Canada’s demographic picture has changed significantly since the launch of the Canada Pension Plan in 1966. With census data showing more single-person households, is it time for the CPP and other defined benefit pension plans to update their plan design to reflect the new realities?
Provincial legislation typically requires defined benefit plans to provide survivor pensions to plan members’ spouses that are at least 60 per cent of the value of the member’s benefit. Unlike death benefits, where plan members can name whomever they like as beneficiaries, legislation only requires employers to make survivor pensions available to members’ spouses, including common law partners.
Jana Steele, a partner in the pension and benefits practice at Osler Hoskin & Harcourt LLP, says she doesn’t know of any plans that allow members to designate a non-spouse as a beneficiary of a survivor pension. But that’s not to say that could never happen; an employer could always go beyond the minimum standard defined in legislation and broaden the types of people eligible for survivor pensions.
“These particular benefits are historically granted,” says Murray Gold, a partner in the pension and benefits practice at Koskie Minsky LLP. They date back to a time when society expected men to be the breadwinners, while women, if they worked at all, would earn significantly less and were unlikely to have pensions. Furthermore, men are often a few years older than their wives, who tend to live longer.
“Given all those circumstances, there was a social policy decision to protect spouses in old age when their male plan members died. There would still be an income for them,” says Gold.
“It was maybe paternalistic, but protective,” he adds.
Today, many women work and belong to pension plans, and family structures are more diverse. In 2016, for example, more than a quarter (28.2 per cent) of Canadian households were single-person homes, according to Statistics Canada’s latest census data. But none of the heads of those households benefits from survivor pensions. Actuarially, plans can offer the same benefit to married and unmarried members. That is, a retirees with a spouse may receive a lower monthly payout because their family unit will receive benefits for a longer period. But Gold notes that some employers, especially those in the public sector, provide a more generous benefit and don’t reduce married members’ benefits even though the plan also offers a spousal pension.
And that’s making some plan members angry. Recently, Canadian courts have heard two cases in which unmarried plan members claimed the inequity between their benefits and those of their married colleagues violated their rights under the Charter of Rights and Freedoms.
Under provincial employment legislation, a plan can differentiate on the basis of marital status as long as it’s a bona fide pension plan. “The question is, ultimately, will there be a route to challenge that legislation for an infringement of the Charter,” says Steele.
Section 15 of the Charter holds every person to be equal under law and provides for protection from discrimination on nine grounds, including race, gender and religion. Marital status isn’t on the list, but courts have held it to be an analogous category.
In one of the cases (Landau v. Attorney General of Canada), which is about alleged discrimination in the Canada Pension Plan, the Ontario Superior Court last year found the Social Security Tribunal was the proper venue to hear the matter. In the other case (Duncan v. Retail Wholesale Union Pension Plan), which deals with alleged discrimination in the Retail Wholesale Union Pension Plan, the British Columbia Supreme Court last month ordered the province’s human rights tribunal to reconsider the matter after it rejected a retired plan member’s complaint at the preliminary stage. However, if the tribunals decide the plans in question discriminate against unmarried members by offering unreduced benefits plus spousal pensions to married people, it could open the door to all sorts of other questions.
“If you look at a [defined benefit] plan, there are, by nature, lots of instances where there are differentiations, such as age and sex,” says Steele. Because women live longer, they’re arguably more expensive retirees than men.
“Should that be taken into account? . . . [Or] is marital status going to be treated differently? And I don’t have a prediction on that,” says Steele.