- If the pension is not in pay, up until the member retires, the non-member spouse can elect one of two options: the non-member spouse can elect to become a limited member of the plan and receive their portion of the member’s pension when the member retires or terminates membership in the plan or the non-member spouse can receive an immediate lump-sum payment from the plan to a locked-in retirement vehicle. If the member chooses to become a limited member of the plan, the amount of pension they will receive in retirement will be calculated as a portion of the member’s actual retirement pension (i.e. including future earnings and early retirement benefits) and will be converted to a pension on their life (i.e. it will not end on the death of the member). If the non-member spouse elects to transfer their portion of the pension out of the plan, the pension value is calculated assuming that the member terminates at the date of the application for the transfer; the calculation of the lump sum is not done as at the date of separation and includes earnings increases after the date of separation (up to the date of application). Depending on the age of the plan member (and the likelihood that the plan member will terminate membership in the pension plan), the lump sum transfer value may be less than the fair value of the deferred pension from an actuarial/economic perspective (click here for more information).
- If the pension is in pay, the non-member spouse will receive their portion of the pension payment directly from the administrator. The non-member spouse’s portion of the pension is converted to a pension on their life and will continue to be paid for as long as the non-member spouse is alive (it does not end when the member dies).
Note that federally regulated pension plans (i.e. banks, airlines, rail) may not offer the above pension division options 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.