Guy Martel, GML Actuarial Services Family Law Institute April 19, 2013.
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Transcript of Guy Martel, GML Actuarial Services Family Law Institute April 19, 2013.
![Page 1: Guy Martel, GML Actuarial Services Family Law Institute April 19, 2013.](https://reader036.fdocuments.us/reader036/viewer/2022062800/56649de85503460f94ae2e01/html5/thumbnails/1.jpg)
Guy Martel, GML Actuarial ServicesFamily Law Institute
April 19, 2013
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Pension valuations Income tax issues Division of a pension in pay (Ontario PBA) Double dipping issues Challenging the rules Other calculations
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Provincially regulated plans Federally regulated pension plans (PBSA) Federal government employees (PSSA, CFSA,
RCMP, …) Foreign Plans Non-registered Supplemental plans (SERPS)
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Parties do not want to wait Privacy: does not want employer or spouse to
know Separation not finalized or other side not
cooperating Missing components of value (contractual
indexing, some bridge benefits) Review statement of Family Law Value
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After tax value of pension After tax value of other assets Gross up on equalization payment
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Situation
House worth $ 300,000
Applicant: age 50, federal public servant for 25 years, including 22.5 years
during marriage, average salary of $100,000 at FLVD
Respondent: age 50, with OMERS for 10 years, all during marriage, average salary of
$45,000 at FLVD
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Respondent keeps the houseApplicant Respondent
House $ 300,000Pension $ 860,000 100,000Disposition costs (23%/10%) (197,800) (10,000)
$ 662,200 $ 390,000Equalization payment (136,100) 136,100
$ 526,100 $ 526,100
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Should 10% projected tax rate of Respondent beused for gross up?
Tax rate of respondent will increase to 13.35% if the amount transferred is $151,222 ($136,100 / (1-.10)).
Gross up at rate of 13.5% =>$136,100 / (1-.135) = $157,341
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Spouses will not end up with assets of equal valueafter gross-up
Applicant RespondentHouse $ 300,000Pension $ 860,000 100,000Pension transfer (157,341) 157,341Disposition costs (21.7%/13.5%) (152,477) (34,741)
$ 550,182 $ 522,600
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$175,912 should be transferred so that they haveequal assets after division
Applicant RespondentHouse $ 300,000Pension $ 860,000 100,000Pension transfer (175,912) 175,912Disposition costs (21.5%/14.1%) (147,079) (38,903)
$ 537,009 $ 537,009
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House is divided 50/50Applicant Respondent
House $ 150,000 $ 150,000Pension 860,000 100,000Disposition costs (23%/10%) (197,800) (10,000)
$ 812,200 $ 240,000Equalization payment (286,100) 286,100
$ 526,100 $ 526,100
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Gross up at 18.3% =>$286,100/(1-.183)= $350,184
Applicant RespondentHouse $ 150,000 $ 150,000Pension 860,000 100,000Pension transfer (350,184) 350,184Disposition costs(19.8%/18.3%) (100,944) (82,384)
$ 558,872 $ 517,800
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Would it be better if before tax values of pension equalized?
Applicant RespondentHouse $ 150,000 $ 150,000Pension 860,000 100,000Pension transfer (380,000) 380,000Disposition costs(19.5%/18.8%) (93,600) (90,240)
$ 536,400 $ 539,760
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Deemed arrears repayment requirement ◦ If active at FLVD, spouse’s share will be credited with
interest to date of transfer◦ If retired at FLVD, arrears payable to spouse will be
accumulated with interest◦ Member’s pension is reduced by spouse’s share◦ Monthly payments to member will be further reduced to
recover overpayment between date of retirement and date of transfer
◦ If in pay at retirement, pension of spouse will be increased to recover payments the spouse should have received between FLVD and date of transfer
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Example
- Family Law Valuation Date: March 1, 2010- Applicant, age 65, receives a non-indexed
pension of $4,000 per month at FLVD- Pension was entirely accrued during marriage- Division occurs March 1, 2013
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Example- If 50% division, spouse should have received
$2,000 per month for last 36 months- Arrears of $75,955 ($72,000 plus interest)- Arrears represent an annual amount of $5,804 for
the applicant’s lifetime- Respondent will receive $29,804 per year
(62.09% of pension)- Applicant will be left with $18,196 per year
(37.91% of pension)- Spouse may have received spousal support
between the FLVD and the date of division
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Example- Dividing the pension 50/50 will result in double
dipping- 40.26% of pension ($19,326 per year) should be
allocated to spouse- Arrears will be of $61,164 ($57,978 plus interest)- Arrears represent an annual amount of $4,674 for
the applicant’s lifetime- Respondent will receive $24,000 per year (50% of
pension)- Applicant will be left with $24,000 per year (50%
of pension)