What is a Spousal Waiver (Form 2)?
A Form 2, once signed and filed with the pension provider, authorizes the pension provider to stop payments to a plan member’s spouse after a plan member dies. The Pension Benefits Standards Act (the “PBSA”) requires that if a member of a pension plan has a spouse when he or she retires, the plan member must select an option that provides the spouse with 60% or more of the member spouse’s pension benefit after the member spouse dies. However, the PBSA also allows for a spouse of a pension member to waive his or her benefits under the member spouses’ plan by signing a Form 2 statement. As outlined at HERE, Form 2 is used when:
“the spouse of a member/former member of a pension plan agrees to waive or give up his or her right to receive survivor’s benefits, if the member/former member dies after starting pension or annuity payments, for one or more of the following purposes:
- to permit the member/former member to elect a form of pension, from a defined benefit or target benefit component of a pension plan or from an annuity purchased using the member’s/former member’s benefits in a pension plan, locked-in retirement account or life income fund, that does not give the spouse a minimum 60% lifetime survivor’s benefit;
- to permit the member/former member to designate a beneficiary other than the spouse for any remaining benefits in the pension or annuity;
- to permit the member to designate a beneficiary other than the spouse for any remaining life income type benefits from a defined contribution component of a pension plan.”
Why you might be asked to sign a Form 2
This form is typically given to a member’s spouse when the parties are still married, and life is good. It may be presented as “Hey honey, if you sign this form, then I will get a few hundred dollars extra per month in pension payments.” The spouse thinks that it is better to have a few hundred dollars more per month in hand so the spouse signs it not thinking at the time of signing what it would mean if the parties separate or the member spouse dies before the pension coming into pay.
Should you sign a Form 2?
If you are presented with a Form 2 Spousal Waiver, do not sign it until you get independent legal advice to understand what you are giving up! If a plan member’s spouse properly completes the form and it is filed with the benefit provider, the member’s spouse is giving up forever any and all pension payments equal to 60% or more of the member spouse’s plans benefits after the member spouse dies. Keep in mind that the PBSA requires that if a plan member has a spouse when he or she retires, the election by the member spouse has to provide the spouse with 60% or more of the member spouse’s pension benefit after the member spouse dies BUT the signed and filed waiver puts an end to those guaranteed monthly payments to the plan member’s spouse after the plan member dies. It defies logic to voluntarily give up guaranteed funds.
Steps to completing a valid Form 2
The following steps must be taken to complete a Form 2:
- complete the form in its entirety;
- it must be signed by the spouse and witnessed not earlier than 90 days before the date that the life annuity payments are to commence;
- it must be signed outside of the immediate presence of the person who is to receive the annuity; and
- it must be filed with the pension plan administrator, RRSP underwriter or life annuity or Life Income Fund (LIF) contract issuing company, as the case may be.
When a Form 2 is invalid
The Form 2 cannot be used if:
- the plan member starts receiving pension or annuity payments;
- the plan member dies after the pension comes into pay*; and
- the plan member dies before the pension comes into pay.
If your Situation Involves the Division of a Pension – Get Independent Legal Advice
Pensions are complex as are the rules for dividing them. If you are being asked to sign a Form 2 or you are in the process of dividing assets during a separation or divorce, your best bet is to get some legal advice, so you fully understand the consequences of the different options available to you.
*”comes into pay” means that the pension plan member has already started receiving pension payments.