Working With the New FSCO Superintendent Approved Family Law Forms

1. Working With the New FSCO Superintendent Approved Family Law Forms Presented by Lynda Ellis and Scott Lamb January 18, 2012

2. Introduction and Overview Overview of Presentation Policy Background and FSCO Approach Who Must Use the Forms Transition The Forms The Process FSCO Positions Next Steps Questions

3. Policy Background and FSCO Approach Standardized valuation of pension assets Common reporting FSCO created Superintendent Approved Forms FSCO created standardized forms in addition to those mandated: Plan Administrator Request for Information/Payment of Fee (Form 1A)& No Division of Family Law Value/Pension Assets (Form 7) FSCO Forms include information in addition to that prescribed FSCO Forms provide comprehensive “top to bottom” approach to processing pension valuation and division applications

4. Policy Background and FSCO Approach Forms have been posted on the FSCO website at www.fsco.gov.on.ca “Imputed Value” defined in the Ontario Pension Benefits Act (PBA) is referred to as the “Family Law Value” in the forms (plain language approach) In use January 1, 2012

5. Who Must Use the Forms? • Spouses subject to the Ontario Family Law Act (FLA) • Pension is subject to the PBA (Ontario registered plans and multi-jurisdictional plans subject to the PBA) • Spouses and plan administrators must use FSCO forms (Form 1A and Form 7 are optional)

6. Who Must Use the Forms? What about other pension plans (Supplemental Employee Retirement Plans (SERPs), federal pension plans) that must be valued “where reasonably possible” with “necessary modifications” in accordance with section 67.2 of the PBA? • FSCO is not responsible for these types of plans • OSFI is responsible for federal plans (such as bank plans) subject to the Pension Benefits Standards Act, 1985 – OSFI and/or federal pension plan administrator must decide how section 67.2 will be applied • SERP plan administrator is responsible for administering the SERP - SERP plan administrator must decide how section 67.2 will be applied

7. Transition Who is subject to the new Family Law regime? • Set out at sections 67.5 and 67.6 of the PBA • Depends on the date the spouses’ Court Order, Family Arbitration Award or Domestic Contract (Settlement Instrument) is made • Settlement Instruments made before January 1, 2012 - old rules apply • Settlement Instruments made on or after January 1, 2012 - new rules apply

8. Transition • Only new rules permit immediate payment of a spouse’s entitlement to a pension benefit or a deferred pension from a pension fund (“if and when” unless in pay) • Subsection 67.6(2) of PBA: • Settlement Instruments made before January 1, 2012 that provide for the division of pension assets cannot be amended/varied after January 1, 2012 to change the way the pension assets are to be divided • Settlement Instruments made before January 1, 2012 that set aside pension assets and dealt with non-pension net family property only may be amended/varied after January 1, 2012 to divide pension assets pursuant to the new rules

9. Transition Examples Example #1 • The parties separated in 2009. The pension benefit was valued by an independent actuary. • The parties have a separation agreement made in December of 2011 that deals with everything including division of the pension benefit. • The parties are subject to the old rules.

10. Transition Examples Example #2 • The parties separated in 2009. The pension was valued by an independent actuary. The parties were unable to settle and a court date could not be obtained until after December 31, 2011. • The parties are subject to the new rules. They must apply for a Family Law Value from the plan administrator before the pension benefit can be divided pursuant to the court order (or another Settlement Instrument).

11. Transition Examples Example #3 • The parties separated in 2010. Both spouses are pension plan members. In 2011 they entered into a separation agreement that dealt with all net family property except the pension benefit, which was deliberately excluded. • The parties may enter into/obtain a new Settlement Instrument and will be subject to the new rules.

12. List of 12 Forms 12 FSCO Family Law Forms:

13. The Process Step One Member/Spouse Applies Step Two Plan Administrator Responds Step Three Parties Divide Step Four Former Spouse Elects Step Five Plan Administrator Pays Step Six Pension Revalued

14. Step One - The Application Application for Family Law Value (Form 1) Who may apply? • The plan member or the married spouse/formerly married spouse of the plan member may apply • Non-member common law spouses may not apply

15. The Application Application for Family Law Value (Form 1) Completing the Form: Link • Provide information about the applicant, the pension plan (name, administrator, etc.), the plan member and the spouse/former spouse • Contact Person Authorization (Form 3) (lawyer, ESL, etc.) Link • Information about the beginning (starting date) and the end (FLVD) of the relationship: • Joint Declaration (Form 2) Link • Appendix A (Form 1) calculation at two dates • Documents (birth/marriage/FLVD) and Fee • Declaration of Applicant re: correctness (witnessed)

16. The Application • Plan administrator is not required to calculate the Family Law Value without the required supporting documents or the applicable fee, if any • Application complete – Plan Administrator has 60 days to provide the Family Law Value

17. Application Fee • Plan administrator may charge a fee • Each plan administrator must decide to charge or not to charge (as a part of the standard of care plan administrator should document support for the position taken) • Maximum fees: • $200 for Defined Contribution Benefit (DC) valuation • $600 for Defined Benefit (DB) valuation • $800 for Combination Benefit and Hybrid Benefit valuations

18. Step 2 - Plan Administrator Responds • Complete FSCO Family Law Form 1A if • The Application is incomplete • The fee is not attached Link • Once complete application is received • Select applicable Statement of Family Law Value (Form 4) Link • Type of plan: DB, DC, Combination (DB + DC), Hybrid (greater of DB or DC) • Status of plan member: active, retired, former

19. All Statements of Family Law Value (Form 4s) Part A Family Law Value – Summary Part B Pension Plan Information Part C Plan Member Information Part D Spouse/Former Spouse Information Part E Options for Spouse/Former Spouse Part F/G Certification by Administrator Next Steps Appendices

20. All Statements of Family Law Value (Form 4s) Family Law Value – Summary • Summary of: • Starting date • Separation date (Family Law Valuation Date) • Family Law Value • The maximum that can be transferred or paid (in $ and as a % if applicable)

21. All Statements of Family Law Value (Form 4s) • Appendices such as: • Plan Provisions • Actuarial Assumptions (if applicable) • Worksheet for the Calculation of the Family Law Value

22. All Statements of Family Law Value (Form 4s) Preliminary Value is the value unadjusted for the period of the spousal relationship Family Law Value (Imputed Value) is the preliminary value adjusted for the period of the spousal relationship Starting Date - date the relationship started Separation Date (Family Law Valuation Date) - date the relationship ended

23. All Statements of Family Law Value (Form 4s) • Additional Voluntary Contributions (AVCs)/Excess Member Contributions • Not included in the Family Law Value • No maximum amount that can be distributed • Distribution of AVCs subject to plan terms • Excess member contributions not determined for an active member (not included on Forms 4A, 4B, 4C)

24. All Statements of Family Law Value (Form 4s) • Surplus added to Preliminary Value if: • Amount known at FLVD • Plan member entitled to receive a share

25. All Statements of Family Law Value (Form 4s) • Not Vested • Preliminary value is reduced 50% • Full or Partial Wind Up • Preliminary value is the wind up value if: • Plan wound up (fully or partially) • The plan member is included in wind up group • Effective date of wind up is on or before the Family Law Valuation Date • The declaration of the wind up is on or before the date Form 4 is issued

26. All Statements of Family Law Value (Form 4s) • Plan Amendments • Will apply mainly to DB plans • Plan member belongs to a class that received or will be receiving a cost of living adjustment (COLA) • Adjustment occurred within the 3 years before the Family Law Valuation Date • Must be disclosed • Only value of COLA actually granted included in preliminary value • Future ad hoc COLA not included in preliminary value

27. FSCO Family Law Form 4A • All Plan Members with a Defined Contribution Benefit (on FLVD) • Preliminary Value is either: Link • The value of the plan member’s account (if the account balance is known at Family Law Valuation Date); or • The value of the plan member’s account at the last day of the month immediately preceding the Family Law Valuation Date if not determinable at the Family Law Valuation Date

28. FSCO Family Law Form 4A • Family Law Value: • If the starting date of the spousal relationship is before the date when plan member joined the plan: • The preliminary value = Family Law Value • If the starting date of the spousal relationship is on or afterthe date when plan member joined the plan: • The preliminary value at Family Law Valuation Date (FLVD) minus the account balance; • The preliminary value at FLVD minus account balance that can be determined between 45 days before/after the starting date; or • The preliminary value is multiplied by the years of membership (service) while the two were spouses divided by the total number of years of membership (service)

29. FSCO Family Law Form 4A • Maximum Amount that may be transferred or assigned to the spouse/former spouse • 50% of the Family Law Value accrued during the period they were spouses • Options • Transfer to LIRA, LIF or another RPP • Transfer to RRSP, RRIF or cash - small amounts; non vested; shortened life expectancy; surplus • Interest • Credited from Family Law Valuation Date to first of the month of payment • Fund rate

30. FSCO Family Law Form 4B • Active Plan Member with a Defined Benefit (on FLVD) Link • Preliminary Value • Determined as of FLVD using CIA Standards of Practice section 3500 • Calculation depends on whether the FLVD is on or before/after the early unreduced retirement date • Weighted calculation • Takes into account future entitlements to bridge or early unreduced benefits (not future salary increases)

31. FSCO Family Law Form 4B • Family Law Value • Preliminary value multiplied by the period of the spousal relationship divided by the period of service/membership under the plan • Maximum Value transferable to spouse/former spouse • 50% of Family Law Value

32. FSCO Family Law Form 4B • Options • Transfer to LIRA, LIF or another RPP • Transfer to RRSP, RRIF or cash payment - small amounts; non vested; shortened life expectancy; surplus • Interest • Credited from FLVD to first of the month of payment • Interest rate used in calculating the preliminary value

33. FSCO Family Law Form 4C • Active Plan Member with a Combination Benefit (DB + DC) on FLVD Link • Calculate the Family Law Value separately for DB and DC • Add the two Family Law Values together • Interest determined separately for DB and DC

34. FSCO Family Law Form 4D • Former Plan Member with a Defined Benefit or Combination Benefit (on FLVD) Link • Must have terminated and be entitled to a deferred pension • Preliminary Value is the value of the deferred pension • Family Law Value is the preliminary value multiplied by the period of the spousal relationship divided by the period of service/membership under the plan

35. FSCO Family Law Form 4E • Retired Member with a Defined Benefit Pension (on FLVD) Link • Family Law Value – Summary • Includes Family Law Value • of retired member’s benefit • of former spouse’s survivor benefit • Pension Summary • Lifetime pension • Bridging/supplemental benefit • Maximum lifetime pension payable • Maximum bridging/supplemental benefit payable • Other Summary Information • Indexation • Post-retirement death benefit

36. FSCO Family Law Form 4E • Former Spouse’s Options • Division of pension in pay • Combination Option - Combine the former spouse’s share of the Family Law Value and the value of the survivor benefit and receive a monthly pension • Only available if plan permits • Only available if a joint and survivor pension provided at retirement • Pension payable for the lifetime of the former spouse • Transfer to RRSP, RRIF or cash – shortened life expectancy; surplus

37. Step 3 – Parties Decide/Required to Divide • The spouses/former spouses obtain a Settlement Instrument (court order, family arbitration award or domestic contract) dealing with pension assets • Division of Family Law Value go to Step 4 • No Division of Family Law Value/Pension Assets (Form 7) (optional) Link • Optional Form • Joint Confirmation • File with plan administrator • Does not affect support orders

38. Step 4 - Former Spouse Elects • Was the first pension payment due on or before the FLVD? • No - Application to Transfer the Family Law Value (Form 5) Link • Transfer former spouse’s share to: • LIRA, LIF or RPP • RRSP, RRIF or cash (non-locked in amounts) • Yes - Application to Divide a Retired Member’s Pension (Form 6) Link • Pay former spouse’s share of pension, including combination pension if available and elected by former spouse • Transfer former spouse’s share to RRSP, RRIF or cash (non-locked-in amounts)

39. Step 5 – The Plan Administrator Pays • Within 60 days of receiving a completed application form (Form 5 or 6) • Payment in accordance with former spouse’s election • Transfer • Division of pension - address retroactive payments, if any, incorporated into pension stream

40. Step 6 - Pension Revalued • Following the division of the Family Law Value pension is adjusted/revalued by the plan administrator • Revaluation following lump sum transfer • DC – pension benefit revalued following transfer by deducting transfer amount • DB (Deferred Vested) – deferred pension revalued on transfer in accordance with prescribed formula • DB (Active) – pension benefit revalued on termination of employment/membership in accordance with prescribed formula • Combination – apply both DC and DB • Hybrid – FSCO is developing policy

41. Step 6 – Pension Revalued • Revaluation following division of pension • Pension is revalued by subtracting former spouse’s share of pension at time of division

42. FSCO Positions • Hybrid Benefit Valuation/Revaluation • Hybrid = greater of DB or DC benefit • Determine the greater benefit at the Family Law Valuation Date (FLVD) • Determine as if the member had terminated employment/membership on the FLVD • Family Law Value is whichever is greater - use Form 4A or 4B • FSCO is drafting a policy for plans with hybrid benefits which will include guidance on how to revalue both DB and DC components

43. FSCO Positions Buybacks and Transfers Buybacks – purchase (cash/RRSP/LIRA) of credited service relating to a leave of absence or pre-membership period in accordance with the terms of the plan Transfers – transfer of funds into a pension plan in connection with a sale, assignment or divestment (PBA section 80) or the adoption of a new pension plan (PBA section 81)

44. FSCO Positions Buybacks and Transfers • Buybacks • key consideration is the purchase date • if the purchase date is within the spousal period the credited service should be included in the Family Law Value • Transfers • date of transfer is irrelevant • service will be deemed to be continuous, the transfer can be ignored and the accrual period will remain the key consideration • only credited service accrued during the spousal period will form part of the Family Law Value

45. FSCO Positions • Small Amounts • Former spouse’s entitlement to commute a small amount based on value of former spouse’s share of Family Law Value • Not based on total Family Law Value (i.e. pre-division value) • Based on YMPE as of the Family Law Valuation Date • Not available for former spouse of retired member

46. FSCO Positions • Shortened Life Expectancy • An application has been made to the plan administrator • The application has been approved • The Family Law Value is based on the shortened life expectancy calculation value • The options available to the spouse/former spouse – transfer to RRSP, RRIF or cash (unlocked for both)

47. FSCO Positions • Death of Member/Former Member after FLVD • Transfer of former spouse’s share of pension benefit or deferred pension to former spouse • Death of Retired Member after FLVD • Retired member’s pension including payment of former spouse’s share will end (subject to any guarantee period) • Spousal survivor pension will be paid unless waived • Combination pension (if applicable) will be paid for life of former spouse (subject to any guarantee period) [PBA 67.4(10)]

48. FSCO Positions • Death of Former Spouse after FLVD • Former spouse of Member/Former Member - Transfer of former spouse’s share of pension benefit/deferred pension made to estate of former spouse [PBA 67.3(5)] • Former spouse of Retired Member - Former spouse’s share of pension will cease unless Settlement Instrument requires payment to continue to former spouse’s estate

49. Next Steps • FSCO: • Developing a Hybrid policy • Continuing to respond to inquiries and post Q&As • Considering whether additional forms are necessary • Intends to review the forms and the process at the end of 2012 • Will review and update the forms and the valuation and division process based on any future legislative changes