Monday, April 13, 2009

Actuaries Oppose Bill 133

I'm late in posting this, but in view of recent legislative progress of Bill 133, I wanted to share the following letter to Ontario Attorney General, Chris Bentley, from James Jeffery and Kelly McKeating, two London, Ontario actuaries who regularly provide pension valuations in Family Law proceedings.

In their correspondence, they set out their concerns regarding changes in the way Ontario pensions are to be valued and divided pursuant to proposed amendments to Ontario's Family Law Act, as set out in Bill 133.

December 1, 2008

The Honourable Chris Bentley

Attorney General of Ontario

11th Floor, 720 Bay Street

TORONTO, Ontario, M5G 2K1 

Dear Sir:

      RE: ONTARIO BILL 133 - PENSION VALUATION AND DIVISION

                 FOR PURPOSES OF THE FAMILY LAW ACT       

 The pension aspects of Ontario Bill 133 provide for a lump-sum release of value from Ontario regulated defined benefit pension plans. This offers welcome relief from the problematic "if-and-when" divisions that are often the only at-source division solution permissible under current rules.

 On the other hand, the proposed new valuation rules will have very serious unintended consequences. Depending on the particulars of the regulations, the consequences will be either unacceptably unfair to the non-member spouse to the profit of the plan member and/or the plan, or they will impose unintended damage to the interests of the plan member and/or the plan itself.

 We are sure you will agree that the latter would be extremely unfortunate at a time when our pension system is in crisis. Moreover, the intended simplification and cost savings are unlikely to be realized. These points are explored more fully in the attached analysis, which we respectfully invite you to carefully consider.

 For very good reasons, the concept of fixed formula valuation rules administered by pension plans was rejected by both the Ontario Law Reform Commission report tabled in 1995, and the Law Commission of Ontario's report tabled in September, 2008.

 Accordingly, we strongly urge that the portions of Bill 133 which relate to permissible at-source division go forward after careful consideration of the details. The valuation aspects should be dropped or deferred pending a fully informed, balanced review.

Yours very truly,

Dilkes, Jeffery & Associates, Inc.

JAMES E. JEFFERY, FSA, FCIA        KELLEY McKEATING, FSA, FCIA

Actuary                                             Consulting Actuary


The new treatment of pensions pursuant to amended Bill 133 is summarized in the amendments as follows:
Under a new section 10.1 of the Act, the net family law value -the imputed value, for family law purposes of a spouse’s interest in a pension plan is to be determined in accordance with the Pension Benefits Act. The section also restricts the court’s power to make orders requiring the division of the interest in a pension plan in connection with the equalization of the spouses’ net family property. An order may provide for the immediate transfer of a lump sum out of the pension plan but, with one exception, cannot provide for any other division of the spouse’s interest in the plan. The exception applies if the spouse has begun to receive a pension under the plan on or before the valuation date. In that case, an order may only provide for the division of the pension payments. Additional restrictions that apply to the division of the interest in the pension plan are also described.

- Garry J. Wise, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

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