The division of pension benefits can be a common point of contention and confusion in cases of marital breakdown. The following is a brief overview of the applicable legislation and methods of pension division.
The Employment Pension Plans Act (EPPA) prescribes the method for dividing all registered pension plan benefits in the private sector while public sector plans are subject to separate legislation (Public Sector Pension Plans Act).
It is important to note that pension division does not apply to common law couples. Common law spouses are only eligible for survivor pension benefits. Under the EPPA, only matrimonial property orders or agreements, made under the authority of the Matrimonial Property Act (applicable to married couples) can divide pensions. The EPPA legislation is prescriptive and there is little room for interpretation or application of common law principles.
Under the EPPA, the spouse is entitled to a portion of the pension benefits which accrued during the period of joint accrual (from the date the relationship began to the date of the marriage breakdown). A spouse’s share cannot exceed 50% of the benefits which accrued during this period of joint accrual. The method of valuing the pension is prescribed and the pension must be divided immediately, except where the member of the plan is within 10 years of Normal Retirement Date (the earliest age at which a member can retire under the plan without an early retirement reduction).
The 5 steps of pension division are as follows:
- Member/Spouse request pension information from plan
- Plan provides information statement and member/spouse determine total pre-division benefit
- Spouse/Member complete Matrimonial Property Order/Matrimonial Property Agreement and file with plan
- Plan reviews Matrimonial Property Order/Matrimonial Property Agreement for compliance. Plan provides Option Statement to Spouse and Post-Division Statement to Member
- Spouse selects option and returns Option Statement, Spouse receive transfer of benefit or pension from plan