Equalization Payment and Pension Division
VanderWal v. VanderWal, 2015 ONSC 384
This case addresses the issue of whether a spouse should transfer a lump sum out of her pension plan in order to satisfy an equalization payment. It is one of few cases that considers the application of section 10.1 of the Family Law Act, which was enacted in 2009 to allow Courts to order a transfer of a lump sum out of a pension plan without the consent of the parties.
The parties in this case resolved all of their issues except for how the Wife should make an equalization payment to the Husband.
The parties were each expecting to receive approximately $145,000 from the sale of their home. If the Wife paid the Husband in cash from her proceeds of sale, then her equalization payment would be $35,660.
If, however, the Wife was required to transfer a portion of her pension, then the figure would climb to $55,336. The issue for the Court was whether the Wife should be ordered to satisfy the equalization payment by transferring a portion of her pension plus applicable interest.
A Court may order a spouse to satisfy an equalization payment by transferring a lump sum out of a pension plan if it is appropriate to do so, as per sections (9)(d)(i) and 10.1(3) of the Family Law Act. In determining whether to order the immediate transfer of a lump sum out of a pension plan and the amount to be transferred, if any, the Court may consider the following factors:
- The nature of the assets available to each spouse at the time of the hearing.
- The proportion of a spouse’s net family property that consists of the imputed value, for family law purposes, of his or her interest in the pension plan.
- The liquidity of the lump sum in the hands of the spouse to whom it would be transferred.
- Any contingent tax liabilities in respect of the lump sum that would be transferred.
- The resources available to each spouse to meet his or her needs in retirement and the desirability of maintaining those resources (s. 10.1(4), Family Law Act).
Section 10.1 creates one way for an equalization payment to be made, but “there is no presumption or statutory onus that an equalization payment will be made by a transfer of a lump sum out of a pension plan. Each case depends on its own facts” (paragraph 11). The Court considered the five conditions outlined above and determined that the Wife was not required to transfer money out of her pension plan. The Court ordered the Wife to pay to the Husband an equalization payment of $35,660 in accordance with section 9(1)(a) the Family Law Act.
The Court relied on Tupholme v. Tupholme, 2013 ONSC 4268 in reaching its decision. In Tupholme, Volgesang J. wrote in obiter that the respondent “should not be able to force his wife to accept a deferred payment of a share of his pension to ease his own liquidity position in the face of the clear words of s. 9(1) of the Family Law Act. Also, in my view, there is no statutory onus on a spouse entitled to an equalizing payment to show that the new pension division mechanism brought into force by the Family Law Statute Amendment Act, 2009 S.O. 2009, c. 11, s. 26 should not be called into play in favour of immediate payment” (paragraph 16).
Sometimes, it will be appropriate to order a spouse to transfer a portion of his or her pension to satisfy the equalization payment. For example in Nadendla v. Nadendla, 2014 ONSC 3796, the Court ordered the applicant husband to transfer a portion of his pension to the respondent wife so that both parties would have a reasonable balance between liquid assets and retirement savings.
In the case at bar, the equalization payment was small compared to the assets available to the parties. The Wife could pay the Husband using her net proceeds from the sale of the matrimonial home and still have more than $100,000 left to invest in a new home. Both parties also had a pension plan. The Wife’s pension was valued at nearly $272,000 and the Husband’s at over $77,000 for family law purposes. The Court was satisfied that both parties would be able to meet their retirement needs, which was still many years away. Therefore, the Wife was ordered to pay the Husband an equalization payment of $35,660.