The Financial Services Regulatory Authority of Ontario is clarifying its guidance on the administration of pension benefits upon marriage breakdown.
The final guidance, which came into effect on Nov. 9, 2021, clarifies the FSRA’s position on issues relating to valuation, payment and division and survivor benefits.
It stated pension assets are to be valued based on the applicable family law legislation, often the jurisdiction in which the parties last resided together prior to separation, with pension assets to be divided based on the rules of the jurisdiction where the pension was earned.
Read: More clarity needed in pension rules following marriage breakdown: ACPM
For spouses covered under a multi-jurisdictional pension plan, the guidance said a member’s entire benefit accrual is determined by the family law rules and pension division rules of the final location in which a member resides and noted an out-of-province court order isn’t enforceable in Ontario.
The guidance also stated that, although all pensions are considered family property under Ontario’s Family Law Act, not all pensions are subject to the Pension Benefits Act, including federally regulated pensions, federal government plans and non-registered supplemental employee retirement plans. These assets must be valued “where reasonably possible” in accordance with the Pension Benefits Act with “necessary modifications,” said the guidance.
Read: FSRA issuing guidance on pension plan administrator responsibilities
It also said that, when calculating the preliminary value of a pension benefit or deferred pension benefit, administrators must use the same set of married assumptions — including the percentage of married and assumed spousal age difference at retirement — that are used to calculate commuted values under the pension plan. “In other words, there shouldn’t be a separate married assumption for marriage breakdown calculations.”