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Welcome to FSCO’s webinar on the valuation and division of pension assets on breakdown of a spousal relationship.
We will begin this webinar in one minute to give everyone a chance to join us.
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Good morning: My name is Brian Mills and I am the Director of Pension Plans Branch at the Financial Services Commission of Ontario.
The recently proclaimed new family law related pension legislation will come into effect on January 1, 2012.
In keeping with FSCO’s commitment to provide information about legislative changes to the industry, I’m pleased to welcome you to today’s webinar. This webinar is intended to provide an overview of the new rules that apply when a plan member and spouse have separated and are seeking a valuation and division of their pension assets.
While we have tried to condense the material, the complex nature of the topic necessitates a fair amount of detail. And so, we may go slightly over the hour planned for the webinar. We appreciate your time and patience.
This topic was also requested by participants from our last webinar. To assist us in identifying topics for future webinars, I encourage you to complete the short survey at the end of this presentation. It will take only a few minutes and your feedback will be of great value to us.
Our two speakers, Chantal & Joey will now deliver the presentation.
I thank you for your time and hope you find this webinar informative.
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Good morning. My name is Chantal Laurin. I will be hosting today’s webinar with my co‐presenter Joey Shiner.
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Before we get started there are a few things you need to note:
• Your minimum screen resolution should be 1024 x 768.
• You can ask questions by sending us an email at [email protected]. We hope to post the response in January 2012.
• This webinar is comprised of a presentation that is divided into three sections. We’ll ask you a self‐assessment question after the first 2 sections and give you a few seconds to choose an answer from a list. Then we’ll provide the correct answer.
•At the end of the webinar, a short survey will appear on your screen. We’d really appreciate your feedback, as it will help us prepare future webinars.
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On June 22, 2011, the Ontario Government proclaimed amendments to the Ontario Pension Benefits Act and the Family Law Act relating to the division of pension assets on breakdown of a spousal relationship.
In the first section of this webinar, we will go over the new family law pension regime that will come into effect on January 1, 2012.
In the second section, we’ll go over the new process and the steps that must be followed in the new regime.
And finally, we’ll show you the resources available to plan administrators relating to family law matters.
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Let’s begin the first section for information about the new regime.
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There are a number of changes to the family law provisions in the Ontario Pension Benefits Act and Ontario Regulation 287/11.
The key changes are:
• Immediate settlement – the former spouse of a plan member will be able to receive an immediate payment of his or her share of the pension assets;
• The method for the valuation and division of pension assets is set out in the Regulation;
• The plan administrator will be responsible for valuing the pension assets; and
• Superintendent approved forms must be used throughout the process. These are forms that have been prepared and approved by the Superintendent of Financial Services and cannot be altered. We’ll go over the forms in detail in the next section.
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In this webinar, we will be using the term “former spouse” although parties may not yet be divorced.
Certain provisions have not changed.
• It is not mandatory to divide pension assets when there is a breakdown in a spousal relationship;
• If pension assets are to be divided, no more than 50% of the plan member’s pension assets accrued during the period of the spousal relationship can be assigned to the former spouse; and
• The former spouse’s share of the pension assets must continue to be administered on a locked‐in basis and cannot be paid in cash except in certain specific situations which we will address later in this webinar.
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The new rules apply to registered pension assets that are subject to the PBA. They also apply to Ontario employees in pension plans registered in other provinces but subject to the PBA.
FSCO recognizes that the Ontario Family Law Act also applies to non‐registered plans (such as Retirement Compensation Arrangements or Supplementary Employee Retirement Plans) and the new valuation rules in the PBA may apply to such plans. However, this webinar will only cover registered pension plans that are subject to the PBA.
The new rules apply if the court order, family arbitration award or domestic contract that provides for the division of pension assets is made on or after January 1, 2012. The date that the court order, family arbitration award or domestic contract is made is key to determining which rules will apply.
We’ve prepared a number of examples to help you understand when the new rules will apply. By “parties” we mean the plan member and his/her former spouse throughout therest of this webinar.
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The parties separated in 2009 and have a court order issued in 2011 that deals with everything except the pension assets. They obtain a court order in 2012 that addresses division of the pension assets. Do they fall under the old or the new rules?
In this example, the parties obtained a court order dealing with all their family assets except the pension assets before January 1, 2012. Because the court order did not deal with division of the pension assets, the parties will be subject to the new rules if they obtain a court order on or after January 1, 2012, that provides for the division of the pension assets.
A court order made under Part I of the Family Law Act, family arbitration award or domestic contract providing for the division of pension assets must be made on or after January 1, 2012, in order for the new rules to apply.
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The parties separated in 2009 and have a family arbitration award made in 2011 that deals with everything including the pension assets. Do they fall under the old or the new rules?
Here, the 2011 family arbitration award provides for the division of all family property. Since the award was made in 2011, the parties would fall under the old rules.
Under the old rules the former spouse must wait until a triggering event occurs before being paid their share of plan member’s pension assets. This would be when the plan member terminates employment or plan membership, retires, dies, or reaches the normal retirement date under the pension plan, or when the pension plan is wound up ‐whichever event occurs first. The administrator has 30 days from this event, to provide the former spouse a copy of the plan member’s termination statement and provide available options which must be at least the same options given to the plan member, for the payment of his or her share of the plan member’s pension entitlement.
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The parties separated in 2010. The pension assets were valued by an independent actuary for purposes of equalization of net family property under the Ontario Family Law Act. A court order providing for the division of pension assets was made after December 31, 2011. Do they fall under the old or the new rules?
The parties in this example would be subject to the new rules because a court order was made after December 31, 2011. They will be required to follow the new process by using FSCO’s Superintendent approved forms, including obtaining a Family Law Value from the administrator. Since the value of pension assets previously calculated by an independent actuary may not correspond to the Family Law Value calculated by the plan administrator, the parties may need to re‐evaluate their net family property calculations.
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Since we’ve concluded the first section, we’d like to ask you to answer the question that is now on your screen.
When the new family law regime comes into effect on January 1, 2012, all of the following statements will be true except….
We’ll pause for about 15 seconds to give everyone a chance to reply.
Most of you have the correct answer which is ……….. B ‐ Superintendent approved forms cannot be altered.
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In the second section of our presentation, we’ll go over the new process and the proposed Superintendent approved forms.
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Plan administrators should be familiar with the new terms introduced in PBA that pertain to the new family law regime.
The Family Law Valuation Date is the date when the spousal relationship ended and is key in determining the value of the plan member’s pension assets.
The Preliminary Value is the total value of the pension accrued by the plan member during the period of membership in the plan, as of the Family Law Valuation Date.
And, the Imputed Value is the part of the Preliminary Value that relates to the period of the spousal relationship. FSCO uses the term “Family Law Value” in the Superintendent approved forms when referring to the “Imputed Value. The Family Law Value is an important value ‐ this is the amount that can be divided between the parties.
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The legislation specifies the maximum fees that a plan administrator may charge.
• It’s $200.00 if the member is entitled to a defined contribution benefit. This fee would also apply to a retired member if the DC benefit remains in the plan;
• $600.00 if the member is entitled to a defined benefit. Target benefit plans are also included in this group; and
• $800.00 if the member is entitled to a combination of a defined benefit and a defined contribution benefit or a hybrid benefit where the member is entitled to the greater of a defined benefit or defined contribution benefit.
Each administrator should carefully decide whether or not to charge a fee for calculating the Family Law Value and ensure that the reasons for this are properly documented.
If a fee is not paid, the administrator is not required to calculate the Family Law Value. It’s up to the parties to decide whether the fee should be shared between them.
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These are the proposed Superintendent approved forms that are posted on FSCO’s website. FSCO intends to finalize these forms in fillable format by the end of this year. The forms are not final until the fillable versions are posted.
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Each form has a box: “For Plan Administrator Use” which may be used to insert helpful information for administrative purposes – such as bar codes, dates, plan registration number, etc.
As with all Superintendent approved forms, these family law forms must not be modified or altered. However, the plan administrator may pre‐populate these forms with information about the pension plan and/or plan member.
As the information provided in these standardized forms may not be sufficient for complex pension plans, the administrator may provide additional plan‐specific information to the parties where necessary.
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The new process can be divided into five steps.
In Step 1, the plan member or the married or formerly married spouse of the plan member applies for the Family Law Value by completing and filing an application with the administrator.
In Step 2, the administrator reviews the application received under Step 1 for completeness and calculates the Family Law Value.
In Step 3, the parties decide whether or not to divide the Family Law Value. If the Family Law Value is to be divided, they move to….
Step 4 where the former spouse files an application with the administrator requesting payment of his or her share of the Family Law Value or the division of the pension in case of a retired member.
In the last step, the administrator pays the former spouse in accordance with the former spouse’s chosen option and recalculates the member’s entitlement.
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Over the next several slides, we’ll go over the first step of the new process.
In Step 1, the plan member or the married or formerly married spouse must complete and file an Application for Family Law Value with the administrator. The application must include all required documents and any applicable fee.
In a common‐law relationship only the plan member can apply. This is because married and common‐law spouses have different property rights under the Ontario Family Law Act.
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In certain situations, more than one Family Law Value will need to be obtained:
• If both spouses are members of the same pension plan, they must make separate applications to get the Family Law Value of each of their pension assets.
• If the spouses are members of different plans, they must each make an application to their respective plan administrators to get the Family Law Value.
• If the plan member is a member of more than one pension plan, an application may be required for each plan. If a plan member accrued benefits under separate plans sponsored by the same employer, such as an hourly plan, a salaried plan and an executive plan, the administrator determines whether separate applications are required for each plan or if one application is sufficient to cover all plans.
The legislation does not set a limit on the number of applications that can be made by the parties. However, the fee, if any, for each application must be paid.
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The Application for Family Law Value or FSCO Family Law Form 1 has 8 Parts ‐ Parts A to H ‐plus an Appendix A.
The information the applicant provides on this form, along with the supporting documents is used to prepare the Statement of Family Law Value – Form 4. Although this form is not to be completed by the plan administrator, the administrator should be familiar with it, to provide the applicant with assistance, if required.
Part A identifies the applicant. If the plan member or former spouse has someone acting on their behalf under a power of attorney for property or a court order, that person would identify themselves under Part C or D of the form.
Part B requires information about the pension plan.
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Parts C and D require personal information about the member and the member’s former spouse. The applicant may check with the plan administrator what is acceptable as proof of date of birth and who can certify the documents that must accompany this form.
If the applicant is a retired member who is receiving a pension from the plan, the administrator will need to verify whether there was a spouse when the first payment was due and if so, who it was.
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If the applicant wants to authorize a contact person to communicate with the plan administrator on their behalf regarding family law matters, the Contact Person Authorization ‐ FSCO Form 3 ‐must be filed. Additional information about this form is included in the questions and answers and instruction sheet that accompany it.
This form does not have to be completed if a person is acting under a power of attorney for property or a court order. Instead, a certified copy of the power of attorney for property or the court order must be given to the administrator with the Application.
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The information provided in Parts E and F is very important, as the plan administrator will not be able to correctly calculate the Family Law Value without it.
In Part E, the applicant must provide the date when the spousal relationship began, which will be one of the following:
• the date of marriage;
• the date the parties started living together in a common‐law relationship;
• a date jointly chosen by the applicant and the former spouse . However, this date cannot be earlier than the date they started living together in a common‐law relationship, or, later than the date of the marriage, if they are or were married; or
• the date that is set out in a court order or family arbitration award.
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The plan administrator may accept any of the following as proof of the starting date of the spousal relationship:
• a certified copy of the marriage certificate; or• a Joint Declaration of Period of Spousal Relationship form; or • a certified copy of a domestic contract or court order or a family arbitration award that
sets out the starting date of the spousal relationship.
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In Part F, the applicant must provide the date when the spousal relationship ended. This is the Family Law Valuation Date.
The applicant and former spouse must agree on the separation date as it is needed to calculate the Family Law Value. If the parties cannot agree on the separation date, or if this date is still being determined by the parties, Part F should not be completed. Instead, they should jointly complete Appendix A of the Application for Family Law Value.
For married spouses, the Family Law Valuation Date must be the earliest of:
• The date the parties separated, with no reasonable prospect that they would resume living together;
• The date the divorce was granted;
• The date specified in a court order or arbitration award; or
• Another date, which must be specified.
If the parties lived together in a common‐law relationship, the Family Law Valuation Date would be the date when they separated with no reasonable prospect that they would resume living together.
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The parties must also provide proof of the date when the spousal relationship ended, by providing:
• a Joint Declaration of Period of Spousal Relationship; or
• Appendix A of Application for Family Law Value; or
• a certified copy of a domestic contract, court order or a family arbitration award that sets out the separation date.
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Since we are discussing the separation date, we’ll draw your attention to Appendix A.
If the applicant and former spouse cannot agree on, or have not decided on their separation date, they may propose two dates to be used as the separation date by completing Appendix A.
The administrator has to prepare two different valuations, one at each date and issue two separate Statements of Family Law Value. The applicable fees may therefore be doubled.
Before the Family Law Value can be divided, the parties will have to select one of the two dates reported in this Appendix. The chosen date must be set out in the court order, family arbitration award or domestic contract, and reported by the former spouse on the Application to Transfer the Family Law Value ‐ FSCO Form 5‐ or Application to Divide a Retired Member’s Pension ‐ FSCO Form 6.
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The Joint Declaration of Period of Spousal Relationship may be used by the parties to declare the starting date or the separation date of their spousal relationship.
Additional information about this form is included in the questions and answers and instruction sheet that accompany it.
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Part G of the Application is for Fee information. Parties can request this information from the plan administrator if they are not sure of the required fee. The administrator is not required to calculate the Family Law Value if the fee is not paid.
Part H of the application must be signed by the applicant or the person acting on the applicant’s behalf under a power of attorney for property or by a person given this authority by a court order. The signature of a witness is also required here.
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The administrator must review the Application for completeness – that it has been made by a person eligible to make the application , that all required documents have been filed, applicable fee has been received and the form is signed and witnessed.
The documents proving date of birth, the starting date and the separation date must be certified copies. Each administrator must decide who can certify these documents.
The plan administrator has flexibility about what to accept as proof of date of birth. However, for the starting and separation dates, it can accept only those documents listed in the instructions for Parts E and F of the Application.
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If the application is incomplete, the administrator may use FSCO Form 1A to communicate any deficiencies to the applicant ‐ to ask for missing or incomplete information, or for payment of the required fee.
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Once a complete application is received, the administrator must prepare and provide the applicable Statement of Family Law Value ‐ FSCO Form 4 ‐ to the parties or to their Contact Person. This must be done within 60 days.
This Statement of Family Law Value is the Statement of Imputed Value referred to in the PBA.
The member’s status and benefit type at the Valuation Date determines which Form 4 – A, B, C, D or E – is to be used.
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There are 5 Form 4s. Detailed information on which Form to use in a specific situation is available on our website.
• 4A: is used for a defined contribution benefit
• 4B: is used for an active member who has a defined benefit
• Where a member has a combination of a defined benefit and defined contribution benefit, 4C is used for an active member and 4D is used for a former member with a deferred pension.
• 4E is used for a retired member who has a defined benefit.
There is also a type of pension plan that provides the greater of a defined benefit and defined contribution benefit. We call them hybrid pension plans. Such plans must calculate which benefit is greater at the Family Law Valuation Date and then use the appropriate Form 4. For example if the defined benefit is the greater benefit, then use 4B.
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Each Statement of Family Law Value – FSCO Form 4 – has various Parts, Next Steps and Appendices.
Due to time constraints, we will review only some of these here. For detailed information, visit our website.
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Part A of every Form 4 contains key information that must be included in the parties’ court order, family arbitration award or domestic contract in order to divide the pension or Family Law Value of a retired member.
The Worksheet for Family Law Value Calculations must be completed before Part A can be completed.
The plan administrator cannot transfer more than 50 per cent of the Family Law Value to the former spouse.
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Part A of 4E is used for a retired member with a defined benefit. Under the Pension Summary the lifetime pension must be reported separately from the bridging/supplemental benefit, as this is only a temporary benefit.
The plan administrator cannot pay the former spouse of a retired member an amount that exceeds 50% of the lifetime pension or the bridging/supplemental benefit.
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Pension plan information must be reported in Part B for all Statements of Family Law Value.
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Parts C and D set out information about the plan member and the plan member’s spouse or former spouse, along with contact person information, if applicable.
4D and 4E require information about the Former Member and Retired Member respectively.
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Part E for 4A through 4D lists four transfer options that may be available to the former spouse. They are:
• transfer to a locked‐in retirement account (or LIRA);
• transfer to a life income fund (or LIF);
• transfer to another registered pension plan ‐ only if the plan administrator of the receiving pension plan provides a written confirmation that it will accept the transferred amount and administer it in accordance with the Ontario Pension Benefits Act.
• transfer to an unlocked vehicle – or cash payment. This is only available in very limited situations such as shortened life expectancy, small amounts, etc.
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Part E of 4E shows the options available to a retired member’s former spouse. These are:
• Division of the retired member’s pension payments, to be paid from the pension plan.
• The “combination option”. This is available only if the pension plan explicitly provides it and if the retired member’s pension is being paid in joint and survivor form. This allows the former spouse to combine the value of two separate amounts – the former spouse’s share of the retired member’s Family Law Value, and the Family Law Value of the former spouse’s survivor benefit ‐ into one payment.
• A transfer to an unlocked vehicle in very limited circumstances such as shortened life expectancy.
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Part F of 4B, 4C and 4D sets out the transfer ratio, which would apply to defined benefit plans only.
The former spouse’s right to transfer is subject to the same restrictions as a terminated member. The transfer ratio in the statement shows the funded status of the plan at the time this Form is completed. It is for information purposes and lets the parties know there may be a delay in transferring the whole commuted value.
The plan administrator must use the transfer ratio at the time of payment to the former spouse, to determine the limits on what can be paid at that time.
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The plan administrator certifies that to the best of its knowledge, the information provided in the Form is correct. This is done in Part F of 4A and 4E; or Part G of 4B, 4C and 4D.
This is a binding signature of the administrator as with other certifications.
If the statement is completed by the administrator’s authorized agent or representative, their contact information must also be provided.
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The Next Steps section also lists any information that the administrator needs to proceed with the division. This includes:
• Canada Revenue Agency forms required for any lump sum transfer;
• locking‐in agreements; or
• written confirmation from the plan administrator of the receiving pension plan that the transferred funds will be accepted and administered in accordance with the PBA.
The Next Steps under 4E is different from 4A to 4D.
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Appendix A of all Form 4s must include the plan member’s membership and employment information as of the Family Law Valuation Date, as well as any Additional Voluntary Contributions ‐ or AVCs.
Appendix A of 4D & 4E also reports excess member contributions for former members and retired members respectively but not for active members.
For disclosure purposes, the plan member’s AVCs and excess member contributions as of the Family Law Valuation Date, if applicable, must be reported, even though these amounts are not included in the Family Law Value.
Neither excess contributions nor AVCs are subject to the 50% maximum division rule or immediate settlement. Timing of the payment of AVCs will be subject to the terms of the pension plan.
Any change in a plan member’s status from the Family Law Valuation Date to the date when the Form 4 is issued to the parties, must be reported in the “Plan Membership and Employment Information” section. For example, a member may have been a former or deferred vested member on the Family Law Valuation Date, but may be retired at the time the Statement is issued.
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Appendix B lists common plan provisions that could affect the valuation of the plan member’s Family Law Value. The plan administrator may also provide this in an attachment.
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Appendix C of 4B, 4C, 4D and 4E lists actuarial assumptions based on section 3500 of the Canadian Institute of Actuaries Standards of Practice for calculating the Family Law Value. This only applies to plan members with a defined benefit.
The plan administrator may want to consult an actuary for assistance in completing this Appendix.
The administrator also has the option to provide this information in a separate document.
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Appendix D of 4B, 4C, 4D and 4E provides information that relates to a full or partial plan wind up, along with surplus entitlement information.
The administrator must provide details if the plan member is entitled to a share of surplus, even if the member’s share is not known at the time the statement is issued.
If the member is affected by a plan amendment related to cost of living adjustments during the last three fiscal years before the Family Law Valuation Date, this information must be provided.
This information is only required to be provided for members with a defined benefit and therefore, is not included in Form 4A.
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We now come to the heart of this new regime – the calculation of the Family Law Value!
The last appendix on all Form 4s is the worksheet for the calculation.
Once this worksheet is completed, the plan administrator will know the Family Law Value and will be able to complete Part A of Form 4.
Just a reminder before we move on:
• the Preliminary Value is the total value of pension accrued at the Family Law Valuation Date, and;
• the Family Law Value is the Preliminary Value adjusted based on the period of the spousal relationship.
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The Preliminary Value for a member with a defined contribution benefit will vary depending on whether the value can be determined as of the Family Law Valuation Date.
If the start date of the spousal relationship is before the date the plan member joined the plan, the Family Law Value is equal to the Preliminary Value.
However, if the starting date of the spousal relationship is on or after the date the member joined the pension plan, there are 3 different calculations:
• If the account balance on the starting date can be determined, the Family Law Value is the Preliminary Value less the account balance at the starting date of the spousal relationship.
• If the account balance cannot be determined as of the starting date, but can be determined
within a 45 day window – before and after the starting date ‐ then the Family Law Value is
the Preliminary Value less the account balance as of this determined date.
• If the Family Law Value cannot be determined based on the account balance, then the Family Law Value is the Preliminary Value at the Family Law Valuation Date ‐multiplied by the period of spousal relationship ‐ divided by the period of service or membership under the plan.
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The Preliminary Value for an active member with a defined benefit is based on weighted calculations and takes into account future entitlements.
If the Family Law Valuation Date is on or before the plan member’s early unreduced retirement date, values A, B and C must be calculated as follows:
• A assumes the member will start the pension on the date resulting in a pension with the greatest value;
• B assumes the member will start the pension at the normal retirement date ‐ for most plans this will be at age 65;
• C assumes the member’s pension will start at the earliest date when the member’s unreduced pension can be paid, if employment or membership continued to that date.
If the Family Law Valuation Date is after the member’s early unreduced retirement date, values B and F must be calculated as follows:
• B assumes the member will start the pension at the normal retirement date and
• F assumes the member will start the pension on the Family Law Valuation Date.
The Family Law Value is easier to calculate. It is simply the Preliminary Value at the Family Law Valuation Date multiplied by the period of the spousal relationship divided by the period of service/membership under the plan.
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If a member has a combination benefit, the plan administrator will need to calculate the Preliminary Value and the Family Law Value separately for the defined benefit portion and the defined contribution benefit portion.
The worksheet for Form 4C is for active members with a combination of a defined benefit and a defined contribution benefit.
The worksheet for Form 4D applies to a former or deferred vested member who has either a defined benefit or a combination of a defined benefit and a defined contribution benefit.
When determining the maximum amount that can be transferred to the former spouse, the administrator must apply the 50% maximum transfer rule separately for the defined benefit portion and the defined contribution portion.
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The worksheet for 4E applies to retired members who are members whose first instalment of the pension was due on or before the Family Law Valuation Date.
The Preliminary Value for a retired member is the sum of the retired member’s lifetime pension and bridging/supplemental benefits (which must be reported separately due to different timelines for payment) less the commuted value of the former spouse’s survivor benefit.
The Family Law Value calculation is the same for all defined benefits.
This Family Law Value is used for equalization purposes under the Family Law Act. The former spouse may not transfer it from the pension plan. Former spouses may only receive a share of the retired member’s pension.
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There are four special circumstances that must be reported in Form 4, if they apply to the plan member. These are:
• Non vested entitlements: If the plan member is not vested, the Preliminary Value is reduced by 50%.
• Applications made by the plan member for shortened life expectancy: If the plan member qualifies for the shortened life expectancy, the Preliminary Value is the same as the commuted value calculated based on shortened life expectancy assumptions. The amount is payable on an unlocked basis to the member and the former spouse.
• Wind up situations: If the effective date of the partial or full wind up of the plan is on or before the Family Law Valuation Date, the member is included in the wind up group and the declaration of the wind up is on or before the date the Statement of Family Law Value is issued, then the Preliminary Value is the same as the wind up value accumulated with interest from the wind up date to the Family Law Valuation Date.
• Surplus entitlement: If the member is entitled to surplus when the Statement of Family Law Value is completed, the amount must be added to the Preliminary Value. Surplus is not locked in. It must be paid in cash. No more than 50% of the surplus accrued during the period of the spousal relationship can be assigned to the former spouse.
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The plan administrator has to provide Form 4 to both parties.
Along with Form 4, FSCO recommends that the administrator also provide to the former spouse, under a covering letter, the following:
• Form 5 or 6 as applicable;
• Form 7 if the parties decide not to split the Family Law Value or pension;
• Any request for beneficiary or spousal information, if required; and,
• Any additional information that the administrator would like to provide.
The administrator now waits for the parties to respond.
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At Step 3, the parties have each received a copy of the Statement of Family Law Value from the administrator.
If the parties decide not to divide the Family Law Value or pension, the administrator may encourage them to jointly complete Form 7 ‐ the No Division of Family Law Value/Pension Assets form. This form may be completed even if the parties have not applied for the Family Law Value from the plan administrator. Alternatively, they can file a copy of the court order, family arbitration award or domestic contract that says the pension is not to be divided.
The process to divide the Family Law Value or pension must be initiated by the former spouse and there is no time limit on when the application must be made. As long as the parties’ Family Law Valuation Date doesn’t change, the information provided under the Statement of Family Law Value will remain valid.
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This step is initiated by the former spouse who must complete Form 5 for a lump sum transfer or Form 6 for payment of a pension, as applicable.
As the former spouse will rely on the information in Part A of Form 4, it is important that the plan administrator completes and delivers the correct Form 4.
The former spouse must also file a certified copy of the court order, family arbitration award or domestic contract that provides for the division and includes the Family Law Valuation Date and the amount that is to be provided to the former spouse.
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In the final step, the administrator processes the former spouse’s Form 5 or Form 6, and pays the former spouse within 60 days of receiving the completed application.
Any pension arrears owing to the former spouse of a retired member cannot be paid in a lump sum. Instead, the arrears must be added to the ongoing payments of the former spouse’s share of the retired member’s pension.
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There is no time limit for a former spouse to submit Form 5 or 6.
However, if the pension assets are no longer in the plan at the time Form 5 or 6 is submitted, the administrator is not required to pay the former spouse. For example:
After Form 4 has been issued and before Form 5 or 6 is submitted to the administrator, the member has terminated employment and has already been paid the entitlement from the plan.
This does raise the issue of what, if any, duties a plan administrator owes a non‐plan member spouse, when a Family Law Application is made. FSCO is giving consideration to this issue, as should administrators.
If the transfer ratio of the plan is less than 1 at the time when the payment is to be made and the full amount cannot be paid out, the balance owing must be paid within 5 years of the initial payment date. This information should be sent to the former spouse.
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If the former spouse dies before the administrator transfers the lump sum, the lump sum must be transferred to the former spouse’s estate.
If the plan member dies before the administrator makes the transfer, the administrator must proceed with the transfer to the former spouse.
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For lump sum transfers, interest or investment earnings must be included from the Family Law Valuation Date to the beginning of the month in which the former spouse’s share of the Family Law Value is transferred.
For defined contribution plans, interest and investment earnings will be based on the fund rate of return. This may be positive or negative.
For a defined benefit plan, the same interest as was used to calculate the Family Law Value must be credited.
For arrears on pension payments, interest must be included in the arrears owing to the former spouse from the Family Law Valuation Date to the date as of which the retired member’s pension is divided. The interest rate on the arrears must be based on the CANSIM rate ‐ Canadian Socio‐Economic Information Management System ‐ compiled by Statistics Canada.
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Once the administrator pays the former spouse the share of the Family Law Value or the retired member’s pension, the administrator must adjust the plan member’s remaining entitlement.
If the plan member has not already done so, the plan administrator may want to remind the member to update their spouse and/or beneficiary designation information.
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Now that we’ve finished our second section, we’d like you to answer a question.
When must the plan administrator pay the former spouse of a plan member, his or her share of the Family Law Value?
We’ll pause for 15 seconds to give everyone a chance to reply.
The correct answer is B.
The plan administrator must pay the former spouse, the share of the plan member’s Family Law Value within 60 days of receiving a complete Application to Transfer the Family Law Value ‐ Form 5 ‐ or an Application to Divide a Retired Member’s pension ‐ Form 6.
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The final section will cover the resources available on FSCO’s and other Ontario government websites.
We will also briefly go over FSCO’s next steps on family law matters.
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FSCO has a webpage dedicated to family law related matters. FSCO will continue to add information to this page throughout the rest of the year. So, stay tuned!
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Electronic copies of the Ontario Pension Benefits Act and Ontario Regulation 287/11 are available on ServiceOntario’s website.
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The Ministry of Attorney General maintains a webpage that is dedicated to family law matters.
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Over the next several months, FSCO will finalize the proposed forms and prepare questions and answers to address stakeholder questions.
For the word version of FSCO’s Forms, you may send your request to [email protected]
FSCO will also update and create policies related to family law matters, as necessary, in the New Year.
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Thank you for participating in today’s webinar.
A copy of today’s presentation will be posted onto our website by December 9, 2011.
FSCO will develop answers to any questions we receive by e‐mail, and post these on our website in January 2012.
We also plan to send an e‐mail to plan administrators in the next few weeks to include links to the webinar recording and presentation for your future reference.
Please remember to complete the survey that will appear on your screen momentarily. Your input is important. Please exit the webinar for this survey.
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