While pension plan administrators know about their plan members’ employment history and salaries, they may not expect to learn much about their personal lives, including how often they text their spouse or whether they have family dinners every night.
However, in most jurisdictions, the spouse of a defined benefit plan member is entitled to a joint and survivor pension unless they waive that right or they’re living separate and apart from the member on the pension commencement date.
Differences exist between provinces. In British Columbia, couples are still spouses for pension purposes if they’ve been living separate and apart for fewer than two years. But in Ontario, couples are no longer spouses for pension purposes once they begin living separate and apart. And in New Brunswick, all married spouses are entitled to survivor benefits, whether or not they’re living separate and apart. But no jurisdiction sets out what “living separate and apart” means.
It all comes down to the details of the member’s marriage. Earlier this year, in Carvalho v. Amorim, the Court of Appeal for Ontario set out six indicia, drawn from family law, for determining whether spouses are living separate and apart for pension purposes: physical separation, withdrawal from the matrimonial obligation with the intention of repudiating the marriage, absence of sexual relations, spousal communication, joint social activities and true intent. None of the factors are determinative.
In some pension plans, single members can select higher monthly payments in exchange for a reduced guarantee period. That option isn’t available to married members whose spouses haven’t waived their right to a survivor pension. So some married members in rocky relationships may falsely declare they’re living separate and apart and therefore receive larger pension benefits at the expense of their spouse’s survivor rights.
Other plan members may not understand the legal meaning of the phrase and believe they’re living separate and apart from their spouse because they live in separate homes. But all marriages are different and spouses may live at two addresses for all sorts of reasons, such as employment opportunities, medical issues and complex blended family dynamics. Courts have recognized couples living in two households can still be in committed marriages, with the member’s spouse remaining entitled to survivor benefits.
Plan administrators don’t need to do a deep dive on the state of every retiring member’s marriage. For instance, according to Ontario’s Pension Benefits Act, an administrator is discharged on paying a pension benefit in accordance with either the information provided by the member or with the latest information on record “in the absence of actual notice to the contrary.”
That is, administrators can rely on the member’s statement of whether they’re living separate and apart from their spouse unless and until the spouse tells them otherwise. Should that happen, the administrator must investigate.
In Chisholm v. FSRA (CEO), a plan member informed the administrator that he was single, even though he was married and living in the same home as his wife. He later asserted he and his wife were living separate and apart. His wife disputed that assessment and complained to the administrator, who gave the parties three options: complete a joint affidavit that stated they were living separate and apart on the date the member retired; complete a joint affidavit that they weren’t living separate and apart on that date; or seek a court order determining spousal status as of that date. The administrator also stated if they didn’t take any steps, it would administer the pension on the basis that the member was single.
The Financial Services Tribunal of Ontario found this approach was wrong. It held that if a pension plan member and their married spouse are living together at the time the first payment is due, a prima facie case is established that they aren’t living separate and apart. The burden of proof is on the party who claims otherwise. A spouse’s right to survivor benefits can only be extinguished with “clear, cogent and compelling evidence” — a member’s bald statement that they’re single is insufficient. The tribunal determined the administrator should have defaulted to protecting the spouse’s rights and paid a joint and survivor pension.
If a plan member claims they’re single but their spouse asserts otherwise, the administrator should first consider seeking further information, whether through a joint affidavit, a court order or evidence of the nature of the marriage. And if the parties don’t provide any evidence, administrators may need to default to protecting the spouse’s statutory right to survivor benefits.