Question 2: Dividing Unmatured Benefits Determined by a…

Benefit Formula Provision (FLA, s
115)

Different pension division rules apply depending on the type of
plan.

If the benefits are determined by the contributions made to the
plan, and investment returns on those contributions, the benefits are in
a “Defined Contribution Account”. Rules that apply to Defined
Contribution Accounts are discussed in Chapter 3.

Other types of plans set out a formula for determining the
benefits that will eventually be paid. The formula is called a “benefit
formula provision” and these types of plans are discussed in this
Chapter.

If the member belongs to a plan that uses a benefit formula
provision, and the member’s pension has not commenced at the time the
pension division arrangements are finalized, the benefits are divided by
designating the spouse to be a kind of member of the plan, called a
“limited member”.

To become a limited member, the spouse would send to the plan the
agreement or court order dividing the benefits, together with a Form P2.
[Reg.,
s 4(1)(b)] The limited member is entitled (at any time after the
earliest date that the member could elect to have a pension commence) to
receive a separate lifetime pension from the plan. (Under the FRA, the
separate pension option was available only if the former spouse waited
until the member’s pension commenced). The limited member may also have
the option of receiving a share of the benefits (a “proportionate share”
of the “commuted value” of the benefits) transferred to the credit of
the spouse, but only if the member has this right.

Unless the plan administrator adopts a different approach as
permitted under Part 6, the limited member’s separate pension is based
on a valuation of the benefits assuming the member’s pension commenced
at the later of the member’s actual age and the average age of
retirement for the plan. [Reg.,
s 24]

Both the lump sum transfer option, if available, and the separate
pension option are deferred methods of dividing the benefits (in
contrast with the method used to divide benefits in a defined
contribution account, which is an immediate division of the account—see
Chapter 3—and with the method used to divide a matured pension, which is
a division of the income stream under the plan when and as it is
paid—see Chapter 5).

Administrator Checklist 2 and Lawyer Checklist 3 (see the
appendices) cover the steps for dividing unmatured benefits determined
by a benefit formula provision.

2.1 Rights of a limited member	What rights does a limited member have?
	A limited member has the rights of a member, unless they are expressly excluded. [FLA, s 113(3)] Specifically:to receive from the administrator direct payment of a separate pension or, if the option is available to the member, a proportionate share of benefits paid under the pension;to enforce rights against the administrator and recover damages for losses suffered as a result of a breach of a duty owed by the administrator to the limited member;except as modified by Part 6 of the FLA, all of the rights of a member under the PBSA;to receive directly from the administrator information about the member’s benefits and the limited member’s share in it. [FLA, s 133; Reg., Part 3, Administrator’s Duty to Provide Information; see paras 15.19 to 15.23]See also para 10.6.
2.2 Sharing in benefit upgrades	Would a limited member who has chosen to receive a separate pension continue to have the same rights as other members? For example, if a member is entitled to receive ad hoc pension increases, would the limited member who chose to receive a separate pension also be entitled to the increases?
	Yes. A limited member has the rights that a member has. [FLA, s 113] A limited member, consequently, would be entitled to the same ad hoc pre-retirement and post-retirement enhancements available to other pensioners.
2.3 Rights a limited member doesn’t have	What rights doesn’t a limited member have?
	A limited member would not, for example, be entitled to group benefits members have because they are employees, such as to participate in a group life insurance plan or enjoy extended medical and dental benefits.

	The rights granted the limited member represent quite a change over the law that applied before pension division legislation was enacted in B.C. (in 1995). Under the old law, the plan administrator could not provide information to the spouse without the consent of the member. And the plan administrator was not compelled to recognize either:the former spouse orthe former spouse’s interest in the member’s pension benefits.
2.4 The member’s elections	The member has remarried but is not yet receiving a pension. The member’s former spouse is a limited member of the plan and entitled to a share of the benefits. How does this affect elections the member is entitled to make? The member wants to protect the new family.
	The member is free to make elections (and beneficiary designations) that protect the new family with respect to the member’s share of the benefits, unless restricted by the terms of the court order or agreement dividing the benefits. [FLA, s 125].
2.5 Changing the beneficiary designation	The member has not yet commenced receiving a pension. Before the breakdown of the relationship, the member designated the former spouse to be beneficiary of any survivor benefit under the pension plan. The benefits are now subject to a pension division agreement under Part 6 of the FLA. The survivor benefits exceed the share of the pension benefits to which the former spouse is entitled. Can the member take any steps to make sure that the portion of the survivor benefit that exceeds the former spouse’s share goes to his new spouse?
	If the member dies before the benefits are divided, the limited member’s proportionate share of the pension benefits would be determined just before the member’s death [see para 2.10] and the limited member would still be entitled to receive the share by a separate pension or a lump sum transfer (if offered by the plan).After the former spouse receives the share, the administrator must reduce the member’s remaining entitlement to reflect the pension division. Survivor benefits under the member’s reduced share would then be paid to the person entitled to them (for example, the member’s surviving spouse, designated beneficiary or estate). [FLA, ss 124(2), 125. Reg., s 22] See para 2.4.

The member should review their beneficiary designation after the pension division and designate a new beneficiary if they wish to do so. Section 145 of the FLA does not automatically revoke a beneficiary designation, so the former spouse may receive the survivor benefits payable under the member’s share if the member does not designate a new beneficiary.There may be situations where there is an agreement or order requiring the member to provide the former spouse with additional security through, for example, a beneficiary designation. But information on that point cannot be provided without knowing more about the obligation imposed under the agreement or order.[See Chapter 8, particularly paras 8.21-8.23]Under the PBSA, a “spouse” is automatically entitled to the survivor benefits, whatever beneficiary designation the member makes, but spousal status is lost if married spouses divorce or separate for more than 2 years, and if unmarried spouses cease living in a marriage-like relationship: PBSA, s 1(3).Under the FRAThe position was more complicated under the FRA. If the member died before the pension benefits were divided with the limited member, instead of receiving a share of the pension valued before the member’s death, the limited member received a share of the survivor benefits. In some cases, this would diminish the limited member’s entitlement (if the survivor benefits had less value than the pension benefits) and the form of the survivor benefits restricted options available to the limited member for receiving the share. To deal with these problems, it was sometimes necessary to make special beneficiary designations protecting the former spouse (such as providing for the former spouse to receive a larger share of the survivor benefits).The FLA has resolved these problems by providing that the new approach (determining the former spouse’s share as of before the member’s death) applies even if the pension division arrangements were made before the FLA came into force. See Chapter 8.An issue also formerly arose with respect to survivor benefits payable under non-contributory plans regulated under the federal PBSA. [See para 8.15] But this problem has also been addressed by the new FLA rules (and also changes to the federal PBSA).

2.6 Why are DB provisions treated

Why is the method for dividing a defined contribution account not used for unmatured benefits determined by a benefit formula provision?

differently fromDC Accounts?

Benefits in a defined contribution account are determined by contributions made by the employer (and, perhaps, the member) plus net earnings made from investing those contributions. The value of a defined contribution account is its current balance.The value of benefits determined by a benefit formula provision, on the other hand, because they depend on a formula, may differ from the total of contributions and investment returns.Between these two types of plans, it is more difficult to value benefits determined by a benefit formula provision because assumptions must be made about a number of future events (when will the member’s pension commence, for example, and how long is the member likely to live?). And it is highly unlikely that contributions made to the plan up to the time of the breakdown of a relationship would be enough to satisfy the estimate of the future benefit’s value. Even if there is enough money, it may not be fair to one or more of the member, spouse, plan or other plan members in the circumstances to base the spouse’s share on the particular assumptions that are made. That is because the valuation will necessarily be based on predictions about the average experiences of a group. No approach to valuation based on average experiences can possibly be fair in every individual situation that can arise.For example: say the pension benefits are valued taking into account the prospect that the member will stay in the plan until an unreduced pension becomes payable. This would place a fairly high value on the benefits and the spouse’s share. After the spouse’s share is transferred, however, the member might immediately terminate employment.To deal with the special problems presented by benefit formula provisions, deferred methods of pension division are employed. The former spouse becomes a limited member of the plan. A limited member can choose between either the separate pension option (FLA, s 115(2)(a)), or the lump sum transfer option if the member also has this option (FLA, s 115(2)(b)), but not until, at the earliest, the date the member could choose to have the pension commence. When the limited member chooses to receive the share, it is valued at that date, using specified assumptions about future events.

2.7 Member is still working	Can a limited member choose to receive the share of the benefits while the member is still accruing benefits under the plan? The member wouldn’t be eligible to receive a pension until the member terminates employment. Why should the limited member be able to take the share if the member is still working?
	Yes, the limited member can choose to take the share of the benefits, even if the member is still working. Part 6 is structured to permit both parties to use their respective shares of the benefits to suit their individual needs. Confining the limited member’s entitlement to benefits payable only after the member terminates employment and commences receiving a pension would prejudice the limited member. (The limited member typically requires income to start earlier than the plan member, who is prepared to defer receiving pension benefits because any loss in value is more than compensated by employment income). Part 6 provides that the options available to the limited member for receiving the share of benefits are available no earlier than the earliest date that the member could elect to have the member’s pension commence [FLA, s 115(3)]. The earliest date is determined by the pension eligibility provisions under the specific pension plan, regardless of whether the plan member actually decides to retire, or to keep working and continue to earn benefits under the plan.
2.8 Why not use a Rutherford split?	Why does Part 6 provide for the limited member receiving a separate pension (or transfer of the commuted value if offered by the plan) instead of using the approach under a Rutherford Order (where, after pension commencement, the member gives part of each monthly pension payment to the spouse)? [Rutherford v Rutherford, 1981 CanLII 726, 23 RFL (2d) 337 (BCCA), add’l reasons 44 BCLR 279]

	For historical context, a Rutherford Order is an arrangement whereby the pension was not divided at source. Rather, the arrangement is a form of trust obligation whereby the member receives all of the benefits directly from the plan and then pays some portion on to the former spouse. In these arrangements, it was not possible for the spouse’s interest to be protected as there was no formal connection between the spouse and the pension plan. These arrangements are very rare today, though they do receive consideration in a narrow range of specific life circumstances (e.g., such as shortened life expectancy of one of the parties).The options permitted under B.C.’s pension division legislation are more effective than a Rutherford Order in separating the financial interests of the spouse and member. Also, plan administered divisions provide a former spouse with more certainty that the payments will be made on time and in the correct amount. The tax issues are more easily dealt with because the parties are responsible for taxes on their respective shares. It’s also advantageous to the parties for the spouse and member to be able to make separate elections that meet their individual requirements. Suppose the member has remarried. Under the Rutherford Order, it would usually not be possible for the member to make elections that would provide both the former spouse and the current spouse with security for payments after the death of the member.In contrast, if the pension has not yet commenced, the lump sum transfer (if offered by the plan) and separate pension options under the FLA provide a former spouse with security for the share of the benefits, and the member can use the member’s share to provide security for a current spouse. (If the pension has commenced, then the only real difference between the Part 6 rules and the Rutherford split is that, under Part 6, the pension fundholder pays the former spouse the former spouse’s share of each monthly pension payment (less tax withholdings) instead of the member doing this: see Chapter 5.)
2.9 Dividing a pension in a flat benefit plan	How is a former spouse’s proportionate share of pension benefits determined if the rates of accrual on benefits differ for different periods (which may be the case, for example, with flat benefit plans)?
	Part 6 uses the same approach, whether the plan is a flat benefit plan, a career average plan, a final average plan or a target benefit plan.The former spouse receives a share of the whole of the benefits as at the date the spouse actually receives the share (in the form of a transfer of a lump sum, if offered by the plan, or as a separate pension). The spouse’s proportionate share is applied to the value the benefits have at that time, assuming the member’s pension will commence at the later of the member’s actual age and the average age of retirement for the plan. [See paras 2.59 and 2.70 concerning alternatives to using the average age of retirement and paras 15.34 and 15.35 concerning adjusting the member’s benefits after division. See para 2.34 if pensionable service is not expressed in terms of months, but other units of time.]

2.10 The member dies before the spouse receives a share	Is the limited member protected if the member dies before the limited member receives a share of the benefits?
	Yes. The limited member receives the share of the benefits calculated in accordance with the Division of Pensions Regulation: see para 8.3. [FLA, s 124(2)]The Division of Pensions Regulation provides that the plan administrator must calculate the benefits as of a date not earlier than the end of the month immediately preceding the day before the death of the member. This means, for example, that if the member dies on Feb. 2nd, the plan administrator must calculate the benefits as of Jan. 31st. If the member dies on Feb. 1st, the plan administrator must calculate the benefits as of Dec. 31st of the previous year. [Reg., s 23(3)(c)][See further paras 2.5, 2.44, 8.3 and 8.15 and Chapter 8 generally]For the position that applies if the limited member dies before the member, and before the benefits are otherwise divided, see para 8.1.If the member dies before the former spouse becomes a limited member, then protecting rights in the pension benefits becomes complicated. The former spouse is entitled to survivor benefits if he or she qualifies as a “spouse” under the PBSA, but spousal status under that Act is lost after 2 years since separation for married spouses, and immediately after separation for parties whose relationship was based on a 2-year marriage-like relationship. [PBSA, s 1(3)] Property rights under the FLA, however, arise on separation, so the surviving former spouse may be able to pursue a claim to pension benefits under Part 6, but the surviving former spouse would have to move quickly to protect that claim: see Howland Estate v Sikora, 2015 BCSC 2248. What this means in practice is that, in order to gain the full protection of Part 6, a former spouse should not delay in becoming a limited member. See also para 8.14.
2.11 The member terminatesemployment (1)	If a member who has terminated employment directs a plan administrator to transfer the commuted value to another plan, does the limited member get a share?

	Yes. If the limited member has not yet received the limited member’s proportionate share of the benefits, the member’s direction to transfer the benefits ends the deferral of the division. [FLA, s 115(6)] The limited member’s share must be transferred from the plan (to, for example, a LIRA or LIF) unless the administrator consents to keeping the share in the plan, or the limited member is already receiving a separate pension. (If the member’s benefits exceed the maximum transfer value under the ITA, see para 10.7.)If a plan administrator receives a request from a member to transfer the commuted value of pension entitlement, it must give the limited member 30 days’ advance notice. [Reg., s 9(1)] See paras 15.28 and 15.29 for information about calculating the notice period and determining when notice is deemed to be received.If the member can elect to have the pension commence at the date of the transfer, the limited member would also be entitled, within the 30-day notice period, to select receiving a separate pension. [FLA, s 115(2)(a)]The value of the limited member’s share would be calculated in accordance with Reg., s 23, assuming pension commencement at the later of the member’s actual age and the average age of retirement for the plan. [Reg., s 23(3)(b)] For alternatives to using the average age of retirement, see paras 2.59 and 2.70.
2.12 The member terminates employment (2)	If the member leaves employment, and decides not to request a transfer of commuted value to another plan (but instead decides to take a deferred pension), what rights does the limited member have?
	In addition to the options permitted under Part 6 (and FLA, s 115 in particular), if the member is eligible on employment termination to request a transfer of the commuted value of the benefits to another plan, the limited member can also make that choice. [FLA, s 113(3)(c); PBSA, s 88] A limited member has all of the rights of a member, except as modified under the FLA.
2.13 Membertransfers entitlement to another plan	If a member who has terminated employment directs the administrator to transfer the commuted value from the plan (plan1) to another plan (plan2), can the limited member require plan1 to retain the limited member’s share?

	The limited member can require plan1 to retain the limited member’s share only if (a) the limited member’s separate pension has already commenced, or (b) the member is in a position to elect to have the pension commence and the limited member chooses the separate pension option. (The limited member has a 30-day window, resulting from the statutory obligation on the administrator to give advance notice of any direction received with respect to the benefits.) [Reg., s 9(1). See para 15.31] See paras 15.28 and 15.29 for information about calculating the notice period and determining when notice is deemed to be received.Otherwise, the limited member’s share would be transferred at the same time as the member’s share (to, for example, a LIRA or LIF in the limited member’s name, or any of the other options permitted under PBSA, s 88.)It is open to the administrator, however, to consent to continue to administer the benefits in the plan. [FLA, s 115(6)(a)]
2.14 The plan is terminated or partially terminated	What happens to the limited member’s entitlement when the plan is terminated or partially terminated?
	The limited member would be subject to the same conditions that apply to the member on plan termination or partial termination.The method used for dividing unmatured benefits determined by a benefit formula provision requires the limited member to wait to receive the share. The limited member’s share is a proportionate share of the value at the deferred date (adjusted to take into account specified assumptions about when the benefits commence).If, while waiting, events occur that enhance or diminish the member’s benefits, the limited member’s share is proportionately enhanced or diminished. The limited member would be subject to the same conditions that apply to the member on plan termination or partial termination.
2.15 Plan surplus or actuarial excess	Is a limited member entitled to share in surplus or actuarial excess declared by the plan?

Yes, to the extent that the member is entitled to share in surplus or actuarial excess.The current PBSA distinguishes between excess assets over liabilities in an ongoing plan (“actuarial excess”) and excess assets over liabilities in a plan that has been terminated (“surplus”), but the limited member’s rights are the same in either case.The limited member would have the same rights as other members: if the limited member is receiving a separate pension, then to the extent that any portion of the surplus or actuarial excess is paid out to retired members or taken into account in calculating the benefits for retired members, the limited member enjoys the same rights as other members. [FLA, s 113]Similarly, if the limited member decides to take a separate pension or a transfer of the commuted value of the benefits (if offered by the plan), the limited member’s entitlement would include any share of actuarial excess or surplus to the same extent that it would be taken into account in determining the member’s benefits. However, a limited member who received the share by a lump sum transfer is not entitled to any further share of the pension benefits, including surplus or actuarial excess, arising after the transfer is completed.The FLA excludes actuarial excess and surplus from the definition of “benefit” (adopting the same policy as under the PBSA). But this does not mean that a spouse who has not yet become a limited member cannot claim a share of actuarial excess and surplus received by the member. The FLA expressly provides that a spouse who is entitled to a share of the member’s pension benefits is also entitled to a share of those additional amounts. [FLA, s 111(4)]

2.16 The plan has a solvencydeficiency

If the plan has a solvency deficiency, does that affect the limited member’s entitlement?

	A limited member would be subject to the same restrictions that apply to transfers by plan members. [Jordison v Jordison, [1996] BCJ No 2694 (Lexis) (BCSC)]If a limited member decides to receive the share by a commuted value transfer, and the plan has a solvency deficiency, then a portion of the commuted value can be transferred and the balance would be transferred when the solvency deficiency has been funded. [PBSA Reg., s 80.]If benefits have not been divided, and the plan is subject to termination, then see PBSA, Reg. s 132 (but note that these PBSA rules do not apply to negotiated cost plans, jointly sponsored plans or target benefit plans, where benefits can be reduced if the circumstances of the plan require reduced benefits: PBSA Reg., s 20.
2.17 Proportionate share (Reg., s 17)	How is the limited member’s share of benefits determined?
	The limited member is entitled to a pro rata share of the benefits calculated as of the date they are to be divided. The fraction is called the “proportionate share”.
2.18 Determining the proportionate share	How is the limited member’s proportionate share determined?
	Reg., s 17 sets out the formula for determining the limited member’s proportionate share of benefits. This formula applies unless the spouse and member agree upon, or the court orders, another approach. [See FLA, s 110, definition of “proportionate share”; Reg., s 17(2)]Basically, the limited member’s share is half of(pensionable service during entitlement period) divided by(total pensionable service)The “entitlement period” is determined by dates specified in the agreement or court order, usually determined by the date the relationship began and the date

of separation, but other dates can be used. [Reg., s 1(1) definition of “entitlement period”; Reg., s 17(2)]Pensionable service is measured in months or parts of months (or other units of time used by the plan for determining entitlement to benefits). [Reg., s 1(1), definition of “pensionable service”] See paras 2.34 and 2.35.“Total pensionable service” is the service that accrued from the date the member joined the plan to the date the limited member’s share is determined. There are four relevant end dates that depend on the facts of the case as follows:the date the limited member’s share is transferred from the plan (in which case, that would be the end date for determining total pensionable service); [see para 2.19 for more information]the date the limited member begins receiving a separate pension (in which case, the end date would be the beginning of the month in which the separate pension commences); [see also para 2.19]for a matured pension, the end date would be the date the limited member begins receiving a share of the income stream (however, in these cases, pensionable service would ordinarily have stopped accruing when the pension commenced); andif the benefits have not been divided and the member dies before pension commencement, the end date would be the day immediately preceding the day of the member’s death. [Reg., s 17(3)]If the agreement or court order does not specify the proportionate share, the Division of Pensions Regulation defines the “proportionate share.” If there is an agreement between the spouse and member setting out a different formula, that would be the proportionate share. If there is a court order setting out the formula, that would be the proportionate share. [Reg., s 17(2)].

2.19 Proportionate share when benefits are transferred from the plan

The limited member has requested a transfer of the limited member’s share from the plan. Reg., s 17(3)(a) directs that total pensionable service be determined by reference to the date that the share is transferred, but we won’t know that until the transfer is actually made, and it’s difficult to anticipate how much time will be involved in calculating the share, giving instructions to the fund holder, and the fund holder being able to finalize the transfer. How do we determine the proportionate share in this case?

	The date of transfer can be estimated, and any difference between the estimated date, and the actual date of transfer, can be adjusted for through interest.As a practical matter, many plans have adopted a practice of using a date not earlier than the end of the month immediately preceding the expected date of the transfer, the approach required for calculating the commuted value of benefits under Reg., s 23(3)(b) and, again, adjust for any delay by adding interest. Adopting this approach ensures consistency and avoids any problems that might arise from using two different dates (one for the proportionate share and one for calculating the commuted value).
2.20 Proportionate share of a matured pension	Reg., s 17 provides the formula for the proportionate share. For a matured pension it provides that the numerator is determined by pensionable service accruing up to the spouse’s “entitlement date” (Reg., s 1(1), definition of “entitlement period”). In this case, the entitlement date is January 2015. The member’s pension commenced in 2012. How do we calculate the proportionate share?
	Since the member would have earned no more pensionable service after pension commencement (subject to phased retirement considerations—see FLA, s 115(5), Reg., s 19, and para 15.16), the proportionate share stops changing at the date of pension commencement. In these situations, as a practical matter, it is the pension commencement date that would determine the pensionable service to be used in the numerator and denominator of the proportionate share formula in Reg., s 17.
2.21 Proportionate share and purchased service	What is meant under Reg., s 18, which excludes any pensionable service purchased by or on behalf of the member before or after the entitlement period?
	The reason Reg., s 18 excludes purchased service from the entitlement period is to clear up an ambiguity. Generally, pension entitlement purchased after the entitlement date will be credited exclusively to the member (through the formula for the proportionate share in Reg., s 17). What happens, however, if service is purchased after the relationship ends, but is referable to the period during the relationship?

The policy adopted is that service purchased during the
relationship increases the former spouse’s share of the pension
benefits (see, for example, Sutherland
v Sutherland, 2008 BCSC 1283). Service purchased
after the end of the relationship, even if it is referable to
the relationship, does not increase the former spouse’s share of the
benefits.

Since property acquired before the relationship is excluded property
under the FLA
(s 85), the same policy applies to service purchased before
the entitlement period.

For example: a member who withdraws some pension entitlement
is later given an opportunity to buy it back.

For example: the administrator gives members an opportunity
to purchase additional pension entitlement.

In each case, if the member takes the opportunity, the additional
service would be “pensionable service . . . purchased by . . . the
member.” If the purchase takes place after the entitlement date, all of
the purchased pension entitlement is allocated to the member. It is
allocated through the formula for the proportionate share. The purchased
service would not be included in the numerator, but would be included in
the denominator, of the proportionate share.

For example:

Jan. 1, 1975	member joins plan
July 1, 1975	member begins cohabiting with his or her spouse
Dec. 31, 1978	member terminates employment and withdraws the benefits (the equivalent of 4 years of service)
Jan. 1, 1980	member resumes employment and rejoins the plan
July 1, 1995	member and the spouse separate
Dec. 1, 1999	member buys back part of the pensionable service withdrawn in 1978 (the equivalent of 2 years’ service)
Jan. 1, 2005	member’s pension commences and the member’s former spouse receives a share of the pension in the form of a separate annuity.

(Note: for simplicity, the example measures service in years, but under the Division of Pensions Regulation pensionable service is measured in months or parts of months, or other relevant units).Had the member not withdrawn any service, the former spouse’s proportionate share of the benefits would be determined as:(½) x (19.5/29)However, during the relationship some of the benefits were withdrawn, so some pensionable service was lost. The numerator of the former spouse’s proportionate share is based only on pensionable service accumulated during the relationship. Reg., s 18 says that service purchased after the entitlement period is not included in the numerator, so the service bought back by the member in the example is not included. The numerator in the example is determined by pensionable service accumulated between Jan. 1, 1980 and July 1, 1995, or 15.5 years.Had the member not bought back any service, the denominator would be 25 years. However, the member did buy back some service. The portion bought (2 years) is included in the denominator. The denominator is 27 years.The spouse’s proportionate share of the benefits, consequently, would be determined as:(½) x (15.5/27)These are the rules that apply if the agreement or order does not otherwise address the issue. Service accruing before or after the entitlement period can be included by agreement or court order. [FLA, ss 127, 129][See para 2.29-2.30]

2.22 Flexible benefits and enhanced pension entitlement upgrades

Our plan is part of a flexible benefits employment package. A member may decide to forego other employment benefits in exchange for an enhanced pension. But the member does not purchase “service”. In our case, the enhanced value takes the form of indexing. If the member decides, after the entitlement date, to enhance the pension, is the limited member entitled to any share of that?

	The policy under Part 6 is to exclude from division additional pension entitlement purchased after the former spouse’s entitlement date.Although the Division of Pensions Regulation speaks of purchasing “service”, the policy applies equally to any form of enhanced value purchased by the member after the entitlement date. See, however, para 2.34. In many cases, this type of arrangement will constitute a hybrid plan, and the spouse will be entitled to use the spouse’s share of the different components of the plan in the same way as plan members (depending on plan design, and in some cases the consent of the administrator). See Chapter 4.
2.23 Proportionate share and benefit upgrades	Would benefit upgrades that are credited after the entitlement period be included in determining the proportionate share? Does it matter whether these benefit upgrades are paid for by the member or the plan sponsor?
	The way the former spouse’s proportionate share is applied means that benefit upgrades credited after the entitlement period are included in the spouse’s share of the benefits.The spouse’s proportionate share is applied to the whole of the benefits at the date the spouse’s share is determined.If the spouse selects a lump sum transfer of commuted value (under s 115(2)(b)), the spouse’s proportionate share is determined on the whole of the value the benefits have at the date of the transfer.If the spouse chooses to take a separate pension (s 115(2)(a)), the separate pension is based on the pension payable to the member at that date (although adjusted assuming pension commencement at the later of the member’s actual age and the average age of retirement for the plan. For alternatives to using the average age of retirement, see para 2.59 and 2.70).Consequently, changes in the value of the benefits following the entitlement period that are attributable to benefit upgrades are divided between the spouse and member. (The contributions required by the plan text that members must make would not constitute purchase by the member.) [See, paras 2.22, 2.34, 2.71 and 2.72]

2.24 What is the entitlement date?

Some of the Forms require information about the spouse’s “entitlement date”. What is the entitlement date?

“Entitlement date” is defined in Reg., s 1 to mean the date specified in an agreement or order on which the spouse becomes entitled to an interest in the member’s benefits. The entitlement date is used both to confirm that the former spouse is entitled to a share of the benefits and to determine the end date of the portion of the pension benefits that is subject to division.Section 81(b) of the FLA provides that spouses each become entitled to a half interest in family property (including pension benefits each of them may have) when the parties separate.The parties, or the court, may select the separation date, or another appropriate date, as the spouse’s entitlement date.The FRA provided rules for determining the entitlement date, if it was not specified in the agreement or court order. The position is different under the FLA where, in order to divide the benefits, the administrator must be advised of the entitlement date. It can be specified in the court order, or in the parties’ agreement. If the order or agreement is silent, this can usually be addressed by the parties signing a further agreement in the form of joint directions, providing the missing information. [Reg., s 1, definition of “entitlement date”; FLA, s 137] The reference in the FLA and the Division of Pensions Regulation to a single order or agreement does not mean that these issues cannot be addressed in a combination of agreements or court orders. In an enactment, words in the singular include words in the plural. [Interpretation Act, RSBC 1996, c 238, s 28(3)]The parties must provide the administrator with information about the entitlement date in writing before the benefits can be divided.The entitlement date is used to determine the spouse’s proportionate share of the pension benefits. But the proportionate share may be changed by the agreement of the spouse and member, or by a court order, and one way of changing the proportionate share would be to select another entitlement date. [Reg., s 1, definition of “entitlement date”. See further Chapter 11] (Another way would be for the agreement or order to set out a different formula or fraction.)

2.25 Pre-relationship accruals	The legislation provides that, unless the spouse and member otherwise agree, or a court orders, only pension entitlement earned during the relationship is divided. But won’t a court have to take pre-relationship entitlement into account because of the decision of the B.C. Court of Appeal in Mailhot v Mailhot, 1988 CanLII 179, 18 RFL (3d) 1 (BCCA)?
	No.Mailhot held that all of the pension benefits accruing up to the breakdown of a relationship, including pre-relationship accruals, constitute a family asset to be divided equally between the spouses. After Mailhot was decided, however, B.C. pension division legislation was revised to divide only those benefits earned during the relationship, and this policy has been carried forward in the FLA rules about excluded property. [FLA, s 85] The result is that the principle in the Mailhot case has been reversed by legislation (as explained in Park v Park, 2000 BCCA 92).Mailhot, however, would still apply to agreements or orders made before July 1, 1995, the date B.C. pension division legislation was first revised to exclude pre-relationship benefits from automatic division. [See para 2.28]Pre-relationship accruals can be divided between the member and spouse, however, if:(a) the parties agree to do so; or(b) if a court holds that it would be unfair to exclude that portion of the pension benefits from being divided [FLA, s 95(1)(b)]; or(c) if to do so would produce a better result than awarding ongoing support. [FLA,s 129]
2.26 Drafting a clause to divide pre-relationship accruals	If the spouse and member agree, or a court orders, that the spouse share in pre-relationship accruals, how should the arrangement be recorded in the agreement or court order?
	A reasonable approach would be to use the model employed in Reg., s 17 but specify an earlier commencement date that includes the portion of pre-relationship service that will be shared with the former spouse.

2.27 When to divide pre-relationship accruals

When would it be appropriate to divide pre-relationship accruals?

Dividing pre-relationship (or post-separation) accruals is a form of reapportionment. The court may reapportion pension benefits for the purpose of providing the spouse with an independent source of income if it is necessary, appropriate or convenient and addressing the spouse’s need to become or remain economically independent would otherwise require the member to pay support or a portion of their pension benefits to the spouse. [FLA, s 129]. Similar factors were considered under the FRA: Parent v Parent, 2012 BCSC 723.Case law under the FRA suggested some other circumstances where benefits earned before the parties commenced living in a marriage-like relationship should be divided (although it remains to be seen whether these will continue to be considered relevant). Two examples:the case involves a long relationship during which most of the pension was earned [Shirran v Shirran, 1999 CanLII 5926, 46 RFL (4th) 371 (BCSC)]the spouse brings assets into the relationship that are used to benefit the family or end up being divided equally. [Sangha v Sangha, [1998] BCJ No 1087 (Lexis) (BCSC)]Case law under the FLA suggests that reapportionment of a pension is unlikely where other options are available to address the spouse’s need for economic independence (for example, see Duursma v Duursma, 2020 BCSC 667), but that it may be ordered in the right factual circumstances. For example, in Kraft v Kraft, 2018 BCSC 496 the spouse received a 50% share of the pension (instead of an approximately 31% share based on the period of the relationship) where the member had previously failed to meet his spousal support obligations.

2.28 Pension accruals and cohabitation	The spouse and member lived together in a common law relationship before marrying and the member earned pension entitlement during that time. Should the accruals during cohabitation be divided between the spouse and the member?
	This was a question considered by the courts a number of times under the FRA and it was eventually decided that, in most cases, benefits earned during prior cohabitation should be divided.Under the FLA, the starting point is that benefits earned during cohabitation in a marriage-like relationship are divisible. But it is still necessary for the commencement date of the relationship to be specified by agreement or court order. It is not the administrator’s responsibility to determine when a marriage- like relationship commences.If the order or agreement was made before July 1, 1995, and is otherwise silent on this issue, Mailhot would apply to include all pre-relationship accruals: see para 2.25. If the order or agreement was made under Part 6 of the FRA, and it does not specify the dates to be used, it is from the date of marriage to the triggering event. (Under the FRA, the triggering event was the first of the following to occur: the date the parties made a separation agreement or the date the court made a declaration of irreconcilability under FRA, s 57, or an order of divorce, nullity or judicial separation: FRA Division of Pension Regulation, s 1, definition of “entitlement date” and s 6(1). For more information, see the 2001 Q&A).See para 14.9.
2.29 Dividingpurchased pension entitlement	My plan allows me to purchase additional pension entitlement. I don’t want to do this if it means that my former spouse will get a share of it.
	Pension entitlement purchased before the relationship began, and after the breakdown of the relationship, won’t ordinarily be divisible.The Division of Pensions Regulation provides a formula for determining the former spouse’s “proportionate share” for dividing the pension benefits. [Reg., s 17] It is based on pensionable service accumulated (including purchased) by the member during the relationship. Any pensionable service accumulated after the

	former spouse’s entitlement date, even pensionable service attributable to the relationship that was purchased by and credited to the member after the entitlement date, is excluded from the numerator. [FLA, Reg., s 18] See para 2.34 for examples.It is possible that there will be exceptions to the general rule. For example, a former spouse might be able to make a claim to pension entitlement purchased after the breakdown of a relationship if it can be established that it was purchased using family property. Similarly, the member may have committed to purchase service before the relationship began, but payments for the service are made during the relationship, and again it may be appropriate for the former spouse to share in the purchased service (see para 2.31).But these would not be questions that an administrator would have to answer. They would be addressed in the agreement or court order dividing the benefits. [See also paras 2.21 and 2.22]A situation in which member’s contributions are increased would not qualify as purchasing service. See paras 2.71 and 2.72.
2.30 Pensionentitlement purchased during the relationship	The member purchased additional pension entitlement during the relationship, but it relates to a period before the relationship. Is that included in the division?
	Yes, the purchased pensionable service would be included in the numerator and denominator of the proportionate share. The test set out in the Division of Pensions Regulation is whether the pensionable service was purchased or accumulated in the entitlement period. The “entitlement period” is defined by the “commencement date” and the “entitlement date”, usually determined by the beginning and end dates of the relationship. [Reg., ss 1, 18] It doesn’t matter that the purchase relates to a period before the entitlement period. [See paras 2.21 and 2.23]
2.31 Pensionentitlement purchased on installment plan	The member purchased additional pension entitlement during the relationship, but payment is on the installment plan. It wasn’t all paid for by the time of the breakdown of the relationship.

The purchased pension entitlement would still form part of both the numerator and the denominator of the formula for determining the proportionate share because it was acquired during the entitlement period. [Reg., s 18]As between member and spouse, their property division arrangements may address responsibility for the debt, but the administrator does not have to worry about that issue. Under the FRA, the approach adopted by courts was that a debt obligation associated with a family asset was taken into account when determining entitlement to the family asset, and this policy has been carried forward in the FLA [FLA, ss 81, 86]. Typically, this would mean that the unpaid portion of the entitlement would be dealt with by reducing the spouse’s share of other assets in recognition that the member is responsible for paying the debt.Two other approaches adopted in cases dealing with debt obligations are to:make the spouse share responsibility for the debt (the spouse could be required to pay a share to the member immediately, or by installments), or:adjust entitlement to the pension benefits to reflect the debt. [See also paras 2.21 and 15.9]If the parties do not address the issue, and service purchased during the relationship is still not paid for at the date the former spouse’s share is to be determined, the administrator should request the parties’ directions concerning how to deal with the issue. (In deciding how to resolve this issue, it is important for the parties to understand that in many cases the cost of purchasing the service may be significantly less than the value of the service itself.)

2.32 Prior service credit

In some cases, pension benefits might be enriched, not by increasing entitlement attributable to a particular period, but by crediting the member with additional pensionable service. This might take place, for example, where the member must be employed for a minimum period before becoming a member of the plan and the probationary period is eventually included as part of the member’s service. What rights does a spouse have where the plan credits the member with additional entitlement during the relationship that relates to a period before the relationship?

	This would be pensionable service “accumulated by the member in the entitlement period”. [Reg., s 18(3), definition of “pensionable service during entitlement period”] It would be included in the numerator of the proportionate share, as well as the denominator.
2.33 Court orders member to restore service	The member withdrew part of the pension benefits during the relationship. It is possible to restore the lost service. The court has ordered the member to do so and also ordered that the spouse’s share of the pension entitlement be based on the restored service. What is the plan’s obligation?
	Once the member makes the purchase, the restored service would be included in the numerator and denominator of the formula for determining the proportionate share.
2.34 Special cases: Cap on service, banked credits, flex benefits, service measured in hours	Some cases are not clearly addressed under the Division of Pensions Regulation. What should the plan do if:the plan sets a cap on service (for example, the plan provides that the maximum pension is earned by a member upon completing 35 years of service)? How does that affect the “proportionate share”? Does that cap the denominator for determining the spouse’s share?the member uses banked credits, earned during the relationship, to acquire pension entitlement at a later date? Is service that is acquired with banked credits considered to be acquired during the relationship, or after the entitlement date?as part of a flex benefits package, the member may choose to give up, for example, a dental plan in exchange for enhanced pension entitlement, or decide on smaller pension benefits in exchange for other benefits. How do the member’s choices affect the limited member’s interest in the benefits?pensionable service is measured by the plan in terms of hours, or bands of hours, worked, rather than months or parts of months? How is this accommodated by the formula for the proportionate share?

If special cases arise, it is always open to the plan administrator
to seek instructions by writing the member and the spouse describing the
ambiguity and either:

1. suggesting an approach in keeping with the spirit of the
   legislation for dealing with the issue, or
2. requesting the member and spouse to agree on an approach and
   advise the plan administrator in writing. [Reg.,
   s 7(2)]

Option (a) will usually be the most efficient since the matter in
question is likely to recur and therefore be familiar to the plan
administrator.

Some suggestions of how the specific issues should be dealt with
under the legislation:

1. cap on service: the cap must be applied to both the
   numerator and the denominator of the formula. If the cap is 35 years,
   then neither the numerator nor the denominator can exceed that amount.
   If the relationship continues after the cap is reached, the numerator
   would stop growing at that point. See para 2.35, and Rutherford
   v Rutherford, 1981 CanLII 726, 23 RFL (2d) 337 (BCCA),
   where the cap was applied to determining the former spouse’s
   proportionate share. Typically, this is an issue that the parties
   expressly address and is often settled by choosing a midpoint, so that
   the member is compensated for some portion of the unused service. If the
   parties have a long relationship, and the cap is an issue, it is likely
   that the question of the former spouse’s proportionate share will be
   determined having regard to support considerations (under FLA,
   s 129) rather than by any consideration of the application of the
   cap.
2. banked credits: credits earned during the relationship
   qualify as family property. Courts will follow a family asset and
   recognize a claim to an asset substituted for the family asset. Where a
   member has banked credits earned during the entitlement period and uses
   them after the entitlement date to acquire pensionable service, the
   spouse would probably be entitled to a share of that pensionable service
   (that is, it should be included in the numerator of the formula
   for the proportionate share). As a practical matter, however, it may not
   be possible to trace the banked credits and determine whether they were
   in fact used.

	flex benefits: the flex package will define a base pension. The spouse’s rights before the breakdown of a relationship would be determined by past elections. The spouse’s future rights should be determined by reference to the base pension: a flex election that enhances the pension should be regarded in the same way as purchasing additional pension entitlement and not divided between spouse and member. Similarly, elections reducing enhancements would not affect the spouse, whose rights following the breakdown of a relationship would be determined by the base pension. But typically the spouse will be entitled to a separate share of the flex account, which can be used by the spouse in the same way as the member [See para 2.22]4. hours or bands of hours: the Division of Pensions Regulation provides that the proportionate share is calculated using the units of time specified under the plan text. [Reg., s 1, definition of “pensionable service”] If benefits are based on hours worked, for example, then pensionable service in the proportionate share formula would be based on those hours. If other units are used to define entitlement, those units would be used in the formula.
2.35 Pensionable service increases without increasing pension value	In some cases, pensionable service increases but there is no corresponding increase in the size of the pension (such as, for example, where there is a cap on service, a maximum pension is defined under the plan text, or the ITA ceiling on benefits payable under a registered pension plan applies). How is this dealt with?
	The legislation and Division of Pensions Regulation set out a default formula for dividing benefits. The result it dictates will be fair in most cases. Where it produces an unfair result, as it might in the example, the court can order, or the spouse and member can agree upon, a different approach for dividing the benefits. [FLA, ss 95, 127, 129. See further para 2.34]
2.36 Dividing a divided portion	Suppose a spouse acquires a share of a member’s benefits on the breakdown of a relationship. If the spouse remarries, can the new spouse claim an interest in the pension entitlement on the break-up of the second relationship?
	Nothing in the FLA permits a claim by a second spouse against a limited member’s share of benefits administered by a plan. Even if the limited member’s share is transferred from the plan, the FLA policy is not to divide property acquired before a relationship commences.

2.37 The spouse’s share is small	The spouse’s share of the pension entitlement is so small that the costs of administering the share really outweigh the benefits paid to the spouse. Can the administrator pay out the spouse’s share on a lump sum basis?
	The plan text can permit the plan administrator to require a member to take a pay out instead of receiving a pension if the commuted value of the benefit is less than 20% of the Year’s Maximum Pensionable Earnings as established by the Canada Revenue Agency. [PBSA, s 89(2); PBSA Reg., s 82]The FLA provides that an administrator can require a former spouse to take a transfer in any situation in which it could have required a member to take a transfer [FLA, s 139(b); Reg., s26]If the basis for requiring the former spouse to receive a transfer is that it is less than the prescribed amount, when dealing with benefits that will increase in value over time (as with a final average plan) this test cannot be applied until the spouse’s share is to be determined (which would not be until the limited member decides to take the share).
2.38 Unlocking spouse’s share	In what circumstances can a former spouse who has received a share of a member’s pension benefits by a transfer to a locked-in plan (such as a LIRA or LIF) unlock those benefits and cash out the entitlement?
	The locking-in rules apply to pension benefits in the hands of a former spouse to the same extent as they apply to plan members, whether the benefits remain in the plan or are transferred from the plan to another financial vehicle. [See Chapter 10, and para 10.4 in particular.]
2.39 Unlocking spouse’s share: to what extent is the member’s personal situation relevant	If limited members have the same rights as members, does that mean that a limited member only has the right to unlock benefits if the member whose benefits have been divided has the right to unlock? For example, if the limited member takes a share of the benefits by a lump sum transfer to a LIRA, and at some later date can establish grounds for unlocking benefits on the basis of shortened life expectancy, is that available to the limited member if the member has no health issues?
	Limited members have rights enjoyed by plan members in general, with respect to the benefits that are being divided, but those rights are not confined by the personal position of the specific member. The limited member will only have the right to receive their share of the benefits by a lump sum transfer if the member has the right to do so. However, if the limited member is permitted to their share of the benefits in a lump sum to a LIRA, the unlocking options available to owners of LIRAs would be available to the limited member, based on the limited member’s personal position. For example, benefits can be unlocked if the owner of the account is a non-resident. If the limited member is a non-resident, this option would be available to the limited member, even if the member is still a Canadian resident. [See Chapter 10, and para 10.6 in particular]

2.40 Lump sum Transfer Option (S 115(2)(b))	If the limited member decides to take the share by a lump sum transfer (provided that option is also available to the member), how is the transfer amount determined?
	The limited member’s portion would be determined as a proportionate share of the commuted value of the benefits calculated assuming the pension commences at the later of the member’s actual age and the average age of retirement for the plan [Reg., s 23(4)], and in accordance with accepted actuarial practice in Canada, consistent with the Canadian Institute of Actuaries Standard of Practice for determining commuted values. [FLA, s 110, definition of “commuted value”; PBSA Reg., s 9] Different rules apply for calculating the commuted value of benefits determined by a target benefit provision. [PBSA Reg., s 9(2). See para 2.76]See also paras 2.59 and 2.70 (for alternatives to using the average age of retirement), paras 3.11-3.12 and Chapter 10.
2.41 Who chooses? Limited member or plan?	When the benefits are determined by a benefit formula provision, the division is deferred and the limited member receives either a lump sum transfer, or a separate pension, at some date after the member becomes entitled to have the pension commence. Who chooses between these options, the limited member or the plan?
	The choice is exclusively that of the limited member. It is exercised by sending Form P4 to the plan. [FLA, s 115(2)] However, if at that time the limited member wishes to access their benefits, the member is not entitled under the rules of the plan to a lump sum transfer, then the limited member is restricted to the separate pension option.

2.42 Transfer to where?	The limited member has applied for a transfer of the proportionate share of the commuted value of the member’s benefits. The limited member has directed the plan to transfer the share to a separate account in the plan. What are the administrator’s responsibilities?

	The plan is not obligated to set up a separate account for the limited member. If the limited member decides to have the share transferred once the member becomes eligible to have the pension commence, the share is transferred in accordance with FLA, s 139, Reg., s 26 and PBSA, s 88. A transfer to another pension plan, or to a separate account within the same plan, is available only if the plan text document of the plan permits it and the administrator of the plan in question is willing to accept the transfer. [PBSA, s 88, FLA, s 115(6), Reg., s 26]
2.43 Transferalternatives	The member is eligible for pension commencement but hasn’t made that election yet. The former spouse has asked for a transfer of pension entitlement (as is permitted under the legislation). Is this option available to the spouse?
	Yes, this option is available to a spouse if the member would be eligible for a lump sum transfer. [FLA, s 115(3); Reg., s 26] Since many plans restrict lump sum transfers once the member reaches retirement age, the parties should check with the plan to confirm whether this option is available under the plan’s rules.
2.44 Reasons for taking the transfer of commuted value	When would the spouse choose to take the transfer of commuted value (if permitted by the plan) instead of the separate pension?
	Typically, this decision is made when the spouse, perhaps with the assistance of a financial advisor, concludes that the spouse can invest the money effectively and produce returns that exceed those that will be provided in the form of a pension. Similarly, some people prefer to have control of the funds and make the request for that reason.Taking the lump sum transfer may also place a higher value on the benefits in the hands of a person whose life expectancy is compromised by health issues.In some cases, the former spouse is concerned about ensuring financial resources are available for a dependent after the former spouse’s death, which might be better realized through the lump sum transfer (and a beneficiary designation in favor of the dependent) than through a separate pension with a guarantee option. The lump sum transfer option may also offer more flexibility about the amount of income received than the separate pension option (if, for example, the rules that apply permit a significant portion to be unlocked).

	Concerns about plan solvency may also be a factor: see para 2.16.
2.45 Reasons for taking the separate pension	When would the spouse choose to take a separate pension?
	Most people in this position choose the separate pension. Many see leaving the benefits in the plan as likely to result in better returns and a more reliable lifetime income. A person with a family history of longevity would also see a lifetime pension has producing higher value. Even if it is expected that similar returns could be achieved by investing a lump sum, most spouses would choose a separate pension to avoid the responsibility of administering the investment of the funds to produce a life income. Even under the FRA, where the separate pension was available only when the member’s pension commenced, many former spouses chose to wait to receive the share for this reason. Another reason the spouse might elect the pension option is if they are under the age at which locked-in funds can be used to produce a life income.
2.46 Need to value before making the election?	Does a spouse need to know the value of the benefits in order to make an informed choice between the lump sum transfer and separate pension options?
	The decision is often made without knowing the actual value of the benefits. For example, a spouse who requires income is more concerned about getting the income started than the actual dollar amount that will be paid. Usually the spouse needs only a general idea of the potential income, and it is often possible to come up with a reasonable estimate of the monthly separate pension based on the annual pension statement about the member’s entitlement (taking into account that adjustments will be made).But there are many reasons why a well-advised spouse should arrange for an independent valuation by an actuary.In some cases, waiting to take the pension share will increase the income available to the spouse.Or the administrator may, in error, adopt conservative assumptions and place a lower value on the lump sum transfer option than the application of normally accepted actuarial standards, so the plan may be prepared to transfer, for

	example, $150,000, while the expected value of the separate pension is closer to $170,000. Or it may be a case where accepted actuarial standards permit more than one approach. Retaining an independent actuary can ensure that the share has been valued correctly.(For a related area, where both parties have pension benefits, and it is advisable to have professional advice on whether or not to divide them under Part 6 at all, see para 11.14.)
2.47 Spouse’s share based on the “normal form”	Whether the spouse takes a lump sum transfer, or a separate pension, the spouse’s entitlement is based on the “normal form” of the pension under the plan. Our plan has two normal forms, depending upon whether or not the member has a spouse. Do we determine the normal form to use by whether the member has a spouse or whether the limited member has a spouse?
	Part 6 divides the benefits based on the member’s entitlement. Where the normal form is dictated by spousal status, the selection of the normal form will depend upon whether or not the member has a spouse.Division of Pensions Regulation, s 23(4)(a)(iii) makes this clear. It says that the former spouse’s proportionate share is of the commuted value of the pension the member would have received had there been no division under the Act and had “the member elected a pension in the unadjusted normal form” provided under the plan. The member’s spousal status at the time the limited member receives the share is determinative.
2.48 Subsidized early retirement and trustee consent	In our plan, the value of an early retirement pension is subsidized, provided the trustees consent. For the purpose of determining the limited member’s share, should the commuted value of the benefits be calculated on the basis that consent has, or has not, been given?
	In any case where consent is relevant, the question of the administrator’s consent must be determined by the administrator on the same basis as if the member made the application [Reg., s 14] If the administrator would have consented, had the application been made by the member, the administrator must consent if the application is made by the limited member.

2.49 Immediate transfer not available	Why isn’t a transfer of a share of benefits that are determined by a benefit formula provision automatically available as of the date of separation?
	Many provinces that have pension division legislation provide for a transfer of the spouse’s share on separation. The value placed on the spouse’s share is frequently (particularly for private sector plans) much lower than the value the benefits will probably eventually have because it is based on the assumption that the member leaves employment on the date of separation. This approach to valuation often ends up allocating the lion’s share of the benefits earned during the relationship to the member.An immediate transfer at a low value does not benefit a spouse, particularly when the transfer is locked-in until the spouse reaches a retirement age (that is, the spouse is going to have to wait a period of years to be able to use the money in any event). By deferring the transfer date, in most cases a significantly higher (and fairer) value, one closer to the value the member will derive from the member’s share, will be placed on the spouse’s share of the benefits.
2.50 If plan offers immediate transfer option	The plan would like to offer the spouse the option of accepting an immediate payment to a Locked-In Retirement Account. Is that option available?This option is not prohibited by the legislation provided that it is also available to the member [FLA, s 115(2)(b)], but unless a court orders otherwise, the payment would have to be calculated in accordance with Division of Pensions Regulation, s 27, and make reasonable provision for future changes to salary levels, or the benefit formula, that would increase the value of the pension [FLA, s 128(2)]. The legislation does not stipulate how to adjust the member’s benefits in this situation. Before agreeing to this course of action, a plan administrator should seek the member’s consent.[For the meaning of “locked-in” see para 10.4]
2.51 Proportionate share and deemed retirement	The spouse has waited until the member’s pension commences to claim a separate pension. The member objects to using the proportionate share set out in the agreement. In 1994, the spouse relied upon a “deemed retirement” clause in the agreement and required the member to begin paying the spouse’s share when the member was first eligible to retire. The member says that the spouse’s separate pension should be determined as a proportionate share of the pension that would have been payable on the assumed retirement date (which is how the payments the member has been making to the spouse were calculated in the first place).

	As between the parties, the member is correct. However, this can be a difficult arrangement for the administrator to implement, and nothing in Part 6 of the FLA requires the administrator to accept an agreement or order that sets out different formulas for dividing the benefits depending on the circumstances. So, unless the administrator consents, the parties will have to make adjustments between themselves.
2.52 S 115(2)(a):Determining the separate pension	The limited member has selected a “separate pension”. How is the separate pension determined?
	See Reg., ss 23 and 24. The commuted value of the benefits is determined under Reg., s 23, based on the pension payable to the member assuming pension commencement at the later of the member’s actual age and the average age of retirement for the plan: see paras 2.59 and 2.70 for more information about the average age of retirement and alternatives to this approach.The limited member’s proportionate share of the commuted value is used to determine the separate pension payable to the limited member for the limited member’s lifetime. The limited member can choose a single life pension or any other form of pension available to plan members.
2.53 S 115(2)(a):what unisex mix should be used?	The limited member has selected a “separate pension”. Our actuary has asked for directions concerning how to determine the limited member’s entitlement on a gender neutral basis: are we to use the unisex mix we use for the general plan (which is 60% Male, 40% Female)? Or should the unisex mix be flipped for the spouse (to 40% Male, 60% Female), which is the same approach we adopt for determining benefits payable to the spouse under our plan in non-marriage breakdown cases?

	The requirement of Reg., s 24(1)(b) is to use accepted actuarial standards. In this case, the unisex mix used for the general plan would be used to determine the commuted value of the member’s entitlement. The spouse’s value would be a proportionate share of the commuted value.After the value of the spouse’s share is determined, if it is to be converted into a pension payable for the lifetime of the spouse, an accepted practice is for the calculation to be based on actuarial factors where the unisex mix used for the general plan is inverted (or flipped).But some plan administrators apply the same unisex mix used for the general plan for this purpose as well.
2.54 Form of pension	The legislation says the administrator must make available to the spouse the options for the separate pension it offers members of the plan. Who gets to choose the option: the spouse or the administrator?
	The spouse. The policy is that the limited member enjoys this right in common with members. [FLA, s 113] The plan is protected since whatever option the spouse selects is adjusted on an actuarial equivalent basis. [Reg., s 24(1)]
2.55 Income Tax Act and spouse’s election	The legislation allows a spouse to select among options available to members of the plan, including a joint survivor annuity. But doesn’t this conflict with Regulations under the Income Tax Act (particularly Reg., s 8503(3)(l))?
	No. This position existed under the FRA, and CRA indicated that the provincial legislation was consistent with the Income Tax Act. The ITA Regulations recognize family property division arrangements that are authorized by provincial legislation. [ITA Reg., s 8501(5)(d)]For clarity, legislation does not require a limited member to elect a joint and survivor pension for their share of the benefits even if the limited member has a spouse at the time they commence their separate lifetime pension.
2.56 Supplementary Pension Plans (“SPP”)	Members of our plan are entitled to supplementary benefits financed from company revenue. The additional benefits are based on the member’s average earnings and regular pensionable service that exceed the maximum amounts CRA will allow to be paid under registered pension plans. Are these divisible?
	Yes. Benefits in a supplemental pension plan are divisible under Part 6 [FLA, ss 119 and 110, definition of “supplemental pension plan”], but the rules that apply

	are different from those that apply to benefits in a registered local plan. See Chapter 6.
2.57 When the member takes early retirement	The member has decided to take early retirement. May the limited member transfer the proportionate share of the pension to a LIRA, or does the limited member now have to receive a separate pension?
	Both options are still available to the limited member, so long as the member remains eligible for the transfer option under the rules of the plan. Once the administrator is advised that the member intends to have the pension commence, the administrator is under an obligation to give the limited member 30 days’ advance notice. [Reg., s 9] This would allow the spouse to choose between the options. See paras 15.28 and 15.29 for information about calculating the notice period and determining when notice is deemed to be received.
2.58 Age adjustment	When determining the spouse’s separate pension under Reg., s 24, how are differences in ages between the member and the spouse taken into account?
	The former spouse’s share of the member’s benefits is based on the commuted value of those benefits and determined on an actuarial equivalent basis. [Reg., s 23] One factor for calculating the commuted value will be assumptions about how long the pension would be paid to a person of the same age as the member at the date assumed for pension commencement. The member’s pension is assumed to commence at the later of the member’s actual age and the average age of retirement for the plan (for the meaning of average age of retirement, and for alternatives to using the average age of retirement, see paras 2.59 and 2.70).Once the former spouse’s share of the commuted value is determined, this is then expressed as a separate lifetime pension for the former spouse, this time having regard to how long the pension would be paid to a person of the same age as the spouse at the date the pension commences. [Reg., s 24] See further para 2.52.Part 6, however does not set out how the age adjustment is to be made. The adjustment must be made using accepted actuarial methods. [FLA, s 110; Reg., s 24; and PBSA, s 1, definition of “commuted value”] B.C. legislation also requires that the adjustment be made on a gender-neutral basis. [PBSA, s 10. See para 2.53]

2.59 “Average age of retirement”

Division of Pensions Regulation, s 23 sets out rules for determining the commuted value of a member’s benefits. One assumption is that the member’s pension commences at the later of the member’s actual age and the date the member reaches the “average age of retirement” for the plan. What does “average age of retirement” mean?

An administrator of a plan is required to file an actuarial valuation report for funding purposes with the superintendent. The report will either specify an assumed age of retirement for plan members [Reg., s 1, definition of “average age of retirement”] or the proportion of plan members retiring at each age that would allow the plan administrator to determine an “average age of retirement” based on such proportions.The report will also include a solvency valuation that may use a different average age of retirement. For the purposes of pension division under the FLA, it is the average age of retirement that is used in the funding actuarial valuation (the “going concern” valuation), not the one used in the solvency valuation (which is driven by special government requirements).The plan may have established average age of retirement assumptions that are based on age and service of members. If so, the average age of retirement would be determined by the age and service referable to the member.Some plans will specify an average age of retirement for female members and a different average age of retirement for male members. However, under B.C. law, an administrator cannot discriminate based on differences in gender. [See, for example, PBSA, s 10]. In these cases, the average age of retirement should be determined on a unisex basis (just as mortality is determined on this basis, and it would be appropriate to use the same unisex weighting that the administrator applies to mortality).The legislation recognizes that it may be more convenient for a plan with many members to specify a different average age of retirement for the purposes of the FLA. For example, it may simplify things, where the plan determines the average age of retirement by some kind of formula, to use a single average age of retirement, or adopt a different formula, and an administrator may choose to do this, provided the age that is selected is younger than the average age of retirement for the plan. [Reg., s 23(5)]Some plan administrators have indicated that they would prefer to continue using the calculation of the commuted value in accordance with the Canadian Institute of Actuaries’ Standards of Practice for Pension Commuted Value. The calculation takes the average of the value assuming pension commencement at the earliest unreduced retirement age and the value assuming pension commencement at the optimal age (i.e., the retirement age that produces the highest commuted value). Such calculations would also be permitted under s 23(5). See para 2.70.

	The reason for valuing benefits using the average age of retirement is to attempt to place a value on the former spouse’s share that is consistent with the plan’s funding assumptions.
2.60 Average age of retirement or actual age	The benefits have not yet been divided, and the member has elected to have the pension commence. The limited member has chosen to receive a separate pension. The member has not yet reached the average age of retirement for the plan. Is the limited member’s share based on the average age of retirement or the member’s actual age?
	The average age of retirement (unless the plan has adopted a different approach under Reg., s 23(5); see para 2.59).Otherwise, the member’s actual age is used if the member is older than the average age of retirement at the date the limited member’s separate pension is determined. [Reg., s 23(4)(a)(iii)] This policy has been adopted under the FLA to protect the plan funding arrangements. Where the member decides to have the pension commence before reaching the average age of retirement, and benefits before that date are subsidized by the plan, the plan is required to administer the pension in accordance with the plan text. But the former spouse is not automatically entitled to the subsidization.
2.61 Actual or projected service?	We are using the average age of retirement to calculate the limited member’s share, but not sure what service we are to use. Is it the service that has accrued to the date that the limited member’s share is being calculated? Or is it projected service to the average age of retirement? In the case we have, if we use the actual accrued service, the pension would be reduced to reflect early retirement. If the spouse waits for another two years, however, there would be no reduction.
	The calculation uses the actual pensionable service accrued to the date of calculation of the proportionate share for the spouse.If the plan provides an unreduced pension based on the member’s age and service, it would use the member’s age as of the average age of retirement, but pensionable service at the date of calculation.For example:

	the plan allows an unreduced pension starting as early as age 60 for a member with at least 12 years of continuous service since date of hire, but applies a reduction of 6% per year for each year the pension starts before age 65 if the member has less than 12 years of continuous service,the average retirement age for the plan is 61, andthe member is currently age 56 with 10 years of continuous service.Under the FLA the plan would calculate the commuted value of the pension assuming a pension commencing at age 61 reduced by 24% (6% x 4 years), because the member does not have 12 years of continuous service as of the calculation date.The administrator would not assume continued service up to the average age of retirement (because the plan would be prejudiced if that assumption proved untrue).Although there is no specific obligation on the plan administrator to advise the former spouse about when to take the pension share, there is a general duty for plan administrators to inform members about options, and that would apply equally to limited members. In this case, the prudent course would be to inform the limited member that waiting for the member to accrue two more years of service would avoid the 24% reduction in benefits. See paras 2.68 and 15.21.
2.62 Bridging benefits	Is a limited member entitled to a share of bridging benefits?
	Yes. The FLA defines “benefit” as “a pension or other monetary amount a person is or may become entitled to receive under the plan . . .”, which would include bridging benefits. [FLA, s 110. With respect to actuarial excess or surplus, however, see para 2.15]A limited member is entitled to a proportionate share of any benefit paid under the plan to the member. [FLA, ss 113, 115(2), 117(2)]Bridging benefits are a temporary monthly supplement designed to provide members with level income over the course of retirement. Probably the most common example is the CPP bridge benefit. This is an additional monthly payment that ceases at 65. The idea is that the member’s separate CPP

	entitlement, when combined with the pension, will produce adequate retirement income, and the bridge benefit is designed to provide level income in the meantime. Of course, the member can elect to take CPP before 65 in a reduced amount or wait until after 65 and allow benefits to increase. The member’s decision about CPP doesn’t affect the payment of the bridge benefits. Some plans offer similar arrangements for Old Age Security benefits. (These adjustments are addressed in s 74 of the PBSA.)Some plans are structured to provide the bridging benefit automatically. Others allow the member to choose whether to receive this option. Where the benefit is optional, what essentially is taking place is that the member chooses to front load the pension payments (so that the increase in the pension in the early years is offset by a reduction over the balance of the member’s lifetime).Although not referred to expressly in Part 6, bridging benefits are part of the pension benefits and, therefore, divisible under Part 6. [Vestrup v Vestrup, 1999 CanLII 5448, [1999] BCJ No 1057 (Lexis) (BCSC.]In calculating the commuted value of the member’s benefits, the commuted value of any bridge benefits must be included in determining the limited member’s entitlement to a lump sum transfer or separate pension.
2.63 Limited member doesn’t provide instructions or plan can’t locate limited member	We have a situation where the former spouse is a limited member who has not yet received a share of the benefits. The member has now decided to have the pension commence. We have given the limited member 30 days’ notice before implementing the member’s decision, but the limited member has not given us directions concerning the limited member’s share. We have another file with similar facts, except the problem is that we cannot locate the limited member to give notice. What happens to the limited member’s pension entitlement?
	See 15.49 and 15.50.
2.64 Elections: Limited member remarries	Does the PBSA requirement—that a member who has a spouse must take pension entitlement in the form of a joint and survivor pension—apply to a limited member who has a spouse?

	No. The PBSA does not require a limited member who has a spouse to elect a survivor benefit for the spouse on retirement or the starting of a life income using locked-in funds. The PBSA places this requirement on retired members. [PBSA, s 80] A limited member is not a retired member.For the meaning of “locked-in” see para 10.4.
2.65 Indexing	If the spouse chooses to receive a separate pension when the member reaches age 55, but the plan does not provide for indexing of pensions until age 60, does indexing apply to the former spouse’s separate pension when the spouse reaches age 60, or when the member does?
	The commuted value of the member’s benefit is determined based on the member’s age and average age of retirement, which will determine when indexing is deemed to begin. If the member and the former spouse are the same age, there is no issue: all reasonable approaches lead to the same answer. If the former spouse is a different age, the administrator should defer the actual indexing of benefits to the date the former spouse reaches the age at which indexing applies (in this case, at age 60), so that the former spouse is treated like other members. Calculation of the former spouse’s initial separate pension should reflect this.
2.66 Voluntary Contributions	If the member has made voluntary contributions to the plan, how are these taken into account?
	Plan members are sometimes entitled to make additional, voluntary contributions to their plans. These are sometimes overlooked when pension benefits are divided. Voluntary contributions should be divided in the same fashion as those in a defined contribution account and not by a pro rata, Rutherford-type formula, because their value depends upon contributions made to date (plus investment returns) and not on some formula based on future events. Essentially the benefits would be treated as if they are in a hybrid plan. See Chapter 4.If, however, the agreement or order sets out a pro rata approach for dividing the pension benefits and does not expressly address how voluntary contributions are to be divided, the formula will apply to both the pension benefits and the voluntary contributions equally. [See Srivastava v Srivastava, 1997 CanLII 3529, 40 BCLR (3d) 358 (BCCA)]

2.67 How old must limited member be to receive separate pension?	The member is eligible for pension commencement, but the limited member has not yet reached the required age under the plan text to begin receiving a pension. Can the limited member still choose to have the separate pension start right away? Or must the limited member wait until personally reaching the age required under the plan text?
	There is no requirement for the limited member to reach the specified age. If the earliest that a pension may commence under the plan is 55, and the member has reached that age, the limited member may choose to receive a separate pension even if years younger.The monthly amount payable to the limited member, however, will be adjusted having regard to the limited member’s age, so that the plan will not end up paying more than if the benefits had not been divided (as specified under Reg., ss 23 and 24).
2.68 Early retirement reduction and limited member’s separate pension	If the pension payable to the member at the date the limited member chooses to receive the separate pension is subject to reduction for early retirement, does that reduction apply to the limited member’s separate pension?
	Yes, if the average age of retirement for the plan is before the age at which there is entitlement to unreduced benefits. In most cases, the average age of retirement for the plan will probably be at or after the unreduced age. If service determines whether there is a reduction at the average age of retirement, then this question would be determined based on service accrued to the date of calculation: see para 2.59. Some administrators have chosen to continue to use the optimal age rather than the average age of retirement, in which case it is quite likely that an early retirement factor will continue to apply in the circumstances.If, in the circumstances, there will be a reduction, it is open to the limited member to choose to postpone the application to receive a separate pension until a later date.Whether the limited member would be better off taking the share right away or waiting until a date after which no reduction would be made, is a question that the plan may be in a position to advise about. Or, if not, the plan administrator may be able to provide the limited member with information about the issue and

	suggest the limited member consult an independent actuary for advice. See paras 2.61 and 15.21.It’s important to note how and when the early retirement adjustment is made. Don’t apply the early retirement adjustment twice! The early retirement reduction is applied when determining the member’s pension under Reg. ,s 23. The limited member receives a proportionate share of that commuted value, which is converted to a separate pension for the limited member. [Reg., ss 23(4), 24(1)] An early retirement reduction would not then be applied to the limited member’s pension, because the limited member’s pension has already been reduced to adjust for that on an actuarially equivalent basis.
2.69 How does reducing the member’s pension entitlement affect eligibility for benefits?	After the limited member receives the lump sum transfer, or the separate pension, we are supposed to reduce the member’s pension entitlement by deducting pensionable service (under Reg., s 21). How does that affect other eligibility issues (such as qualifying for an unreduced pension, or where the plan text determines survivor benefits based on minimum levels of pensionable service)?
	Reducing the member’s pension entitlement because it has been divided with the former spouse does not affect the member’s eligibility under the plan in any respect. Any question about eligibility for benefits that depends upon pensionable service would be determined having regard to total service (including service allocated to a former spouse because of pension division). [Reg., s 21(5)]
2.70 Using the optimal age instead of the “average age of retirement”	Our preference would be to continue as under the FRA and calculate the former spouse’s share by reference to the optimal age (the age that places the highest value on the benefits), rather than the average age of retirement. Is that permitted?
	Yes. An administrator may decide to use an age that is younger than the average age of retirement for the plan. [Reg., s 23(5)] The policy is to permit the administrator to adopt sensible administrative procedures that in its view will simplify processing pension division arrangements, provided that those procedures do not prejudice either of the parties. Adopting the optimal age would not prejudice either party.Many plans provide in the funding valuation a rule or formula for determining the average age of retirement, so there is no objection if the administrator uses a different formula for determining the average age of retirement under the FLA,

	provided it is consistent with the FLA policy (that the specified average age of retirement not be greater than the age used in the funding valuation).
2.71 Members required to pay increased contributions	To maintain benefits, our plan was amended to require members to pay substantially increased contributions. The limited member’s share of the benefits relates to the period before the increased contributions, but the way the FLA works, the limited member’s proportionate share applies to all of the benefits at the date of division, so will include some portion of the period that relates to the increased contributions. Does this increase in contributions require any adjustment to the limited member’s share?
	No. An increase in the contributions that a member is required to make does not constitute purchasing additional service (additional service purchased after the entitlement period would be excluded from the division: see paras 2.21, 2.22 and 2.29).In these cases, the policy of the FLA is to calculate the limited member’s proportionate share of the benefits as of the date the share is being received by the limited member (by lump sum transfer or separate pension).The member is protected because the member’s increased contributions relate to the pensionable service that accrued after the limited member’s entitlement date, all of which the member keeps. But the division takes place on a pro rata basis using current values.
2.72 Members can elect to pay increased contributions	Our plan gives members a choice to participate in two different plans, one that provides benefits based on 1% final average earnings, the other based on 2% final average earnings. The contribution rates are higher for the second plan. The member wants to switch to the 2% final average earnings plan, but the member’s former spouse is a limited member of the plan. How would this switch affect the limited member’s entitlement?
	This would constitute purchasing additional service (which would be excluded from the limited member’s share: see paras 2.21, 2.22 and 2.29). The limited member’s proportionate share would be based on the entitlement under the 1% final average earnings plan.
2.73 Early retirement and projections	The limited member has decided to receive a separate pension, and the member is some years from the average age of retirement. It seems

about future service and benefits	reasonable in this case to calculate the limited member’s share taking into account future increases in the value of the benefits between now and the average age of retirement. Is that permitted?
	No. Reg., s 23(4)(ii) provides that the limited member’s entitlement is based only on the benefits accrued to the valuation date. (In this context, the valuation date is the end of the month immediately preceding the commencement date of the separate pension: Reg., s 23(3)(a)).
2.74 Pre-retirement indexing	Our plan provides for pre-retirement indexing on benefits of members who have terminated employment and have deferred vested entitlement. Would that indexing be included in determining the limited member’s proportionate share of the benefits?
	Yes, limited members have essentially the same rights as members. See paras 2.1 and 2.2.
2.75 Dealing with conflicting legislative requirements	Our plan is federally regulated, and we are concerned that if we comply with B.C. law, we may be offside federal requirements. For example:under the federal PBSA, either the member or former spouse can apply for pension division. But under B.C. law it appears that only the former spouse can apply;under the federal PBSA, we cannot act on a court order until the time for appealing the order has expired, but there is no similar requirement under B.C. law, which provides that the division must take place within 60 days of receiving the required information; andunder the federal PBSA, a joint and survivor pension can be divided into two single life pensions, but the B.C. rule provides only for dividing the income stream.How do we avoid running afoul of the two regulatory regimes?
	There is no real conflict in any of these circumstances.Filing by member: In fact, both the FLA and the federal PBSA permit the member to file the required Forms. [FLA, s 113(2); federal PBSA, s 25(5)]

	Neither Act would permit a member to make any elections on behalf of the former spouse. (The FLA permits the member to file a Form P2 for the spouse to become a limited member. Federal PBSA, s 25(5) refers to the materials filed by the member as requiring the administrator to act in accordance with the order or agreement as prescribed under the governing legislation.)Relying on an order before the appeal period has expired: Similarly, there is no real conflict between the two Acts regarding acting on an order that may be subject to an appeal. An order dividing pension benefits must be appealed within 30 days of pronouncement, so the 60 days required under Reg., s 16 to implement a pension division would not apply if an appeal was launched and a stay of the court order was issued.Commuting a joint and survivor pension: The federal PBSA permits a plan to amend the plan text document to permit, when a relationship breaks down, commuting a joint and survivor pension into two single life pensions. While the FLA does not expressly provide for this, nothing in the FLA prohibits a plan from providing that option. The FLA sets out minimum standards that must be observed. As a matter of policy, matured pensions are left intact to avoid any possibility of prejudice to a plan from intervening with settled arrangements (see paras 5.7 and 5.15). However, if the plan has already voluntarily provided for commuting the joint and survivor pension, there is no reason why the former spouse cannot take advantage of that opportunity.
2.76 Target benefit plan	How are benefits in a target benefit plan divided?
	A target benefit plan is a plan that determines benefits using a benefit formula provision, but which limits the employer’s liability to fixed contributions so that benefits must be reduced (or contributions voluntarily increased) if the plan’s resources do not meet the levels required to fund the benefits. (Under this arrangement, the plan cannot pay out benefits that exceed its financial resources, and there would be no requirement for the participating employer to increase contributions to cover a shortfall.)Before pension commencement, the benefits would be divided in the same way as other plans using a benefit formula provision. [FLA, s 110, definitions of “benefit formula provision”, “target benefit provision”, and s 115]Special rules apply to calculating the commuted value of benefits determined by a target benefit provision: PBSA, s 86(b); PBSA Reg., ss 9(2), 79] The amount is limited

	based on the “target benefit funded ratio” (TBFR) calculated in accordance with the regulations. The value that may be transferred is the product of the value of the member’s benefits multiplied by the TBFR. Whereas a commuted value calculation would assume termination of employment for the member as of the calculation date, the commuted value of benefits determined by a target benefit provision is similar to the valuation of the member’s pension liability in a going-concern valuation.After pension commencement, the rules that apply to matured pensions would be used: see Chapter 5.If a spouse is considering an option to take the share as a lump sum transfer, it may be prudent to consult an actuary. Because of the different rules, it appears that for plans that have converted to become target benefit plans, the commuted values are significantly lower than they would have been before plan conversion.
2.77 Target benefit provision: temporary improvement in benefits	We administer a target benefit plan. The limited member chose to receive the share of the benefits by a separate pension. We have amended our plan to provide for a temporary improvement in benefits for retired members under PBSA, s 21. How does this affect the entitlement of the limited member under the separate pension? What about the entitlement of former limited members who received their share by a lump sum transfer from the plan?
	See para 5.27.
2.78 Defined benefit provision and target benefit provision	The definition of “defined benefit provision” in FLA, s 110 expressly does not include a “target benefit provision”. What is the significance of that exclusion? Does it mean that benefits in a target benefit plan are divided differently from benefits in a defined benefit plan?
	No, the same pension division rules apply to plans that use a defined benefit provision and those that use a target benefit provision. The FLA follows the terminology under the PBSA, which uses the term “benefit formula provision” as the general term (including plans that have a defined benefit formula, and those that have a target benefit formula). The PBSA then distinguishes between these two plans with respect to how they are funded and how benefits may change.For the purposes of dividing benefits under the FLA, both types of benefit formula provisions are treated in the same way. Before pension commencement,
		both are divided under FLA, s 115, which applies if “. . . the benefits to be divided are under a local plan and are determined under a benefit formula provision . . .”. [FLA, s 115(1)(a)] After pension commencement, both are divided under FLA, s 117, discussed in more detail in Chapter 5.
2.79 ITA Forms used when transferring benefits from a pension plan		What tax forms are used to transfer benefits from a registered pension plan to a registered savings or income plan?
		It is not possible to provide any tax advice in this publication and if tax issues arise, qualified professionals should be consulted. However, as a general principle, the Income Tax Act accommodates transfers from registered pension plans to other registered pension plans, or registered savings or income plans, because of a breakdown of a marriage or common-law partnership. [See ITA Form T2151; ITA, s 147.3(5)]It is a good idea to ask both the plan administrator making the transfer and the financial institution accepting the transfer (or plan administrator if it is a plan- to-plan transfer) to confirm the forms they require.