The Association of Canadian Pension Management is calling for increased clarity regarding Ontario’s rules for the valuation and division of pension payments following a marriage breakdown.
In response to a consultation by the Financial Services Regulatory Authority of Ontario, the ACPM recommended the draft guidance document include an example of an exception to the rule determining pension valuation and division. Currently, if a court order, family arbitration award or domestic contract is dated before Jan. 1, 2012, spouses are subject to the pre-2012 pension valuation and division rules, according to the draft document, which noted the rule doesn’t apply if one party isn’t required to make an equalization payment.
The ACPM also said more clarity is needed around out-of-province separations. While the draft document indicated the multi-jurisdictional agreement allows the family law rules and pension division rules in the province of residence to apply to the entire pension regardless of where the pension was earned, it also stated if part of the pension was earned in Ontario, that province’s pension division process will apply.
The draft document also stated an out-of-province court order isn’t enforceable in Ontario without an Ontario order, a situation that places the responsibility on the plan administrator to request a court order or domestic contract prior to making payment and imposes additional costs to the member, former spouse and the plan administrator, the ACPM said in its consultation paper.
“Often there are multiple provinces involved and splitting the pension into various portions would require the confirmation of the dates worked in various provinces and would significantly complicate the process. . . . Out-of-province separations are complicated matters and difficult to summarize to cover most situations. We feel the guidance should include a note that these situations can be complex and consultation with experts in multi-jurisdictional pension law is advised prior to making payment of any pension assets earned in Ontario to ensure the proper legislation has been followed.”
While the association agreed the final adjustment to a member’s pension can’t be finalized until termination of employment or plan membership, it said administrators are able to provide a good estimate immediately following the family law value transfer to the former spouse. “In our view, the estimated adjusted pension is the best possible information administrators can provide the member and is more useful to the member than the unadjusted amount. Continuing to provide the member with their unadjusted pension amount on their annual pension statement could create confusion.”
The ACPM also said the draft document wasn’t clear on what practical steps or actions a plan administrator is obligated to take to ensure that retired members and their spouses had the necessary information to waive a survivor pension. “Plan administrators aren’t privy to the details of non-pension assets or other agreed to terms in the separation agreement.”