Target-benefit plans and commuted-value transfer were the focus of the Pension Division Review Project Committee’s May 2019 meeting
30 May 2019
By Kevin Zakreski
The Pension Division Review Project benefits from having an expert project committee. At this month’s meeting, the committee’s attention was focused primarily on two topics: target-benefit plan design and commuted-value transfer.
In very simple terms, target-benefit plans are pension plans that combine features found in both of the more-traditional plan designs: defined-benefit plans and defined-contribution plans. Legislation expressly addressing target-benefit plans first appeared in British Columbia in September 2015, with the coming-into-force of the new Pension Benefits Standards Act. This date is significant for the Pension Division Review Project because it means that this legislation wasn’t in force when part 6 of the Family Law Act was being developed. That said, the advent of the new legislation was on the horizon, so part 6 does address what it calls “a target benefit provision” by including it within section 110’s definition of “benefit formula provision.” This means that part 6 addresses division of benefits in a target-benefit plan within the general class of division of benefits determined under a defined-benefit-formula provision. In the meeting, the committee gave some consideration to the narrow issue of whether this approach is functioning sufficiently well in practice.
On the meeting’s second topic, section 115 of the Family Law Act applies to division of a pension with benefits determined under a defined-benefit-formula provision, if the pension is a “local plan” and it “has not commenced.” The section gives the spouse who has become a limited member under the plan a number of options. One of these options is “to have the limited member’s proportionate share of the commuted value of the benefits transferred from the plan to the credit of the limited member.” The committee discussed whether this option should be curtailed in circumstances in which the plan member wouldn’t be able to take a commuted-value transfer.
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.