Alberta court ruling permits division of pension benefits by former common-law spouses

A recent Alberta court decision effectively provides that pension benefits of former commonlaw spouses may be divided in Alberta. Until now, the Alberta Employment Pension Plans Act (EPPA) has only allowed the division of pensions of former married couples.

Background

Ms. Lubianesky and her common-law spouse, Mr. Gazdag, cohabitated for approximately 15 years and had two children. In 2015, the couple entered into a Parenting, Support and Property Agreement (the Agreement), whereby the parties agreed to transfer funds from Mr. Gazdag’s pension plan and registered retirement savings plan (RRSP) to Ms. Lubianesky. However, the EPPA only permits division of pension funds in the case of formerly married couples. As such, the pension plan administrator did not transfer the pension funds to Ms. Lubianesky pursuant to the Agreement.

Court ruling

Ms. Lubianesky made an application under the Canadian Charter of Rights and Freedoms (the Charter) to challenge the provisions of the EPPA limiting pension division to formerly married couples. Ms. Lubianesky argued that the EPPA denied a benefit to unmarried spouses that is afforded to married spouses, namely that the EPPA prevented unmarried spouses from structuring their financial and legal affairs as they see fit.

As a remedy, Ms. Lubianesky asked that the court “read in” or in other words, effectively amend the EPPA, to extend the application of s. 78(a) of the EPPA to unmarried spouses. The court agreed, and declared that s. 78(a) of the EPPA be read as follows:

“agreement” means a written agreement between pension partners that provides for the division and distribution of a benefit and that meets the requirements of sections 37 and 38 of the Matrimonial Property Act, mutatis mutandis, whether or not that Act is applicable as between the pension partners.

It should be noted that a common-law partner is considered a “pension partner”, or spouse, under the EPPA after three years of cohabitation or after living in a marriage-like relationship “of some permanence” if there is a child of the relationship. Other jurisdictions have different definitions of common-law partners.

Alberta regulatory response

On May 23, 2018, the Alberta Superintendent of Pensions issued EPPA Update 18-03, Eligibility for Pension Credit Splitting on Relationship Breakdown Extended to Common-Law Spouses (EPPA Update 18-03), which notifies plan administrators of this decision and provides additional guidance. In particular, EPPA Update 18-03 points out that up to 50% of the benefits earned during a relationship, which now includes a period of common-law cohabitation as well as the period of marriage, may now transferred to a former spouse.


Comment

Currently, this decision only applies to members subject to Alberta pension legislation, regardless of the plan’s province of registration. Pension plan administrators with Alberta members are required to apply this change for common-law relationship breakdowns in respect of Alberta members, former members and retired members.


News & Views - June 2018 (PDF)