Ontario court ruling changes pay out of pre-retirement death benefits

July 2, 2013

The Ontario Court of Appeal's October 2012 ruling in Carrigan v. Carrigan Estate will stand - a decision that changes how pre-retirement death benefits are paid out to the spouse of a plan member.


In March 2013, the Supreme Court of Canada dismissed an appeal to review the landmark decision. Pending any amendments to the Ontario Pension Benefits Act (PBA), the decision must now be applied to all pension plans registered in Ontario as well as plans registered in other provinces that have plan members employed in Ontario. This Q&A outlines what action Sun Life Financial is taking and how processes have been updated to ensure compliance with the ruling. 


Carrigan case background
The Carrigan case involved a plan member who died prior to retirement.  At the time of his death, the plan member was living with his common law spouse, but was still legally married to another person from whom he had been living separate and apart from for many years.


The Court of Appeal's interpretation of the PBA concluded that neither the common law spouse nor the separated spouse was entitled to the death benefit. It ruled that the death benefit should be paid to the plan member's designated beneficiary. In this case, the designated beneficiary was the plan member's separated spouse and his daughters.


What has changed as a result of this decision?
The commonly held interpretation of section 48 of the PBA was that a common law spouse who was living with a plan member at the date of death was entitled to the pre-retirement death benefit. Based on the Carrigan decision, the common law spouse is not entitled to the death benefit when a plan member remains legally married to another person, even if the plan member is living separate and apart from that person at death. The pre-retirement death benefit becomes payable to whomever the plan member has designated as the beneficiary.


How does this affect plan members?
According to the Financial Services Commission of Ontario (FSCO), this decision directly affects plan members subject to Ontario pension legislation and who:

  • have not started receiving a pension;
  • are legally married to a person who they are living separate and apart from; and
  • are living with another person in a common law relationship.


Plan members who are affected by the decision and who want their common law spouse to be the beneficiary of the pre-retirement death benefit should verify their current beneficiary and if necessary, file a new beneficiary designation with Sun Life Financial naming their common law spouse.


What action is Sun Life Financial taking?
We are closely monitoring FSCO's position in relation to the Carrigan case to ensure we're aware of any impact to plan text or booklets for plan members employed in Ontario that result from FSCO's review. As we work through this process, we will ensure that any future amendments to either your company's plan text or your plan member booklet will reflect wording that is in line with the Carrigan decision.


We have reviewed our pre-retirement death benefit process and have amended any forms related to these processes in order to comply with the decision.


Payout of pre-retirement death benefits
This process requires verification by a common law spouse claimant (through the form Validation of prescribed requirements) that the plan member was not legally married to another person at the date of the plan member's death.


Is Sun Life Financial notifying plan members of this change?
We will not be communicating directly with plan members. To help you communicate these changes to your plan members/employees, we have prepared a sample communication that may be incorporated into an email or posted to your company's intranet.


Is Sun Life Financial making any changes to how Joint and Survivor Benefits are paid?
No. FSCO has not yet stated its position on whether the Carrigan case applies outside the context of section 48 of the PBA and a pre-retirement death benefit situation. We will notify you if any changes occur.


Where can I obtain more information?

You may consult the section for Pension Plan Administrators on FSCO's website at http://www.fsco.gov.on.ca/en/pensions/Pages/admin.aspx



Please contact your Sun Life Financial Group Retirement Services Representative.