Pension entitlement does not simply vanish when a member dies. Survivor benefits are usually payable when a member dies before pension commencement and may also be payable when a retired member dies.
Survivor Benefits if the Member Dies Before Pension Commencement
Survivor benefits payable when a member dies before pension commencement may take one of two forms: a pension or a lump sum. If the member is survived by a spouse (as defined under the PBSA), the spouse has the option of receiving the survivor benefits in the form of a pension, unless the plan administrator requires the spouse to transfer the benefits out of the plan. [PBSA, s 79(1)(a)(i)(A) and (3)] If the member is not survived by a spouse, the survivor benefit is usually a lump sum paid to either (a) a beneficiary designated by the member, or (b) the member’s estate. [PBSA, s 79(1)(c)]
Many plans provide for survivor benefits that, depending upon vesting rules and length of pensionable service, have the same commuted value as the pension would have (this is the case, for example, for B.C. public sector plans, and also federal public sector plans, and is now a requirement under the current PBSA for all private occupational plans registered under it).
Survivor Benefits Payable After the Pension Commences
Survivor benefits payable after the pension commences may also take the form of either a continuing pension or a lump sum payment. If, when the member takes the pension, the member has a spouse (as defined under the PBSA), the member must, unless the spouse signs a prescribed PBSA Reg. waiver, take the pension in the form of a joint and survivor pension that will provide a pension to the survivor of the member and the spouse that pays at least 60% of the amount received during the parties’ joint lifetimes.
If the PBSA Reg. waiver is signed, and a member takes a single life pension with a guarantee period and dies before the guarantee period expires, a beneficiary designated by the member, or the member’s estate, will receive the benefits for the balance of the guarantee period.
Some plans provide additional options for which the general rules described in this Chapter may not apply.
Competition Between Limited Member and Others
In any situation where a member dies, questions may arise concerning the rights of a member’s former spouse under an agreement or court order dividing pension entitlement. If the member forms a new relationship, rights between the former spouse (spouse1) and the current spouse (spouse2) may come into conflict. The FLA and the PBSA, however, set out rules for resolving the conflict.
This Chapter deals with the questions that arise when the member dies before or after retirement. Additional information about issues that may arise when the member dies after retirement can also be found in Chapter 5.
| 8.1 Limited member dies before the member | If the limited member dies before the member’s pension commences and before receiving a share of the benefits, what happens to the limited member’s share? |
| The limited member’s share is paid to the limited member’s estate in a lump sum. [FLA, s 124(4)] This is the same rule that applied under the FRA. The limited member’s share is based on the commuted value of the benefits at the date of the limited member’s death, 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(3)(d) and (4)] (Alternatives to using the average age of retirement are discussed at paras 2.64 and 2.75.) | |
| 8.2 Can a limited member designate a beneficiary? | Does a limited member have the right to designate a beneficiary, and who would receive the limited member’s share of the benefits if the limited member dies before the benefits are divided? |
| There is no provision in the FLA that permits a beneficiary designation to be made by a limited member before receiving a share of the benefits. The Wills, Estates and Succession Act, SBC 2009, c 13, however, appears to permit a designation to be made, since the beneficiary designation rules specified under that Act apply to pension plans, whether or not the plan gives the person entitled to a benefit the right to make a designation. [WESA, s 84(1)] Some plan administrators [SN1] [GU2] [SN3] have already taken this step and permit a limited member to make a beneficiary designation. But even if this cannot be done directly, it can be achieved indirectly. If the limited member dies before the benefits are divided, the FLA provides that the limited member’s share is paid to the limited member’s estate. [FLA, s 124(4)] The limited member can direct who is to receive those benefits by making a will. Once the limited member receives the share (by a separate pension for example, or a lump sum transfer to a registered plan), the limited member would be able to designate a beneficiary. |
| 8.3 Member dies before benefits divided | The member has died before pension commencement. The limited member has not yet received the share of benefits by a lump sum transfer or separate pension. The member’s new spouse, not the limited member, is the beneficiary of the survivor benefits. What rights does the limited member have? |
| Under the FLA, the death of the member ends the deferral of the pension division arrangements. The limited member’s share of the benefits must be calculated as of the valuation date determined in accordance with the regulations. [FLA, s 124(2)] The Division of Pensions Regulation allows a bit of flexibility on the valuation date, however, by providing that the valuation date not be earlier than the end of the month immediately preceding the death of the member. [Reg., s 23(3)(c)][SN4] The administrator is required to give the limited member 30 days’ notice before taking any steps as a result of the member’s death. The limited member will receive a separate pension, and in some cases (which must be confirmed directly by the plan at issue) the limited member may have a lump sum transfer option. [Reg., s 24(2)] Once the former spouse receives the share of the benefits, the member’s benefits would then be adjusted to reflect the division. [Reg., ss 21 and 22]. Survivor benefits payable to the member’s new spouse would be calculated by the administrator based on the member’s adjusted entitlement. [Reg., s 22] [See Introduction to Chapter 8 and para 2.10] |
| (subject to the statutory priority of a new spouse under the PBSA). [FLA, s 125] If the former spouse is the beneficiary of the survivor benefits, and there is no new spouse, the former spouse[SN5] will receive the whole of the survivor benefits. There are a number of cases dealing with unchanged beneficiary designations after the breakdown of a relationship, so a remedy may be available (some of the case law in this respect was considered in Tarr Estate v Tarr, 2014 BCCA 315). Certainly, in most cases involving an unchanged beneficiary designation, the fairest resolution will probably be for the court order or agreement to provide that the former spouse receives only the former spouse’s share of the benefits under Part 6, and no share of survivor benefits payable under the member’s remaining share. But it may not be possible to achieve this result if the member fails to change a beneficiary designation. [See para 2.5 and 11.3] Leaving a beneficiary designation unchanged is completely different from where the member intentionally designates a former spouse to be beneficiary after their relationship ends, something that plan administrators advise is not all that uncommon. See, for example, para 8.20. | |
| 8.5 Does the FLA apply to pension div. arrangements under the FRA? | The FLA rules are different from the FRA rules. Under the FRA, if the member died before the benefits were divided, a limited member was entitled to receive only a share of the survivor benefits. What happens if the agreement or order was made before the FLA came into force? Do the FRA rules still apply, or does the FLA govern this question? |
| The FLA applies to a situation where a spouse became a limited member under the FRA[SN6] but benefits had not yet been divided when the FLA came into force. [FLA, s 253(2)][SN7] If the agreement or order dividing the benefits does not expressly direct what is to happen in any situation, so that the pension division arrangements have to be determined by reference to the default rules under the Division of Pensions Regulation, and a question arises after the FLA comes into force, then the question will be decided by reference to the FLA default rules. This means that: if the member dies after the FLA comes into force, |
- the limited member has not already received the proportionate share of the pension benefits by a lump sum transfer or a separate pension, and
- the agreement or order dividing the benefits does not provide directions concerning what is to happen in this circumstance,
then the FLA rules will apply. The limited member will receive a share of the benefits determined the day before the member’s death. See para 8.3.
The member’s pension will then be adjusted to reflect the division. Survivor benefits based on the member’s remaining share would be payable to the member’s new spouse, designated beneficiary or estate, as the case may be.
Problems with the FRA approach
A problem with the FRA approach, which based the limited member’s share on the preretirement survivor benefit, was that in some cases the limited member could receive substantially more and, in other cases, substantially less, than the share that would have been received had the pension benefits been divided during the parties’ joint lifetimes. The FLA rule means that the limited member will receive the same share in either case.
Another problem with the FRA approach was that the default rules were based on the assumption that the survivor benefits would have a lower value than the pension, and so allocated all of the survivor benefits that accrued during the relationship to the surviving spouse. This worked reasonably well where the survivor benefits were reduced in value but meant that the surviving spouse received double the share in any case where the survivor benefits equaled the commuted value of the benefits (now the position in BC because of provisions of the current PBSA).
Cases sometimes arose under the FRA rules where the parties intended an equal division of the benefits but did not override the default rules. When the member died, and these questions had to be resolved, they were typically resolved by the parties agreeing to rectify the court order or agreement to provide for an equal division. Typically, giving the surviving spouse a disproportionate share meant that there were insufficient resources to support the deceased member’s dependents.
| There may be cases where the agreement or order is silent about what is to happen in this scenario, and the limited member, or the member’s estate, may argue that the FRA rules should continue to apply. If the application of those rules would produce a result that differs from an equal division of the benefits, however, it is important to note that the court retains a jurisdiction to revise pension division arrangements in any case where they would operate inappropriately in the existing circumstances. [FLA, s 131] It is unlikely that a court would exercise this jurisdiction to enforce an accidentally unequal division of the benefits. In cases where the parties intended an equal division of benefits (the usual case) but the default rules did not achieve that, the usual remedy would be rectification based on their intentions, or based on mutual mistake: see, for example, Madsen v Madsen, 2012 BCSC 1535 (which dealt with rectification where the parties mistakenly specified the wrong legislation to govern the division of the benefits). | |
| 8.6 Administrator consultation with parties | The FLA previouslyprovided that the FLA default rules did not apply in any question where the administrator consulted with the parties under the FRA. This provision has been repealed. What is the policy rationale for that? |
| The default rules under the FLA apply in any case where the parties’ agreement or order does not adequately deal with the issue. Section 253(3) of the FLA previously provided that, in any case where the administrator consulted with the parties under the FRA and received directions on particular issues, those directions would govern the issue. That section was repealed as, over a decade after the FLA came into force, it was considered that the pension division arrangements had been completed for any situations in which the parties had consulted with the administrator under the FRA. | |
| 8.7 Required beneficiary designation not made | The member died (before pension commencement). Spouse1 has served the plan administrator with a court order made 5 years ago providing that she is entitled to a share of the benefits and that the member was required to designate her as beneficiary of the survivor benefits. But the member designated spouse2 to be the beneficiary of the survivor benefits. Who is entitled to the benefits? |
| In a case like this, the best course may be to interplead (pay the money into court if it is a lump sum benefit or, if it is an annuity, file materials with the court registry describing the nature of the asset). Spouse1 and spouse2 must then establish their claims in court. As to the principles that govern rights in this situation: the court will protect the interests of spouse1 notwithstanding that the beneficiary designation was not made. There may be a remedy against the member’s estate for breach of the pension division arrangements. [Munro v Munro Estate, 1995 CanLII 1396, 4 BCLR (3d) 250 (BCCA)] If the benefits have already been paid to a third party, spouse1 may have a claim against the third party. [Gregory v Gregory, 1994 CanLII 2274, 92 BCLR (2d) 133 (BCSC); Fraser v Fraser, 1995 CanLII 1594, 16 RFL (4th) 112 (BCSC)] If the administrator made the payment without any notice of the court order, however, there would be no liability on the administrator to pay the benefits twice. See also para 14.1. It is also worth noting that, under the FRA, it was held that pension division arrangements finalized before the member’s death are enforceable even if the former spouse has not become a limited member by that date: Martens v Martens, 2009 BCSC 1477. Filing the forms to become a limited member was regarded as an administrative formality, not a necessary requirement to perfect substantive rights to the benefits. Of course, if the forms are not filed, in the meantime the administrator would be required to administer the benefits in accordance with the plan text. If the forms are not filed until after death benefits are paid out from the plan, for example, the former spouse would have to look to the recipient of those benefits, not the plan administrator, for recourse. Since the same administrative provisions are carried forward under the FLA, it is expected that a court would consider the earlier precedent binding. See para 13.24. | |
| 8.8 Designating limited member beneficiary | Is there any reason why a member who is not yet receiving a pension should designate the limited member a beneficiary of the survivor benefits? Is this necessary to provide security for the limited member receiving the proportionate share? |
| Not for dividing benefits in a local plan. Once a former spouse becomes a limited member, the limited member is secure for the proportionate share and would look to the administrator to enforce that interest. The idea that a former spouse should be designated beneficiary of survivor benefits derives from the original Rutherford Order, where that was the only possible way of providing some measure of security to the former spouse for receiving the proportionate share. The implementation of pension division legislation in B.C. in 1995 meant that, since that date, the beneficiary designation was no longer necessary as security. That does not mean that there may not be other reasons and situations where it would be appropriate for a member to keep a former spouse as beneficiary, just that it’s not a necessary part of dividing pension benefits in local plans under Part 6. If providing security for the former spouse’s share is the only reason for the designation, the designation may well cause unexpected problems depending on how future events unfold (such as where the benefits are divided, but the beneficiary designation is left unchanged: see paras 2.5 and 8.4). If the benefits are in an extraprovincial plan, however, a beneficiary designation can provide important security for the former spouse. For that reason, the FLA requires the member of an extraprovincial plan to make the beneficiary designation. [FLA, s 123(4)] See para 7.6. | |
| 8.9 Change in spousal status after retirement | Under our plan, if the member’s pension has commenced, a survivor benefit is payable only if the survivor continues to have spousal status at the date of the member’s death. We are administering a division of a matured pension and the limited member, who would otherwise be entitled to the survivor benefit, no longer qualifies as a spouse. What happens when the member dies? |
| The limited member would still be entitled to receive the survivor benefits. Entitlement to 60% survivor benefit |
| For plans subject to the B.C. PBSA and the federal PBSA, if the member has a spouse at the date of pension commencement, the plan is required to provide the spouse with a 60% survivor benefit, unless the spouse signs a prescribed waiver allowing the member to take a different form of pension. If the waiver is not signed, the 60% survivor benefit is payable to the spouse even if at some future date there is a change in spousal status. Entitlement to this statutory benefit is determined at the date of pension commencement, meaning that a later separation, divorce or annulment would not affect the plan’s obligation to pay the survivor benefit. [See para 5.23] This is a common feature of pension standards legislation across Canada. Waiving the 60% survivor benefit If the member’s spouse waives the statutory 60% survivor benefit, the member is permitted to choose another form of pension provided under the plan text, such as a pension payable only for the member’s lifetime, or a pension that pays some other level of survivor benefit (such as a 50% survivor benefit, or a survivor benefit in the same amount as paid during the member’s lifetime). There is a great deal of variety in the forms of pension that may be selected. Some plan texts providing for survivor benefits impose a condition that the survivor benefits are payable only if the spouse continues to be the member’s spouse at the date of the member’s death. In B.C., this condition has no effect. The PBSA expressly provides that change of spousal status after pension commencement does not affect entitlement to survivor benefits elected at pension commencement, whatever the plan text may say. [PBSA, s 81(2)] Administrators of plans that provide for a different result should give priority to amending the plan text to comply with the requirements of the governing legislation. Note that some variable benefit plans may determine spousal status as at the date of the member’s death and not pension commencement. | |
| 8.10 Waiver signed without full information | The member’s spouse signed the prescribed waiver, and the member elected a 50% survivor [SN8] pension that is payable to the person who qualifies as the member’s spouse at the date of the member’s death. The member and spouse were separated for more than 2 years before his death. Under our plan a person no longer qualifies as a spouse after 2 years’ separation. The former spouse says she did not understand that the pension could end without benefits being payable to her on the member’s death. She’s challenging the waiver saying it was signed without full information. Is that a ground for challenging a waiver? |
| This was an issue that arose before PBSA, s 81(2) came into force (see para 8.9), but may still be relevant if the plan is regulated outside B.C. A waiver is not effective unless the person signing it was provided with full information about what was being waived. Consequently, an issue that must be considered is whether the former spouse had full knowledge of what was being received in exchange for what was being given up when the waiver was signed. In all too many cases where a spouse signs the prescribed waiver, the information provided by the plan administrator is silent, or ambiguous, about entitlement depending upon continued spousal status and it is expected that, in those cases, the waiver would be ineffective (see, for example, Deraps v Coia, 1999 CanLII 3790, 179 DLR (4th) 168 (Ont CA)). | |
| 8.11 Payment to limited member’s estate | Section 117(4) says that if the limited member dies before receiving all of the limited member’s share, the administrator must pay that to the limited member’s estate. What happens if the limited member chooses a separate pension, and dies after payments commence? |
| Section 117(4) applies only where the limited member has not yet chosen to receive the proportionate share by a lump sum transfer or a separate pension. If the lump sum transfer has been made, there is no remaining entitlement. Similarly, if a separate pension is chosen, the separate pension represents all of the limited member’s share. It will have been calculated based on the election made by the limited member. If the limited member chose a single life pension, all of the limited member’s entitlement is received as of the death of the limited member, by definition (subject to any guarantee period elected by the limited member or any residual benefit that may be available if, for example, payments were less than contributions associated with the share). |
| 8.12 Proportionate share if limited member dies before the member’s pensions commences | What is the proportionate share if the limited member predeceases the member before the benefits are otherwise divided? |
| If the limited member dies before the member’s pension commences, and before the benefits are otherwise divided, a proportionate share of the commuted value of the benefits is paid to the limited member’s estate. [FLA, s 124(4)] See para 8.1. The proportionate share would be calculated by the same formula that would have been used if the benefits were divided during the parties’ joint lives. [Reg., s 17] See also para 2.18. | |
| 8.13 Agreement waives survivor benefits of pension already in pay[SN9] [GU10] | The member has provided us with a separation agreement in which the former spouse waives any claim to the pension benefits. The member is receiving the pension and there is a 60% survivor benefit for the former spouse. The member wants to change the beneficiary of the survivor benefit to his new spouse. What are our obligations? |
| See paras 5.8, 5.21 and 11.15. See also Zant v Zant, 2022 BCSC 2023. | |
| 8.14 Competition between separated spouse and common law spouse | The member died (before pension commencement). The member and the former spouse (spouse1), who were married, separated 4 years ago. The member was in a marriage-like relationship with a new spouse (spouse2) at the date of his death. Who is entitled to the survivor benefits? Spouse1 has now filed a Form P1. |
| The administrator must pay the survivor benefits to spouse2. Although spouse1 may have rights in this situation, a court order must be obtained to advance them (or there must be an agreement between the parties recognizing spouse1’s interest). Separation triggers rights under the FLA, including vesting an undivided half interest in family property in each of the parties, and proceedings can be commenced under the FLA even after the death of a party, provided no limitation period has expired (for example, if the parties are common law partners, the proceedings must be commenced within 2 years of the separation: Howland Estate v Sikora, 2015 BCSC 2248. This means that it is still open to the former spouse to make a claim to a share of the pension benefits under the FLA, and the former spouse can still send in a Form P1 for information about the benefits, notwithstanding the death of the plan member. See also para 2.10. |
| That doesn’t mean the plan has to wait to see what happens. The possibility of a family law claim doesn’t override the administrator’s obligations with respect to administering the benefits, which in this case would be paying out the survivor benefits. [FLA, s 142] Because spouse1 has filed a Form P1, the administrator must first give spouse1 30 days’ notice before paying out to spouse2. If in this time spouse1 gets an injunction or starts legal proceedings, consider interpleading. [See para 8.7] See paras 15.228 and 15.29 for information about calculating the notice period and determining when notice is deemed to be received. | |
| 8.15 Death of member and supplemental benefits | The former spouse is a limited member under our plan, with entitlement to a proportionate share of registered benefits and also of supplementary benefits. The former spouse has not yet received the share of the benefits by a separate pension or a lump sum transfer. The member has just died. We know that the registered pension is now to be divided with the limited member, under FLA, s 124(2). But what is the position with respect to the supplemental benefits? |
| Part 6 does not automatically provide for the division of supplementary benefits on the death of the member because not all supplementary plans provide for the payment of benefits if the member dies before pension commencement. If, however, the supplemental pension plan pays a survivor benefit in these circumstances, then the former spouse is entitled to a share of the supplemental benefits determined as of the valuation date determined in accordance with the regulations. [FLA, s 124(1)(b) and (2)] The Division of Pensions Regulation provides that the valuation date must be not earlier than the end of the month immediately preceding the death of the member. [Reg., s 23(3)(c)] | |
| 8.16 Former spouse still qualifies as spouse under the PBSA | The member has applied for pension commencement. Our records show that the member has a spouse. The member has provided us with an agreement under which the spouse waived any claim to the benefits. But the information provided shows that the parties have been separated for less than two years. Doesn’t that mean that the former spouse still qualifies as a spouse under the PBSA rules? PBSA, s 80 says that the member must elect a 60% survivor benefit unless the prescribed waiver is signed. How do we sort this out? Does the member have to elect a 60% survivor benefit for the former spouse? Does the member have to get the former spouse to sign the prescribed waiver under the PBSA to choose another form of pension? |
| The agreement overrides the PBSA rules, including the statutory entitlement to the 60% survivor benefit. The FLA provides that the obligation on the member to choose the 60% survivor benefit no longer applies in the following circumstances: [FLA, s 145; see also PBSA, s 80(9)] pension benefits are divided; a former spouse becomes a limited member; there is an agreement adjusting for the former spouse’s pension entitlement in some other way; orthe former spouse waives any claim to pension benefits in a family law agreement. The policy underlying s 145 is to ensure that a former spouse does not benefit from the member’s pension benefits twice (once under the FLA, and then secondly under the PBSA). To summarize: the prescribed waiver is required only if the former spouse is entitled to survivor benefits under PBSA, s 80;a former spouse is not entitled to survivor benefits under PBSA, s 80 if there is an agreement that provides that the spouse does not receive any share of the pension (because that’s the effect of FLA, s 145, particularly s 145(4)); andtherefore, since there is no entitlement to the survivor benefits, there is no need for the prescribed waiver. The agreement eliminates the need for a prescribed waiver. Essentially, the agreement removes spousal status for pension purposes. |
| 8.17 Waiving the spousal benefits under PBSA | Does the spouse have to sign FLA Form P7 (“Withdrawal of Notice/Waiver of Claim”) to waive spousal entitlement that arises under the PBSA? |
| No, Form P7 would only be used to waive spousal entitlements in a marriage breakdown situation. The PBSA provides spouses with a number of rights, including: (a) the requirement that the member’s pension pay a 60% survivor benefit for the spouse; and (b) entitlement to priority over a designated beneficiary of benefits payable on the death of the member before pension commencement. In each case, the PBSA permits the spouse to waive these benefits by signing a prescribed waiver (see PBSA Reg., Schedule 3, Form 2 and Form 4). These rights also cease if FLA, s 145 applies (where the spouse has become a limited member of the plan or there is an agreement or order dividing the benefits). In neither of these cases is there any need for the spouse to also sign a Form P7 to waive the benefits. (Nor would Form P7 be sufficient for this purpose, if the parties have not adhered to the requirements of the PBSA.) | |
| 8.18 Former spouse still qualifies as spouse under PBSA | The member has died before pension commencement. The former spouse still qualifies as a spouse under the PBSA rules and so appears to be entitled to the survivor benefits under s 79, because the prescribed waiver under the PBSA was not signed. The member’s personal representative has provided us with a copy of an agreement where the former spouse waives any claim to the pension benefits. Does that override the entitlement of a spouse to survivor benefits under PBSA, s 79? Who is entitled to the survivor benefits? |
| The same position applies as discussed in para 8.16. The agreement overrides the PBSA rules. The FLA provides that once pension benefits are divided, or a former spouse becomes a limited member, or there is an agreement adjusting for the former spouse’s pension entitlement in some other way, or the former spouse waives any claim to pension benefits, the statutory priority of a spouse to survivor |
| benefits under the PBSA no longer applies to the former spouse. [FLA, s 145; PBSA, s 79(5)] The policy underlying s 145 is to ensure that a former spouse does not benefit from the member’s pension benefits twice (once under the FLA, and then secondly under the PBSA). Essentially, if FLA, s 145 applies, the former spouse no longer qualifies as a spouse for the purposes of s 79 of the PBSA, even if the parties have been separated for less than 2 years. Consequently, there is no requirement for the former spouse to sign the PBSA prescribed form. (The survivor benefits would be paid to the beneficiary designated by the member or, if none, to the member’s estate. This is a different situation from where the member has already elected a 60% survivor benefit for the former spouse when the pension commenced. Nothing in the PBSA affects the vested entitlement of the spouse: see para 5.21.) | |
| 8.19 Waiving the 60% survivor benefit under PBSA | This isn’t a situation where the parties’ relationship is ending (or, at least, we have no information about the relationship). The member wants to take a single life pension starting next month and the spouse has signed PBSA, Schedule 3, Form 2, waiving the 60% survivor benefit, but the form is set up to also waive other beneficiary rights and the spouse has not ticked that box. The member has elected a single life pension and designated his sister as the beneficiary of it (there is the possibility of a residual payment if the amounts paid to member during the member’s lifetime are less than the contributions made to the plan). The member also wants to designate his sister beneficiary of the benefits if he dies before pension commencement. Can we implement the member’s directions? |
| No. The PBSA provides that: a spouse can waive the 60% survivor benefit, using the prescribed form (which is Schedule 3, Form 2 of the PBSA Reg. See PBSA, s 80(4)). This would be Waiver A.a spouse who signs Waiver A gives up the 60% survivor benefit to allow the member to choose another form of survivor benefits is still entitled |
| to receive any other survivor benefits under the plan, unless the spouse also waives those other rights by completing the Waiver B portion of the Form (PBSA, s 80(5) and (6)). (c) even if the spouse waives the 60% survivor benefit and any other survivor benefit under the plan, this applies only to benefits payable after pension commencement. The spouse is still entitled to receive survivor benefits payable if the member dies before pension commencement (unless the spouse signs Form 4, set out in Schedule 3 of the PBSA Reg.: PBSA, ss 79 and 80(8)). This means that the member can choose the single life pension because the spouse completed Waiver A, but the spouse is still entitled to be beneficiary of the plan unless Waiver B is also completed. Note that while Waiver A must be completed prior to the member commencing their pension (and not more than 90 days before, see PBSA s 80(4)(iii)), Waiver B can be completed any time prior to the member’s death, including after pension commencement (see PBSA s 80(6)(a)(iii)).[SN11] The member can designate his sister to be beneficiary of survivor benefits payable before pension commencement provided that the spouse waives entitlement by signing PBSA, Form 4. See also paras 3.18, 5.12, 5.22, 8.17, 8.27, 11.17 and 15.49. | |||
| 8.20 Former spouse designated as beneficiary and member dies | The member has died before pension commencement. Benefits were divided with the former spouse some years ago, but the member designated the former spouse as beneficiary after the division was completed. For any other beneficiary, we would pay out the death benefits in a lump sum, remitting tax withholdings to CRA. Is the position different where the beneficiary is a former spouse? Can the former spouse choose to transfer the benefits to a registered plan to defer paying taxes until the funds are withdrawn from the plan? | ||
| This publication is unable to provide tax advice, and this question should be directed to CRA. However, Chart 9, in T4040, the Tax Guide published for RRSPs and Other Registered Plans for Retirement advises that a lump sum amount (up to a specified maximum amount) that a taxpayer is entitled to receive from a former spouse’s registered pension plan on the former spouse’s death can be rolled over to a registered plan, such as a registered pension plan, an RRSP or a RRIF. | |||
| 8.21 Former spouse designated beneficiary and | The member and the former spouse made an agreement that each would keep his or her own benefits, but that each would designate the other beneficiary of the benefits. Our plan was sent a copy of the agreement. The member has now decided to have the pension commence, designating his | ||
| member has a new spouse | current spouse as joint annuitant. Is this permitted, in light of the agreement with the former spouse? | ||
| The parties’ agreement cannot override the statutory priority (under PBSA, s 80(1)) enjoyed by the current spouse to be the joint annuitant. [Hamilton v O’Pray, 2015 BCSC 51] Unless the agreement or order is clearly drafted on this point, however, there may be questions concerning the member’s liability to the former spouse for not being able to maintain the beneficiary designation. In Hamilton v O’Pray, for example, the court interpreted the obligation as being restricted to maintaining the beneficiary designation until pension commencement. The member was not liable for the former spouse having no rights under the matured pension. In another case, the member’s obligation was viewed differently, and the member’s estate was liable for (1) the member failing to advise the former spouse that it was not possible to make the designation and (2) the member not making alternative arrangements to provide similar security. [Munro v Munro Estate, 1995 CanLII 1396, 4 BCLR (3d) 250 (BCCA); see para 14.1]. | |||
| 8.22 Former spouse designated irrevocable beneficiary and member has new spouse | The Wills, Estates and Succession Act, SBC 2009, c 13, permits a beneficiary designation to be made on an irrevocable basis (s 88). This means that it cannot be changed without the consent of the beneficiary. We’ve received a separation agreement that requires the plan member to designate the former spouse irrevocable beneficiary of the pension benefits until the former spouse receives the proportionate share of the pension benefits. The member is in a new relationship. Who gets the benefits if the member dies? | ||
| The former spouse would receive the proportionate share of the pension benefits determined as of the valuation date determined in accordance with the regulations and the member’s pension would be adjusted accordingly. The person qualifying as the member’s spouse at the date of death would be entitled to the survivor benefits (determined on the adjusted pension benefits). An irrevocable beneficiary designation prevents the member from changing the designation without the consent of the beneficiary, but it does not override the statutory priority the PBSA provides to a member’s spouse. | |||
| 8.23 Former spouse designated | Our plan has received a court order that gives the former spouse a share of pension benefits and requires that the member designate the former spouse beneficiary of the benefits until the former spouse receives the | ||
| beneficiary in court order | proportionate share of the benefits. Is this an irrevocable beneficiary designation? | ||
| The designation does not trigger the provisions of WESA, which require the designation to specify that it is made irrevocably. However, the effect is similar: the member cannot change the designation until the former spouse receives the proportionate share of benefits, unless the former spouse consents. The beneficiary designation, however, would not override the provisions of the PBSA respecting entitlement to survivor benefits: see paras 8.21 and 8.22. | |||
| 8.24 Former spouse designated irrevocable beneficiary subject to a contingency | The member and the former spouse made an agreement under which the member is required to designate the former spouse irrevocable beneficiary of the pension benefits, unless the former spouse remarries, or cohabits in a marriage-like relationship for 90 days. Does this qualify as an irrevocable beneficiary designation under WESA? | ||
| Making an irrevocable designation that is subject to a contingency would appear to go beyond what is contemplated under WESA, which provides for two types of designation, one that is revocable and one that is irrevocable. It would be difficult for the plan administrator to determine whether the contingency had occurred. In this circumstance, best practice would be for the plan administrator to not accept the beneficiary designation and explain why it cannot be administered. An irrevocable beneficiary designation that recognized that the member could change the beneficiary designation in favour of a new spouse, however, would be acceptable, because that recognizes the limitations imposed by the PBSA respecting the entitlement of a member’s spouse to survivor benefits. | |||
| 8.25 Can a former spouse be a joint annuitant? | The member’s pension has not yet commenced. The parties want to divide the pension using the rules that apply to matured pensions. They want to divide the monthly payments equally during their joint lifetimes and have the survivor receive all of the benefits on the death of the other party. This only works if the former spouse can be the joint annuitant. The member does not have a new spouse, but the former spouse no longer qualifies as a spouse under family or pension legislation. Can the member designate his former spouse to be a joint annuitant? | ||
| Not all administrators are prepared to permit this, but it is an option that some plan administrators (such as the Pension Corporation) make available. | |||
| 8.26 Former spouse waived share for a payment that was not made | The member and the former spouse made an agreement 20 years ago under which the former spouse waived any share of the member’s pension benefits in exchange for a payment of $4000. The former spouse has applied to become a limited member of the plan and claims that the payment was never made. The member says he paid the lump sum but is unable to provide us with any record of the transaction. He wants to designate his children beneficiary of the benefits in the meantime, but he is also terminating from the plan and has applied to transfer his benefits from the plan. What are the plan’s obligations in this case? |
| Whether or not the payment was made, the pension division arrangements do not give the former spouse an interest in the benefits, so the former spouse is not in a position to apply to become a limited member. (Filing to become a limited member requires an agreement or court order that expressly gives the former spouse an interest in the benefits.) [FLA, s 134] The former spouse may have legal remedies against the member, such as suing the member for the payment, and may even be able to set aside the agreement and advance a claim to the pension benefits. But it is not up to the plan administrator to determine whether or not the agreement has been carried out, nor what legal remedies may be available to the former spouse. However, the former spouse would still be able to request information from the plan concerning the benefits, by filing a Form P1. A “spouse” is entitled to request information from the plan, and a “spouse” includes a former spouse. [FLA, ss 133 and 3(2); see paras 13.8 and 13.23] If the former spouse files a Form P1, the plan is under an obligation to give advance notice about the member’s directions concerning transferring his benefits from the plan. But until the former spouse files a Form P1, the administrator would not be able to provide the former spouse with that information: see para 13.19. Nothing in the court order prevents the member from making a beneficiary designation, and there is no basis on which the former spouse (who separated from the member years ago and therefore no longer qualifies as a spouse under the PBSA) has a claim to be beneficiary of the plan, without first obtaining an agreement or court order to that effect. | |
| 8.27 Death of the member after separation | The member has died. We have a note on file advising that the member and spouse were separated and the date given is more than 2 years ago, so the spouse may no longer qualify as a spouse under the PBSA. No Forms have |
| been filed with us. What rights would the surviving former spouse have in this situation and what are the obligations placed on the plan administrator? |
| Basically, the whole structure of Part 6 is to ensure that plan administrators are not at risk from the issues that might arise from the breakdown of a relationship. To promote that position, the legislation provides that the administrator is not required to do anything towards dividing pension benefits until notified by one party or the other as required under Part 6. The fact that the parties are separated, and the administrator has notice of that separation, does not trigger duties by the administrator. That is the thrust of FLA, s 143 (and s 143(3) in particular). If the administrator is required to administer the benefits (here, take the necessary steps with respect to the death benefits) and there is a Form P1 on file, the administrator is required to give the former spouse notice. Or if there is an incomplete application to become a limited member, the notice obligation also applies. But if there is no notice obligation (the case here), there is no liability to the administrator for administering the benefits as required. [FLA, s 143(3)] Under the old FRA, Parts 5 and 6 were no longer available to a former spouse after the death of the other spouse, unless there was a triggering event and proceedings had been commenced before the death. The position is different under the FLA: separation is a triggering event, vesting a half interest in family property in each of the parties, and proceedings can be commenced under the FLA even after the death of a party, provided no limitation period has expired. See para 8.14. What this means is that the former spouse can still make a claim to a share of the pension benefits and can still send in a Form P1 for information about the benefits, notwithstanding the death of the plan member. That doesn’t mean the plan has to wait to see what happens. The possibility of a family law claim doesn’t override the administrator’s obligations with respect to administering the benefits. [FLA, s 142] The former spouse won’t be able to unwind steps legitimately taken in administering the benefits. If the former spouse is properly advised, he or she should commence proceedings, and apply for a restraining order so that death benefits are not paid out and preserve the possibility of receiving a share. |
| Otherwise, the former spouse’s claim would be to a share of whatever form the benefits take once there is a court order or agreement respecting the spouse’s entitlement. When a member dies before pension commencement, the plan administrator is required to prepare a pre-retirement death benefits statement, which must be provided to the deceased member’s surviving spouse. [PBSA, s 37(2)] This obligation to notify the spouse does not arise if there is no surviving spouse, within the meaning of the PBSA, or the surviving spouse’s interest has terminated because the required waiver was signed, or there has been a division of the benefits under the FLA. [PBSA, s 37(2)(b) and (6); FLA, s 145] If there is sufficient evidence that the parties were separated for longer than 2 years, so they are no longer spouses under the PBSA, then the former spouse would have no claim under the PBSA to survivor benefits. The administrator’s obligations are clear enough if there is a waiver, or satisfactory evidence that FLA, s 145 applies, but determining whether the member has a surviving spouse is a bit trickier. The first step in these circumstances would be to have the personal representative provide as much information as possible on the question of separation. | |
| 8.28 Waiver of 60% survivor benefit after death of the member | The member has died. The member’s former spouse is entitled to the unexpired guarantee period but has contacted us and wants to waive that benefit in favour of the member’s current spouse. Can this be done? |
| No. The PBSA would have permitted the waiver if it had been signed before the member’s death, but not after. [PBSA, s 80(6)(a)(iii); see para 5.13] The policy rationale is that waiver is permitted before the member’s death, because at that point the former spouse has only a right to receive the benefits. After the member’s death, there is no longer a right that is capable of being waived: the benefits have vested in, and now belong to, the former spouse. See also para 5.21. | |
| 8.29 Waiver of entitlement to LIF | The member terminated employment and pension benefits were transferred to a LIF. The member’s will left the LIF account to be divided between his 3 children. The benefits are substantial. However, at the date of death the member had a common law partner who is entitled to the LIF under the PBSA. The common law partner wants to give effect to the |
| deceased’s wishes and wants to waive any claim to the account. Is that permitted under the PBSA? |
| The benefits cannot be waived (see para 8.28 for a similar situation), but the common law partner will be able to give effect to the deceased’s wishes. PBSA Reg., s 125(1) permits the benefits to be paid to the surviving spouse on a non-locked-in basis. The surviving spouse would be required to pay taxes on the payment but could then pay the net benefits to the deceased’s children[SN12] . (This would not have been possible under the old PBSA, because it provided that benefits payable on the death of the LIF owner to a surviving spouse remained locked-in). |
[SN1]Cynthia Callahan-Maureen (Min. of Finance)- Note the name is B.C. Pension Corporation. Technically, Pension Corporation is not the “plan administrator”, it is the administrative agent for the boards of trustees of the public sector plans, which are the plan administrators.
[GU2]Pension Corporation to confirm accuracy of this statement.
[SN3]Adrian Rockwell ( BC Pensions) – Yes, this is correct
[SN4]Updated by Cynthia Callahan-Maureen (Min. of Finance)
[SN5]Updated by Stephen Cheng (Westcoast Actuaries)
[SN6]Updated by Adrian Rockwell (BC Pensions)
[SN7]Adrian Rockwell (BC Pensions) – My reading of FLA s. 253(2) suggests that this should say “…where a spouse became a limited member under the FRA but benefits had not yet been divided when the FLA came into force.”
[SN8]Updated by Stephen Cheng (Westcoast Actuaries)
[SN9]Adrian Rockwell (BC Pensions) – The text of the question specifies that the member is already receiving a JLLS 60% pension. The fact that the pension is already in pay is a key point that I think should be clarified in the “title” of the question to the left.
If, on the other hand, the member’s pension had not yet commenced, a separation agreement in which the former spouse waives any claim to the pension benefits could possibly be used to allow the member to designate a different beneficiary per FLA s. 145(4)(a).
[GU10]Group to discuss
[SN11]Updated by Adrian Rockell (BC Pensions)
[SN12]Stephen Cheng (Westcoast Actuaries) – I don’t think this could be “transferred”.