Pension Division Upon Marital Breakdownó Information for Lawyers and Actuaries
If a pension plan member is going through a separation or divorce, there are many things that require careful consideration, including how their pension will be affected. A pension is considered to be a family asset, so a memberís former spouse may be entitled to a portion of it. In order to divide a pension, the pension plan requires direction on how a pension is to be divided.
This web resource is aimed to provide lawyers and actuaries with information they require when assisting their clients with separation agreements or court orders. You will be able to find the following:
Links to resources and tools
Specific information related to a plan memberís account (available on request with consent from the plan member)
Information about the pension plan
How to receive additional information and assistance
The Family Law Act (FLA) and Family Law Act Ė Division of Pension Regulations provide a framework for the division of family assets, including the division of pensions. While the BC Pension Corporation and the plans it administers cannot provide legal advice, this resource will direct you and your clients toward the information and documents required in order to ensure pension divisions are accurately handled in separation agreements. If you and your client are drafting a non-standard marital breakdown pension division, the Teachersí Pension Plan can review the draft agreement to advise if it can be administered by the BC Pension Corporation in accordance with provincial law and plan rule requirements.
The BC Pension Corporation administers the following pension plans:
College Pension Plan
Municipal Pension Plan
Public Service Pension Plan
Teachersí Pension Plan
WorkSafeBC Pension Plan
Resources to value a pension asset
The pension administrator can provide you with a number of resources, which can be very useful in determining the value of the pension to be divided and the proportionate shares.
Before releasing any information about a plan memberís pension account to their legal counsel, the plan administrator requires authorization. Authorization can be obtained by a former spouse who has filed Form P1(Division of Pensions Regulation, s.4(a)) Claim and request for information and notice with the plan, or the plan member can submit this in a letter format. The FLA forms allow for a plan member or former spouse to request that the plan provide information directly to their legal counsel.
About the Teachersí Pension Plan
The Teachersí Pension Plan is a defined benefit plan. This means pension benefits are calculated using a formula based on a memberís salary and their time worked while they are a member of the plan. The value of the pension benefit is not based upon the contributions made to the plan.
The planís website provides an overview of the other key facts about the plan, including information on the plan rules and actuarial valuations, as well as a wide range of other guides and resources. Please contact the pension plan if you have any questions about the pension plan and administration of the pension division.
Pension estimator and other resources
The General Pension Estimator, located in the Member Resources section of the plan website, can provide estimates of the memberís pension at different ages. Additionally, if a plan member has applied to retire, they will be provided with pension estimates as part of the retirement package.
Members who have terminated employment with a Teachersí Pension Plan employer are provided with a Termination Selection Statement, which can be forwarded to counsel. Termination Selection Statements provide the commuted value amount as well as the deferred pension amount. The Teachersí Pension Plan only calculates commuted values for members who have terminated employment.
What is a commuted value?
The commuted value of a pension benefit is the amount of money that needs to be set aside today, at current market interest rates, to provide sufficient funds to pay for the future pension at retirement.
What is a deferred pension?
A lifetime monthly income payable at a later date, either because the member terminates employment before the earliest date at which the pension may begin, or because the member chooses to have the pension commence at a later date.
Please contact the plan if you have any questions about these tools and resources.
Scenario: plan member not yet receiving a pension
What you need: Person Profile
The Person Profile is a summary of each memberís information and provides a complete history of the memberís participation in the pension plan, including the yearly service accrued by the member. The Person Profile also identifies periods of purchased service, as well as any participation in other plans the BC Pension Corporation administers. While the Person Profile contains information such as service and salary, it does not contain the commuted value amount of the pension. The plan memberís contributions with interest shown on this report do not represent the value of the pension; if you are a lawyer and you require a value of the pension, consult an actuary. Please see the link to actuaries in the Additional resources section.
What you need: Memberís Benefit Statement
Active members of the Teachersí Pension Plan receive annual Memberís Benefit Statements (MBS), which are also available online via the My Account portal. Terminated members may access their last MBS online via the My Account portal. These statements provide members with pension estimates to assist their retirement planning, as well as a written record of their service and contributions in the plan. While the MBS does not provide information on the value of the pension in the form of a commuted value, it does provide the memberís accrued and projected monthly pension benefit amounts. This information can be used by an actuary to determine the value of the pension asset if required. Please see the link to actuaries in the Additional resources section.
Scenario: plan member receiving a pension
What you need: retired memberís semi-annual statement
All retired members who are receiving a monthly pension benefit receive statements in January and July each year. This statement provides all the required information for valuing the pension asset of a retired member. It includes the type of pension option selected, such as single life or joint life, any nominated beneficiary(ies) and the amount of the monthly pension, along with other valuable information.
Drafting a separation agreement for pension division
The following information should be used in conjunction with the Continuing Legal Education Societyís Family Law Sourcebook for British Columbia and the British Columbia Family Practice Manual. The Family Law Sourcebook provides a detailed discussion of family law principles while the Family Practice Manual is concerned with procedure. Family law checklists are also available on the Law Society of British Columbia website at lawsociety.bc.ca.
Pension administrator requirements
Part 6 of the Family Law Act provides that an administrator may administer the division of a memberís pension benefit only if the administrator has first received a copy of an agreement or order respecting the division of benefits between the member and the former spouse. The agreement or court order needs to identify the plan or employer and the dates to use for dividing the benefits.
If a pension is to be divided, there must be clear direction in the separation agreement or court order about how that division should be handled. There could be delays in processing the pension benefits if the pension plan needs to obtain clarification. When meeting with clients it is recommended you determine the following:
Ask if your client and their former spouse are already in receipt of a monthly pension payment, or if they are active or deferred members of the plan.
Ask for the correct name of the pension plan (or plans) to be divided. As some plan members contribute to multiple plans it is important that all plans be identified. All pension plans that are being divided need to be listed in the separation agreement or court order.
Clearly indicate the calculation of the proportionate share of the pension that is payable to the former spouse. The Family Law Act default formula for the calculation of the proportionate share is:
Proportionate share = Ĺ of pensionable service earned by the member during the entitlement period, divided by the total pensionable service earned by the member.
The legislative default calculation of proportionate share for benefits under defined contribution provisions is: transfer amount = Ĺ (account balance Ė pre-relationship contributions).
The proportionate share can be something different from the legislative default; however, if a different proportionate share has been agreed upon, it must be set out in the way of a formula. The plan cannot divide a pension based on a set dollar amount.
Clearly identify the entitlement period. The Family Law Act normally considers this to be from the time that the plan member and the spouse married or lived in a marriage-like relationship, until the date they separated. However, this is not a default provision in the legislation and the pension administrator must be provided with the start and end dates that are to be used in the entitlement period for the pension division.
Address any other special provisions for dividing the pension that vary from those under the FLA (e.g., if the division will include any service purchased after the entitlement date, or whether disability benefits should be divided. If the agreement or order does not address disability benefits they are deemed to belong to the member).
In order to calculate the pension benefit, the Teachersí Pension Plan will require clear copies of proof of age documentation from both the plan member and the former spouse. It is recommended that this documentation be submitted at the time the separation agreement or court order has been completed. If your client and their spouse do not submit their documentation, the plan will not be able to calculate the pension benefit. This could result in a delay until the documentation is submitted. Your clients must keep the plan informed of their current contact information so impacted parties can be notified when the plan member decides to select a monthly pension or transfer their benefits from the plan.
Proof of age documentation includes one of the following:
Passport (past or current)
Canadian citizenship or immigration papers
Current Driverís License or British Columbia Identification Card
Certificate of Indian Status Card
Marriage Certificate (if the date of birth is recorded on the document)
Permanent Resident Card (past or current)
Certificate of Registration of Birth Abroad
If the memberís or former spouseís name has changed and none of the proof of age documentation received reflects the change, we will require all legal name change documents or marriage certificates to confirm the name change.
Form P1 (Division of Pensions Regulation, s.4(a)) Claim and request for information and notice should be sent to the pension plan as soon as possible. It is required before the pension administrator can provide any information to the former spouse, and it can also serve as authorization for the plan to provide information to another party such as legal counsel. It is very important that the form is fully completed and includes all current information.
If a Form P1, separation agreement or court order has been filed, the plan will notify a former spouse of any action taken by the member (e.g., termination of employment, transfer of benefits, and an election to retire). At this time the plan will provide an opportunity for a former spouse to become a limited member if they have not already applied. Once the former spouse is a limited member, the plan will provide the pension benefit options available as a limited member. The plan does not notify a former spouse when the plan member has reached their earliest retirement age. Once the member has reached earliest retirement age, it is the former spouseís responsibility to apply for their benefit in either the form of a lump sum transfer of the commuted value or a separate pension.
As soon as the separation agreement or court order has been finalized, Form P2 (Division of Pensions Regulation, s.4(b)) Request for designation as limited member and the accompanying administrative fee should be submitted. The administrative fee is $750.
Your client and their former spouse must provide up-to-date contact information in order to receive updates and notifications. Early application to become a limited member means the former spouse is entitled to receive certain information, including an annual benefit statement sent to the limited member, and is entitled to nominate their own beneficiary(ies) for their portion of the pension benefit.
A former spouse must submit the following forms (if relevant) in order to transfer the benefit entitlement:
Form P3 (Division of Pensions Regulation, s.4(c)) Request for transfer from defined contribution account is used if the member still has benefits in a defined contribution account. After the spouseís interest in the benefits has been recognized by an agreement or order, the form is used to direct the plan administrator to transfer the spouseís share to another registered retirement plan, such as an RRSP.
Form P4 (Division of Pensions Regulation, s.4(d)) Request by limited member for transfer or separate pension is used for dividing benefits determined by a benefit formula provision before pension commencement. After the former spouse is registered as a limited member, this form is used by the former spouse to select how their share will be received. Once the plan member reaches the earliest retirement age, the former spouse may choose either a lump sum commuted value transfer or a separate pension.
Form P5 (Division of Pensions, s.4(e)) Waiver of survivor benefits after pension commencement is used when the memberís pension has commenced and the former spouse is entitled to survivor benefits under the pension. The FLA allows the former spouse to give up the potential survivor benefits and allow them to be paid to another person. This is a permissive provision under the FLA and there is no mandatory requirement for pension plans to administer the form. The Teachersí Pension Plan does not administer this form. However, this does not prevent your parties from independently agreeing to use this form and undertake an alternate approach to give up the survivor benefits in the event of the memberís death and a benefit being payable from the pension plan.
Form P7 (Division of Pensions Regulation, s.4(f)) Withdrawal of notice/waiver of claim is used in three ways by the former spouse (or, if the former spouse is deceased, the former spouseís personal representative):
1. To withdraw the notice from a specific form,
2. To withdraw a specific document, or
3. To waive their claim and withdraw all forms and documents connected to that claim (including a court order submitted in support of a claim).
Note that a Form P5 or P7 cannot be withdrawn by this form, and a notice cannot be withdrawn once the benefit division arrangements are completed.
Form P8 (Division of Pensions Regulation, s. 6) Change of information can be used to notify the plan administrator of any changes in information. The form is not necessary: letters, email or verified-identity phone calls are also acceptable for changing information.
Form P9 (Division of Pensions Regulation, s. 1) Agreement to have benefits divided under part 6 is used in two cases:
1. If the member and former spouse do not have a formal agreement, this form allows them to divide their pension with no other documents, or
2. If the member and former spouse have an agreement existing from before 1995, this form allows them to come under the Family Law Act.
Note that this form must not be filed by the member and former spouse if a written agreement or court order dividing the benefits already exits. This form cannot override a written agreement or court order; this form is only applicable if such a document is silent on the issue.
What happens if the plan requires clarification?
Once all documents have been completed accurately and submitted to the plan, the former spouse will be notified that they are now a limited member of the Teachersí Pension Plan. As a limited member, they are entitled to a pension benefit.
If the plan administrator is not able to administer the pension division or requires clarification, a letter will be sent to you seeking clarification or stating the sections of the separation agreement or court order that could not be administered. In all cases we advise the parties to seek legal advice. Please contact the Teachersí Pension Plan if you have any questions about the plan and the pension division.
Review of draft agreements before they are finalized
The plan is available to review draft separation agreements and court orders from a pension administrator perspective. The plan will only indicate whether the pension division can be administered, or if any information is missing or requiring clarification. The plan will not provide advice on the substantive content of the separation agreement itself. Please contact the plan if you have any questions.
Summary of actions required
In summary, the following actions are required:
Submit proof of age documents
Submit the complete separation agreement or court order, as well as subsequent separation agreements or court orders or amendments; each document must include key information (e.g., name of pension plan, entitlement dates of the pension division period, providing a formula for the calculation of the proportionate share)
Submit the relevant forms and administration fee
Ensure contact information is current and up-to-date
Where applicable, separation agreements and court orders should address all the contingencies for a non-standard division. Some examples include:
Future accruals (e.g., what happens if a plan member terminates employment before the agreed upon retirement date; a new spousal relationship during the same period of time as a future accrual)
A plan member purchases additional service or goes on disability leave
A plan member dies before retiring (if a different proportionate share is agreed upon in the event of a death)
The Canadian Institute of Actuaries provides a directory of actuaries who are fellows in good standing and have chosen to make their location and specialties publicly available to anyone who may be looking to retain the services of an actuary. An actuary with the marriage breakdown specialty is best able to provide you and your client with a value of the pension assets:
Questions and answers about pension division on the breakdown of a relationship in British Columbia
Published by the British Columbia Law Institute, this Questions and Answers study paper is a resource intended to assist family lawyers, plan administrators and their advisors, and former spouses in dealing with issues that arise in dividing pensions.
This webpage is published for the Teachersí Pension Plan by the Pension Corporation. This publication is based on the relevant plan documents (statutes, regulations and rules). If there is a discrepancy between this publication and the plan documents, the plan documents apply.