The B.C. Supreme Court defeats Air Canada’s pension policy in the recent decision of Jarman v. Jarman, 2011 BCSC 1155.
In Jarman v. Jarman, the main issue centered on Air Canada’s refusal to divide and pay a portion of the husband’s Air Canada Supplemental pension directly to the wife as required under Part 6 of the Family Relations Act.
Air Canada argued that upon an actuary determining each spouse’s share of the pension, the husband would be responsible for paying the wife her monthly share; instead of Air Canada paying the wife’s share directly to her. As a result, the wife would have to rely on the husband to pay her share of the Air Canada pension. Even after the husband’s death, the wife would be required to rely on the husband’s new spouse (if he had one) to then pay her share of the husband’s survivor benefits.
Before further discussing the result in Jarman v. Jarman, it is helpful to have a general understanding of pension division upon marriage or relationship breakdown.
If the spouse’s pension has accrued in B.C., Part 6 of the Family Relations Act and the Division of Pensions Regulation, B.C. Reg. 77/95 would apply. According to the Division of Pensions Regulation, the period of pension accrual used to calculate the receiving spouse’s share is from the date of marriage to the date of entitlement (which is either a section 57 declaration made by the Court; a divorce order made by the Court; or the signing of a separation agreement). If the receiving spouse seeks to include the period of pre-marriage cohabitation, they have to make a reapportionment claim under section 65 of the Family Relations Act.
Under Part 6 of the Family Relations Act, a spouse’s pension can generally be divided in four main ways:
(1) Matured Pension: if the pension has matured, meaning the spouse has retired, the pension benefits (i.e. the income from the pension, not the pension itself) are divided by a benefit split administered by the plan (each month the plan pays part of the member’s pension to the spouse);
(2) Unmatured Pension in a Defined Contribution Plan: an unmatured pension in a defined contribution plan is divided by transferring the spouse’s share, on marriage breakdown, to another pension vehicle;
(3) Unmatured Pension in a Defined Benefit Plan: an unmatured pension in a defined benefit plan is divided by making the spouse a limited member of the plan. The limited member can
(a) wait until the member retires and receive a separate pension, or
(b) not wait, and direct the plan at any time after a member becomes eligible to retire to transfer the limited member’s share to another pension vehicle, such as an RRSP; and
(4) the spouses can agree that the spouse who accrued the pension will keep the entire pension in exchange for a lump sum payment or the receiving spouse will retain an asset of equal value to the pension.
If the pension accrued in B.C., but the pension is federally regulated, as in the case of Jarman v. Jarman (or when a spouse is employed by the army or public service) the pension is regulated by the Pension Benefits Standards Act, 1985, R.S.C. 1985, c. 32, (2nd Supp.) (“PBSA”).
Under the PBSA, section 25(1) states that pension plan benefits are “subject to the applicable provincial property law” – meaning the Family Relations Act and the B.C. Division of Pensions Regulation. There is also case law that makes it clear that Part 6 of the Family Relations Act applies to federal pensions. See, for example, H.E.D.C. v. R.M.C., 2003 BCCA 420.
In Jarman v. Jarman, Air Canada argued the PBSA and hence B.C. provincial law did not apply to its’ pensions. The Court rejected Air Canada’s position on this point. Instead, the Court found that section 25 of the PBSA brought the husband’s Air Canada pension within Part 6 of the Family Relations Act. Under the Family Relations Act, if a pension is to be divided, a spouse is entitled to receive “from the plan a proportionate share of the benefits paid under the pension” for the period specified.
Mr. Justice Savage, writing for the Court in Jarman v. Jarman, opined at paragraph 25:
In the circumstances, I am satisfied that the [wife] should have an order that Air Canada pay directly to the [wife] her entitlement at source from the Supplemental Retirement Plan on a monthly basis following the first day of the month following the making of this order.
The Court in Jarman v. Jarman made it clear that pension policies, created by companies such as Air Canada, will not override federal and provincial law. The decision of Jarman enables a spouse to receive pension benefits directly from the pension plan instead of their ex-spouse.
