Partition of benefits – SPPs and VRSPs
Do you have to advise spouses when a conjugal union breaks down? Here are the main rules regarding the partition of benefits provided for in the Supplemental Pension Plans Act and the Voluntary Retirement Savings Plan Act.
If you are a
supplemental pension plan administrator, consult the section
Partition of benefits – SPPs, which is designed for you. Professionals who would like greater detail on the rules of partition, specifically
actuaries who would like to know more about the calculation rules, can also consult it.
Breakdown of a union
The breakdown of a union includes:
- a divorce
- a separation from bed and board (legal separation)
- an annulment of marriage
- an annulment of a civil union
- a dissolution of a civil union
- the end of the conjugal relationship of de facto spouses (de facto separation).
The breakdown of a union excludes the de facto separation of married spouses or spouses in a civil union.
An asset that should not be overlooked
Following the breakdown of a union, married spouses and spouses in a civil union can have partition carried out on the benefits accrued in the plan to which one of the spouses is a member. The same applies to
de facto (common law) spouses if they are recognized as such.
Pension plans are part of the family patrimony. Plans are a major asset and an important element in retirement planning. Married couples and couples in a civil union should take their pension plans into account when having partition carried out on property accumulated during the union.
Partition consists of transferring a share of the value of the member's pension plan and not part of the pension that he or she has accumulated, even if the member is retired.
To make decisions about the partition of a plan, it is essential to know how much the accrued benefits were worth at the time of the breakdown of the union. Observing certain conditions, the plan administrator can provide spouses with a statement of benefits that indicates the value.
Step 1: Valuating benefits
Step 2: Partition
Plans that are affected
This section on partition is only pertinent to the following plans:
- Voluntary retirement savings plans (VRSPs)
- Supplemental pension plans (SPPs):
- Defined-contribution plans, including:
- Simplified pension plans (SIPPs)
- Defined-benefit plans, including:
- Member-funded pension plans
- Defined-contribution and defined-benefit pension plans
- Multi-employer negotiated-contribution pension plans
- Target-benefit pension plans
In the case of a supplemental pension plan, this section on partition applies only if the member's benefits are subject to the Supplemental Pension Plans Act. This is the case if the plan member has a job
in Québec under provincial jurisdiction in the private, municipal or university sector. Some members' benefits in the parapublic sector are also subject to the Act.
The place where the member worked when accumulating benefits determines whether Québec law applies. This is the case if a person works in Québec, even if the pension plan is administered outside the province or registered with a monitoring agency outside Québec.
There's a word for it!
Several terms are used in talking about supplemental pension plans:
- Pension plans
- Registered pension plans (federal)
- Employer pension plans
- Private pension plans
Plans or savings that are not affected
- Québec Pension Plan
- Canada Pension Plan
- Public and parapublic sector plans administered by Retraite Québec
- Plans in the private and public sector that are under federal jurisdiction (banks, interprovincial transport and telecommunications businesses, federal public service, etc.)
- Pension plans in the private, municipal or university sector related to a job outside Québec
- Individual or group registered retirement savings plans (RRSPs)
- Registered retirement income funds (RRIFs)
- Locked-in retirement accounts (LIRAs) and Life Income Funds (LIFs)
- Deferred profit-sharing plans (DPSPs)
- Tax-free savings accounts (TFSAs)
- Pensions paid by an insurer, where there is no longer a relationship between the pensioner and the supplemental pension plan to which he or she contributed. This is the case, for example, when the pension was taken over by an insurer when the plan was terminated.