Bill 17 – British Columbia amends Family Law Act

Special Notice – August, 2024

British Columbia is implementing changes to the rules for pension division on relationship breakdown. Some of these changes, made through Bill 17 – 2023: Family Law Amendment Act came into effect on May 11, 2023 when the bill received royal assent. Amendments to the regulations have now been released. The remainder of the changes will come into effect on January 1, 2025.

This Special Notice highlights the relevant changes and implications for pension plan administrators.

Commuted value option for limited members 

A limited member will only be permitted the option to transfer their proportionate share of the commuted value of a defined benefit (DB) provision out of the plan if the plan text gives that right of transfer to the member.

Most plans with a DB provision do not permit members to elect a commuted value transfer after becoming eligible for early retirement. In such cases, limited members should no longer be offered a commuted value transfer after the member reaches early retirement unless the plan provisions are amended to permit members the commuted value option.

Spousal waivers on member death after pension commencement

Currently, where a member dies after pension commencement and the member’s spouse is entitled to receive, or is receiving, survivor benefits, the spouse can elect to waive the survivor entitlement under the Family Law Act (FLA) by giving notice using Form P5. However, there is no obligation on the plan administrator to pay the benefits directly to another person and many plan administrators do not do so because of complications in verifying the recipient and due to concerns as to whether the completion of the waiver was done on an informed basis.

From January 1 next year the FLA will require the spouse to give the administrator notice of an agreement or order to pay another person all or part of the survivor benefits received by the spouse. A new Form P10 (Notice of Assignment of Survivor Benefits by Agreement or Order) is expected to be published shortly for use under this process. Form P5 will be repealed and should no longer be used.

Changes to administration fees for pension division

The maximum administration fees will be increased from $750 to $1,000 for registering a spouse as a limited member and from $175 to $200 for transfer from defined contribution accounts. The FLA will also require that the plan administrator deduct the fee from the payment of benefits unless one or both of the member and spouse pay the fee under a separate transaction.

Division of annuities, locked-in retirement accounts (LIRA) and life income funds (LIF)

The FLA will clarify that annuities privately purchased by a member are subject to the applicable pension division provisions under the FLA only if the annuity is in pay. Funds held in a LIRA or LIF will also be subject to the applicable pension division provisions under the FLA. Generally, these changes will have no direct consequences to pension plan administrators.

Changes effective from May 11, 2023 when Bill 17 received Royal Assent:

Designation of Limited member after spouse passes away 

Allows for the personal representative of a deceased spouse’s estate to give notice using the prescribed form to designate the spouse as a limited member provided the member’s pension has not commenced at the time of the spouse’s death.

Date for the commuted value calculation in case of a member’s death

Aligns the calculation date referenced in the FLA with the date in the Division of Pension Regulations.

Disability benefit allocation

Clarifies that a member’s entitlement to disability benefits does not affect the manner or time in which other plan benefits are divided.

Plan administrators of both plans registered in British Columbia, and those with plan members that accrue pension entitlement while working in British Columbia, should review their plan texts for required amendments as well as administrative practices and statements for pension division where there is a spousal relationship breakdown.

For more information on how your pension plan might be impacted by these changes, please contact your local Eckler consultant or reach out to us at Eckler.ca.