What do I need to know about Ontario pension valuations?

Gord Krofchick, a forensic accountant, fraud investigator, and business valuator in Toronto, answers:

Legislation passed by the Ontario legislature in January 2012 has resulted in a dramatic change in the way pension assets are valued and divided between divorcing couples in Ontario. The new rules – formally known as Bill 133 – only apply to spouses where no court order, family arbitration award, or domestic contract that provided for the division of pension assets between the two spouses was made before January 1, 2012. If they’ve entered into any one of these arrangements before the end of 2011, they are bound by the old rules.

We are frequently asked, “Can you value my pension?” and the answer is that it depends on whether your pension is covered by the Ontario Pension and Benefits Act (“OPBA”), or in other words, whether it is a provincial pension. So if either your client or their spouse is a member of a pension plan that operates at a nationwide level, like those available to federal public service employees or banks, for example, the value of the marital pension will be calculated under Bill 133 by an independent pension valuator. Clients with pensions covered by the OPBA, however – like HOOPP, OMERS, and Ontario Teachers’ Pension Plan – will need to have their pension valued by the pension plan administrator. Please contact your pension plan administrator to determine if your pension falls under the OPBA.

Another question we are frequently asked is “What about taxes?” For pensions that are not transferred to a spouse’s deferred investment vehicle (i.e. an RRSP, pension, etc.), a national tax must be calculated and deducted to account for the fact that the party that originally owned the pension must pay tax on this amount when it is withdrawn. These calculations can be performed by an independent pension valuator. If the marital pension is divided at source, then each spouse is responsible for the future payment of taxes on their respective portions and no tax calculation is required.

Gordon Krofchick, CA, CBV is President of Krofchick Valuation Partners and is a forensic accountant with over 30 years’ experience in working with issues that impact a matrimonial separation, divorce, or other complex financial and litigation issues.