- If the pension is not in pay and the member is not eligible for an unreduced pension, 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 membership in the pension plan. This calculation often results in a very low value for the pension (ignoring possible early retirement benefits, future increases, etc.). In most cases, this value is not a fair value to assign to the pension from an actuarial/economic perspecitve click here for more information.
- If the pension is not in pay and the member is eligible for an unreduced pension, the non-member spouse can either take an immediate lump sum transfer (same as when the member is not eligible for an unreduced pension) or they can defer the division and receive a pension when the member retires.
- 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.
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.