As a result of a recent decision of the Alberta Court of Queen’s Bench, common-law spouses in Alberta now (finally) have the right to divide pension benefits on relationship breakdown. In this blog post, we discuss the change in pension rights for common-law spouses.
The Old Rules
Under the Employment Pension Plans Act (Alberta) (“EPPA”), pension partners can agree to divide benefits on relationship breakdown, subject to the restrictions in the EPPA and the Matrimonial Property Act (Alberta) (“MPA”). Until recently, the right to enter into such agreements was restricted to married spouses because the MPA applies only to married and formerly married spouses. As a result, Alberta common-law spouses were unable to enter into an agreement to divide pension benefits.
On April 13, 2018, the Alberta Court of Queen’s Bench issued its decision in Lubianesky v Gazdag. Ms. Lubianesky and Mr. Gazdag lived together in a common-law relationship from 1998 to 2013. Upon the breakdown of their relationship, they entered into an agreement that addressed a number of issues, including the transfer of Mr. Gazdag’s pension, which was subject to the EPPA. Unfortunately, as the court noted, “everyone overlooked the provisions of the EPPA,” which did not allow for such transfers between unmarried or common-law spouses. Being bound by the EPPA, the administrator of the pension plan refused to transfer Mr. Gazdag’s pension benefits.
Ms. Lubianesky sought a declaration that subsection 78(a) of the EPPA violated the equality provisions of the Canadian Charter of Rights and Freedoms on the grounds of marital status. As a remedy, she asked the court to read in wording to the EPPA that would extend the right to divide pension benefits to unmarried spouses.
In a well-reasoned decision, the court agreed with Ms. Lubianesky. It found that denying common-law spouses the ability to divide their pension benefits, a right that is granted to married spouses, was discriminatory and to the disadvantage of unmarried spouses. The court, in turn, granted the remedy requested by Ms. Lubianesky and read into the EPPA language that extends the right to divide pension benefits on relationship breakdown to common-law spouses.
The New Rules
In response to the decision of the court, on May 23, 2018, Alberta Treasury Board and Finance released EPPA Update 18-03, Eligibility for Pension Credit Splitting on Relationship Breakdown Extended to Common-Law Spouses (the “EPPA Update”). The EPPA Update makes clear that common-law pension partners (spouses) now have the same rights to divide pension benefits as legally married pension partners on marriage breakdown. Those rights, as is also made clear in the EPPA Update, are subject to the same restrictions that apply to married spouses, including the restriction that no more than 50% of the benefit accrued during the relationship may be paid to the spouse. The agreement between the separating common-law spouses must also meet the formal requirements for such an agreement under the MPA.
With the decision of the Court of Queen’s Bench, common-law spouses in Alberta now have the same rights to divide pension benefits on relationship breakdown as married spouses. Plan administrators in Alberta or with members employed in Alberta need to be aware of the change and make any necessary changes to their administrative policies and procedures.
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