Any person who is the “spouse” of a member of a registered pension plan in Canada has rights regarding the pension entitlement of his or her partner. That important policy has been entrenched in pension legislation for decades. Exactly who is a “spouse”? The answer to that question has recently become a bit more complicated.
The Ontario government changed the Ontario Pension Benefits Act effective January 1, 2017 to recognize the evolving definition of a family, for legal purposes. Administrators of registered pension plans should take steps now to ensure that their pension plan documentation and administration is keeping up with these changes. Reputational and financial costs could be imposed on pension plan administrators who fail to recognize spouses’ rights to pensions, in this modern world where there has been an evolution of what constitutes a spouse.
The basic rules in Ontario are that two people are spouses for pension purposes if they are married to each other, or they fall within one of the following two categories:
- they have been living in a conjugal relationship continuously for at least three years, or
- they have been living in a conjugal relationship of some permanence for less than three years and are the parents of a child.
Effective January 1, 2017 a change was made to Ontario pension benefits legislation that is relevant to the phrase, “parents of a child”.
Prior to 2017, the Ontario legislation said that spousal pension rights under the parent category were triggered if the plan member and his or her partner were “the natural or adoptive parents of a child”. That wording was simple. Arguably, it did not capture circumstances where a child was conceived with assisted reproduction. And it certainly did not address the complex issues of surrogacy or sperm donors.
The Ontario government has stepped in to address these complex issues. The definition of “parents of a child” in the Ontario pension benefits legislation now refers to provisions of the Ontario Children’s Law Reform Act. That legislation has detailed provisions that address the complicated question of “who is a parent?”. These are not simple provisions. For example, they address circumstances of surrogacy where entitlement to parentage has been waived. They also address circumstances of sperm donors where there is a written agreement, prior to conception, confirming that the donor does not intend to be a parent.
Pension plan administrators should consult their advisors to understand how to navigate these new requirements. Pension plan texts, member booklets, forms, and all other communications and administration must align with these changes. Administrators will have to rely on experts to determine whether an individual is a spouse of a pension plan member, if the two individuals have been living together for less than three years, but may qualify as “spouses” because there is a child.
Administrators have a legal obligation to ensure that the correct individuals receive their pension entitlements. That means that these new Ontario requirements should be considered and implemented in all aspects of documentation and administration.