Q400. What is the difference between contractual indexation and ad hoc indexation?
A400. A pension plan that provides contractual indexation is one that gives its retired members regular or automatic cost of living increases calculated in accordance with a formula set out in the pension plan. The formula for such increases is generally based on a wage or price index.
A pension plan that provides ad hoc indexation is one that provides for discretionary increases only, with no guarantee of any future increases. Such plans must be amended each time an increase is to be provided to retired members.
The plan administrator is required to include information about indexation (contractual or ad hoc) in the Statement of Family Law Value (FSCO Family Law Form 4E) if it is provided under the terms of the plan.
Q401. Should the value of any contractual indexation be included in the Family Law Value?
A401. Yes. Indexation that is provided on a contractual basis under the pension plan is an integral part of a member’s accrued pension benefit or a former member’s deferred pension, and plan administrators must include the commuted value of contractual indexation in the Family Law Value. See FSCO policy - Contractual Provision for Indexation - for additional information. -03/2015
Q402. If a pension plan provides for ad hoc indexation increases only, is the former spouse of a retired member entitled to any future increases on his or her share of the pension?
A402. Ad hoc increases granted before the Family Law Valuation Date are included in the Family Law Value and shared when the pension is divided. Any future ad hoc increases would only be added to the former spouse’s share of the retired member’s pension if it was for provided for in the parties’ settlement instrument (court order, family arbitration award or domestic contract). -03/2015
Q403. If a pension plan provides for contractual indexation, is the former spouse of a retired member entitled to any future increases on his or her share of the pension?
A403. Yes. Contractual increases payable on or after the Family Law Valuation Date are included in the Family Law Value. Therefore, any future increases would be added to the former spouse’s share of the retired member’s pension. -03/2015
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