Spousal Relationship Breakdown: Your Pension and Dividing Your Family Assets

Last revised: January 2004
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Who does this Fact Sheet apply to?

This Fact Sheet is for members of the OPSEU Pension Plan who are involved in a spousal relationship breakdown (same or opposite sex) from either a common-law relationship or legal marriage.

This Fact Sheet contains important information about your OPTrust pension to assist you during this difficult period, whether your relationship breaks down before or after your retirement.

For the purpose of this Fact Sheet, the period of a spousal relationship may be different depending upon whether you and your former spouse were married or in a common-law relationship prior to the relationship breakdown.

How the law works

Family law legislation in Ontario (the Family Law Act) imposes certain rights and obligations on spouses when a marriage or spousal relationship breaks down. Specifically, the Family Law Act sets out a process for dividing assets acquired by a couple during their relationship. This method requires that the value of these assets – the “net family property” – must be shared between spouses. Pension assets are included in the definition of net family property and must therefore be dealt with as part of the division of family assets.

This Fact Sheet is not intended to provide you with legal advice. It describes OPTrust’s policy concerning some family law issues because they are affected by the requirements of Ontario pension law.

To ensure that you understand your legal rights and obligations, you and your former spouse may wish to obtain independent legal counsel. You may want to show your lawyer this Fact Sheet.

Relationship breakdown

When your marriage or spousal relationship ends, you and your former spouse must determine the value of your family assets – including pension benefits – acquired during your spousal relationship. A defined benefit pension plan such as the OPSEU Pension Plan can account for a significant portion of the family assets. Depending on the value of your OPTrust pension, this may have a considerable impact on how your other assets are divided between you and your former spouse.

Dividing your family assets

An important objective of the Family Law Act is to facilitate the equal division of family assets between spouses when a relationship breaks down. However, this does not always mean that you or your former spouse will receive exactly one half of each asset.

How much can OPTrust pay your former spouse?

Your domestic contract or a court order may set out certain obligations affecting you and your former spouse with respect to the equalization of your family assets. But pension law in Ontario (the Pension Benefits Act) puts certain limits on the amount OPTrust can pay your former spouse. Pension law will not permit the payment of more than 50% of the pension benefit earned during the period of your spousal relationship, to be paid to your former spouse for the equalization of family assets. This limitation applies even if a separation agreement, court order or other document states a higher amount.

Valuation date

To calculate the division of your pension, OPTrust needs to know your “valuation date.” This is the date agreed to by you and your former spouse to value the pension benefit earned during your spousal relationship. However, if no agreement has been made or if this information is not provided to OPTrust, we will use as the valuation date, the last day for which we have received contributions to the Plan. The pension benefit will be calculated based on OPTrust’s pension formula in effect on the valuation date.

Please note: If your valuation date occurs after a divestment, your service between the divestment date and valuation date will be used to calculate your right to a pension benefit under the OPSEU Pension Plan.

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Determining the value of a pension

For family assets to be properly divided, the value of each asset needs to be known.

Before you and your former spouse negotiate the division of your family assets, we recommend that you determine the value of your OPTrust pension. To do so, we suggest you seek independent professional advice from an actuary as well as a lawyer. OPTrust cannot give you this advice.

OPTrust will provide you with a statement showing the benefit accrued during your spousal relationship period up to your valuation date, using the pension formula in effect at that time (One half of this value is the maximum 50% that can be claimed by your former spouse). We will also disclose all pension data such as your contributions, pension credit and salary history during this period to assist you in calculating the value of your pension benefit.
If you want OPTrust to give this information to someone else – your lawyer, actuary or your former spouse – you must give us your consent in writing.

OPTrust often receives requests for a calculation of the “commuted value” of the pension benefit payable to the former spouse. However, we do not provide commuted value estimates to determine family assets. This is because the assumptions and methods agreed to by the separated couple to divide the family assets under family law may differ from the way OPTrust determines the commuted value.

After the value of your pension is determined, you and your former spouse may decide that you keep your pension entitlement while he or she receives other property or assets of equal value in exchange. The actual pension benefit does not always need to be divided to realize an equal division of family assets.

Filing domestic contracts or court orders

A certified copy of your domestic contract or court order must be filed with OPTrust if your pension is to be divided between you and your former spouse. Without this document, OPTrust has no authority to pay your former spouse his or her portion of your pension benefit.

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What happens if your relationship ends before retirement?

At the valuation date, if you are not vested (i.e. you do not have at least 24 months of continuous membership credit or at least 24 months of credit in the Plan), the entitlement under the Plan would be a refund of your contributions, plus interest.

However, the period between your valuation date and the date your plan membership ends is considered for vesting purposes. This means that if you have less than two years of credited service in the Plan at your valuation date but more than two years of service at your termination date (when you leave the Plan), your benefit at the valuation date is calculated as though you were vested on the valuation date. Your former spouse is therefore entitled to a portion of the benefit calculated as if it were vested on the valuation date.

In the case of a relationship breakdown before you retire, the pension benefit payable to your former spouse is not payable immediately. While the pension benefit for your former spouse may be calculated as of today, this benefit will not be payable until the time you terminate your employment and associated membership in the Plan (i.e. leaving your job before or at retirement). Until then, your former spouse will not receive any share of the pension benefit owed as a result of the division of family assets.

To calculate the maximum amount payable to your former spouse, OPTrust applies the
following formula:

* The YMPE refers to the maximum earnings from employment on which CPP contributions and benefits are calculated. The YMPE is based on average wage levels and changes every year.

** Ingrid’s best 5-year average annual salary is more than the average YMPE in 2003; therefore the 5-year average YMPE is used to calculate the maximum amount payable.

When you terminate your membership in the Plan, any payment options that are available to you are also available to your former spouse. For instance, if you are age 40 and terminating your membership in the Plan, you and your former spouse would have three options for your accrued benefit:

1. a deferred pension under the Plan payable at age 65 or
2. transfer of the commuted value of your deferred pension to a prescribed savings arrangement (e.g. a locked-in RRSP) or
3. purchase of a life annuity.

You and your former spouse do not have to select the same option. You may elect to receive a deferred pension under the Plan, while your former spouse may decide to opt for a commuted value transfer to a locked-in RRSP.

The pension payable to your former spouse does not remain linked to your pension benefit; it is separate from the pension you will receive from OPTrust. In other words, if you die before your former spouse, he or she will continue to receive his or her entitlement. The amount paid to your former spouse will be actuarially adjusted to reflect any difference in age between you and your former spouse.

Additionally, the pension payable to your former spouse is integrated with the Canada Pension Plan (CPP) when he or she turns 65. Therefore, any monthly pension amount contained in a court order or domestic contract must take this Plan feature into account. Otherwise, OPTrust will treat the monthly pension amount as payable before CPP integration, which means the amount, will be reduced when your former spouse turns 65.

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What happens if you die before retirement?

If you die before retirement, any death benefit payable from the Plan may be subject to a family assets claim as specified in a domestic contract or court order. However, explicit provisions in a domestic contract or court order are required. Otherwise there is no benefit payable by OPTrust to your former spouse.

Your former spouse is not entitled to a survivor pension since he or she does not meet the definition of an “eligible spouse” at the time of your death. However, your former spouse may be entitled to claim against any death benefits payable from the Plan, as previously explained.

If your former spouse dies before you retire, his or her pension entitlement will be directed to his or her estate upon your termination from the Plan, unless a domestic contract or court order indicates otherwise.

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What happens if your relationship ends after retirement?

If your relationship breaks down after retirement, the domestic contract or court order that specifies the pension payable to your former spouse must have a prospective payment date. Pension payments cannot be backdated. Therefore, any pension benefits payable to your former spouse from the commencement date of your pension to the current date should be settled during negotiations between you and your former spouse.

If your relationship breaks down after you retire, your former spouse’s pension benefit is calculated differently from the way it is calculated when a relationship breaks down prior to retirement. While you and your former spouse may agree that he or she receives a lesser amount, OPTrust will calculate the maximum pension benefit payable to your former spouse as follows:

The pension paid to your former spouse is paid for his or her lifetime – not your lifetime.

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What happens if you die after retirement?

If you die after retirement, your former spouse’s share of your pension is unaffected. Your former spouse may be eligible to receive a survivor pension from the Plan, provided he or she meets the Plan’s definition of “eligible spouse.”

To receive a post-retirement death survivor pension, you and your former spouse must have been living together:

• at the time your membership terminated in the Plan;
  AND
• at the time your first pension payment is effective.

If your former spouse meets the definition of “eligible spouse,” then he or she is entitled to the post-retirement death survivor pension even if you are divorced or separated at the time of your death. The post-retirement death survivor pension is calculated based on the value of your pension before division.

What happens if your former spouse dies after retirement?

If your former spouse dies after your retirement, his or her portion of your pension benefit ceases. Any “residual balance” is payable to his or her estate.

When an OPTrust pensioner dies, a residual balance is calculated. This is the difference between the member’s pension contributions plus interest, minus all the pension payments to the member and his or her survivors. However, in a relationship breakdown situation the calculation is modified for the former spouse. If your former spouse is entitled to the maximum amount payable, the residual balance would equal half of the contributions accrued during your spousal relationship, plus interest, minus any pension benefit already paid to your former spouse.

If your former spouse dies after he or she begins to receive a pension, there is no survivor pension payable from the Plan. Your former spouse will receive a “single-life” pension, which ceases upon his or her death. There is no payment made to your former spouse’s new spouse, should he or she remarry.

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Retirement options

The OPSEU Pension Plan provides reduced and unreduced retirement options for members.
Depending on your age and years of service you may qualify for the temporary Factor 80, Surplus Factor 80, Factor 90 or the 60/20 retirement options. If you are eligible for an unreduced pension, your former spouse is also eligible for the same early retirement options available to you.

For example, let’s say you are 57 years old with 23 years of service; you are eligible to retire under the temporary Factor 80 option. Your former spouse is therefore eligible to receive their pension benefit at the time you retire, regardless of his or her age.

Buybacks and Transfers

If, during your spousal relationship, you purchased credit for past non-credited service before or during your spousal relationship, the accrued service is subject to equalization under the Family Law Act. As a result, your former spouse is also entitled to a portion of this service even if the service was prior to your spousal relationship.

Inflation protection

All pensions payable from the Plan – including those payable to a former spouse – are adjusted annually for increases in the cost-of-living. For example, the pension payable to your former spouse is adjusted for inflation from the valuation date to the date of the first payment, and annually thereafter. The maximum increase in any one year is 8%. Any increase above 8% is rolled forward into the next year, to be used when the adjustment is less than 8%. This is the same inflation protection that you receive as a pensioner or deferred pensioner.

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Insured benefits

The Government of Ontario provides postretirement health and dental benefits to eligible
OPTrust pensioners. You may be entitled to insured benefits, if you meet one of the following criteria:

1. you are receiving a pension based on at least 10 years of credit in the OPSEU Pension Plan or its predecessor, the Public Service Pension Plan (PSPP),
   OR
2. you are receiving a pension based on at least 10 years of continuous employment and have some credit in the OPSEU Pension Plan for at least some part of each of those ten years.

Insured benefits are not extended to your former spouse once you are divorced or ceasing to be in a common-law or same sex relationship. If a separation agreement or court order requires that you provide insured benefits in this case, you must purchase this coverage from an insurance provider.

For more information about insured benefits you or your former spouse should contact an insurance provider.

Income taxes

For all tax purposes, you and your former spouse are treated separately. Therefore, any pension benefit payment to your former spouse is subject to the requirements of taxation as his or her income under the Income Tax Act and will have no impact on your income tax filing.

Prior membership

OPTrust can only provide information for your pension accrued in the OPSEU Pension Plan. If you were previously a member of the Public Service Pension Plan and retain a right to a deferred pension from that plan (i.e. did not transfer), you should contact the Ontario Pension Board directly for information with respect to that pension plan.

For more information

If you have any questions about a relationship breakdown and your OPTrust pension, please contact OPTrust.
 

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