Pension Death Benefit Beneficiary Rules for Ontario Workers

Many people assume the person named on their pension forms will receive the death benefit. For a workplace pension in Ontario, the rules are more layered, and a spouse often comes first.

This article explains the general order of entitlement, who counts as a spouse, and what a waiver does. Which rules apply depends on your plan, so confirm the details with the plan administrator.

Spouse comes first before the pension starts

Under the Pension Benefits Act, s. 48, when a member dies before the pension starts, the spouse is entitled to the pre-retirement death benefit, ahead of any designated beneficiary.

Not every workplace plan is governed by Ontario's Pension Benefits Act. Federally regulated plans and plans in other provinces may follow different rules, so check which law covers your plan.

When a designated beneficiary or the estate is paid

A designated beneficiary, and then the estate, takes the commuted value only if no spouse is entitled. The order matters: a designation on a form does not override a spouse who is entitled.

• Spouse entitled: the spouse receives the pre-retirement death benefit.
• No spouse entitled: the designated beneficiary takes the commuted value.
• No spouse and no designated beneficiary: the estate takes it.

Who counts as a spouse, and separation

For the Pension Benefits Act, a spouse includes unmarried partners in a conjugal relationship who have lived together continuously for not less than three years, or who are in a relationship of some permanence and are the parents of a child. This is different from the definition in the Insurance Act, so do not assume the same person qualifies under both.

A spouse who was living separate and apart from the member on the date of death has no entitlement to the pre-retirement death benefit.

Spousal waiver

A spouse may waive the pre-retirement death benefit by delivering a written waiver to the plan administrator in the form approved by the Chief Executive Officer. The waiver can be cancelled by a signed notice before the member dies.

A waiver is what allows a designated beneficiary to be paid when a spouse would otherwise be entitled. If you are unsure whether a waiver exists, ask the plan administrator.

Designations, wills and the estate

The Succession Law Reform Act, s. 51(1) lets a participant in plans such as pensions designate a person to receive the benefit payable on the participant's death. A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.

A later designation revokes an earlier one to the extent they are inconsistent, so whichever valid designation is made last controls. For a workplace pension, a designation still does not displace a spouse who is entitled under the Pension Benefits Act.

If the commuted value is paid to the estate, an estate trustee collects the estate assets, pays taxes and debts, and distributes the residue to those entitled. A legal representative should get a CRA clearance certificate (Form TX19) before distributing estate property, because anyone who distributes without one is personally liable for unpaid amounts, up to the value of the assets distributed.

When applying for a certificate of appointment of estate trustee, the Office of the Children's Lawyer must be served if any beneficiary is under 18. For a dependant's support claim, amounts payable under a plan designation are deemed part of the net estate, so designated assets that skip probate can still be reached by a dependant. Such an application generally cannot be made more than six months after the grant of letters probate or administration, although the court may allow a later application against any part of the estate that is still undistributed.

What to do next

• Contact the plan administrator and ask which rules govern the plan and who is recorded as entitled.
• Gather proof of the relationship, such as marriage records or evidence of living together, and any separation papers.
• Ask whether a spousal waiver was ever filed.
• Remember that pension amounts with a beneficiary designation are left out of the estate value used for Estate Administration Tax.
• Speak with a lawyer if two people claim to be the spouse, or if a spouse and a designated beneficiary disagree.

Frequently asked questions