughters as beneficiaries of the death benefit under the pension plan. Ronald continued to live in a conjugal relationship with Jennifer until his death. Ronald had not yet started to draw a pension at the time of his death.

Carrigan Majority Decision

Juriansz J.A. wrote the majority decision, with a concurring decision written by Epstein J.A. Melodee and Jennifer both satisfied the definition of "spouse" on the date of death, Melodee because she was still married to Ronald, and Jennifer because she had lived with him in a conjugal relationship for a period of not less than three years. In the end, however, this status did not qualify either of them for the death benefit.

The decision focussed on the interaction between s. 48(1) of the PBA, which provides that the spouse on the date of death will receive the pre-retirement death benefit, and s. 48(3), which disentitles the spouse if the member and spouse were living separate and apart at that time. The Court of Appeal determined that Melodee was not entitled to the death benefit under s. 48(1) because she was living separate and apart from Ronald, thus triggering the application of s. 48(3).

In the majority's view, once s. 48(3) was triggered, s. 48(1) did not apply (in the strict wording of s. 48(3)). If s. 48(1) did not apply, then it could not apply to provide the death benefit to Jennifer, even though she was also a "spouse" as defined in the PBA, and even though she was not living separate and apart from Ronald (and thus s. 48(3) did not apply to her). Based on this reasoning, the Court of Appeal decided that in the absence of a spouse entitled to the death benefit, it was payable to the named beneficiary pursuant to s. 48(6). Melodee therefore was entitled to a portion of the death benefit (along with her children) not in her capacity as spouse, but because Ronald had named her as one of his beneficiaries under the pension plan.

A Better Interpretation of s. 48?

In my view, the dissenting judgment of LaForme J.A. in Carrigan holds much appeal, not only because it aligns with the common understanding of the operation of s. 48, but because it interprets the provision in its entire context and in a common sense fashion.

Section 48 clearly sets out a priority scheme for the payment of pre-retirement death benefits, as described above: to a qualifying spouse, then to the named beneficiary if there is no such spouse, then to the member's estate in the absence of a qualifying spouse or named beneficiary. The decision in Carrigan is based on a very technical and narrow reading of the provision, and would appear to run contrary to the policy underpinnings of the provision, which is to provide a death benefit to the individual who was the member's spouse on the date of death in priority to others, unless the member and spouse had separated.

Although the majority in Carrigan based their judgments on the "proper interpretation" of s. 48, it seems that it might be more sensible to interpret s. 48(3) as applying to any spouse potentially entitled to the death benefit under s. 48(1). That is, it seems clear that based on the definition of "spouse" in the PBA, both Melodee and Jennifer qualified as the "spouse" of Ronald on the date of his death (though there was some confusion in the case regarding whether a member can in fact have more than one "spouse" as defined under the PBA). Section 48(1) applies to both of the spouses.

Turning then to s. 48(3), as the majority correctly pointed out Melodee is not entitled to receive the death benefit, since she and Ronald were living separate and apart on the date of his death, thus making s. 48(1) inapplicable to her. In my view, that does not mean that s. 48(1) is inapplicable in general, and in particular inapplicable to Jennifer.

Put another way, a reasonable interpretation of s. 48(3) would be to read it as "Subsections (1) and (2) do not apply to a spouse potentially entitled under those subsections where the member, former member or retired member and his or her spouse are living separate and apart on the date of death". The section should be applied to both individuals who potentially qualify for the death benefit under s. 48(1), in order to determine which (if either) is entitled to the benefit.

Interpreting s. 48(3) in the narrow fashion adopted by the majority leaves the common law spouse out of the equation entirely, which in my view is certainly not what the drafters of the PBA intended.

We understand that this decision may be appealed. In the interim and pending any stay of the decision, plan administrators and members should consider the following implications.

Implications for Plan Administrators

The case has far-reaching implications for pension plan administrators. All administrators should immediately review their member communications, including beneficiary designation forms, since those communications may no longer accurately describe the priority scheme for the payment of pre-retirement death benefits. Plan administrators will also have to revise their administrative procedures for the payment of pre-retirement death benefits in future cases. They may also face claims based on past payments, on the basis that the payment did not go to the correct recipient.

Implications for Plan Members

Carrigan also has important implications for pension plan members and their common-law spouses. The entitlement of a common-law spouse to a pre-retirement death benefit will depend on whether the pension plan member was previously married, and whether the member divorced the former spouse or merely separated from him or her, even if the subsequent common-law relationship has existed for years or decades. Based on the reasoning in Carrigan, a member who is separated but not divorced from his or her spouse by marriage will have to name his or her common-law spouse as a beneficiary under the pension plan, in order for the common-law spouse to receive a pre-retirement death benefit should the member die prior to retirement.

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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