Common-law spouse versus beneficiary
With the recent Supreme Court of Canada dismissal of an appeal in Carrigan v. Carrigan Estate—a case that has changed how pre-retirement death benefits are paid out—pension plan administrators should ask employees to update beneficiary forms.
The case revolves around Ronald Carrigan, who died before he had a chance to retire. He was separated—but not divorced—from his wife, Melodee, and was living with a common-law partner, Jennifer Quinn, for about eight years before his death.
The Ontario Court of Appeal’s interpretation of the Pension Benefits Act (PBA) concluded that Melodee was not entitled to the death benefit, because she was living apart from Ronald at the time. Jennifer, although qualified as a “spouse” under the PBA, was also not entitled to the death benefit because Ronald and Melodee were not divorced.
The Court of Appeal stated that the death benefit should be paid to Ronald’s designated beneficiary (Melodee and his daughters). Since the Supreme Court refused to grant leave to appeal, pending any amendments to the PBA, the Court of Appeal decision must now be applied by pension plan administrators.
“This case reinterprets the whole notion of spousal rights within family law to move away from the notion of spousal protection and to move toward a view of pensions as being the individual’s right to determine where it goes,” says Ari Kaplan, a partner in the pension and benefits group with Koskie Minsky LLP.
As for what plan administrators should do now, Sheryl Smolkin, a Toronto-based lawyer, says they should inform members that in order for a common-law spouse to receive the pre-retirement death benefit, there must be a clear beneficiary designation. It may also be prudent to encourage members to name a subsequent beneficiary who will get the benefit if the common-law spouse dies first or the relationship ends.
Office exercise A-okay
Employees approve of physical activity in the workplace, according to a recent ParticipACTION survey. While only 11% of Canadians participate in desk-side exercise, 64% see it as an acceptable workplace habit.
“Given how much time we spend at work, it is great to see that attitudes toward workplace exercise are changing,” says Kelly Murumets, president and CEO of ParticipACTION. “Now we need to transform those attitudes into actions.”
Research supports 10-minute bouts of physical activity as an effective way to increase fitness and meet the recommended 150 minutes of activity per week, as stated in the Canadian Physical Activity Guidelines.
“For those of us who work an eight-hour day, 10 minutes represents only 2% of our total time spent at work,” says Murumets. “Adding in a 10-minute activity break is not only good for our physical health, it also helps heighten mental alertness and productivity—both helpful in the workplace.” She recommends getting coffee or lunch a few extra blocks away, walking over to speak to a co-worker rather than phoning, emailing or messaging, and holding walking meetings with colleagues.
March’s federal budget provided some modest taxation relief for plan sponsors and members who overcontribute to a registered pension plan (RPP).
The current income tax rules that apply to RPPs allow RPP overcontributions to be refunded to plan members or employers, if the refund is made to avoid the revocation of registration of the RPP. However, in situations where RPP contribution limits have not been exceeded, there is no legislative provision that permits the refund of a contribution that was made as the result of a reasonable error (e.g., an employer made a mistake in calculating the member’s or employer’s contributions for a particular year). Instead, refunds of such contributions are currently allowed at the discretion of the Canada Revenue Agency (CRA) on a case-by-case basis.
The budget proposes to enable administrators of RPPs to make refunds of contributions in order to correct reasonable errors without first obtaining approval from the CRA—if the refund is made no later than December 31 of the year following the year in which the inadvertent contribution was made. If an RPP administrator seeks to correct a contribution error after the deadline, the existing procedure of seeking authorization from the CRA will continue to apply. Refunds to an RPP member will generally be reported as income of the member in the year received and deductions claimed by the member in a prior year will generally not be adjusted. For employers, which generally use the accrual method of calculating income, a refund of RPP contributions will normally reduce the RPP contribution expense for the year to which it relates.
Strong equity returns support solvency
Stronger equities and a slight increase in long-term interest rates have given DB plan sponsors a reason to be happy. According to the Mercer Pension Health Index, Canadian pension plans have improved their solvency position in Q1 to 87%, up from 82% at the beginning of this year.
“All the key drivers of pension plan health moved in the right direction in the first quarter of 2013,” said Manuel Monteiro, a partner in Mercer’s financial strategy group. “Equity markets performed very well, long-term interest rates edged up, and plan sponsors have been making contributions to fund the deficits.”
“A typical balanced pension portfolio returned 4.1% (not annualized) in the first quarter,” said Rob Stapleford, a partner in the firm’s investment consulting business. “Developed global equities returned about 10%, while emerging markets were essentially flat on the quarter. These returns benefited many plans that have diversified their equity holdings in recent years by increasing fund allocations to global equities while reducing their exposure to the concentrated Canadian stock market.” Canadian equities returned 3.3% and the best performing S&P/TSX sectors were healthcare (22.8%), IT (17.5%) and industrials (14.2%). The worst performing were materials (-10.4%), utilities (0.5%) and financials and energy (both 4.2%). The Canadian dollar strengthened against the pound, euro and yen but weakened against the greenback.
CRA seeks input on medical expense tax credit
In March, the Canada Revenue Agency (CRA) opened a consultation period on the medical expense tax credit and announced that Interpretation Bulletin IT-519R2, Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction has been cancelled.
First released in 1998, the bulletin provided clarification on a section of the Income Tax Act (ITA) that defines medical expenses. Known as ITA 118.2(2), the section is used, in part, to define who and what are eligible for a medical expense tax credit. This is important for plan sponsors as it provides definitions of what services and products are allowable for cost-plus claims, healthcare spending account claims and employer group benefits plans.
Its cancellation and the consultation period—which will conclude on June 28—indicate that changes may be coming. The announcement includes four proposed changes that have to do with adding a requirement that medical practitioners’ certification be in writing for all certifications made after Dec. 20, 2002. Other changes relate to common-law partner claims and remuneration payments made to common-law partners.
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Great-West Life offers two new health support programs to its clients in collaboration with Shoppers Drug Mart pharmacists. The first is a diabetes support program: members will receive A1C testing, medication therapy recommendations and lifestyle management counselling. The second is a comprehensive medication-counselling program for those taking specific maintenance medications. It will initially focus on the ACE inhibitor medication category used to treat hypertension. Both programs are voluntary, and there is no additional cost to members or benefits plans. greatwestlife.com
Empire Life launched Hybrid Solution 100, a life insurance product combining guaranteed and adjustable features. Coverage amounts are guaranteed, and the product offers maximum and minimum price and value limits. Premiums can move up or down only as a result of changes in an interest rate range that’s determined annually using a Government of Canada long-term bond yield benchmark. empire.ca
The month in numbers
- 80%: the percentage of point-of-care claims TELUS Health eClaims service now supports in the Canadian private insurance community — TELUS Health
- Top 5% of claims drives 45% of drug plan costs: The top five categories are injectable biotech agents (7.4%), antidepressants (6.2%), statins (6.1%), proton pump inhibitors (5.2%) and anticonvulsant agents (2.6%). — Green Shield Canada
- 15.1%: the share of biologic drug spend in the 2012 Green Shield Canada study—an increase of more than 2% from 2011 — Green Shield Canada
- $16,615: the annual cost of Stribild, a newly approved four-drug fixed dose tablet antiretroviral therapy for adults with HIV-1 — ClaimSecure March Drug Review