This morning, the Supreme Court of Canada dismissed the application for leave to appeal in Carrigan v. Carrigan Estate. As a result, the Ontario Court of Appeal’s new interpretation of the priority scheme for the payment of pre-retirement death benefits under the Ontario Pension Benefits Act (the PBA) is now settled law. It would appear that the only remaining option for stakeholders hoping to avoid the Ontario Court of Appeal’s conclusions is to seek an amendment to the PBA.

How Did Pre-Retirement Death Benefits Work Prior to Carrigan?

Prior to the Ontario Court of Appeal decision in the Carrigan case, it was commonly accepted that if a pension plan member died prior to retirement, then the member’s spouse on the date of death was entitled to the pre-retirement death benefit, unless the member and spouse were living separate and apart or the spouse had waived entitlement to the benefit. Under the PBA, “spouse” means, except where otherwise indicated in the PBA, either of two persons who,

  1. are married to each other, or
  2. are not married to each other and are living together in a conjugal relationship,
    1. continuously for a period of not less than three years, or
    2. in a relationship of some permanence, if they are the natural or adoptive parents of a child, both as defined in the Family Law Act;

This definition of spouse includes same-sex and “common law” spouses.

Ontario Court of Appeal Decision

In the Carrigan case, Ronald Carrigan, the plan member, died prior to retirement. At the time of his death, there were two individuals potentially entitled to the pre-retirement death benefit as his “spouse”: (1) Melodee Carrigan, who was legally married to Ronald but from whom he had separated; and (2) Jennifer Quinn, who had been living in a conjugal relationship with Ronald for about eight years prior to his death.

The Court of Appeal interpreted the PBA in a very narrow and technical manner, concluding as follows:

  • Melodee was not entitled to the death benefit, because she was living separate and apart from Ronald at the time of his death (that conclusion was not controversial).
  • Even though Jennifer qualified as a “spouse” under the PBA and was not living separate and apart from Ronald at the time of his death, because Ronald had never divorced Melodee but had only separated from her, Jennifer was not entitled to the death benefit either.
  • Since there was no qualifying spouse, the death benefit should be paid to Ronald’s designated beneficiary.

The Court of Appeal’s decision contradicted the understanding under which everyone in the pension industry had been operating – that in such circumstances the common law spouse, Jennifer, would be entitled to the death benefit.

What Are the Implications?

The Carrigan case changed not only how pension plan administrators must pay pre-retirement death benefits in the future, it also called into question past payments of pre-retirement death benefits which had been made in similar circumstances, creating the risk of legal claims from deceased members’ named beneficiaries or estates.

The Carrigan case also raised serious questions about the interpretation of other provisions of the PBA, notably the provision requiring that where a member has a qualifying spouse on the date of retirement, the pension must be paid in joint and survivor form unless waived by the spouses. The decision in Carrigan suggested that this requirement would not apply where the qualifying spouse is a common law spouse, and the member has a legally-married spouse from whom the member is separated.

Given that the Supreme Court has refused to grant leave to appeal, pending any amendments to the PBA, the Ontario Court of Appeal decision must now be applied by pension plan administrators. In particular, plan administrators should consider reviewing plan communication materials and providing checklists and training for staff to deal with member queries related to death benefits. Plan members may also want to consider their personal circumstances and whether any steps need to be taken (such as obtaining a divorce where a separation has occurred) in order to manage their pension benefit entitlements.