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News



March 27, 2013
Ontario court’s common-law ruling could disrupt millions of pensioners

An Ontario Court of Appeal decision awarding the proceeds of a deceased man’s pension to his divorced wife rather than the common-law spouse with whom he was living at the time of his death could result in many costly lawsuits, a loss of pension assets and the re-assignment of pension earnings, according to lawyers representing various prominent pension plans.

According to the pension plans’ representatives, the Court’s decision overturned a 25-year administrative practice of awarding pension benefits on death to the “spouse in the house” (often a person living in a common-law relationship with the deceased individual at the time of his/her death) rather than to divorced or estranged spouses.

Reports suggest that could mean common-law spouses who are now in receipt of survivor benefits from pension plans may be disentitled in favour of deceased members’ divorced or separated spouses.

According to reports published in the Toronto Star, up to two million people could be affected by the ruling.

“The ruling has very serious implications for pension plans, their members and the large number of common-law spouses who have received payments over the years, and whose entitlements may now be questioned,” says Ontario Teachers’ Pension Plan President James Leech.

The ruling could also result in increased pension costs and a reduction in payments to pensioners and their survivors, warns pension consultant and actuarial firm Morneau Sheppell.

The controversy stems from an October 31, 2012 decision by the Court that awarded the man’s pension assets to his former spouse instead of his common-law spouse.  Since both the separated spouse and the common-law spouse met the spousal definition, the Court had to base its decision on Section 48(3) of the Pension Benefits Act (PBA), which deals with the disbursement of benefits to spouses “living separate and apart from the member.”

In its assessment, the Court concluded that a common-law partner can become a legal spouse only by living in a conjugal relationship with a member.  However, since it is possible for legally married spouses to live separate and apart, the terms of the PBA must then refer only to legally married individuals.  As a result, the Court awarded the benefits to the separated spouse.  (See the January 2013 edition of the Coughlin Courier for background.)

The common-law spouse is appealing the ruling to the Supreme Court of Canada.

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