Pensions Newsletter – October 2019

FAMILY LAW

Van Delst v. Hronowsky, 2019 ONSC 2569

Mr. Hronowsky and Ms. Van Delst applied for divorce. Both were members of the Public Service Superannuation Act (PSSA). At issue was the inclusion of certain pension amounts in each party's net family property (NFP).

Ms. Van Delst took several leaves without pay during the marriage, some of which constituted non-pensionable leave. Under the PSSA, a plan member is required to contribute to his or her pension for the first three months of leave, but may opt out of further contributions thereafter. If the plan member does not specifically opt out or elects to continue making contributions, then pension benefits accrue to that member while on leave, and the plan member is required to pay the deficiencies in contribution, either by way of a lump sum payment or by equal contributions over time. Ms. Van Delst opted for equal contributions, and at the date of separation, she still owed several payments.

The Ontario Superior Court of Justice (Court) held that as Ms. Van Delst is compelled by the PSSA and its regulations, by virtue of making the election, to receive all her pension benefit entitlements, these entitlements are "vested" within the meaning of property under section 4(1) the Family Law Act. As a result, the valuation that assumed that Ms. Van Delst continued to accrue pensionable service while on leave without pay and incorporated a deduction equal to the amount of contribution deficiencies was the appropriate valuation to be included in Ms. Van Delst's NFP.

Ms. Van Delst was also entitled to a survivor benefit from Mr. Hronowsky's pension. However, as it was not vested at the date of separation and would be lost upon the granting of the divorce, the Court held that it was not required to be included in Ms. Van Delst's NFP.

With respect to Mr. Hronowsky's pension, the Court concluded that the appropriate retirement age to be used in the valuation was age 60, as Mr. Hronowsky provided evidence that the retirement date contemplated by him was as soon as he was entitled to do so with an unreduced pension. Mr. Hronowsky's pension also included a contingency survivor benefit, which relates to a future potential spouse. With respect to the contingency survivor benefit, the court accepted evidence that Mr. Hronowsky would likely not acquire a future spouse for whom the survivor pension will ever be an asset as he retired within three months of separation, and the plan requires that a person be the contributor for at least one year in order to qualify as an eligible spouse. As a result, the value of the contingency survivor benefit was to be included in the value of Mr. Hronowsky's pension for the purposes of calculating his NFP.

Ontario Superior Court Decision

Stalzer (Estate) v. Stalzer, 2019 ABQB 658

Frank and Elizabeth Stalzer (Parties) separated in 2006, but they did not resolve the property issues arising from their separation before Mr. Stalzer's death in 2016. The Parties were both in the Canadian military and entitled to Canadian Armed Forces (CAF) pensions. Ms. Stalzer retired from the military around 2000, while Mr. Stalzer retired prior to the Parties' separation. Mr. Stalzer was thereafter a member of the Local Authorities Pension Plan (LAPP). Ms. Stalzer was receiving survivor benefits from the CAF pension as she was still married to Mr. Stalzer on the date of his death.

At issue was the division of Mr. and Ms. Stalzer's CAF pensions and Mr. Stalzer's LAPP pension and death benefits. The trial judge held that the legislation permits the division of Mr. Stalzer and Ms. Stalzer's CAF pensions notwithstanding Mr. Stalzer's death. While Ms. Stalzer argued that her CAF pension was no longer divisible because the CAF will not give a piece of a pension to a deceased person, section 8(5) of the Pension Benefits Division Act (PBDA) provides that an amount which cannot be transferred by reason only of the death of the former spouse shall be paid to their estate or succession. Further, the PBDA does not preclude an application being made for a division of Mr. Stalzer's pension benefits under section 4(1) because he died. Section 6 of the corresponding regulations specifically contemplates that a former spouse of a deceased member may make an application for a division of pension benefits.

Given that Ms. Stalzer was receiving survivor benefits from Mr. Stalzer's CAF pension and will be entitled to receive survivor benefits until she dies or otherwise ceases to be entitled to receive the benefits, the trial judge noted that the survivor benefits received by Ms. Stalzer would need to be considered by the court in equally dividing Mr. Stalzer's CAF pension at source. However, more evidence was needed from Ms. Stalzer to make a decision on the amount, including the gross monthly amount of her survivor benefits, how much she had received in survivor benefits to date, as well as an estimate of how much she could receive in survivor benefits during her lifetime.

Further, the trial judge noted that the distribution of LAPP death benefits was subject to mandatory statutory definitions. Though Ms. Stalzer contended that the death benefits should be considered matrimonial property because Mr. Stalzer commenced his LAPP pension during the parties' marriage, Ms. Stalzer was living separate and apart from Mr. Stalzer for three or more consecutive years at the time of his death. Thus, she did not meet the definition of surviving "pension partner(s)" as defined in section 1(3) of the Employment Pension Plans Act and the terms of the LAPP in effect at the time of Mr. Stalzer's death. Consequently, the trial judge held that Ms. Stalzer was not entitled to pension partner death benefits nor could the commuted value of Mr. Stalzer's LAPP pension be paid out to her as a pension. While C$127,055.22 was paid out to Mr. Stalzer's estate from LAPP, the only portion of Mr. Stalzer's LAPP pension held as divisible was the amount accrued between the date of marriage and the date of separation (Joint Accrual Period).

The trial judge ordered that Mr. Stalzer's estate ask LAPP to calculate the commuted value of Mr. Stalzer's LAPP pension during the Joint Accrual Period and Ms. Stalzer's entitlement to same. The trial judge further ordered that Mr. Stalzer's estate pay to Ms. Stalzer her share of the net death benefits, taking into consideration that Ms. Stalzer will need to share in the tax consequences as the death benefits have already been paid out to the estate.

Alberta Queen's Bench Decision

EMPLOYER CONTRIBUTIONS FOR UNIONIZED EMPLOYEES

Norfolk General Hospital v. Service Employees International Union, Local 1, 2019 CanLII 81794 (ON LA)

In the agreed facts, a part-time employee (Employee) of Norfolk General Hospital (Hospital), who was a member of the Service Employees International Union, Local 1 (Union), voluntarily enrolled in the Healthcare of Ontario Pension Plan (HOOPP), in which the Hospital is a participating employer. The Employee retired from the Hospital and began receiving pension benefits from HOOPP. She then returned to the Hospital as a part-time employee while in receipt of HOOPP benefits. Upon return to the Hospital, the Employee neither enrolled in HOOPP, nor did the Hospital make any contributions to HOOPP on the Employee's behalf.

The issue in this case was the interpretation of the collective agreement between the Hospital and the Union. The collective agreement provided that part-time employees shall receive 14 per cent of straight time hourly rate in lieu of all health and welfare benefits, income protection plans, and paid holidays. Notwithstanding the foregoing, all part-time employees who voluntarily enroll in HOOPP and are members of HOOPP receive 10 per cent in lieu of benefits. The Employee was only receiving 10 per cent in lieu of benefits from the Hospital.

The Union argued that context supports its position that the Employee should receive 14 per cent in lieu of benefits because the collective agreement was intended to reflect the fact that an employee enrolling in HOOPP received the advantage of the Hospital contributing to HOOPP on the employee's behalf. The Union further argued that the difference in percentage is to prevent a part-time employee from "double dipping". In this case, the Union submitted that the rationale no longer applies to an employee who does not, upon being employed for a second time, enroll in HOOPP and for whom the Hospital is not making pension contributions. The Hospital argued that there is no express reference to such contributions in the collective agreement. Instead, in this case, where the Employee is collecting a pension, he or she is clearly a member of HOOPP as per the collective agreement.

The arbitrator noted that, if the Hospital is correct in its interpretation, the Employee is receiving nothing from the Hospital in substitution of the four per cent that is attributable to the pension portion of the 14 per...