Welcome to FSCO’s Webinar on Family Law Value Applications.

We will begin this webinar in one minute to give everyone a chance to join us.

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Good morning! My name is Dave Gordon and I’m the Deputy Superintendent of Pensions at the Financial Services Commission of Ontario. I’m pleased to welcome you to today’s webinar, which will focus on providing additional information on plan administrators’ responsibilities when they’re asked to provide the Family Law Value of a pension. You may have attended the family law webinar that FSCO held in November 2011. In that webinar, we provided an overview of the new family law rules that apply when a plan member and spouse have separated, and seek a valuation and division of their pension assets. Since that webinar took place, you’ve asked us to provide you additional information on this topic. This webinar will discuss what plan administrators need to know when an application for a Family Law Value request is received, and how to calculate a Family Law Value. We’ve condensed this material as much possible. However, due to the complex nature of this topic, a fair amount of detail has been provided. Therefore, we may go slightly over the hour we planned for this webinar. We appreciate your time and patience. Since we plan to continue hosting webinars for our pension stakeholders, we’d appreciate it if you could please complete the short survey that will appear at the end of this presentation. It will only take a few minutes, and will greatly assist us in identifying topics for new webinars and in making future improvements. Our two speakers, Joey and Christine will now deliver the presentation. I thank you for your time and hope you find this webinar both informative and helpful.

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Good morning, my name is Joey Shiner. I’ll be hosting today’s webinar with my co-presenter Christine Anderson.

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Before we get started, there are a few things you need to note:

• When we say “you” during this presentation, we’re referring to plan administrators and their agents.

• If you have questions about this presentation, please send us an email at pensionwebinar@fsco.gov.on.ca. We’ll post all of your questions and answers on our website within a few weeks of this webinar. In addition, we will send you an email with links to the webinar recording, presentation slides, and questions and answers, once they’re posted on our website.

• This webinar is divided into six sections. After each section, we’ll ask you a self-assessment question and give you a few seconds to choose an answer from a list. Then we’ll provide the correct answer.

• At the end of this webinar, a short survey will appear on your screen. We’d really appreciate your feedback, as it’ll help us determine topics for future webinars.

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On January 1, 2012, the amendments to the Ontario Pension Benefits Act and the Family Law Act relating to the division of pension assets upon the breakdown of a spousal relationship came into force. In this presentation, we’ll discuss how you’re impacted by these new rules with a focus on the valuation and division of the pension assets upon the breakdown of a spousal relationship. • In the first section of this presentation, we’ll give you an overview of the new family

law pension regime that came into effect on January 1, 2012.

• Next, we’ll provide you with some general information about the family law forms and the process you must follow when you respond to applications.

• In the third section, we’ll go over the Preliminary Value calculation. • We’ll then talk about what you should consider when you complete a Statement of

Family Law Value.

• In the fifth section, we’ll go over what you are required to do before you pay the former spouse his or her share of the Family Law Value.

• And finally, we’ll discuss how you would revalue the plan member’s entitlement after the spouse’s share has been paid out.

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Let’s begin by going over the rules of the new family law regime.

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I’m sure you’re all aware of the new rules, but we’ll still provide you a quick summary. Under the new family law regime: • A plan member’s former spouse is entitled to receive an immediate settlement, or

payment, of his or her share of the pension assets.

• You need to ensure that pension assets are valued in accordance with the formulas that are set out under Ontario Regulation 287/11.

• In addition, Superintendent approved forms must be used throughout the process.

• Please note that under the legislation, as the pension plan administrator, you’re responsible for calculating the Family Law Value of plan members’ pension assets. You may hire other service providers to perform the calculations for you. But keep in mind, as the plan administrator, you’re ultimately responsible for the information you provide to plan members and their former spouses.

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The new family law regime went into effect on January 1, 2012.

The new valuation and division rules are set out under sections 67.1 to 67.6 in the Ontario Pension Benefits Act and Ontario Regulation 287/11. During this presentation, when we say “the Regulation”, we’re referring to Ontario Regulation 287/11.

There are 12 Superintendent approved forms available on FSCO’s website at www.fsco.gov.on.ca. These family law forms should be used by the separating spouses,if the new family law regime applies to them. These forms include: application forms, statement forms, and election forms. We’ll spend some more time talking about theseforms in the next section of this presentation.

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This slide outlines some of the things you should think about when dealing with the new family law process.

First, you need to ensure you have a process in place for dealing with family law matters. When you’re making decisions, such as whether or not to charge a fee for calculating the Family Law Value, you should document the rationale for your decision and include it in your plan’s governance documents. Your governance documents should also include delegation information, such as, which person, position, or entity is responsible for providing the certification that is required on the Statement of Family Law Value (Form 4).

You also need to consider training and educating staff on the new rules. This will help ensure that accurate and consistent information is being provided to plan members.

Next, you need to let plan members know who they should contact about family law related matters, and where completed family law forms should be sent.

You may want to consider simplifying the application process for your plan members and their former spouses, by pre-populating certain information on the application form, such as the pension plan information. This may help minimize the number of errors that are made on the family law forms.

Last, but certainly not least, you should consider whether you need to hire professional advisors, such as lawyers and actuaries who specialize in family law, to help you through the process.

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You must decide whether or not you want to charge a fee for calculating the Family Law Value. Regardless of your decision, it needs to be recorded in your plan’s governance documents, and should include an explanation about why you made this decision.

Keep in mind that if you decide to charge a fee, it can’t be more than the maximum amounts that are set out in the Regulation. The maximum fees are: $200 for a defined contribution valuation, $600 for a defined benefit valuation, and $800 for a combination (defined benefit + defined contribution) or hybrid (greater of defined benefit or defined contribution) valuation.

If the fee is not paid, you are not required to calculate the Family Law Value.

Also note that HST is not included in the maximum fee. To find out if the HST must be charged for your particular plan, please contact the Canada Revenue Agency.

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If your pension plan includes Ontario members who have pension benefits that are subject to Ontario’s Pension Benefits Act, the new rules will apply.

Similarly, if you’re the plan administrator of a multi-jurisdictional pension plan, or your pension plan is registered in another province, you must apply Ontario’s new pension valuation and division rules in respect of your plan’s Ontario members.

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In general, if plan members’ pension benefits are not subject to the Ontario Pension Benefits Act (PBA), then Ontario’s new pension valuation and division rules do not apply to them.

Plan members whose pension benefits are not subject to the Ontario PBA include:

• Ontario members of federally regulated pension plans (this includes federally regulated pension plans in certain industries, such as banking, airlines and telecommunications);

• Members who are not employed in Ontario; and

• Ontario members of Supplementary Employee Retirement Plans (SERPs).

If you are the plan administrator of a federally regulated pension plan, note that section 10.1(2) of the Ontario Family Law Act requires that assets of Ontario members be valued “where reasonably possible” in accordance with section 67.2 of the Ontario PBA, “with necessary modifications”. You may want to seek clarification from the Office of the Superintendent of Financial Institutions Canada about the application of the federal Pension Benefits Standards Act, as it relates to the former spouse’s available options, and the maximum that may be paid to him or her.

You should note that the same provision (section 10.1(2)) would also apply to an Ontario member of a SERP.

You should be aware that there may be some situations where members work in Ontario, but live in another province, or work in another province, but live in Ontario. FSCO is in the process of preparing some questions and answers to deal with these situations. These Qs and As will be posted on FSCO’s website in the future.

If you are uncertain whether the new rules apply, or what your responsibilities are in a specific situation, you can check FSCO’s website or contact us. Information on how to contact us will be provided at the end of this webinar.

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You need to know who falls under the old and new rules in order to inform your members and their spouses about what they need to do to get the value of their pension assets.

The transition rules are set out in sections 67.5 and 67.6 of the Pension Benefits Act (PBA).

To determine whether the old or new rules apply, you need to look at the date the Settlement Instrument was made - not the parties’ separation date. When we talk about a “Settlement Instrument” we’re referring to a court order, family arbitration award, or domestic contract (that is, whichever one applies in the situation). Also, when we say “parties”, we’re talking about the plan member, and his or her former spouse.

The general rule is: If the Settlement Instrument was made on or after January 1, 2012, then the new rules apply. If the Settlement Instrument was made before January 1, 2012, then the old rules apply - but there are some exceptions.

At the end of the day, you’re ultimately responsible for determining which rules apply, and for following the appropriate process. Since Settlement Instruments may not always be clear, you may need to consult with your lawyer before making this determination.

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As we mentioned earlier, the new rules apply if the Settlement Instrument was made on or after January 1, 2012, and the old rules apply if it was made before January 1, 2012. However, there are some exceptions to these rules.

One exception is if the Settlement Instrument was made before January 1, 2012, but did not deal with the pension assets. (That is, it dealt with all other assets, except for the pension assets.) In this case, the parties may revise or obtain a new Settlement Instrument after January 1, 2012, that specifically addresses the pension assets. In this case, the revised or new Settlement Instrument will fall under the new rules.

Note that when we say “deal with the pension assets”, we’re referring to a Settlement Instrument that was made before January 1, 2012, and either provided for the division of pension assets, or provided for a final settlement that included the value of pension assets without requiring their division.

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If the Settlement Instrument was made before January 1, 2012, and dealt with the pension assets, the old rules continue to apply.

Note that the old rules would still apply in this situation, even if the Settlement Instrument was changed after January 1, 2012.

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Since we’ve talked about the application of the new and old rules, let’s go over a real life example.

You just received a completed Application for Family Law Value (Form 1) from a plan member named Fred, and an application from Fred’s wife Wilma to transfer her share of the pension assets to her locked-in RRSP. The application includes a court order that was made on October 3, 2011. Under the court order, Wilma must receive 50 per cent of the pension assets. What should you do?

In this case, you have a court order that was clearly made before January 1, 2012. This means the old rules apply. You should return Form 1 and include a letter to Fred that explains why Form 1 cannot be used.

Wilma would get her own letter, which explains why you can’t process the transfer request at this time. As the old rules apply, Wilma won’t be able to receive her share of the pension assets until a “triggering” event occurs. A triggering event will occur when Fred terminates his employment or plan membership, retires, dies, or reaches the plan’s normal retirement date (whichever event occurs first). In your letter, you can also explain that Wilma will get a statement with her options once the triggering event occurs.

If you run into this type of situation, where the old rules apply, you are not obligated to calculate the Family Law Value. Under the old rules, it is up to the parties to get their own actuary to do the calculation for family law purposes.

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The forms listed here need to be completed by plan members and their spouses.

As we discussed on the previous slide, when you receive an application, you need to determine whether the old or new rules apply. If the new rules apply, you then need to confirm if the right person signed the form. For example, the Application for Family Law Value (or Form 1), can only be signed by the plan member, and/or the spouse who is (or was) married to the plan member. If Form 1 was signed by the plan member’s common-law spouse, it should be returned to this person with an explanation.

Note that Forms 2 and 3 may need to accompany Form 1. Typically, Form 2 will be signed by the parties as proof of their separation date (which is their Family Law Valuation Date). Form 3 would only be completed if the Contact Person information was completed in Form 1.

If you receive a completed Form 7, this information should be kept in the plan member’s file.

We will discuss all of these forms in more detail during the next section of this presentation.

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We’ll now test your knowledge of the material we just covered, by asking you a self-assessment question. You will need to exit the full screen mode to view the question.

When a process to handle family law related matters is being developed, the plan administrator should:

A) decide whether or not to charge a fee for calculating the family law value

B) train staff

C) consider hiring a third party advisor who is a family law expert

D) all of the above

We’ll pause for about 10 seconds to give everyone a chance to respond.

The best answer is D (all of the above). You should have a process in place for dealing with family law matters, and your decisions about the fees, delegations etc. should be documented and included in your plan governance documents.

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In the second section of this presentation, we’ll provide you general information about the family law forms and the process that should be followed when reviewing and completing them.

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When you receive an Application for Family Law Value (Form 1), you need to confirm that the new rules apply, and then review it to make sure it’s complete and accurate. Remember, once you receive a complete Form 1, you only have 60 days to issue the Statement of Family Law Value (Form 4).

You should review Form 1 to ensure that you have received all required documentation. A list of the required documents is provided in Part G of Form 1 and is shown on this slide.

If you charge a fee for calculating the Family Law Value, the fee must also be included. While there is no limit on the number of applications that can be made, each application must be accompanied by a fee (if one is being charged), along with other required documentation.

Some of the common issues with Form 1 include: incorrect completion of the contact person information (or no Form 3), no witness signatures, and a lack of agreement for the starting and/or separation date.

You should also check that the spouse who is listed on Form 1, is the same person who is listed in your records. If there is a discrepancy, you need to resolve any differences before the Family Law Value is determined.

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If Form 1 is incomplete - for example, the required fee was not provided, the required documents are missing, or the form was not entirely filled out - you may either fill out Form 1A, or use your own method of communicating any deficiencies to the applicant.

Once you’ve determined that Form 1 has been completed correctly, you need to decide which version of Form 4 should be used. (Note that there are five versions of Form 4: 4A, 4B, 4C, 4D and 4E). You’re required to provide Form 4 to both parties, within 60 days of receiving a complete Form 1.

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This slide shows the various Statements of Family Law Value that are available. To determine which version of Form 4 you need to use, look at the status of the plan member, and the type of benefit the plan member had on the Family Law Valuation Date.

For example, if the member only has a defined contribution benefit, or if the member has a hybrid benefit in which the defined contribution benefit is greater than the defined benefit, you should complete Form 4A .

You must use these forms for providing the Family Law Value. You cannot create your own versions of these forms. In addition, these forms can only be completed by the plan administrator, or its authorized agent.

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We’ll now go over a few examples, to clarify which forms need to be used.

For example, Jack was an active member of his employer’s defined benefit pension plan until February 24, 2012. He separated from his wife, Jill, on January 7, 2012, just before he started his retirement at the age of 65. When Jack filed the Application for Family Law Value (Form 1) with his plan administrator, he had already started receiving a monthly pension payment from his plan.

Although Jack is now a retired member, his plan administrator must complete Form 4B, because on the Family Law Valuation Date, he was still an active member of the pension plan. This means that Jill is entitled to a lump sum payment out of the pension plan, and not to a share of Jack’s monthly pension.

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Here’s another example. Margaret separated from her spouse, Bob, on January 23, 2012. On their separation date (that is, the Family Law Valuation Date), her defined contribution benefit was greater than her defined benefit.

Margaret kept working after the separation. She had a hybrid benefit under her pension plan until she terminated her employment on March 30, 2012, and became a deferred vested member. On the termination date, her pension was assessed again. This time, her defined benefit was greater than her defined contribution benefit.

Margaret filed an Application for Family Law Value (Form 1) with her plan administrator on April 15, 2012. Although Margaret is now a deferred vested member, and the defined benefit was the greater benefit on her termination date, her plan administrator must complete Form 4A. This is because on the Family Law Valuation Date, she was an active member of the plan, and her defined contribution benefit was the greater benefit.

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This slide shows the sections that make up the Statement of Family Law Value (Form 4).

You need to complete Parts B, C and D using information that is provided in Form 1 and from your pension plan records.

Over the next several slides, we’ll talk about parts A and E, as well as the Appendices to the Forms.

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By now, we hope that you’re familiar with the terms “Preliminary Value” and “Family Law Value” that are used in the Statement of Family Law Value (Form 4).

The Preliminary Value is the total value of the pension that was earned by the plan member during the period of his or her plan membership, up to the Family Law Valuation Date.

The Family Law Value is the “imputed value” under the Ontario Pension Benefits Act, and is the portion of the Preliminary Value that relates to the period of the spousal relationship.

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Part A of all of the Statement of Family Law Value forms provides a summary of the information needed by the parties and the courts. It includes:

• the starting and end dates of the spousal relationship;

• the Family Law Valuation Date (which will usually be the separation date);

• the Family Law Value (or imputed value); and

• the maximum amount or percentage that can be paid to the former spouse of the plan member.

For a retired member Form 4E also provides a pension summary, which includes information about the retired member’s lifetime pension, any bridge or supplemental benefit, any post-retirement indexation, and the post-retirement death benefit.

This section is usually completed last.

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A former spouse of a retired member must receive his or her share of the Family Law Value as a share of the retired member’s pension payments. (Although the former spouse cannot receive his or her share of the Family Law Value as a lump sum, the administrator is still required to calculate the value for equalization purposes under the Family Law Act.)

A pension plan may offer a combination option to the former spouse, but only if the option is included under the plan’s terms. Under the combination option, the former spouse is entitled to receive a pension that is payable for the lifetime of the former spouse and is based on the former spouse’s share of the Family Law Value, plus the Family Law Value of the survivor benefit.

The former spouse may receive a payment on an unlocked basis, if it’s due to surplus, or resulted from the approval of the retired member’s shortened life expectancy application. Note that a payment for a small amount is not available for the former spouse of a retired member.

Transfer options to a locked-in retirement account, life income fund, or another registered pension plan cannot be provided to a former spouse of a retired member.

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Part E is the section where you set out the former spouse’s options. In this section, you need to include all transfer options that are available to the former spouse.

If the plan member has not retired, the former spouse’s share is required to be transferred on a locked-in basis to one of the following:

• a locked-in retirement account,

• a life income fund (if the age requirement is met), or

• to another registered pension plan (if the receiving plan is willing to accept the transfer).

Note that the same transfer options are available under Forms 4A, 4B, 4C and 4D. Once again, don’t forget that the former spouse of a retired member is not eligible to receive a transfer option.

The former spouse may receive his or her share on an unlocked basis, only if:

• the payment is for non-vested benefits;

• the payment results from the approval of the member’s shortened life expectancy application;

• a surplus payment is being made; and/or

• a small amount is being paid.

Although the Ontario Pension Benefits Act refers to a former spouse leaving his or her Family Law Value in the plan, currently, this option cannot be provided. A pension plan can only offer this option, if, and when, the government makes new regulations to support this option.

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The Statement of Family Law Value has several appendices. Under these appendices, you have to provide membership and contribution information, information about the plan provisions and actuarial assumptions (if applicable) that were used in the calculation of the Preliminary and Family Law Values. If applicable, you may also need to provide information about the wind up of the plan, entitlement to surplus, and plan amendments related to ad hoc cost of living adjustments.

A worksheet for the preliminary and Family Law Value calculations also needs to be completed.

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Once again, you will need to exit the full screen to view the next question:

When an Application for Family Law Value (Form 1) is received, how much time do you have to send out the Statement of Family Law Value (Form 4)?

A) 45 days

B) 60 days

C) 90 days

D) there is no deadline

We’ll pause for about 10 seconds to give you a chance to respond.

The correct answer is B, 60 days. If you receive a complete and accurate version of Form 1, you must send out Form 4 to both the applicant and the applicant’s spouse within 60 days.

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We’ll now move on to the third section of the presentation, where we’ll go over the Preliminary Value calculation.

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We’ve received a lot of questions about the application of section 3500 of the Canadian Institute of Actuaries’ Standards of Practice.

In FSCO’s view, the Regulation requires that section 3500 of the CIA’s Standards of Practice be applied when calculating the Preliminary Value, regardless of the Family Law Valuation Date. This means that section 3500 is applicable, even if the Family Law Valuation Date is before January 1, 2012.

For example, if the Family Law Valuation Date is October 1, 1996, interest rates must be determined using the methods and CANSIM series that are outlined in section 3500, and that were in effect on October 1, 1996. These same rates will be used to update the Family Law Value to the date of transfer. Similarly, the mortality table you use also needs to be in accordance with section 3500.

Note that the unisex mortality table must be used for benefits that were earned on or after January 1, 1987. If benefits were earned before 1987, your plan needs to decide whether it wants to use the unisex or sex-distinct mortality table.

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Note that the value of additional voluntary contributions (AVCs), excess member contributions for contributory plans, and ad hoc cost of living adjustments must not be included in the Preliminary value calculations. Even though they aren’t part of the Preliminary Value calculations, they still need to be reported under the Appendices (if they’re applicable).

Although the division and payment rules under the new family law regime don’t apply to AVCs, they may still be included in the family assets and be paid to the former spouse. For example, there is no cap on the maximum amount of AVCs that may be paid to the former spouse. However, the timing of the payment is subject to the plan’s terms. For example, if the plan says AVCs can only be paid on termination of employment or membership, the former spouse would receive the payment when the member’s employment is terminated.

Excess member contributions only get reported if they remain in the plan for a former or a retired member. Note that excess member contributions are not calculated for active plan members.

You need to provide an explanation about amendments which provide ad hoc cost of living adjustments to the class of employees to which the member belongs, and that resulted in a payment during the plan’s three fiscal years before the Family Law Valuation Date.

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There are a few special situations you should consider when you’re calculating the Preliminary Value.

If a plan member was not vested on the Family Law Valuation Date (FLVD), the Preliminary Value must be calculated as if the plan member was vested, and then it needs to be reduced by 50 per cent. Note that in the 2012 Ontario Budget, the government confirmed that pension benefits will be vested immediately, effective July 1, 2012. This means if the member was not vested on June 30th, he or she will be vested on July 1st. However, if the Family Law Valuation Date is before July 1, 2012, you need to determine if the member would have been vested on that date.

If your plan was wound up partially or fully, the plan member is included in the wind up group, and the effective date of the wind up is on or before the Family Law Valuation Date, then the Preliminary Value is equal to the wind up value, plus interest, from the effective date of the wind up to the Family Law Valuation Date.

Surplus must be added to the Preliminary Value, if on or before the Family Law Valuation Date:

• the Superintendent of Financial Services consented to the payment of surplus, or the plan was amended to permit the payment of surplus;

• the plan member is entitled to receive a specified amount of the surplus; and

• the surplus has not yet been paid to the member.

Finally, in the circumstances of shortened life expectancy, the Preliminary Value is the same as the commuted value for shortened life expectancy.

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For retired members and their former spouses, there are two Preliminary Values that you need to calculate separately.

The former spouse’s Preliminary Value is the value of the survivor pension. If a guarantee is attached to the survivor pension, FSCO’s position is that the value of the guarantee also needs to be included in the former spouse’s Preliminary Value, and not the retired member’s.

The retired member’s Preliminary Value includes everything except the survivor pension. If there’s no survivor pension because it was waived before pension payments began, FSCO’s position is that the value of any guarantee should be included in the retired member’s Preliminary Value. This applies, regardless of whether or not the spouse is the beneficiary of the guarantee.

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If a plan member has a hybrid benefit, where the greater of a defined benefit or defined contribution benefit is paid out, it’s FSCO’s view that the Preliminary Value calculation depends on which benefit is the greater benefit on the Family Law Valuation Date.

To determine which benefit is greater, assume that the member terminated his or her employment or plan membership on the Family Law Valuation Date, and calculate the termination value of both benefits.

You must compare the defined benefit and defined contribution benefit values as of the Family Law Valuation Date. Do not determine and compare these values again on a later date, such as the payment date.

If the defined contribution benefit is the larger benefit, then calculate the Preliminary Value of the defined contribution benefit using Form 4A. If the defined benefit is the greater benefit, then calculate the Preliminary Value of the defined benefit using Form 4B.

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A number of pension plans allow members to buyback past service. The family law regulation doesn’t specify how purchased pension credits must be valued upon the breakdown of a spousal relationship. It’s FSCO’s view that purchased pension credits should be treated differently based on how they were purchased.

In the pension industry, a “buyback” is money that is transferred into a pension plan to purchase credited service related to absence periods, or pre-membership periods. Buybacks can be purchased with cash, or by transferring money from a locked-in retirement account, a registered retirement savings plan, or from another registered pension plan.

In FSCO’s view, the key consideration for determining whether a buyback should be included in the Preliminary Value is the date the pension credit was purchased. If the purchase falls within the period of the spousal relationship, it must be included in the Preliminary Value. This is true whether or not the period of credited service relating to the buyback predates the spousal relationship.

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The second scenario for receiving credit for prior service is if there was an asset transfer from one pension plan to another. Money may be transferred into a pension plan in connection with a purchase and sale, or other divestment situation (as described under section 80 of the PBA), or in connection with the adoption of a new pension plan (as outlined in section 81 of the PBA). In these situations, service under the original pension plan is credited to the member under the successor pension plan, and the PBA deems the service or membership to be continuous from the original pension plan to the successor pension plan. This means that the date of transfer is irrelevant, and only the credited service that was accrued during the spousal relationship period will form part of the Preliminary Value.

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Since we’re done with the third section of the presentation, we’ll ask you another self-assessment question. Remember to exit full screen to view the question.

What is not included in the Preliminary Value?

A) additional voluntary contributions

B) excess member contributions

C) both A and B

D) none of the above

We’ll pause for about 10 seconds to give everyone a chance to respond.

The correct answer is C, both A and B. Additional voluntary contributions and excess member contributions must be reported on the Statements of Family Law Value for reporting purposes only.

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We’ll now move on to the fourth section of the presentation, where we will discuss what you should consider when you complete a Statement of Family Law Value.

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Once the Statement of Family Law Value (Form 4) has been filled out, it’s ready to be signed and sent out.

The form can be signed by the plan administrator, or any individual who is authorized by the administrator. This may include internal staff, or authorized staff of a third party service provider.

Whoever signs this form must have signing authority and the delegation of signing authority should be documented in your plan’s governance documents.

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When you’re ready to send out the Statement of Family Law Value to the plan member and his or her former spouse, it’s helpful to include a cover letter.

If you send out a cover letter, it should provide information on the next steps, such as:

• Which form needs to be completed to initiate the division of the pension?

• Who may complete the form?

• What needs to be specified in the Settlement Instrument that must accompany the form? (Note that the former spouse’s share of the Family Law Value must be stated in the Settlement Instrument.)

• What information is required to process the payment? (For example, you may want to include information about Canada Revenue Agency forms, locked-in retirement account agreements from financial institutions, or written confirmation from another plan administrator that it will accept the transfer, etc.)

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You may want to include a copy of the Application for Family Law Value (Form 5) or the Application to Divide a Retired Member’s Pension (Form 6), when you send Form 4 to the plan member’s former spouse. This will help ensure that the right form gets completed by the former spouse, if the parties decide to proceed with dividing the Family Law Value or pension. In addition, it may be even more helpful if you pre-populate some of the information on the forms, such as the pension plan information.

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You may also want to include Form 7 in the package that’ll be sent to the plan member and his or her spouse. If the parties decide not to proceed with dividing the Family Law Value, they may want to complete Form 7, but they are not required to do so.

If Form 7 is completed, the parties are informing you that they have decided not to divide their pension assets (that is, everything remains status quo). Note that Form 7 does not affect orders for support payments, nor does it affect the former spouse’s right to any survivor pension that is payable to him or her after the death of the retired member.

If the parties want to provide you with a copy of their Settlement Instrument, which indicates that the member’s pension will not be divided, it can serve the same purpose as Form 7.

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Since we’ve completed the fourth section of this presentation, we’ll ask you another self-assessment question. Please exit your full screen to view the question.

Who completes the Application to Transfer the Family Law Value (Form 5) or the Application to Divide a Retired Member’s Pension (Form 6)?

A) the plan member

B) the plan member’s former spouse

C) the plan administrator

D) both A and B

We’ll pause for about 10 seconds to give you a chance to respond.

The correct answer is B. Form 5 or Form 6, whichever is applicable, must be completed by the plan member’s former spouse.

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In this section of the presentation, we’ll go over what you need to know and are required to do, when you pay the former spouse his or her share of the Family Law Value.

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If the parties decide to proceed with the division of the Family Law Value or pension, there’s no deadline for submitting the Application to Transfer the Family Law Value (Form 5), or the Application to Divide a Retired Member’s Pension (Form 6).

However, you may want to point out that if the member’s pension benefits are no longer in the plan, you won’t be able to process Form 5. This may happen in cases where the member’s employment is terminated and the pension benefits were transferred out of the plan, before you received Form 5 from the former spouse. You should also inform the former spouse of any payment delays, if the plan is being wound up, or if the plan is underfunded.

Please note that the former spouse’s transfer options may change from the time Form 4s are issued, to the time Form 5 is received. For example, the Life Income Fund option may not have been available to the former spouse when Form 4 was provided, because the age requirements weren’t met. However, if the former spouse has met the age requirements by the time Form 5 is received, you should let the former spouse know about the availability of this option.

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When you receive Form 5 or 6, you need to check that the right form was filled out and that the correct person completed the form. Note that Forms 5 and 6 can only be completed by the plan member’s former spouse, who was identified in Part D of the Statement of Family Law Value (Form 4).

You should also check the Family Law Valuation Date, and verify that it’s the same date that was provided in Form 4. If this date has changed, you need to inform the former spouse that you cannot proceed with the pension payment, and that another Application for Family Law Value (Form 1) will have to be completed, along with all required documents and any applicable fee.

Lastly, you should review the Settlement Instrument to ensure it includes the Family Law Valuation Date and information about the former spouse’s share of the Family Law Value or pension. The information in the Settlement Instrument must be provided under Part D of Form 5 – Transfer Information, or under Part D of Form 6 – Pension Division Information.

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Within 60 days of receiving a complete copy of Form 5 or 6, you must pay the former spouse his or her share of the Family Law Value or pension, plus interest (from the Family Law Valuation Date). Note that you cannot charge a fee for providing this service.

The payment must be in accordance with the former spouse’s election. If the former spouse’s available options have changed since the Statement of Family Law Value (Form 4) was issued, you need to let him or her know.

If the individual is a former spouse of a retired member, you’ll need to calculate any arrears that are owed, and convert the arrears into pension payments.

Remember, you cannot pay the former spouse more than 50 per cent of the Family Law Value or pension (as specified in Form 4) and that it must be paid with interest.

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For a lump sum transfer that is paid to the former spouse of an active or former plan member, the Family Law Value must be updated with interest from the Family Law Valuation Date to the beginning of the month in which the transfer takes place. If the plan member has a defined contribution benefit, you should use the rate of return of the plan member’s individual account. If the plan member has a defined benefit, you need to apply the same interest rate that was used in calculating the Preliminary Value.

If the individual is a former spouse of a retired member, and you’re calculating interest on the arrears that are owed to him or her, you must use CANSIM series V122515, which is available on the Bank of Canada’s website. The payment of arrears to a former spouse of a retired member is not made as a lump sum payment. It needs to be turned into a pension and paid to the spouse over a period of time.

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If the information in the Settlement Instrument is incomplete (for example, the former spouse’s share of the Family law Value is not identified), you should ask the parties to revise the Settlement Agreement to include the information that is required by legislation.

If the information in the Settlement Instrument contravenes the requirements of the Pension Benefits Act (for example, it requires you to pay the former spouse more than 50 percent of the Family Law Value), you may:

• ask the parties to revise the Settlement Agreement to reflect the maximum amount that is allowed under the Pension Benefits Act; or

• pay the former spouse the maximum amount permitted by law.

You cannot pay more than the amount that is permitted, even if it’s included in the court order.

Remember, you must ensure that you comply with the requirements of the Pension Benefits Act and Regulation, regardless of what the Settlement Instrument instructs you to do.

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If an active or former member dies before you pay his or her former spouse, you’re still required to pay the former spouse his or her share of the Family Law Value.

If a retired member dies after the pension is divided, you must stop paying the former spouse his or her share of the pension (subject to any guarantee period). However, if the former spouse did not waive the survivor pension, you must pay the former spouse a survivor pension for the rest of his or her life. The amount of the survivor pension would normally be 60 per cent of the retired member’s pension before the split due to the breakdown in the spousal relationship.

For example, Marge was a retired pension plan member who was receiving $1,000 per month before she got divorced from Homer. After their divorce, they each received $500 per month. When Marge died, Homer was entitled to receive $600 per month, provided that he had not waived the survivor pension.

If Homer chose the combination option, Marge’s death would have no effect on the amount that is being paid to Homer. In this situation, you must continue to pay Homer the same amount of pension that was paid before Marge died, for the duration of his life.

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If the former spouse of an active or former member dies before you transfer his or her share of the Family Law Value (in accordance with Form 5), the Pension Benefits Act requires you to make the payment to the former spouse’s estate.

However, the Pension Benefits Act doesn’t address what you must do if a former spouse of a retired member dies before the retired member. In the absence of a requirement under the Pension Benefits Act to continue to make payments to the former spouse’s estate, it’s FSCO’s view that the former spouse’s share of the retired member’s pension reverts back to the retired member. The only exception is if the Settlement Instrument that was filed with Form 6, requires payment to continue to the former spouse’s estate during the retired member’s lifetime.

The former spouse’s pension payments stop when the retired member dies, subject to any guarantee period.

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Since we’ve completed this section of the presentation, we’ll ask you another self-assessment question. Remember to exit the full screen in order to view the question.

If a Settlement Instrument requires the plan administrator to pay more than 50 per cent of the Family Law Value, what can the plan administrator do?

A) comply with the instructions in the Settlement Instrument

B) ask the parties to revise the Settlement Instrument

C) pay only up to the maximum amount allowed under the Pension Benefits Act

D) both B and C

We’ll pause for about 10 seconds to give you a chance to reply.

The best answer is D, both B and C. You must comply with the requirements of the Pension Benefits Act and the Regulation. You may either ask that the Settlement Instrument be revised, or pay up to the maximum amount that is allowed under the Pension Benefits Act. The former spouse cannot receive more than 50 per cent of the

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Family Law Value with interest. You can’t pay more than the maximum permitted by law.

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In the final section of our presentation, we’ll discuss how to revalue the plan member’s entitlement after the former spouse’s share has been paid out.

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Once the former spouse is paid his or her share of the Family Law Value or pension, you must revalue the plan member’s pension benefits, deferred pension, or pension, and ensure that you’re following the rules that are set out in the Regulation.

The timing and method of this revaluation depends on the type of benefit that was divided (i.e., whether it was a defined benefit or defined contribution benefit), and the plan member’s status (i.e., whether the individual is an active, former or retired plan member).

After you pay the former spouse, you need to inform the member about the adjustment that has been made (or will be made) to his or her pension entitlement. This information should be provided on the member’s annual pension statement.

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After you divide the retired member’s pension, it must be revalued by subtracting the former spouse’s share of the pension. Note that if the former spouse is owed retroactive payments, they also need to be deducted from the retired member’s pension.

If the retired member was also receiving a bridge or supplemental benefit, the benefit must be revalued separately from the pension.

Finally, make sure you inform both the retired member and the former spouse about what will happen to the pension after they die.

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If a plan member has a defined contribution benefit, it must be revalued on the date of the lump sum transfer, by deducting the amount that was transferred to the former spouse.

For a former member with a defined benefit, the deferred pension must be revalued on the date of the transfer, in accordance with the prescribed formula.

For an active member with a defined benefit, the pension benefit must be revalued when the plan member’s employment or plan membership ends, in accordance with the formula that’s prescribed in the Regulation.

If the plan member has a combination of a defined benefit and defined contribution benefit, you should follow the rules for revaluing both types of pension benefits.

FSCO is currently drafting a policy for plans with hybrid benefits that will include guidance on how to revalue both the defined benefit and defined contribution components.

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The plan member’s status may change between the Family Law Valuation Date and the date the former spouse provides Form 5 to the plan administrator. Regardless of this change, the former spouse’s available options are determined based on the status of the plan member on the Family Law Valuation Date.

For example, if the individual was an active member on the Family Law Valuation Date, but has since retired and started receiving a monthly pension from the plan, the former spouse must receive a lump sum transfer of his or her share of the Family Law Value. The Regulation doesn’t provide direction on how to recover the overpayments that were made to the retired member. However, in FSCO’s view, once the former spouse’s share is paid, any overpayments should be amortized over the life of the retired member. This should be consistent with the methodology set out in section 39 of the Regulation regarding payment of arrears to a former spouse (with necessary modifications).

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We recommend that you visit FSCO’s website at www.fsco.gov.on.ca, to access resources related to family law matters. On our website, you can download family law forms, view resources from previous FSCO webinars, and read questions and answers on this topic. We will post new questions and answers throughout the year.

If you visit our website, you can also go to our Subscription Centre, where you can sign up for our Pension e-Bulletin and RSS feeds on the pension sector. This is a great way to keep up to date on the latest pension industry news.

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Thank you for participating in today’s webinar.

Please note that a copy of this presentation will be posted on our website in July. In addition, we’ll post answers to any questions that we receive from individuals who attended this webinar.

We also plan to send you an email with links to the webinar recording, presentation slides, and Qs and As, once we post them on our website.

Since your feedback is very important to us, we’d appreciate it if you could please complete the short survey that will appear at the end of this presentation.

We hope you found this presentation helpful and informative.

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