Pre-Retirement Death Benefit - Dependent Children (May 2012)

OSFI has recently received questions regarding whether a plan can pay a pre-retirement death benefit to a dependent child/children, where there is no survivorA survivor is the common-law partner at the time of the member or former member’s death or if there is no common-law partner then it is the spouse at the time of the member or former member’s death. at the time of death. Subsection 23(1.1) of the PBSA provides that where there is no survivor on the death of the member or former member, the value of the pre-retirement death benefit must be paid to the designated beneficiary or, if there is none, the estate or succession. As such, in order for dependent child/children to receive the pre-retirement death benefit, the member would need to have no survivor at the time of death and the child/children would have to be the named designated beneficiary.

If the plan does not allow the designation of a beneficiary or if the member or former member has not designated a beneficiary and the member or former member does not have a survivor at the time of death, then the value of the pre-retirement death benefit must be paid to the estate or succession.

The PBSA does not allow plans that provide a dependent child pension to reduce the pension benefit credit paid to a designated beneficiary or, if there is none, an estate, by the value of the child pension paid from the pension fund. Plan administrators will need to amend their plan texts to ensure that the pre-retirement death benefit is in accordance with the PBSA. Subsection 23(1.1) of the PBSA came into force on July 1, 2011, therefore child benefits already being paid prior to that date are not affected.

The PBSA does not specify the manner in which the pre-retirement death benefit under subsection 23(1.1) is to be paid. However, it is not subject to the locking-in provisions under section 18 of the PBSA and therefore is an unlocked amount.