Understanding Pension Plan Design and Family Benefits
Explore the intricacies of pension plan design in relation to modern families, focusing on equities and inequities regarding pensions as family property and spousal benefits. Learn about rules, needs upon separation and death, Ontario's new pension valuation rules, prescribed methods, settlement options, common law spouses, death benefits, survivor pensions, and eligibility testing.
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Presentation Transcript
Pension Plan Design and the Modern Family: The Equities and Inequities of Pensions as Family Property and Spousal Benefits Anne Slivinskas Associate General Counsel and Director, Pension Law and Policy Group May 23, 2014
Overview 2 1. What are the rules? 2. Do they meet the needs of members and their spouses Upon separation? Upon death?
Pensions as Property 3 Ontario s new rules for pension valuation and division 1. A single prescribed method for pension valuation; 2. Settlement options determined by pension status; 3. Extension of valuation and settlement options to common law spouses.
Pensions as Property: Single Prescribed Valuation 4 FLA value = PBA value Calculated by plan administrator, not member s actuary Prescribed formula & forms
Pensions as Property: Pension Status on FLV Date Drives Form of Settlement 5 Immediate lump sum transfer for pre-retirement separations No need to wait for member's termination, death or retirement Division of pension payments for post-retirement separations
Pensions as Property: Extension of Valuation and Division Options to Common Law 6 Married spouses date of marriage Married spouses who cohabitated before marriage date jointly chosen, no earlier than date they moved in and no later than date of marriage Common law spouses date jointly chosen, no earlier than date moved in
Death Benefits What needs are they designed to meet? 7 Family property? Spousal support? Both?
When is eligibility tested? 9 Pre-retirement - Member s death Post-retirement Member s retirement
Policy Concerns 10 Date of entitlement determination is arbitrary
Determination of competing claims depends on factual finding of spousal status 11
Member does not have unilateral control over the death benefit 12
Proposed Solution: Priority to Designated Beneficiaries and Estates 13 Remove the spousal priority and allow members to choose a beneficiary for their death benefits with estate as default Remove joint and survivor pensions as the minimum standard, but allow pensions to be joint and survivor pensions at the election of the member and her or his spouse; Allow surviving spouses to make a dependent s claim against the designated beneficiary or the estate, as the case may be.
Anne Slivinskas Associate General Counsel and Director, Pension Law & Policy Group 416.730.6339 Anne_Slivinskas@otpp.com 5650 Yonge Street Toronto, Ontario M2M 4H5
