PBA Amendments in Response to Carrigan Case Become Law

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Following the recent provincial election, Ontario’s Liberal government re-introduced the budget bill which had been defeated during the last session of the legislature. With the Liberals’ new majority in the legislature, the budget bill passed easily this time around. Bill 14, the Building Opportunity and Securing Our Future Act (Budget Measures) Act, 2014, received royal assent on July 24, 2014.

Among other things, the budget bill re-introduced changes to the Pension Benefits Act (PBA) to address the October 31, 2012 decision of the Ontario Court of Appeal in Carrigan v. Carrigan Estate.

Ontario Court of Appeal Decision

In a previous blog post, we set out in detail the implications of the Carrigan case, which essentially established a new priority scheme for the payment of pre-retirement death benefits, and by extension joint-and-survivor benefits, under the PBA.

In a nutshell, the Court of Appeal held that where a pension plan member died prior to retirement, even if the member had a “common law” spouse on the date of death, that spouse would not be entitled to receive the pre-retirement death benefits if the member had previously been married, and was separated from but never divorced a previous spouse. (The former spouse was also not entitled to the death benefits; instead, they would be payable to the member’s named beneficiary.)

Prior to the Carrigan decision, virtually all pension practitioners and pension administrators interpreted the PBA as requiring payment of the death benefit to the member’s common law spouse in this situation.

PBA Amendments Now In Force

Changes to s. 48 of the PBA clarify that in circumstances where a pension plan member is legally married to a spouse from whom he or she is separated, is living with a new spouse in a common law conjugal relationship, and dies prior to retirement, the common law spouse will be entitled to the pre-retirement death benefit.

Amendments to s. 48 of the PBA also provide a discharge to any pension plan administrator who made a payment to the common law spouse in such circumstances, if the payment was made prior to October 31, 2012, which is the date the Carrigan decision was rendered by the Ontario Court of Appeal. No discharge is available if, after that date and prior to July 24, 2014 (the date the PBA amendments came into force), a payment was made to the common law spouse in such circumstances. During that time, administrators should have been making payments in accordance with the decision in Carrigan.

Similar amendments to s. 44 of the PBA clarify that where a pension plan member is legally married to a spouse from whom he or she is separated, is living with a new spouse in a common law conjugal relationship, and the plan member commences a pension, the pension must be paid in a joint-and-survivor form (with the survivor pension payable to the common law spouse should he or she survive the member), unless the member and the common law spouse waive this form of pension. A discharge is also available under s. 44, where a pension plan administrator paid or is paying a joint and survivor pension that commenced prior to the effective date of the amendment, the member had a married spouse from whom he or she had separated and also had a common law spouse, and the common law spouse is the spouse entitled (or potentially entitled) to the survivor pension.

It was widely believed that the interpretation of the PBA in Carrigan was unfair to common law spouses of pension plan members, since it led to their disentitlement to death benefits where the pension plan member had not divorced a former spouse, even if the member had separated from the former spouse years or even decades prior to death. The PBA amendments passed in the 2014 budget bill restore the entitlement of common law spouses in such circumstances.

Topics:  Canada, Pension Benefits Act

Published In: Finance & Banking Updates, Labor & Employment Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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