Family Law related FAQs - Interest - Payment to Former Spouse

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(Q500 was archived on November 21, 2016)

 
(Q501 was archived on June 5, 2015)
 
 
Q502. Must a pension plan pay interest to a former spouse of a retired member when his or her share of the Family Law Value is paid out of the pension plan as a share of the retired member’s pension?
 
A502. Yes. Section 39 of Ontario Regulation 287/11 provides that any lump sum arrears owing to the former spouse relating to his or her share of a retired member’s pension, must be credited with interest from the Family Law Valuation Date to the date as of which the retired member’s pension is divided.
 
The rate of interest is based on the average (over a reasonably recent period that does not exceed 12 months) of the yields of five-year personal fixed term chartered bank deposit rates as determined from the Canadian Socio-Economic Information Management System (CANSIM) series V122515. This CANSIM series is compiled by Statistics Canada and is available on the website maintained by the Bank of Canada. See section 38(4) of Ontario Regulation 287/11. -02/2014
 
 
Q503. When interest on pension arrears is paid by a pension plan to a former spouse of a retired member, does the interest amount paid to the former spouse reduce the retired member’s pension?
 
A503. Yes. A former spouse’s interest in a pension fund arises on the parties’ Family Law Valuation Date (separation date). When the former spouse’s arrears are calculated, interest is added and the total amount is paid out over the life of the retired member as a portion of the former spouse’s share of the retired member’s pension (i.e. arrears and interest are converted to pension payments rather than being paid as a lump sum). This arrears and interest amount is deducted from the retired member’s share of the pension, reflecting the fact that the retired member received both his or her portion and his or her former spouse’s portion of the pension from the Family Law Valuation Date to the date the pension was divided. See section 39(1) of Ontario Regulation 287/11. -02/2014 

 

 

Q504. Must a pension plan pay interest to a former spouse of a member or former member when his or her share of the Family Law Value is expressed as a proportion (i.e. percentage) in the parties’ settlement instrument (court order, family arbitration award or domestic contract)?

 

A504. Yes. If the former spouse’s share of the Family Law Value is expressed as a proportion of the Family Law Value, the lump sum payment must be credited with interest from the Family Law Valuation Date (separation date) to the beginning of the month in which the lump sum is paid in accordance with section 30(4) of Ontario Regulation 287/11 (Regulation).
 
For defined benefits, the rate of interest is the same rate that is applied to calculate the preliminary value of the pension benefits or deferred pension as set out in section 30(5)2. of the Regulation. For defined contribution benefits, the rate of interest is calculated at such rate of return as can be reasonably attributed to the member’s or former member’s individual account (i.e., reflects the actual gain or loss of the individual account) as set out in section 30(5)1. of the Regulation. -03/2015
 
 
Q505. Must a pension plan pay interest to a former spouse of a member or former member when his or her share of the Family Law Value is expressed as a dollar amount in the parties’ settlement instrument (court order, family arbitration award or domestic contract)?
 
A505. In accordance with the decision of the Ontario Superior Court of Justice in Heringer v. Heringer, 2014 ONSC 7291 [New Window], effective December 17, 2014, if the former spouse’s share of the Family Law Value is expressed as a dollar amount, the lump sum payment should be credited with interest only if the settlement instrument explicitly requires that interest is to be credited on the amount. -03/2015
 
 
 
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