Pensions – valuation issues – Marc J. Coderre
When spouses separate, their property needs to be equalized under the mechanism set out in the Family Law Act. All family lawyers are familiar with this.
Pensions are viewed as property. Therefore, they need to be valued. For individuals employed by the Federal Government, they need to understand that there is a difference between the value that can be provided by the Federal Government under the Pension Benefit Division Act and the formula dictated under the Family Law Act to value pensions. Very simply, the methodology is different and the pension values will be different. A Federal Government employee needs to have his/her pension valued by a qualified actuary.
The Federal Government, under the Pension Benefits Division Act, will produce a value which is referred to as the maximum transferable amount. This represents 50% of the pension that could be transferred to the non-member spouse. That value is calculated by the government as of the date of the report.
The value of a pension under the Family Law Act referred to as the Family Law Value is the value of a pension on a very specific date, the date of separation. That date is fixed and does not change.
Some of the reasons that can explain the differences in the values are, and not limited to, the mortality assumptions, the discount rate, various employment assumptions, retirement age etc.
In the end, the proper way to value a Federal Government, in Ontario, upon separation, is to have a qualified actuary provide a report using the prescribed formula under the Family Law Act.
For guidance on such matters, please feel free to contact me.