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How are pensions in Alberta divided on marriage breakdown?

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Under Alberta’s Employment Pension Plans Act, pensions can be divided differently depending on the applicable scenario:

  • If the pension is not in pay and the member is more than 10 years away from their pensionable age (age 65 in most pension plans), the non-member spouse can receive a lump sum transfer from the pension plan to a locked-in retirement vehicle. This lump sum value is calculated by assuming that the member terminates and begins receiving a pension at their pensionable age. This calculation often results in a very low value for the pension (ignoring possible early retirement benefits, future increases, etc.). In many cases this value is not a fair value to assign to the pension from an actuarial/economic perspective click here for more information.
  • If the pension is not in pay and the member is less than 10 years away from their pensionable age (age 65 in most pension plans), the non-member spouse can either take an immediate lump sum transfer (same as when the member is more than 10 years away from pensionable age) or they can defer the division and receive a lump sum transfer when the member retires/terminates/dies in the future. The reason that the spouse would defer the settlement is because the lump sum will be calculated at the future date and will include benefits such as early retirement enhancements that the member will become entitled to in the future. Depending on the death/termination benefits under the plan, this deferral may not provide any additional value if the member dies or terminates prior to retirement. If the member does retire and receives a pension from the plan in the future, the plan has the option of providing the non-member spouse with a separate pension (not all plans offer this option).
  • If the pension is in pay, the non-member spouse will receive their portion of the pension payment directly from the administrator. Please note that by default this pension is only paid in accordance with the form of pension elected by the member at retirement, and consequently, may not continue after the member’s death. The plan has the option, however, of converting the spouse’s share to a pension payable on their life (not all plans offer this option). In addition, the plan may offer the non-member spouse the option to take their portion as a lump sum.

The Alberta Public Sector Pension Act (which covers the Local Authorities Pension Plan, the Mangement Employees’ Pension Plan, the Public Service Pension Plan, the Special Forces Pension Plan and the Universities Academic Pension Plan) and the Teachers’ Pension Plans Act are partially exempted from Alberta’s Employment Pension Plans Act; the Employment Pension Plans Act only applies to these plans to the extent prescribed by regulation under the Public Sector Pension Act and the Teachers’ Pension Plans Act. This means that the pension division options on marriage breakdown described above do not necessarily apply to members of these pension plans; however, the pension division options outlined above apply to pension plans under both the Public Sector Pension Act and the Teachers’ Pension Plans Act.

Note that federally regulated pension plans (i.e. banks, airlines, rail) may not divide the pension in the same manner as mentioned above and may only allow the division options available under the federal Pension Benefits Standards Act. Under the federal Pension Benefits Standards Act, up to 100% of the benefits earned during the relationship can be assigned to the spouse. If a portion of the member’s pension benefits are assigned to the spouse, the non-member spouse is deemed to have been a member of the pension plan and have terminated their membership in the plan. Most federal pension plans have established administrative policies as to how the non-member spouse can receive their share of the pension, however, typically they will have the choice of an immediate lump sum transfer or a deferred pension in the plan if the member is not retired and they will receive a pension from the plan if the member is retired (the plan may offer a lump sum option and they may convert the spouse’s pension to one payable for their lifetime). For more information, click here.

Federal government pensions are divided in accordance with Pension Benefits Division Act which only allows an immediate lump sum transfer from the pension plan to the non-member spouse. For more information, click here.