Interest Payable from Pension Transfer and Equalization Payment

Heringer v Heringer, 2014 ONSC 7291

This case addresses the issue of interest payable with respect to a lump sum transfer from either spouse’s pension in satisfaction of an equalization payment.

Background

The parties were married in 1980 and separated in 2007. The parties resolved their matrimonial matter in 2012 by way of Minutes of Settlement. The Respondent Husband was a member of the Ontario Public Service Employees Union (OPSEU) and had a defined benefit pension plan which was administered by OPTrust.

The parties agreed to “a global settlement payment of $137,000.00 payable by the husband to the wife by means of transfer of his portion of his pension pursuant to Bill 133 [Asset Division on Marriage Breakdown Filed under Pension Benefits Act]” (paragraph 2). The above mentioned settlement was incorporated into a Final Order, dated December 11, 2012. Pursuant to the Applicant Wife’s request, OPTrust transferred the sum of $137,000.00 to her Locked-in Retirement Account on March 22, 2013.

The Applicant Wife requested an Order that the Respondent and OPTrust pay interest on the transferred amount from the valuation date until the date of transfer. OPTrust was added as a party for the purpose of this motion only.

Analysis

The basis of the Applicant Wife’s position is information she had erroneously received from a Benefits Specialist with OPTrust. The specialist advised the Applicant Wife that interest at a specified rate would be paid on whatever transfer amount was agreed upon, as long as the total transfer amount did not exceed the maximum Family Law Value (50% of the Respondent Husband’s pension). Further, the Application to Transfer the Family Law Value Form provided by the Financial Services Commission of Ontario stated, “interest will be added to the Family Law Value from the Family Law Valuation Date to the beginning of the month in which the transfer of your share of the Family Law Value is made.” This form was signed and submitted by the Applicant Wife to OPTrust.

The Respondent argued that the “global settlement amount” agreed to by the parties in the Minutes of Settlement included multiple components in addition to the pension transfer, and the whole of the Agreement was consistent with the equalization scheme provided for in the Family Law Act. The Respondent further submitted that the Applicant was seeking post-separation interest on an asset owned by him, which is contrary to the Family Law Act and the parties’ Agreement.

OPTrust submitted that there is no authority under the PBA or its regulations that allows OPTrust to pay interest where the court order does not: (1) provide for the payment of interest, or (2) the transfer amount provided in the Order or Agreement is not expressed as a percentage of the imputed value of the member’s pension. Thus the administrator does not have the discretion to pay the additional amount requested by the Applicant Wife absent a court order or domestic contract providing for same.

The Court agreed with the submissions of OPTrust and the Respondent Husband. As such the Court, did not award any interest to the Applicant Wife. The Forms and the interpretation guides provided by FSCO contained an incorrect interpretation of the law. The Court relied on provisions from the Family Law Act and the Pensions Benefit Act to reach the following conclusion:

  1. Where the court order provides for the transfer of a lump sum which is expressed as a percentage of the “imputed value”, interest is added to the amount to be transferred because the imputed value is required to be adjusted pursuant to s. 30(4) of Ontario Regulation 287/11;
  2. Where the court order provides for the transfer of a lump sum expressed as a specified amount, there is no legislative provision to adjust the amount to be transferred on account of interest. The plan administrator has no jurisdiction or authority to add interest to the specified amount unless the court order requires that it be added. (Paragraph 43)

FSCO, the government body that regulates pension plans in Ontario, uses the term Family Law Value in their Forms rather than the term imputed value used in the Pension Benefits Act. For family law purposes, the imputed value of each spouse’s entitlement to pension benefits is a portion of the preliminary value (total amount of the plan member’s pension before being apportioned for family law purposes) based on the period between the spouses’ date of marriage and the valuation date.

According to the decision, the reason for the distinctive treatment between orders that express a percentage of the imputed value and orders that express a specific amount is that a plan administrator has no way of knowing whether interest was already included in the specified amount. Absent an express request to transfer interest, the plan administrator does not have the authority or discretion to transfer interest for orders that provided for the transfer of a lump sum expressed as a specified amount.

This decision affects parties who have a settlement agreement or court order made on or after January 1, 2012 (when new Family Law Matters regulations came into effect under the Pension Benefits Act).

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