December 1, 2008
The Honourable Chris Bentley
Attorney General of Ontario
11th Floor, 720 Bay Street
TORONTO, Ontario, M5G 2K1
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
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