Court Decisions

Welsh v. Ashley decision

 
Q50. On April 24, 2015, the Court of Appeal for Ontario (the 'Court') released its decision in Welsh v. Ashley [New Window], which provided the former spouse of the deceased member 100 per cent of pre-retirement death benefit under the pension plan. This decision appears to conflict with the Ontario Pension Benefits Act (PBA), which provides that the former spouse is not entitled to more than 50 per cent of the pension benefit that accrued during the period of spousal relationship. Does this decision have an impact on the maximum that may be paid to the former spouse under the PBA as a result of a marriage breakdown?
 
A50. No.  In the Financial Services Commission of Ontario (FSCO)’s view, the Court’s decision is based on the unique provisions of the parties’ Separation Agreement, and the determination of who the designated beneficiary was for purposes of the pre-retirement death benefit in light of a conflict between the Separation Agreement (which designated the former spouse as the sole beneficiary) and the beneficiaries on record under the pension plan (which were the deceased member’s children).
 
The Court treated the beneficiary designation in the Separation Agreement as being effective, even though the member did not change the beneficiary information under the pension plan.  Therefore, the former spouse ended up receiving 100 per cent of the pre-retirement death benefit since she was designated as the sole beneficiary under the Separation Agreement.
 
As this case dealt with beneficiary issues and the fact that the member did not have a new spouse on the date of death, the Court was not required to consider:
 
  • the former spouse’s maximum entitlement under the PBA as a result of marriage breakdown;
  • the applicable family law regime (i.e., pre or post January 1, 2012 pension valuation and division rules); or
  • any case laws related to division of family property (e.g., the Court’s February 10, 2004 decision in The Ontario Teachers’ Pension Plan Board v. Superintendent of Financial Services et. al, otherwise known as the 'Stairs case' [New Window]).
Accordingly, the Court’s decision has not changed the former spouse’s maximum entitlement as set out in sections 67.3(6), 67.4(5) or 67.6(4) of the PBA, as applicable. -10/2015
 
Q51. If there is a settlement instrument made before January 1, 2012, that assigns an interest in the pension benefit to a former spouse, and the member dies before pension commencement, what is the priority of benefits? Is the former spouse’s share of the member’s entitlement (as set out in the parties’ settlement instrument) limited by the maximum payment provision under section 67.6(4) of the Ontario Pension Benefits Act?
 
A51. Section 48(13) of the Ontario Pension Benefits Act (PBA) provides that payment to the member’s former spouse in respect of a family law settlement must be dealt with first, i.e., before the payment of any pre-retirement death benefits under the pension plan.
 
When dealing with a settlement instrument (court order, family arbitration award or domestic contract) that was made before January 1, 2012, the former spouse’s share for equalization purposes is limited to 50 per cent of the pre-retirement death benefit in accordance with section 67.6(4) of the PBA.  The Court of Appeal for Ontario’s February 10, 2004 decision in the 'Stairs case' [New Window] remains the binding authority, which provided that the former spouse is not entitled to more than 50 per cent of the pension benefit that accrued during the period of spousal relationship.
 
Once the former spouse’s share has been paid in satisfaction of the settlement, the plan administrator may then proceed with the payment of the remainder of the pre-retirement death benefit in accordance with the spousal and beneficiary information on record. Section 48 of the PBA sets out the priority of payment of the pre-retirement death benefit, first to any new spouse of the member on the date of death, and then to any designated beneficiaries.
 
If the member does not have a new spouse on the date of death, or if the member’s new spouse has waived his or her right to receive a pre-retirement death benefit in accordance with section 48(14) of the PBA, then the remainder of the pre-retirement death benefit may be paid to the member’s designated beneficiary (or beneficiaries), which may include the member’s former spouse. If the member has not designated a beneficiary, payment will be made to the member’s estate.
 
It is therefore possible, in cases where the member does not have a new spouse on the date of death, for his or her former spouse to be entitled to 100 per cent of the pre-retirement death benefit if the former spouse is named as the sole beneficiary; the former spouse will first receive his or her payment as set out in the settlement instrument, and the remainder as the beneficiary for the pre-retirement death benefit. -10/2015
 
Q52. If there is a settlement instrument made on or after January 1, 2012, that assigns an interest in the pension benefit to a former spouse, and the member dies before pension commencement, what is the priority of benefits? Is the former spouse’s share of the member’s entitlement (as set out in the parties’ settlement instrument) limited by the maximum payment provision under section 67.3(6) of the Ontario Pension Benefits Act?
 
A52. Section 48(13) of the Ontario Pension Benefits Act (PBA) provides that payment to the member’s former spouse in respect of a family law settlement must be dealt with first, i.e., before the payment of any pre-retirement death benefits under the pension plan.
 
When dealing with a settlement instrument (court order, family arbitration award or domestic contract) that is made on or after January 1, 2012, the former spouse’s share for equalization purposes is limited to 50 per cent of the Family Law Value (imputed value) in accordance with section 67.3(6) of the PBA.  An Application to Transfer the Family Law Value (FSCO Family Law Form 5) must accompany the settlement instrument in order for the plan administrator to pay the former spouse his or her share of the Family Law Value.
 
Once the former spouse’s share has been paid in satisfaction of the settlement instrument, the plan administrator may then proceed with the payment of the remainder of the pre-retirement death benefit in accordance with the spousal and beneficiary information on record. Section 48 of the PBA sets out the priority of payment of the pre-retirement death benefit, first to any new spouse of the member on the date of death, and then to any designated beneficiaries.
 
If the member does not have a new spouse on the date of death, or if the member’s new spouse has waived his or her right to receive a pre-retirement death benefit in accordance with section 48(14) of the PBA, then the remainder of the pre-retirement death benefit may be paid to the member’s designated beneficiary (or beneficiaries), which may include the member’s former spouse. If the member has not designated a beneficiary, payment will be made to the member’s estate.
 
It is therefore possible, in cases where the member does not have a new spouse on the date of death, for his or her former spouse to be entitled to 100 per cent of the pre-retirement death benefit if the former spouse is named as the sole beneficiary; the former spouse will first receive his or her payment as set out in the settlement instrument, and the remainder as the beneficiary for the pre-retirement death benefit.
 
[Note: If a separated member dies before settling his or her affairs, it is FSCO’s view that section 67.2(6) of the PBA permits the former spouse who was married to the deceased member, to apply to a plan administrator for a Statement of Family Law Value (FSCO Family Law Form 4). The plan administrator should, upon receiving an Application for Family Law Value (FSCO Family Law Form 1) from the former spouse (or estate representative), process the application in accordance with section 67.2(8) of the PBA, and provide copies of the Statement of Family Law Value to both the former spouse and the estate representative, consistent with section 67.2(9) of the PBA.] -10/2015 
 

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