Family Law related FAQs - Preliminary and Family Law Value (Imputed Value) Calculations

 
 
Q1000. What is the Preliminary Value?
 
A1000. The Preliminary Value is the total value of the pension that was earned by the plan member during the period of his or her plan membership up to the Family Law Valuation Date (separation date).
-03/2012
 
 
Q1001. What is the Family Law Value?
 
A1001. The Family Law Value is the “imputed value” under section 67.2(5) of the Ontario Pension Benefits Act [New Window]. The Family Law Value is the portion of the Preliminary Value that relates to the period of the spousal relationship. -03/2012
 
 
Q1002. On the Family Law Valuation Date, an individual was either an active member or a former (deferred vested) member of the pension plan. However, between the Family Law Valuation Date and the settlement/payment date, the individual retired and is receiving a pension from the pension plan. How is the former spouse’s share of the Family Law Value to be determined and what are his or her payment options?
 
A1002. Neither the Ontario Pension Benefits Act nor Ontario Regulation 287/11 explicitly addresses the issues that arise when a member’s status changes between the Family Law Valuation Date and the settlement/payment date. The member’s status on the Family Law Valuation Date determines how the former spouse’s share of the Family Law Value is to be calculated, including the options that are available to the former spouse. If the member was not retired as of the Family Law Valuation Date, the only option that is available to his or her former spouse is a lump sum transfer from the pension plan.
 
Once the former spouse’s share of the Family Law Value has been transferred out of the pension plan as a lump sum, the adjustment to the retired member’s pension should be based on section 33 of Regulation 287/11 with respect to the initial reduction and section 39 of Regulation 287/11 with respect to converting the arrears into pension instalments.  -02/2014
 
 

(Q1003 and Q1004 have been archived - August 2016)

 

 

Q1005. When calculating the preliminary value of a pension benefit, deferred pension or pension, what married assumption should a plan administrator apply?  

 
A1005. When calculating the preliminary value of a pension benefit or deferred pension (i.e. for a member who has not retired as of the Family Law Valuation Date), the plan administrator should use the same married assumption that is used to calculate the commuted value for the pension plan as a whole.  In other words, there should not be a separate married assumption for marriage breakdown calculations.  For example, if the commuted value calculation under the plan assumes that 70 per cent of members will be married and 30 per cent of members will be single, then the same assumption should also be used for marriage breakdown calculations. If a pension plan uses the actual marital status of a plan member when determining the married assumption for commuted value calculations, i.e. 100 per cent married for a married member and 0 per cent married for a single member, the pension plan should assume that the member is married when calculating the preliminary value in order to reflect the value of the member’s pension as a family asset accrued during the marriage, consistent with the Ontario Family Law Act.
 
When calculating the preliminary value of a retired member’s pension, the pension plan should assume that the retired member was married on the Family Law Valuation Date, in order to reflect the value of the retired member’s pension as a family asset accrued during the marriage, consistent with the Ontario Family Law Act.  -02/2014
 
 
Q1006. Should the Preliminary Value of an active member’s pension benefit include survivor benefits?
 
A1006. Yes. In FSCO’s view, the Preliminary Value of an active member’s pension benefit must include the value of any survivor benefit that is payable upon the death of the member after retirement.  For example, if the normal form of pension under a pension plan is a joint and survivor pension, an assumption should be made as to the probability that the survivor pension will become payable when calculating the Preliminary Value. -03/2012
 
 
Q1007. If there is a guarantee attached to the joint and survivor pension, should the value of the guarantee be included in the retired member’s Preliminary Value or in the former spouse’s Preliminary Value?
 
A1007.  Sections 9(2)(b) and 10(2) of Ontario Regulation 287/11 [New Window] state that the value of any pension payable to the former spouse on the death of the retired member is excluded from the retired member’s Preliminary Value and included in the former spouse’s entitlement.
 
The Preliminary Value of the survivor benefit is based on the lifetime pension that would be payable to the surviving spouse. Therefore, it is FSCO’s view that if there is a guarantee attached to the survivor benefit, the value of the guarantee must also be included in the former spouse’s Preliminary Value. 
-03/2012
 
 
Q1008. If the pension-in-pay to the retired member is not a joint and survivor pension (i.e. there is no survivor benefit) but there is a guarantee attached to the pension and the spouse is the beneficiary of that guarantee, should the value of the guarantee be included in the retired member’s Preliminary Value or in the former spouse’s Preliminary Value?
 
A1008. If there is no survivor benefit, the pension payable to the former spouse (i.e. as the plan member’s beneficiary) would not be a lifetime pension. Therefore, in FSCO’s view, if there is no survivor benefit, the value of the post-retirement guarantee should be included in the retired member’s Preliminary Value regardless of whether or not the former spouse is the beneficiary of the guarantee.
-03/2012
 
 
Q1009. When calculating the Preliminary Value for an active member under section 6 of Ontario Regulation 287/11, should the commuted value of bridging benefits be included in the factor “B” calculation for pension plans that provide an age 60 normal retirement date with bridging benefits payable to age 65?
A1009. Yes. Although there is no specific reference to bridging benefits under factor “B” in the Preliminary Value formula (since for most plans the normal retirement date is age 65 at which time bridging benefits would not generally apply), the legislation still requires factor “B” to be calculated in accordance with the specific terms of the pension plan. Therefore, for pension plans with an age 60 normal retirement date, factor “B” must include the commuted value of any bridging benefits. -03/2015
 
 
NewQ1010.  Effective December 10, 2015, section 2(3) of Ontario Regulation 287/11 was amended to reference the March 31, 2015 version of section 3500 of the Canadian Institute of Actuaries Standards of Practice, instead of the June 3, 2010 version. How does this amendment affect how Family Law Values are to be determined?

A1010. Section 67.2(1) of the Pension Benefits Act (PBA) provides that preliminary values must be determined “in accordance with the regulations and as of the family law valuation date of the member, former member or retired member and his or her spouse”.  Since the PBA governs how a plan administrator must determine the preliminary values and provides that the plan administrator must do so “in accordance with the regulations”, the amendment to section 2(3) of Regulation 287/11 changed the basis upon which preliminary value calculations must be determined from the June 3, 2010 version of section 3500 of the Canadian Institute of Actuaries Standards of Practice (2010 Standard) to the March 31, 2015 version (2015 Standard), effective December 10, 2015.

Section 67.2(8) of the PBA provides that the plan administrator must calculate the Family Law Value (imputed value) once the plan administrator receives a complete Application for Family Law Value (FSCO Family Law Form 1).  This means that:
 
  • if the complete Application was received before December 10, 2015, the calculations must be determined using the 2010 Standard;
  • if the complete Application was received on and after December 10, 2015, the calculations must be determined using the 2015 Standard. -08/2016
 
NewQ1011.  A plan administrator is in receipt of a complete Application for Family Law Value (FSCO Family Law Form 1) and is ready to calculate the Family Law Value (imputed value). Is the Family Law Valuation Date relevant to determining which version of the Canadian Institute of Actuaries Standards of Practice   must be used?

A1011.  No. The key factor to consider when determining which version of section 3500 of the Canadian Institute of Actuaries Standards of Practice (CIA SOP) to apply when calculating a Family Law Value (imputed value) is the date on which the plan administrator receives a complete Application for Family Law Value (FSCO Family Law Form 1). The Family Law Valuation Date (FLVD) is not relevant when making this determination. 
 
Although there is reference to the FLVD in section 67.2(1) of the Pension Benefits Act (PBA), the PBA does not require that preliminary values be determined in accordance with the version of the CIA SOP that would otherwise be in effect on the FLVD.  The reference to the FLVD is not intended to indicate what version of the regulations a preliminary value calculation must be based on, but to indicate the effective date of calculation of the preliminary value. This in turn must be determined in accordance with the regulations in effect on the date the plan administrator performs the calculation. -08/2016
 
 
NewQ1012. What mortality tables must be used for purposes of family law calculations?
A1012.  The Family Law Valuation Date (FLVD), as defined in the Pension Benefits Act (PBA), is the actuarial valuation date under section 3500 of the Canadian Institute of Actuaries Standards of Practice (CIA SOP). Therefore while the PBA itself does not directly require that the economic and demographic assumptions (including mortality rates) to be applied for purposes of family law calculations stem from the valuation date/FLVD, the CIA SOP do. Therefore, if a complete Application for Family Law Value (FSCO Family Law Form 1) was received by the plan administrator on or after December 10, 2015, the March 31, 2015 version of the CIA SOP (2015 Standard) applies, and the economic and demographic assumptions as of the FLVD must be determined in accordance with the 2015 Standard. Accordingly, for purposes of family law calculations, the following mortality tables must be used:
 
​Family Law Valuation DateComplete applications received on or after December 10, 2015  [Mortality tables based on section 3500 of CIA SOP (March 31, 2015 version)]
​On or before December 9, 2015

UP94 (generational): mortality rates equal to the UP-94 Table with generational projection using mortality projection Scale AA must be used.

 

​December 10, 2015 to December 31, 2016

CPM2014 (CPM-B1D2014 or CPM-B): CPM2014 mortality rates with either the one-dimensional or two-dimensional improvement scale (CPM-B1D2014 or CPM-B respectively) must be used. 

 

​On or after January 1, 2017

CPM2014 (CPM-B): mortality rates CPM2014 combined with mortality improvement scale CPM-B scale must be used.

 

 
If a complete Application for Family Law Value (FSCO Family Law Form 1) was received by the plan administrator before December 10, 2015, the June 3, 2010 version of the CIA SOP (2010 Standard) applies, and the economic and demographic assumptions as of the FLVD must be determined in accordance with the 2010 Standard. Accordingly, for purposes of family law calculations, the following mortality tables must be used:
 
Family Law Valuation Date​Complete applications received before December 10, 2015 [Mortality tables based on section 3500 of CIA SOP (June 3, 2010 version)]
​Prior to February 1, 2011

​UP94 (2020): mortality rates equal to the UP-94 Table projected forward to the year 2020 using mortality projection Scale AA must be used.

 

​February 1, 2011 to December 9, 2015

​UP94 (generational): mortality rates equal to the UP-94 Table with generational projection using mortality projection Scale AA must be used.

 
-08/2016
 
 
RevisedQ1013. How should interest rates be determined for purposes of calculating the preliminary value of defined pension benefits?
 
A1013. Interest rates must be determined using the methods described in section 3540 of the Canadian Institute of Actuaries’ Standards of Practice [New Window] (CIA SOP) for purposes of calculating the preliminary value of defined pension benefits, consistent with section 3 of Ontario Regulation 287/11 (Family Law Matters).
 
Specifically, the interest rates must be calculated based on the applicable Canadian Socio-Economic Information Management System (CANSIM) series, as set out in section 3540.05.
 

As outlined in section 3540.02 of the CIA SOP, if the Family Law Valuation Date is:

  • on or before January 31, 2011, the reported rates for the applicable CANSIM series should be determined with a lag of two months;
  • on or after February 1, 2011, the reported rates for the applicable CANSIM series should be determined with a lag of one month.   -11/2016

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