fbpx

New Road-Map For Valuing Non-Ontario Pensions For Family Law Purposes in Ontario

Summary

The Ontario Court of Appeal in Van Delst v Hronowsky, 2020 ONCA 329 decides pension administrators must value non-Ontario pensions in the same manner as an Ontario pension under the Pension Benefits Act, RSO 1990, c P.8 (the “PBA”) unless a different method is necessary in the circumstances. 

The court set out the following process for determining the value of a non-Ontario pension in Ontario: 

  1. The parties request a pension administrator to generate a value based on Ontario law;
  2. The parties may seek directions from the court if:
    1. The pension administrator not regulated by provincial legislation refuses to calculate the value under Ontario law; or
    2. Issues arise from necessary modifications in applying the provincial scheme to the non-Ontario pension; 
  3. In the event of litigation, the court prefers a single jointly appointed expert to provide expert evidence on the pension, rather than competing valuators. 

Facts

The parties were married in October 1995 and separated in September 2016. Both spouses worked for entities governed by the federal Public Service Superannuation Act, RSC 1985, c P-36 (the “PSSA”). The parties disputed the net family property (“NFP”) calculation of their pensions. 

Both parties provided expert reports valuing their pension plans. These competing valuations arose since there is no equivalent to the PBA for valuating federally regulated pensions. 

Superior Court of Justice (Van Delst v Hronowsky, 2019 ONSC 2569)

The trial judge, Justice Engelking reached the following conclusions: 

  1. The husband’s pension value was $1,129,294.00, the wife’s was $447,465.00.  
  2. The NFP of the husband was $1,834,578 and $707,458 for the wife;
  3. The husband owed the wife an equalization payment of $563,560;
  4. The normal retirement date for the husband was age 60 and 65 for the wife;
  5. Justice Engelking excluded the wife’s survivor benefits from the husband’s pension because she would lose her entitlement to those benefits at the time of divorce;
  6. Justice Engelking included contingent benefits into the NFP. 

On appeal to the Ontario Court of Appeal, the issue became whether and how to apply section 67.2 of the PBA and its regulation, Family Law Matters, O Reg 287/11 to a federally regulated pension plan. 

Ontario Court of Appeal: For the purpose of the Family Law Act, Pension Valuations in Ontario Must Occur Under the PBA, Unless There are Compelling Reasons to the Contrary 

The PBA

Justice Hourigan for the Ontario Court of Appeal noted PBA functioned to simplify the valuation of pensions for calculating the NFP. That scheme created a formula for pension valuations for pension administrators to apply: “Thus, courts largely got out of the business of pension valuation.” It allowed litigants to avoid retaining actuarial experts and litigating competing pension valuations.  

Subsection 10.1(1) of the Family Law Act, RSO 1990, c F.3 (the “Family Law Act”) provides that for family law purposes, the imputed value of a spouse’s interest in a pension is determined in accordance of section 67.2 or section 67.7 of the PBA. Subsection 10.1(2) of the Family Law Act stipulates that where any other pension plan applies, the imputed value for family purposes of a spouse’s interest in that plan occurs in accordance with the PBA “with necessary modifications.” 

Justice Hourigan interpreted this to mean that the default position of the Family Law Act is a pension administrator must apply the PBA approach of valuating pensions to a plan not regulated under the PBA unless a party can show the need for modifications to that approach. Pension administrators must valuate a non-Ontario pension as if it were an Ontario pension “to the extent reasonably possible.” 

If the non-Ontario pension is not the same as the provincial pension, the pension administrator must determine if any modifications are necessary in the circumstances. Even if a modification is necessary, the court will ask if the federal pension is functionally equivalent to the provincial pension. 

Assessment of Trial Judge’s Decision

The Ontario Court of Appeal found three instances where the trial judge erred in not valuating the non-Ontario pension in the same manner as an Ontario pension plan with necessary modifications. 

Justice Hourigan found the trial judge erred by replacing the generalized concept of normal retirement date under the default provincial scheme with a case-specific value. Although it was necessary to apply a modification to the PBA since the federal pension did not stipulate a normal retirement date as required by the PBA, “the trial judge was required to adopt the functional meaning of normal retirement date in the PBA [emphasis in original]” being the date or age a member may retire with unreduced pension benefits. This is because the PSSA pension benefits are similarly structured to those under Ontario plans.  

Hence Justice Hourigan found the normal retirement date for both parties was age 60. He directed the matter back to the trial judge to determine the equalization payment owed based on the experts’ age 60 calculations with the parties’ further equalization calculation submissions. 

Justice Hourigan also found the trial judge reached the correct result both in not including the wife’s contingent interest in the husband’s pension in her NFP and by including the contingent survivor benefit in valuating both spouses’ pension but erred in the analytical approach. In both instances the standard method for valuating pensions in Ontario provided a complete answer. A case-specific analysis different from this methodology was unnecessary. 

Takeaway

In Ontario pension administrators under a federal or other non-Ontario pension plan must follow the same process as a provincially regulated pension plan unless a different method is necessary. 

If you have any questions on the implications of this decision or any other family law matter you can arrange a consultation with one of our family lawyers by calling: 519-621-7260.

 

Case study prepared by

Simon A. Marmur, Associate Lawyer | Pavey Law LLP | T. 519.621.7260, Ext. 227

 

COVID-19: OFFICE RESPONSE & PROCEDURE

Dear Clients and Visitors,

At Pavey, Law LLP the health, safety and wellbeing of our employees, clients, contacts, and colleagues is foremost in our minds as we continue to closely monitor the COVID-19 outbreak.

To do our part to reduce the risk of, we have adjusted our business operations by implementing the following protocols:

The firm has limited client meetings to urgent matters only and moved to teleconferencing where appropriate.  Clients will be contacted directly to make alternative meeting arrangements or to reschedule.

If you are attending our office for an urgent meeting and/or delivery, no client or visitor shall be permitted into our office, if:

They have traveled internationally or have been in close contact with someone who has travelled internationally any time in the past 14 days; or

They have any reason to believe that they might otherwise have been exposed to a confirmed case of COVID-19 in the past 14 days; or

They are exhibiting any symptoms of infection (e.g. fever, dry cough, shortness of breath or other breathing difficulties).

Should the outbreak result in a full office closure, we have a contingency plan to implement remote work capabilities and have technology to ensure our accounting systems and data are available and secure. By modifying our operations and working remotely, our lawyers and staff will continue to be responsive to your legal and business needs.

Limited access into our Reception will be permitted to exchange documents and to accept deliveries and payments.

PLEASE CONTACT US AT 519-621-7260 SHOULD YOU NEED ASSISTANCE WITH ACCESSING OUR RECEPTION.

We wish everyone well as we collectively navigate this global health challenge.

Pavey Law LLP