A hybrid plan is a plan that determines a member’s benefits by a combination of defined contribution and defined benefit provisions [definition of “hybrid plan”, FLA, s 110] If the member’s benefits are in a hybrid plan, and the member’s pension has not commenced at the time of the breakdown of a relationship, it is divided in two steps. [FLA, s 116]
The defined contribution account is divided using the methods that apply to defined contribution accounts (see Chapter 3). The benefits determined by a benefit formula provision are divided by the methods that apply to plans using benefit formula provisions (see Chapter 2).
The FLA also permits options for both parts of the plan to be treated in the same way (all divided as if all benefits were determined by a benefit formula provision, or all divided as if all benefits were in a defined contribution account) if that option is available to the member, or if the administrator consents. [FLA, s 116(2)]
| 4.1 Subject to FLA? | Is the plan subject to the FLA? |
| [See para 1.9 and Chapter 1 generally] | |
| 4.2 Pre-March 18, 2013 arrangements | Does the FLA apply to an agreement or court order made before the FLA comes into force? |
| [See Chapter 14] | |
| 4.3 Alternatives to hybrid split | The member’s benefits are in a hybrid plan. The plan administrator has offered the spouse the option of leaving the portion that is based on the defined contribution provisions in the plan and dividing the whole of the pension benefits on a deferred basis, using the benefits in the defined contribution account at a later date to purchase additional, or enhanced, pension entitlement. May the spouse accept that option? |
| Yes. This is expressly permitted under Part 6. [FLA, s 116(2)(b)] |
| 4.4 Is our plan a hybrid plan? | Benefits under our plan are determined primarily by a benefit formula provision, but there is a defined contribution component that is used to purchase additional pension entitlement when the member elects to have the pension commence. Are we a hybrid plan? |
| Yes, the rules under FLA, s 116 that apply to hybrid plans would govern the division of the benefits. The defined contribution account would be divided by an immediate transfer to, for example, a LIRA or LIF for the former spouse [PBSA, s 88] (subject to the option discussed under para 4.3 and 4.5), and the former spouse would become a limited member with respect to the benefits determined under the benefit formula provision. [See Chapter 10 for more information about transfers from a plan.] | |
| 4.5 Charging the admin. fee | Benefits under our plan are determined primarily by a benefit formula provision, but there is a defined contribution component that is used to purchase additional pension entitlement when the member elects to have the pension commence. When we divide the defined contribution component, instead of transferring the former spouse’s share from the plan, we permit the former spouse to keep the share in a separate account in the plan and use it in the same way as members, to purchase additional pension entitlement. What administrative fee would we charge for this? |
| The administrator can charge up to $200 for the transfer from the defined contribution account and up to $1000 for registering the former spouse as a limited member. [Reg., s 28] In this case, you are doing both: dividing the defined contribution account between the parties, and the former spouse is becoming a limited member of the plan. So the maximum that could be charged is $200 plus $1000, or $1200. | |
| 4.6 Minimum defined benefit | Our plan consists of a defined contribution account, combined with a minimum defined benefit. Are we a hybrid plan? How are these benefits divided? |
| Yes, this meets the definition of “hybrid plan” in FLA, s 110. It is not possible to provide advice on this point without more information, but the guiding policy is that all aspects of the benefits must be shared. It would not be consistent with the requirements of the FLA to base the former spouse’s share just on the defined contribution account if there is value in the minimum benefit provision. |