Amount transferred to a former spouse
Former spouses share amounts accumulated in the member's pension plan and not the pension that the member will receive at retirement. This applies to all types of plans, whether the member is retired or not. The member's former spouse receives an entitlement to a sum that can only be used when he or she retires.
Example
The member is retired and receives an annual pension of 20 000 $. The value of that pension is 220 000 $. He divorces and agrees to give half of his plan to his former spouse. Therefore, she will receive 110 000 $, plus interest. The member's pension will be decreased to take into account the amounts transferred to her. See the section entitled Adjusting benefits after partition.
Amount transferred to a former married spouse
The amount transferred to a former married spouse is the amount indicated in the judgement, or else in the agreement that was confirmed in the judgement, plus interest. The amount is usually expressed either as a proportion (for example, half of the value of benefits accumulated during marriage) or else as a fixed amount (for example, 20 000 $).
Amount transferred to a former de facto spouse
The amount transferred to a former de facto (common law) spouse is the amount provided for in the agreement, plus interest.
Interest on amounts
In addition to the amount provided for in the judgment or agreement, the former spouse will receive the applicable interest, even if the judgment or agreement makes no mention of it.
The interest is calculated as of the date of the valuation of property (end of the conjugal union or the date of the institution of the action), until the date on which the money will be transferred to the former spouse's name.
Rates used to calculate interest
Interest is charged to the plan member
After partition, the plan member's benefits will be reduced by the value of the capital and interest transferred to the former spouse.
Payment of interest is required under the Regulation respecting supplemental pension plans
It serves no purpose, and is sometimes illegal, to set the date of the valuation of benefits on the same date as the judgment so that a former spouse will receive exactly half of the plan member's benefits on that date. The Regulation makes provision for the mandatory addition of interest to ensure that former spouses are not penalized because of the length of time that passes before receiving their portion of the benefits.
To avoid paying interest...
Former spouses can agree that the share of the benefits paid to the plan member's former spouse is fixed and deemed to include interest. However, long legal proceedings can penalize the former spouse, since there will be no compensation for the waiting period.
Limit of 50% of a member's benefits
Former married spouses
The Civil Code makes provision that a plan member cannot transfer more than half of the total value of his or her benefits (and not half of the value of benefits accumulated during the marriage) as established on the date on which the property was valuated (institution of the action or end of conjugal relationship).
The limit applies to the total value of all of the member's supplemental pension plans, if there is more than one. The calculation can be made without taking into account the interest to be added.
The limit applies to partition of the family patrimony only. There is no limit when a plan is partitioned for another reason.
Former de facto spouses
Under the Supplemental Pension Plans Act, de facto (common law) spouses cannot agree to transfer more than half of the total value of benefits as established at the end of their conjugal relationship.
This limit is calculated without taking into account the interest that to be added. Unlike married spouses, the limit must be respected for each of the member's pension plans.
Locking-in of the amount transferred to a former spouse
Since the aim of a pension plan is to give members an income at retirement, the same principle applies to the amount transferred to a former spouse.
Except in special cases, the former spouse can only withdraw the amount at retirement. This is called "locking-in". Therefore, the former spouse should not count on that money to buy a new house, for example.
Though there are exceptions, the plan administrator carries out partition by transferring the amount to which the former spouse is entitled into an authorized transfer instrument, such as a locked-in retirement account (LIRA), a life income fund (LIF), an annuity contract or another pension plan. The former spouse must choose the instrument and financial institution into which the amount will be transferred.
Cases where the amount can be transferred in cash to a former spouse
The former spouse can receive the amount in cash in the following cases:
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If the amount to be transferred (capital + interest) is less than 20% of the maximum pensionable earnings (MPE) under the Québec Pension Plan for the year in which payment will be received. The MPE is established in conformity with the Act respecting the Québec Pension Plan.
Example
In 2012, the MPE is 50 100 $. The plan member's former spouse can therefore receive payment in cash if he or she is entitled to less than 10 020 $.
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If the former spouse has not lived in Canada for at least 2 years.
One has to have lived outside of Canada for at least 2 years in order to no longer be considered a resident.
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If a member's benefits are not locked-in.
If only a part of a member's benefits are not locked-in, the amount transferred to the former spouse will be not locked-in in the same proportion. For example, if a plan member in a simplified pension plan has 20 000 $ in a locked-in account and 20 000 $ in a not locked-in account, half of the amount transferred to the former spouse can be paid in cash.
Amounts received in cash are taxable
However, it is usually possible to postpone taxation by transferring the money directly into a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF).
Insolvent plan
For a defined benefit pension plan that is insolvent (the annual statement indicates the degree of the plan's solvency), it is possible that a former spouse may not immediately receive the total amount owing to him or her. The balance will be received within a time period that can be up to 5 years.
Example
The plan is 90% solvent. The former spouse is entitled to 20 000 $. 18 000 $, that is, 90% of the amount to which the former spouse is entitled, is transferred immediately. The balance will be transferred within a maximum time limit of 5 years.
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