Famly Law related FAQs - Payment and Transfer Options Available to Former Spouses of Plan Members

 

Q700. I am the former spouse of a plan member. Am I entitled to receive immediate payment of my share of my spouse’s pension assets?

 

A700. You are entitled to immediate payment of your share of the pension assets only if the new pension valuation and division rules that came into effect on January 1, 2012 apply to you. If the new rules do not apply to you, a “triggering event” must occur before you can receive payment for your share of the pension assets. A “triggering event” occurs when a plan member terminates employment or plan membership, reaches normal retirement age, retires, or dies (whichever event occurs first). -03/2012
 
 
Q701. I am the former spouse of a plan member. I am entitled to receive a locked-in lump sum payment with respect to my share of the pension assets. Can I receive my payment in cash (i.e., on an unlocked-basis)?
 
A701. You can only receive your payment in cash, if under the Ontario Pension Benefits Act:
  • the pension plan member has a shortened life expectancy; or
  • the payment qualifies as a “small amount” (provided this option is available under the plan terms).
If these situations do not apply to you, your share of the pension assets cannot be paid in cash and must be transferred to, and administered on a locked-in basis by, the financial institution that will hold the assets. The same locking-in rules apply under both the old and new pension valuation and division regimes.
 
(Note: The plan administrator will deduct tax on any amounts paid in cash.) -08/2012
 
 
Q702. Can a pension plan give a former spouse the option to leave his/her share of the Family Law Value in the pension plan?
 
A702. No, this option [provided under section 67.3(2)4 of the Ontario Pension Benefits Act (PBA)] cannot be provided to a former spouse at this time. It can only be made available under the terms of the pension plan if and when the government makes new regulations to support this section of the PBA. -03/2012
 
 
Q703. Can a pension plan provide transfer options (e.g. a transfer of a lump sum to a locked-in retirement account or life income fund) to the former spouse of a retired member?
 
A703. No. The former spouse must receive his/her share of the retired member’s pension in the form of pension payments from the pension plan. -03/2012
 
 
Q704. If a former spouse has a locked-in account as a result of a division of pension assets on the breakdown of a spousal relationship, when may the former spouse start receiving income from his/her own locked-in account to which the assets are transferred? Which rules apply?
 
A704. If the court order, family law arbitration award or domestic contract requiring a division of assets held in the locked-in account is made on or after January 1, 2012, the former spouse’s ability to start receiving payment of income out of his/her own locked-in account can begin no earlier than the date on which he/she reaches 55 years of age. If the court order, family law arbitration award or domestic contract is made on or before December 31, 2011, the former spouse’s ability to start receiving payment of income out of his/her own locked-in account will continue to be based on the former plan member’s age. -12/2013
 
 
Q705. Can a plan administrator divide a retired member’s pension without first receiving a complete Application to Divide a Retired Member’s Pension (FSCO Family Law Form 6)?
 
A705. No. The plan administrator is not permitted to divide the pension until it receives a complete application from the retired member’s former spouse. The application is complete when the plan administrator receives the following:
 
  • a correctly completed Application to Divide a Retired Member’s Pension;
  • a certified copy of a court order, family arbitration award or domestic contract that provides for the division of the retired member’s pension and that entitles the former spouse to a share of that pension; and
  • any other document(s) as specified by the Plan Administrator under “Next Steps” of the Statement of Family Law Value (FSCO Family Law Form 4E).
The retired member must therefore continue to receive his or her full pension until such time as the plan administrator receives the complete application. Once the pension is divided, it must be revalued in accordance with section 39(1) of Ontario Regulation 287/11. -03/2015
 
 
Q706. Section 67.4(5) of the Pension Benefits Act states that a court order, family arbitration award or domestic contract cannot entitle the former spouse of a retired member to a share that exceeds 50 percent of the Family Law Value (imputed value) of the pension. However, after the pension is divided and revalued, our calculations show that the former spouse’s share of the pension is more than the retired member’s remaining share. Can we pay the former spouse a larger pension than the retired member?
 
A706. Yes. The 50 percent maximum payment rule under section 67.4(5) of the Pension Benefits Act (PBA) applies to the maximum share of the pension that may be paid to the former spouse as of the Family Law Valuation Date. When the payment of arrears and interest on the arrears is added to the former spouse’s share of the pension, it may exceed 50 percent of the retired member’s share of the pension. -03/2015
 

 

 

For more information: FAQs - Valuation and Division of Pension Assets on Breakdown of a Spousal Relationship

 

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