Locked-in retirement accounts the focus of July 2019 Pension Division Review Project Committee meeting
July 26, 2019
BY Kevin Zakreski
At this month’s meeting, the Pension Division Review Project Committee examined locked-in retirement accounts. British Columbia’s Pension Benefits Standards Act defines locked-in retirement account to mean “an RRSP that is prescribed to be a locked-in retirement account.” The regulation completes this definition by adding that “an RRSP is a locked-in retirement account if the RRSP includes locked-in money.” Locked-in retirement accounts are commonly created when an employee, who was a member of an employer’s pension plan, ceases to be employed by that employer, for whatever reason, after the plan vests.
While part 6 of the Family Law Act doesn’t apply to benefits from a locked-in retirement account, these benefits are considered to be family property under part 5 and may be divided under that part. The committee grappled with whether this approach should continue to prevail or whether the act should be amended to provide for division of locked-in retirement accounts under part 6.
The committee also continued its consideration of commuted-value transfer and private annuities. At this meeting, it examined a possible inconsistency in the calculation of commuted value under the Division of Pensions Regulation and the Pension Benefit Standards Regulation.
Section 118 of the Family Law Act is dedicated to private annuities. It provides that “the provisions under this Part [i.e., part 6] that apply to the division of benefits after pension commencement apply to the division of the annuity.” This declaration has the effect of making section 117—a general provision that deals with pension division of local plans after the pension commences—applicable to private annuities. In the meeting, the committee considered the implications of grouping private annuities with pensions, given that annuities have some features that have no equivalents in pension plans.
The Pension Division Review Project benefits from having an expert project committee. The committee is working toward publishing a consultation paper, in which it will set out proposals on these and other issues. The consultation paper will allow the public to comment on the committee’s proposals to reform pension division under the Family Law Act.