Q1100. Is the Family Law Value required to include the value of credited service purchased through buybacks and transfers into a pension plan (e.g. in cases of a purchase and sale or other divestment situation)?
A1100. Ontario Regulation 287/11 does not specify how purchased pension credits must be valued upon the breakdown of a spousal relationship. It is FSCO’s view that purchased pension credits should be treated differently based upon how they were purchased. FSCO’s position on three common and specific scenarios is provided below.
(i) Buybacks of Credited Service
Money transferred into a pension plan in order to purchase credited service related to absence periods or pre-membership periods is referred to as a “buyback" in the pension industry. Buybacks can be purchased with cash, or by transferring money from a locked-in account, a registered retirement savings plan, or from another registered pension plan. It is FSCO’s view that the key consideration in determining whether a buyback must be included in the Family Law Value is the date the pension credit was purchased. If the purchase falls within the period of the spousal relationship, it should be included in the Family Law Value. This is true whether or not the period of credited service relating to the buyback predates the period of the spousal relationship.
For more information: FAQs - Valuation and Division of Pension Assets on Breakdown of a Spousal Relationship
(ii) Transfers Under Sections 80 and 81 of the Ontario Pension Benefits Act (PBA)
If money is transferred into a pension plan in connection with a purchase and sale or other divestment situation (section 80 of the PBA) or in connection with the adoption of a new pension plan (section 81 of the PBA), and as a result the service under the original pension plan is credited to the member under the successor pension plan, the PBA deems the service/membership to be continuous from the original pension plan to the successor pension plan. The pension accrual and spousal relationship periods continue unchanged in these circumstances and the date of transfer is irrelevant.
(iii) Reciprocal Transfers Under Section 21 of the PBA
Similar to a transfer of money into the pension plan under section 80 or 81 of the PBA, if money is transferred into a successor pension plan under a reciprocal transfer agreement that has been filed with FSCO, the service is deemed to be continuous from the original pension plan to the successor pension plan. The pension accrual and spousal relationship periods continue unchanged in these circumstances and the date of transfer is irrelevant. -03/2012
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