Pension Problem Help Needed

[moremiles]

I have a pension plan I joined in 1975 & it was suspended in 1999. I was married in 1985 & split with my wife in 2003. We have a mediation agreement that states I am to complete the necessary paperwork to provide my ex with her share of the pension. This is a defined benefit plan & the maximum payable to me when I retire is $771 a month. That amount is frozen & will not change. I thought everything was fine but when I made some inquiries as to splitting the pension "they" are telling me I have to provide a lump sum as an equalization payment. I thought that she would be provided with 50% of 15 (years together) divided by 25 (years in the plan), or roughly $771 x 60% divided by 2 = $231.30 a month. I never really worried about it before because my impression was always she would collect money when I did. Was I really that wrong in making that assumption. I am turning 56 in a couple of weeks & had been thinking of retiring at 60, but now I don't know what is going to happen & I am a nervous wreck. My ex friend the lawyer told me he would talk to me about it but only if I paid him $1500 for a consultation. We are not divorced but I am wondering if that would be the route to go & if this is something that could be worked out as a monthly payment for me when I collect my pension? If I have to provide a lump sum I don't know where it would come from because I don't have that much money! Could anyone offer me some advice?

[logicalvelocity]

Mr. Moremiles,

Welcome to the forum. Your don't need a lawyer for consultation on your pension plan but rather what you need is to get yourself a copy of your pension plan directives and study same to determine your rights in relation to your pension. Many pensions have online websites with help guides. Additionally, your employer's human resource department may be of assistance.

[moremiles]

They haven't been any help as of yet. In fact when I inquired about removing my wife as beneficiary "they" are the ones that suggested I retain an actuary to determine a lump sum equalization payment.

Actual quote from the plan in response to my latest inquiry:
"If you require the calculation of any pension values to be used in determining an appropriate division of property under family property law, you will need to retain the services of an independent actuary. The ****** Pension Plan is not in a position to determine pension values for this purpose"

Again I would ask am I going about this all wrong? I have no problem keeping her on as beneficiary if it would make this simpler. I have had numerous conversations with people that work for the plan & they have been most unhelpful.

[logicalvelocity]

Yes you can get an independent appraisal of the pension plan based on information provided by the pension administrator respecting contributions. Check the yellow pages... I believe the cost is about 400-600.

[moremiles]

Thanks for the info. I guess what I am trying to avoid is paying the lump sum equalization payment in the first place & rather pay the percentage she is entitled to monthly. Is that not possible? I really don't understand this as I have had no legal advice.

[Rioe]

Based on my experience with my pension plan inquiries, there is usually a mechanism in place to split a pension in the case of divorce. The lump sum you are worried about would not have to be paid by you, it would come out of your pension funds and your pension would be reduced accordingly, affecting your ultimate monthly amounts when you retire. It's calculated based on what part of your pension you contributed to during the years between the marriage and separation dates. So if you contribued before or after the marriage, that part would not be split.

And when she receives the lump sum, she must invest it as a retirement pension, such as in a locked-in RRSP that she cannot make early withdrawals from. She doesn't get it all at once despite it being called a lump sum. And it would be from that investment her monthly payments would come from when she retires, and it won't have anything to do with your retirement date.

From your description, it sounds like your pension plan is unwilling to do the calculations themselves to find out what the exact lump sum may be. Mine did, but I was told it may not be accurate and that an independent actuary would be better but my ex and I agreed the extra cost to do so wasn't worth it.

[copping]

Hi Rioe, I have a lump sum payment that I am to receive when my ex retires also, my lawyer told me I could do what I want with the money, she didn't say anything about it having to go into an RRSP / investment? Mind you I don't know what I want to do with it but would be nice if I had a choice.

[midnightvampyr]

pensions are an asset subject to the division of asset rules....three options....lump sum payment of an independently determined amount no tax consequences for either payor or payee; delinking of the pension so that the pension administrator puts the funds in "spouse's " name; monthly payout of the value in the pension plan to spouse.....for example, if you have $100,000 in pension assets and spouse is entitled to half, you would pay $5,000 (or some other agreed or court ordered amount) until you have paid out the $50,000....this would entitle you to full pension benefits when you retire, however, if you are still paying spousal support, you may have to "equalize" payments based on income (the old double dip)...make sense???...

[moremiles]

I contacted the pension plan people again on Friday & they told me not to worry about it. They will make the necessary calculations & the ex will get the agreed upon percentage plus any interest, when I apply for the pension. I finally talked with someone who actually wanted to help me! Big relief, she will get her lump sum but it will come from the money in my pension plan. I will not have to come up with an equalization payment myself.
So "Rioe" you are right on the money! Thanks very much to everyone for their input. I really appreciate it. I think maybe all of you know that feeling of "Oh shit WTF do I do now". I am sleeping better now.