Marriage Breakdown and the Applicability of the Ontario Family Law Act (Ontario FLA)

On June 22, 2011, the Ontario Government proclaimed amendments to the Ontario Pension Benefits Act (PBA) and the Ontario FLA relating to the division of pension assets on the breakdown of a spousal relationship. These amendments came into effect on January 1, 2012. OSFI has been asked by a number of stakeholders how these amendments impact federal pension plans.

Subsections 25(2) and (3) of the PBSA specifically provide that, subject to the exceptions specified in subsection 25(2), on a spousal relationship breakdown (i.e. divorce, annulment, separation or breakdown of a common-law partnership) a pension benefit that would otherwise be covered by the PBSA is subject instead to the application of provincial property law with respect to the valuation and distribution of that pension benefit.

So, for a federally regulated pension plan with members who reside in Ontario, the Ontario FLA and the Ontario PBA family law provisions would apply (subject to the exceptions specified in section 25(2) of the PBSA) in determining the valuation of their pension benefits and how the benefits are to be distributed on a spousal relationship breakdown. The PBSA still applies for anything else related to that pension benefit (e.g. minimum standards on vesting rules, transfer options, etc.).

Certain provisions in the Ontario PBA and the Ontario FLA apply to plans otherwise covered by the PBSA and other provisions are specific to Ontario regulated pension plans only. For example:

Valuing the benefit

Under the Ontario pension valuation and division rules, all plan administrators are responsible for calculating the value of a member’s pension benefit. Therefore, plan administrators of federally regulated pension plans, that have Ontario residents, are also responsible for calculating this value in accordance with the Ontario PBA.

Fees

The Ontario PBA provisions regarding the fees that a plan administrator can charge do not apply to federally regulated pension plans. Plan administrators of federally regulated pension plans may charge reasonable fees for the valuation and distribution of benefits on the breakdown of a spousal relationship if:

• The terms of the pension plan text permit it; and
• The plan administrator is of the view that it is in the best interest of all plan members.

The method for calculating these fees should be disclosed to members at the time that the request for services is made or before

Forms

The requirement to use forms that have been approved by the Ontario Superintendent does not apply to federally regulated pension plans. Plan administrators of federally regulated pension plans are expected to administer pension benefits in accordance with the court order or agreement that has been submitted to them (subsection 25(5) of the PBSA).

For more information on Ontario’s pension valuation and division rules, please visit the Financial Services Commission of Ontario’s website. Plan administrators of federally regulated pension plans should seek legal advice to determine how specific provisions apply.