The Financial Services Regulatory Authority of Ontario’s proposed family rule could allow for pension benefits to be divided more fairly in the event of a marriage breakdown, says Louis Duranleau, a senior principal of pensions at Normandin Beaudry.
“When there’s an agreement between the spouses to share the retiree’s pension before it’s effectively divided in the plan, there could be a reduction of the pension for the retiree. I think it would be great to have some clarification and flexibility because the legislation may not give you this scope of freedom. If spouses have agreed since the valuation date to split the pension in half, the retiree shouldn’t be penalized further.”
The FSRA is currently seeking feedback on the proposed rule, which is intended to reduce uncertainty around some administrative and technical matters, improve efficiency in the valuation and division process, provide flexibility to spouses and plan administrators and ensure fairness between different stakeholders.
Read: FSRA releases final guidance on impact of marriage breakdown on pension benefits
A guidance approach is preferable to a hard-and-fast rule embedded in legislation, says Duranleau, adding it would make the process more flexible, allow for faster modifications and clarify grey areas around payment rules.
The FSRA is also seeking feedback on its revised pension plan amendments guidance. The revised document will provide greater clarity on the determination and permissibility of certain plan amendments that have retroactive effects — including the FSRA’s interpretation of relevant provisions of the Pension Benefits Act — and expand on the regulator’s approach to the evaluation and use of discretion in registration of these amendments.
“I appreciate that the FSRA [is bringing] clarity and guidance to the retroactive amendment process,” says Duranleau. “We understand the guidance reflects how the legislation is written, however, it still seems somewhat restrictive from a legislative standpoint. I hope their principles-based approach described in the guidance will leave room for the FSRA’s judgment and discretion to handle each situation depending on the specific circumstances.”
The FSRA is accepting comments on both proposals until Jan. 19, 2024.
Read: FSRA pension plan administration guidance requires clarity, consistency, says ACPM