1. What happens to a pension when you divorce in Alberta?

2. Is a Pension Family Property in Alberta?

3. Does My Spouse Automatically Get Half of My Pension?

4. What If I Had My Pension Before We Got Married?

5. Defined Benefit vs. Defined Contribution Pensions

6. How Do You Find Out What a Pension Is Worth?

7. Can a Pension Be Divided Without Waiting for Retirement?

8. What Is a Family Property Order?

9. Do We Have to Physically Divide the Pension?

10. What If Both Spouses Have Pensions?

11. What Happens If the Pension Is Already Being Paid?

12. What About CPP?

13. What About a Teacher, Government or Public-Sector Pension?

14. Can I Just Use the Pension Amount on My Financial Statement?

15. What If My Spouse Refuses to Provide Pension Information?

16. Don't Forget the Pension When Negotiating Property

17. How Bridgestone Law Can Help

Introduction

When a couple separates, it is relatively easy to identify assets such as a house, bank account or vehicle. A pension can be more difficult.

A pension may not provide money that can be accessed today, but after a long marriage it can represent hundreds of thousands of dollars in future retirement benefits. In some cases, it may be one of the most valuable assets the couple has accumulated.

This leads to an important question:

What happens to a pension when you divorce in Alberta?

Generally, pension benefits accumulated during a relationship can be relevant to the division of family property. The fact that the pension is connected to one spouse's employment or appears only in that spouse's name does not necessarily mean the other spouse has no interest in its value.

However, pensions are more complicated than many other assets. The rules and mechanics of division can depend on the type of pension, the dates of the relationship, the governing legislation and the specific pension plan.

Is a Pension Family Property in Alberta?

A pension can be an important part of the property accumulated during a marriage or qualifying relationship.

One spouse may have worked for the same employer for 25 years and accumulated a substantial pension while the other spouse accumulated little or no pension of their own.

The spouse with the pension might assume:

"It came from my job, so it belongs to me."

That is not necessarily the case.

Alberta's family property legislation generally considers property accumulated during the relationship when determining how property should be divided after separation.

Pensions are particularly important because they represent compensation earned over time. Although the pension may not be payable until retirement, it can have significant present value.

Does My Spouse Automatically Get Half of My Pension?

Not necessarily.

There is an important distinction between saying that a pension is relevant to property division and saying that half of the entire pension automatically belongs to the other spouse.

The period during which the pension was accumulated matters.

For example, imagine that Daniel began working for an employer with a pension plan in 2000.

He married Melissa in 2010.

They separated in 2025.

Daniel had already accumulated approximately 10 years of pensionable service before the marriage, followed by another 15 years during the marriage.

It would generally be incorrect to assume that Melissa automatically receives half of everything Daniel accumulated since 2000.

The dates of pension participation and the spouses' relationship must be examined to determine what portion of the pension is relevant to their property division.

What If I Had My Pension Before We Got Married?

This can significantly affect the analysis.

Under Alberta's Family Property Act, certain property that existed before the marriage or qualifying relationship may have an exempt value. The legislation also distinguishes between the original exempt value and increases in the value of exempt property.

With pensions, however, determining the value attributable to different periods can be much more complicated than looking at an old bank statement.

A pension may have accumulated through:

• employee contributions;

• employer contributions;

• years of pensionable service;

• investment growth;

• changes in salary;

• benefit formulas; and

• other provisions of the pension plan.

This is why the value of a pension should not be estimated simply by looking at the employee's contributions.

The pension administrator, and in some cases an actuary or other financial professional, may need to provide information concerning the pension and the period during which benefits accumulated.

Defined Benefit vs. Defined Contribution Pensions

Understanding the type of pension involved is important.

Defined Contribution Pension

A defined contribution plan generally has an identifiable account balance based on contributions and investment performance.

In that respect, it can sometimes appear similar to an investment account.

However, pension legislation and locking-in requirements may still affect how the funds can be transferred or divided.

Defined Benefit Pension

A defined benefit pension is different.

Instead of simply having an investment account containing a specific amount of money, the plan generally promises a retirement benefit calculated using a formula.

That formula may take into account factors such as:

• years of pensionable service;

• earnings;

• age at retirement; and

• the particular terms of the pension plan.

For example, a spouse may expect to receive $4,000 per month for life after retirement.

Determining what that future income stream is worth today can be considerably more complicated than reading the balance on an RRSP statement.

How Do You Find Out What a Pension Is Worth?

The first step is usually obtaining information from the pension plan administrator.

The documents required will depend on the pension involved, but they may include:

• pension statements;

• membership information;

• dates of pensionable service;

• contribution information;

• estimated retirement benefits;

• relationship breakdown statements; and

• pension valuation information.

For some pension plans, the administrator has an established procedure for determining and dividing pension benefits following a relationship breakdown.

In other circumstances, additional actuarial advice may be appropriate.

It is important not to assume that the number appearing on an annual pension statement represents the amount that should simply be divided between the spouses.

Can a Pension Be Divided Without Waiting for Retirement?

Depending on the pension plan and applicable legislation, there may be mechanisms allowing pension benefits to be divided following the breakdown of a relationship rather than requiring former spouses to remain financially connected until retirement.

For pensions governed by Alberta pension legislation, the legislation and pension plan rules can provide procedures for division and distribution following relationship breakdown.

Other plans may be governed by separate legislation.

Federal public-service pensions, for example, are subject to federal pension division legislation. Federally regulated employment pensions may also be subject to federal pension standards legislation.

As a result, the correct procedure should always be confirmed for the particular pension involved.

What Is a Family Property Order?

When pension benefits are to be divided directly through certain pension plans, the plan administrator may require a Family Property Order that complies with the legislation and the requirements of that particular plan.

The order may need to identify matters such as:

• the pension plan;

• the pension member;

• the other spouse or pension partner;

• the period during which the pension was jointly accumulated;

• the division percentage or factor; and

• other information required by the plan.

The wording is important.

A pension administrator cannot necessarily implement an agreement simply because the spouses have agreed that the pension will be "split equally."

The documentation must comply with the requirements governing the particular pension plan.

Do We Have to Physically Divide the Pension?

Not always.

Just as with RRSPs and the family home, spouses can sometimes consider the pension as part of their overall property settlement.

For example, suppose:

Spouse A has:

• a substantial workplace pension; and

• relatively little equity in other assets.

Spouse B has:

• no workplace pension; and

• an interest in the family home.

Rather than dividing the pension directly, the spouses might negotiate a settlement under which Spouse A retains the pension while Spouse B receives a greater share of another asset.

This is sometimes referred to as offsetting.

However, an offset should be approached carefully.

A pension worth $300,000 for property-division purposes is not necessarily economically identical to $300,000 sitting in a bank account.

Taxes, accessibility, risk, future benefits and other characteristics of the assets can differ significantly.

Example: Pension vs. Family Home

Consider a couple named Andrew and Lisa.

They have been married for 25 years.

Andrew has accumulated a substantial defined benefit pension through his employment. Lisa does not have a comparable workplace pension.

They also own a home in Calgary with significant equity.

Andrew wants to keep his entire pension.

Lisa wants to keep the house.

They might consider whether Lisa receiving additional equity in the house could offset some or all of her interest in Andrew's pension.

But before signing an agreement, they need reliable values.

If they underestimate the pension, Lisa could give up a valuable retirement asset without receiving sufficient property in exchange.

If they overestimate it, Andrew could surrender too much home equity.

Proper valuation can therefore be essential.

What If Both Spouses Have Pensions?

Both pensions should generally be identified and considered.

For example:

Sarah has a pension through a public-sector employer.

Michael has a pension through a private employer.

The fact that both spouses have pensions does not necessarily mean they can simply agree that "everyone keeps their own."

One pension may be substantially more valuable than the other.

They may also have different characteristics. One might provide a guaranteed lifetime defined benefit, while the other might be a defined contribution plan with a specific account balance.

The appropriate analysis considers the actual values and characteristics of both pensions.

What Happens If the Pension Is Already Being Paid?

A pension that has already entered the payment stage can create additional complexity.

Instead of dealing with a future retirement benefit, the pension member may already be receiving monthly payments.

The pension plan's rules and governing legislation will determine what options are available when a relationship breaks down after retirement.

This can also raise questions involving survivor benefits, pension partner designations and previous elections made when the pension commenced.

Obtaining advice early is particularly important because some pension decisions made at retirement can be difficult or impossible to reverse later.

What About CPP?

The Canada Pension Plan is different from an employer pension plan.

After divorce or separation, CPP pensionable earnings accumulated during the period the spouses or common-law partners lived together may potentially be divided through what the federal government calls credit splitting.

A CPP credit split can affect the future CPP retirement or disability benefits of both individuals.

It should therefore be considered separately from the division of an employer pension under Alberta's family property legislation.

What About a Teacher, Government or Public-Sector Pension?

Public-sector pensions often have their own legislation, plan rules and administrative procedures.

For example, Alberta has separate pension arrangements and administrators associated with teachers, local authorities, public service employees and other public-sector workers.

You should not assume that the procedure used for one pension will apply to another.

If either spouse has a significant public-sector pension, it is important to identify the exact pension plan early in the property-division process and obtain the plan's relationship-breakdown information.

Can I Just Use the Pension Amount on My Financial Statement?

Not necessarily.

A pension is one area where an apparently simple number can be misleading.

An annual pension statement may show contributions, an estimated monthly retirement benefit or another figure that was designed for retirement planning rather than family property division.

Those figures may not answer the question:

What is the value of the pension interest that needs to be considered for this separation?

The appropriate valuation method depends on the pension and circumstances.

This is particularly important with defined benefit pensions.

What If My Spouse Refuses to Provide Pension Information?

Pension information forms part of the financial disclosure that may be necessary to properly resolve family property.

If a spouse has a workplace pension, relevant documents and information can be requested.

Depending on the circumstances, this may include information identifying:

• the pension plan;

• the plan administrator;

• the date the spouse joined the plan;

• pensionable service;

• current benefits;

• contributions;

• retirement projections; and

• relationship-breakdown values.

A spouse should be cautious about agreeing to a final property settlement before significant pension interests have been properly identified and valued.

Don't Forget the Pension When Negotiating Property

One of the biggest mistakes a separating spouse can make is focusing entirely on assets that are immediately visible.

The house feels real.

The money in a bank account is available today.

A pension payable 15 or 20 years from now may feel less important.

But that does not mean it is less valuable.

Imagine agreeing to give up your interest in a pension so that you can keep an additional $50,000 of home equity, only to discover later that the pension interest you surrendered was worth several times that amount.

Once a final property settlement has been signed and implemented, correcting that mistake can be extremely difficult.

How Bridgestone Law Can Help

Pensions are among the more technical assets involved in an Alberta divorce.

At Bridgestone Law, our Calgary family lawyers can help identify the pensions that need to be disclosed, determine what information should be obtained from the pension administrator and assess how pension benefits fit into the overall division of family property.

Where necessary, we can also work with actuaries, accountants, financial advisors and other professionals to obtain appropriate valuation and tax advice.

We can help you consider whether the pension should be divided directly, whether another asset could be used to offset a pension interest and how the proposed settlement affects your long-term financial position.

Most importantly, do not ignore a pension simply because retirement is years away.

A pension accumulated over a long relationship can represent one of the family's largest assets.

If you are separating or divorcing in Alberta and you or your spouse has a workplace pension, contact Bridgestone Law to speak with a Calgary family lawyer about how the pension may affect your property settlement.