[vc_row][vc_column][vc_column_text]February 16, 2012
Divorcing or Separating? Do you have a workplace pension? If so you should be aware of changes in the law.
Rules governing division of workplace pensions on divorce or separation under the Ontario Pension Benefits Act and the Ontario Family Law Act were amended by Bill 133 and will be effective January 1, 2012. Recently, the Ontario government has filed regulations to accompany these amendments which give details of new requirements for valuating workplace pensions. These new rules will apply to all spouses whose relationship has broken down, unless a division of your workplace pension is provided for by way of court order or signed separation agreement made prior to January 1, 2012.
Bill 133 enacts significant changes to Ontario’s family law system and creates new rules governing:
- Valuation of Pensions
- Valuation of pensions must be calculated by pension plan holders in accordance with the new regulations. Specifically, Bill 133 requires pension plan holders to calculate “imputed value of pension entitlement for family law purposes” on divorce or separation.
- Payment/Settlement of Pensions
- Former spouses of pension plan members may be able to receive immediate payment of their share of pensions, either as a lump sum or monthly payments, if the divorce or separation occurs before retirement or pension division.
- Pension Plan Administrators to Value Workplace Pensions
- Either spouse may apply directly to pension plan holders for a valuation of the workplace pension as part of a division of matrimonial assets. Please note, pension plan holders may charge a fee for these calculations.
Under these new laws your pension plan holder must provide a valuation of a workplace pension plan directly to you. Up to 50% of a spouse’s pension plan entitlement earned during the marriage period may be paid out to the other spouse directly from the plan itself, if the transfer is granted by court order or agreed to in a separation agreement. Consequently, there will be considerable changes to calculations of each spouse’s net family property under the Family Law Act, which will affect the ultimate division of matrimonial property.
Changes to the rules will apply to division of pensions required by court order or signed separation agreement made on or after January 1, 2012, even though the signed date of separation may have occurred before January 1, 2012. All pension members and their spouses are required to make available a Statement of Imputed Value from the pension plan holder under these new rules if the date of separation occurred before or after January 1, 2012, unless a spouse is entitled to a specific equalization payment which factored in the value of the workplace pension already, as set out in a court order made before January 1, 2012.
If you have already have signed separation agreement where your workplace pension was dealt with, but where it was left open to the parties to choose whether it came under Bill 133, then either spouse may apply to a court of competent jurisdiction for a division of the workplace pension.
If you already have a signed separation agreement where your workplace pension was dealt with in a formal manner and the agreement was made before January 1, 2012, the old rules may still apply even if you have filed the separation agreement with the pension plan holder after January 1, 2012.
Unless the parties agree to amend the existing court order or signed separation agreement, a former spouse may not be able to request immediate payments of their share of pension when the new rules come into effect since the new rules are not retroactive. If you are in this position, you may have to wait until the plan member terminates employment or plan membership, retires, dies or reaches normal retirement age before receiving a share of pension assets.
LOCKED-IN PENSION ACCOUNTS
If a spouse has a locked-in pension account questions may arise as to when they may receive income payments from the locked-in account to which assets of the workplace pension were transferred.
If a court order or signed separation agreement is made on or after January 1, 2012, the non-pension owner spouse may start to receive income payments out of the locked-in account no earlier than the date he or she reaches 55 years of age.
If the court order or signed separation agreement is made before January 1, 2012, the old rules will apply and the former spouse’s ability to start receiving income payments will continue based on the former pension member’s age.[/vc_column_text][/vc_column][/vc_row]