“A spouse’s interest in a pension plan constitutes “property” as defined in the FLA, and therefore, prima facie, it must be included in that spouse’s NFP calculation. See the decisions in Jackson v. Mayerle, 2016 ONSC 72, and Martin v. Martin, 2018 ONSC 6804.
A spouse’s interest in a pension plan may be removed from his or her NFP calculation and dealt with separately in certain circumstances that are set out in s.10.1(3), (4), and (5) of the FLA. Those sections of the FLA give the court some options for dealing with pension divisions outside of the NFP calculations. The options include the transfer of a lump sum out of the pension plan, or the division of periodic pension payments if the pension is in pay. See Fawcett v. Fawcett, 2018 ONCA 150 at paras. 31-32, Grassie v. Grassie, [2013] O.J. No. 1030 at paras. 60-66, L.M. v. D.B.M., 2017 ONSC 5197 at para. 73, Jackson at para. 597, and Martin at paras. 160-170.
A survivor’s benefit pension is a pension in its own right as it represents an expected income stream that can be actuarially valued. It is analogous to the pension entitlement of an employee who is not retired. See Bennett v. Bennett, [2004] O.J. No. 5808 (Div. Ct.) at para. 20.
A survivor’s benefit pension falls within the definition of “property” in the FLA and prima facie must be included in a spouse’s NFP calculation. See the Divisional Court decision in Bennett at paras. 20-27. Also see the trial decision in Bennett, reported at 2003 CanLII 1957 (ON SC), 68 O.R. (3d) 619, MacMillan v. MacMillan, [2000] O.J. No. 104 at paras. 26-28, and Withers v. Withers, [2013] O.J. No. 1441 at para. 69.
There is no court decision at any level that specifically states that a survivor’s benefit pension cannot be removed from the NFP calculations and dealt with separately. However, in every case in which a survivor’s benefit pension has been found to have value, the court has included the survivor’s benefit in the NFP calculations.
In the Bennett case, the husband had acquired a pension plan through which the wife had a survivor’s benefit pension. The trial judge included the value of the wife’s survivor’s benefit pension in the calculation of the equalization payment. Writing for the Divisional Court, Pierce J. wrote at para. 27 that “the survivorship pension is carved out of the pension as a whole, with the result that Mr. Bennett receives a reduced monthly benefit in his pay envelope by virtue of the plan funding a survivor pension for his wife.”
In the MacMillan case, both parties agreed that the husband’s pension should be excluded from the equalization payment and divided at source. At issue was the treatment of the wife’s survivor’s pension benefit. The trial judge held that the wife’s survivor’s pension benefit was to be valued and included in her NFP calculation for the purpose of determining the equalization payment.
In the Withers case, the husband had acquired a pension that included the wife’s survivor’s benefit pension. At trial the wife submitted that it would be fundamentally unfair to include her survivor’s pension in her NFP calculation because to do so would cause her to suffer a financial hardship and because she may never actually receive a payment from the survivor’s pension. The husband submitted that the wife’s survivor’s pension had value as the husband had in fact contributed money, or money’s worth, through his employment, to the acquisition of the survivor’s pension. Relying upon the Bennett decision, the trial judge in Withers held that the wife’s survivor’s pension must be included in the wife’s NFP calculation for the purpose of determining an equalization payment.
In Armstrong v. Armstrong, 2016 ONSC 126, the wife’s survivor’s pension was not included in the NFP calculations, but the circumstances were very different than in the present case. In Armstrong, unlike the present case, the terms of the husband’s federal pension provided that the wife’s survivor’s benefits would terminate on divorce. Wein J. found that the wife’s survivor’s benefits should not be included in her NFP because the parties’ divorce was almost a certainty and the wife’s survivor’s benefit was “very unlikely to vest.” Thus, it was not included in the wife’s NFP calculation as it had no value.
Given the above-mentioned court decisions, I accept that the applicant’s survivor pension in this case is property in the form of an interest in a pension plan, and it has value. Therefore, it must be included in the applicant’s NFP calculation unless there is specific authority in the FLA to exclude it.”