Thursday, September 17, 2009

Ontario's New Family Law Pension Regulations Still MIA

While Bill 133, Ontario's Family Statute Amendment Act, became law in May, regulations to establish Ontario's new pension calculation rules are still in limbo - leaving a bit of a black hole for parties and professionals in the Province's family law system.

Under Bill 133,the valuation, or "net family law value," of a pension plan member's entitlements will be provided to spouses directly by pension plan administrators on the request of either spouse. Additionally, up to 50% of a spouse's pension entitlement attributable to the period of a marriage may be paid out to his or her spouse from the pension plan itself, if the transfer is provided for by a Court Order, a family arbitration award or Separation Agreement.

This brings significant modification to the calculation of equalization entitlements under the Family Law Act and in most cases, will streamline the determination of spouses' net family property in family law negotiations and proceedings.

The Bill was intended to significantly reduce the expense of divorce proceedings, by eliminating the current need for costly, actuarial valuations of each spouses' employment pension entitlements in most cases.

However, until the method of calculating "net family law value" of a pension is determined by anticipated Regulations, it is not possible to utilize the new law or to take advantage of the streamlined system that is contemplated by it.

Penny Hebert of Pension Appraisal Solutions provides the latest on the pension-regulation waiting game in a September newsletter:

We had a call from a lawyer recently asking for our advice on how to word their separation agreement according to Bill 133. Much to their dismay, we had to tell them that the pension portion of Bill 133 has not come into force yet!

Family law pension buzz that dominated the pension scene from the spring of 2008 to the spring of 2009 has been silenced, but only for the short term. The buzz will be back in 2010, probably later in the year than earlier.

Bill 133, the Family Law Statue Amendment Act, 2009, received royal assent May 2009 and we are all waiting for a look at the regulations. Many lawyers are asking us when the new pension rules will be finalized. As estimated in our April 2009 newsletter, John D. Gregory, General Counsel for the Ministry of the Attorney General, recently confirmed that it is unlikely that the new pension rules will be in force before the new year.

Pension plan administrators cannot finalize their systems for calculating the new family law, pension value and for initiating a division of the pension when the marriage breaks down until the regulations have been finalized. Some of the larger pension administrators are suggesting they will need six months or more to get their new systems developed and activated.

Some of you are carrying on as usual when presented with a case that involves a pension. Most of you are playing the waiting game, and understandably so. Although the new rules will simplify the pension issue for your clients who have pensions when they separate, it may not be better.

Family law practitioners wanted pensions simplified and plan administrators wanted a single pension value. The LCO responded by offering an ‘Immediate Settlement’ regime for dealing with the pension. The Ministry of the Attorney General responded by enacting an ‘Immediate Settlement’ regime with the plan administrator alone providing the value of the pension for NFP purposes and for pension division purposes. Both stakeholders received their wish with Bill 133. Only on review of the regulations to Bill 133, will the major stakeholders to an individual’s pension find out how the new pension rules will work.

- Garry J. Wise, Toronto

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