Earlier this month, the Financial Services Commission of Ontario (FSCO) published a new form that former spouses may use to waive their rights to survivor benefits under a retired member's defined benefit (DB) pension. Consulting firm Morneau Shepell warns that it is important to understand the consequences of using it.
On March 1, FSCO introduced Form 8, Post-retirement Waiver of Joint and Survivor Pension by the Former Spouse of a Retired Member on Spousal Relationship Breakdown. In Ontario, spouses typically have a right to at least 60% of the survivor pension after a plan member dies.
Fairly common as part of divorce
In an article posted to its web site earlier this week, benefits consulting firm Morneau Shepell notes that it is fairly common for a retired member to have a former spouse removed as the survivor under a DB pension plan as part of a divorce. Besides completing Form 8, Morneau Shepell says the following other requirements need to be met in order to waive the survivor benefit:
- The former spouse was the spouse of the retired member on the date when the first instalment of his or her pension was due.
- The pension valuation and division rules that came into effect on Jan. 1, 2012 apply.
- The former spouse received a Statement of Family Law Value (FSCO Family Law Form 4E) and was identified as the spouse in Part D (Spouse/Former Spouse of Retired Member Information).
- The waiver is included in the final court order or separation agreement.
- The pension has not already been divided.
- Form 8 must be sent to the administrator of the pension plan, not FSCO. Upon receipt of Form 8, the administrator must satisfy itself that all requirements have been met.
Morneau Shepell goes on to describe Form 8 as "helpful" in that it provides clear direction on how the survivor pension can be waived, but warns that it is still important that counsel for a retired member and the former spouse understand the implications of proceeding with the waiver.
"Limitations imposed by the pension plan text and income tax legislation may mean that some of the value of the survivor benefit may be lost through the waiver," concludes the article. "The pension plan administrator can provide information to both parties, but should be careful to provide accurate information and to maintain neutrality between the parties."