New rules for splitting pensions on breakdown of spousal relationships

In the spring of this year, the Ontario government completed a number of legislative changes to family law in the province. One of the changes established new rules for dividing pension assets when a spousal relationship breaks down. As a result, the CAAT Plan will have a new process in place, effective January 1, 2012.

Immediate settlement

The principal change is that the law will provide for an immediate settlement and division of pension assets. Under the existing system, nothing can be finally determined until a member terminates or retires. With immediate settlement, a former spouse will be entitled to his or her share (up to a maximum of 50 per cent of the eligible pension amount) at the point the separation is formally recognized by the courts, an arbitration award or domestic contract. This will apply to both active and retired members.

For active members, the former spouse will have a locked-in, lump sum entitlement, with some transfer options. For retired members, the former spouse may receive a share of the member’s pension.

More information will be made available by early 2012.  

Family Law Value

Another change is that the Plan will always be responsible for determining the “Family Law Value” – the value of the pension that will be available to be split. In the past, members were responsible for providing their own actuarial calculation of this amount. Members will now deal directly with the Plan on this issue, and will not need to involve their employer’s human resources or payroll departments.

Plan members or their former spouses contemplating a separation settlement will be able to request a Family Law Value from the Plan. It is important to remember that the value will reflect the time period of the spousal relationship only, and not necessarily the member’s full pension accrual.

There is a series of prescribed forms the government has developed for Plan members and their former spouses to use to request and receive the Family Law Value. In most cases, both parties must sign off on the forms. All of the relevant forms will be available on the CAAT Plan website at the beginning of 2012 when the new rules take effect.  

Making the split

Once the Family Law Value is established and the Plan receives an application from the former spouse to split the pension assets, accompanied by a court order, domestic contract or family arbitration award, the Plan will have 60 days in which to make the transfer. For active members, their pension will be reduced by an amount in respect of the Family Law Value settlement made to their former spouse. Their annual statements in future years will reflect this reduction.

The new process will apply to all cases with an effective date of January 1, 2012, or later, unless the division of pension had already been agreed upon through a final legal document.