In a decision that is sure to spark controversy in pension circles, the Ontario Court of Appeal has ruled in favour of a new interpretation to the death-benefit entitlement provisions of the Pension Benefits Act (“PBA”), potentially disentitling many common law couples from their spouses’ pensions.

In Carrigan v. Carrigan Estate, a pension plan member died, leaving both a legal spouse, from whom he had been living separate and apart for more than a decade, and a common law spouse, with whom he had lived for almost 10 years. Both claimed entitlement to the plan member’s pre-retirement death benefit as “spouses” under the Act.  

In this case, the plan member died before retirement, meaning that the pre-retirement death benefit provisions of the PBA applied. Those provisions specifically state that spouses living “separate and apart” from the plan member on the date of death are ineligible to receive any pre-retirement death benefits.

Whereas married couples are defined by their marriage certificate, common law spouses are defined by their cohabitation arrangements. Accordingly, the Court of Appeal held, when the legislature excluded from the pre-retirement death benefit those spouses who lived “separate and apart”, it must not have intended for that benefit to apply to common law couples as these, by definition, can never live separate and apart.

Therefore, the Court of Appeal disentitled the common law spouse from the member’s pension. However, the Court also disentitled the legal spouse because she had lived separate and apart from the pension plan member for years. Ultimately, the Court awarded the death benefit to the plan member’s designated beneficiaries: the plan member’s legal spouse and their two daughters.

This interpretation of the pre-retirement death benefit’s spousal entitlement is a marked departure from how the provision had been applied by the pension industry since the PBA was amended to include spousal entitlement to minimum death benefits in 1988. Later amendments redefined spouses as “two persons”, whether married or common law, thus bringing opposite sex couples who were not married and same sex couples whether married or not, under the protections of the PBA.

In other words, the PBA on the whole was amended to entitle all surviving spouses living with a plan member on the date of death to a death benefit as a matter of public policy. Thus, the new application of the PBA's pre-retirement death benefit as espoused in Carrigan may disproportionately affect common law couples (opposite- and same-sex), persons the legislature clearly intended to protect.

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

For a more detailed analysis of the decision, read our Pension Pulse.