The recent Ontario Court of Appeal decision in Carrigan v. Carrigan Estate has sent shivers through the pension industry across Canada. While the facts in Carrigan were not atypical, the appeal court’s decision was totally unexpected. If your organization administers a pension plan for employees whose entitlements are regulated by the Ontario Pension Benefits Act (PBA), you need to pay attention to this decision.

Mr. Carrigan, an active pension plan member, died with two spouses. He had a married spouse from whom he had been “living separate and apart” for over eight years. He also had a common law spouse with whom he had been living with for at least eight years. The PBA definition of “spouse” is such that both married and common-law spouses can file a claim following a plan member’s death. So, naturally, both spouses claimed the death benefit.

At trial the judge interpreted the PBA in a manner consistent with the industry view; namely, that the spouse (married or common-law) who is living with a plan member at the date of death has priority, and is entitled to the death benefit payable to “the spouse”, subject to the operation of a spousal waiver if one exists. As there was no spousal waiver, the common-law spouse was awarded the pre-retirement death benefit.

The Court of Appeal undertook a painful exercise in statutory interpretation. In so doing, the majority of the Court interpreted the PBA pre-retirement death benefit provisions such that if the married spouse was “living separate and apart” from the plan member at the time of death, the death benefit had to be paid to the plan member’s designated beneficiary (or estate in lieu). In Carrigan the designated beneficiary happened to be the married spouse and their two daughters, and, hence, the common-law spouse, who had been living with the plan member at the time of death, was denied the death benefit.

Implications for PBA Administrators

Carrigan has implications beyond pre-retirement death benefits. Pension plan administrators subject to the PBA must carefully review their plan member communications and develop policies addressing issues arising from Carrigan, for example, policies addressing:

  • the proper “spouse” for purposes of pre-retirement death benefits, spousal waivers and Joint & Survivor annuities; and
  • claims and potential claims arising from previous decisions relating to death benefits, spousal waivers or Joint & Survivor annuity purchases.

Implications for Non-PBA Administrators

Carrigan offers valuable lessons for non-PBA pension plan administrators, who should be asking themselves: 

  • do our policies mandate sufficient investigation and documentation prior to paying death benefits?
  • have our decision-makers been sufficiently trained to address the complexities arising from competing claims for benefits?
  • do our communications accurately reflect the complex issues that may arise following the death of a plan member?

Common-law spouses living with an Ontario pension plan member who is legally married but separated from the married spouse, cannot assume they will be entitled to the pension survivor benefits after their partner dies.

Pension plan administrators are frequently called upon to adjudicate cases involving spouses and former spouses (married and common-law) and have learned to deal with multiple claims for the same benefit. However, those adjudications have generally taken place with a firm understanding of applicable fundamental principles. Carrigan has created uncertainty where there was previously general consensus on expectations and established practice in the pension industry. Given that death and marriage breakdown are constants in today’s society, this is unfortunate.

Leave to appeal to the Supreme Court of Canada is being sought.