On June 22, 2011, the Ontario government published final regulations governing the division of pensions on marriage breakdown. With the publication of these regulations, which come into force on January 1, 2012, long-awaited reform of the family law provisions of the Ontario Pension Benefits Act appears to be coming to a close.
The reform of the marriage breakdown provisions began with the passing of Bill 133, the Family Statute Law Amendment Act, on May 14, 2009. Under this new regime, former spouses of plan members will be able to receive an immediate payment of their share of the member’s pension benefits – either as a lump sum transfer or a division of monthly pension payments, depending upon whether the valuation date is before or after the member’s retirement. (This differs from the current “if and when” regime, which requires spouses to wait until the member has terminated employment or retired before they can access the member’s pension.)
In March of this year, the Ontario government finally released the regulations – in draft form – required to implement this regime. As discussed in my earlier blog post, the draft regulations set out the methodology to be followed by pension plan administrators when calculating the valuation of the member’s pension assets.
In the final form of the regulations, some refinements have been made to the calculation methodology, including:
- guidance for administrators of “hybrid” plans (i.e., plans that include both defined benefit and defined contribution components) – the government had sought feedback on this issue earlier this year in its consultation paper;
- separate methodologies depending upon whether the valuation date falls before or after the earliest date on which the member would have been eligible (or deemed eligible) for an unreduced pension under the plan’s early retirement provisions; and
- procedures to follow where an agreement has not yet been reached with respect to the valuation date.
To provide additional guidance to plan administrators and members, the Financial Services Commission of Ontario (FSCO) has posted questions and answers on its website. Among other things, these Qs&As confirm that there will be no retroactive application of the new rules, and thus court orders and agreements made before January 1, 2012 will continue to be governed by the current “if and when” regime. The Qs&As also emphasize that once in force, all plan administrators must provide these calculations when requested to do so – it is not voluntary.
FSCO has also indicated that it is in the process of developing new marriage breakdown forms, including a form to be completed by spouses requesting a plan administrator to determine the value of pension assets and a form to be completed by the plan administrator showing the value of those assets.
Given the complexity of these new regulations, plan administrators should begin putting in place systems and procedures now so that they are ready to respond to requests in the new year.