CPP - Some Comments on Waiving or Deferring Credit Splitting

1. CPP - Some Comments on Waiving or Deferring Credit Splitting Facts: • Both parties have CPP, but wife has no contributions from 1986 to 1994. • Parties have two children, born 1985 & 1988. • Cohab. commenced in 1981 • Married in 1990 and separated in 2007 • S. 57 declaration in 2008 Anderson Pension Law Consulting

2. Anderson Pension Law Consulting

3. Anderson Pension Law Consulting

4. Anderson Pension Law Consulting

5. Anderson Pension Law Consulting

6. Questions to consider: 1. Should they divide CPP? What will they get? 2. Is a disability relevant to the decision to divide? 3. How is CPP divided? _______________________________ Anderson Pension Law Consulting

7. Credit split? • assume both benefit from equalization? • Carol’s CPP estimated $325/mo. less than husband’s B.’s. ($538 v. $863) • common sense guess: equalization should leave each with about $700/mo. in CPP. • common sense guess incorrect. • likely result: Dennis gets $750/mo. and Carol gets $733/mo. Which she would receive even if no split. Anderson Pension Law Consulting

8. (Credit split?, cont.) • CPP adjusts for low earning years • 2 main adjustments CPP makes are (a) drop out 15% lowest years, and (b) drop out years child under 7 Anderson Pension Law Consulting

9. (Credit split?cont.) • Carol’s lowest years were 1986 to 1994. • the 2 children were born in 1985 & 1988. • Carol had $0 pensionable earnings only in years caring for a child under 7. • Carol can apply for child rearing drop out for those years Anderson Pension Law Consulting

10. (Credit split?cont.) • Result? Carol still gets max even if no splitting • Dennis’s CPP reduced to $700/mo. • Result? overall loss of value ($115/mo.) without any compensating benefit. • in this case, therefore, parties should probably not credit split Anderson Pension Law Consulting

11. (Credit split? cont.) • usually, credit splitting makes sense. • Take up rate is very low. • Lawyers should make sure clients are aware of credit splitting. Anderson Pension Law Consulting

12. (Credit split? Cont.) • Some cautions: • Analysis assumes both parties continue to work based on past history. • Future events can change everything • lost employment, disability, choosing to take CPP early, all would affect decision. Anderson Pension Law Consulting

13. (Credit split? Cont.) • Often makes sense to defer decision until close to collecting benefits • Caution: • limitations on when can apply • Caution - legislation may change • Not all provinces permit waiver. None permit deferral. Anderson Pension Law Consulting

14. (2) Significance of car accident? • even if equalization did make sense, the injuries are reason to postpone • Dennis will probably qualify for CPP disability benefit Anderson Pension Law Consulting

15. (car accident, cont.) • CPP disability benefit based on 2 components: (a) flat rate, and (b) an amount based on unadjusted pensionable earnings. • currently Dennis would probably be entitled to max. benefits ($1077.52/mo) Anderson Pension Law Consulting

16. (car accident, cont.) • equalization would immediately reduce CPP disability benefit. • Carol is 52 and could not apply for max. CPP benefits for another 13 years. • result? overall loss of value without any compensating benefit. Anderson Pension Law Consulting

17. (car accident, cont.) • alternative? • defer credit splitting until Dennis reaches 65 • at 65 disability benefits replaced by CPP pension • if Carol would otherwise elect CPP before that date? support order (Coulter) Anderson Pension Law Consulting