Over the next weeks, tens of thousands of RCMP members and reservists (at least 6,800 officers in B.C. alone) will receive retroactive pay and salary increases following a collective agreement reached in August 2021. For RCMP families living with the reality of separation and divorce, there may be questions about how the retroactive pay affect child and spousal support, as well as whether the payout must be shared with an ex-spouse.
As any lawyer worth their salt would say, “it depends!” I cannot provide legal advice about your specific situation in a blog post, but here are some general principles to consider:
(1) Retroactive pay is a reward for past services, akin to severance pay, and therefore, it may be considered “property” under Part 5 of the Family Law Act. However, this would only be the case if the entitlement to the pay was “crystallized” at the date of separation, meaning that the RCMP member was entitled to the retroactive pay at the date of separation. Although the Collective Agreement covers a six-year period from April 1, 2017 to March 31, 2023, the agreement was not ratified until August 6, 2021. This means that if a couple separated AFTER August 6, 2021, there is a good argument that the retroactive pay received by the RCMP member is a family asset to be divided 50-50 upon receipt (net of taxes).
(2) If separation occurred prior to August 6, 2021, it will be difficult (although perhaps not impossible) to argue the retroactive pay is an asset; however, it should still be considered for child support and spousal support purposes. On the other hand, if the retroactive pay is divided equally as an asset, it would not likely be considered for support purposes, as this would entail what is known as “double dipping” on the same monies.
(3) If the monies are to be considered for support purposes, does this mean that retroactive support is owing back to April 1, 2017, meaning court orders and separation agreements need to be varied? Not likely. The RCMP members receiving the retroactive pay are not required to go back and re-file their income tax returns. Instead, the pay will be part of their income in the 2022 tax year. Similarly, for support purposes, the court ought to consider their pay as part of 2022 income.
(4) But should it be included as part of the 2022 income for support purposes if it is a one-time anomaly? Likely yes. However, if 2022 is the first year of paying support, it may be reasonable to consider an average of 2 or 3 years, rather than using the one “higher than normal” year when setting support payable. On the other hand, if it isn’t averaged, the payor would only have one year of paying additional support (due to the retroactive payments), rather than having elevated support over the next three years on the basis of a rolling average. Or you could consider negotiating an agreement where support is paid on the regular salary and a “top up” of support is provided separately in relation to the retroactive pay outs. This is already an option that some families choose in relation to overtime pay: set child support according to base salary and then do a one-time “top up” of support at the end of the year to account for overtime pay because it is variable and unpredictable each year. In a typical year, a payor is paying child support based on the previous year’s tax return, but this can be challenging if last year’s overtime pay was significantly higher than what one is earning in the year that support is being paid. This “top up” approach provides a more reasonable monthly pay amount, while still sharing the overtime or retroactive pay according to one’s obligations under the Federal Child Support Guidelines. There are a number of options to consider in order to “lessen the blow” but in any case the retroactive pay will be considered income for support purposes, unless you and your former spouse agree otherwise.
(5) Remember that if you are the payor of child or spousal support, you do have disclosure obligations when there is a material change in circumstances. Now is a good time to re-read your separation agreement or court order to remind yourself of these obligations so they don’t come back to bite you in the future. Keep in mind that your pay raise is going to increase your obligation, whether you increase child support now or wait until the next tax year or support review.
(6) How the retroactive pay and salary increase may or may not affect spousal support, specifically, is quite unique to the separation agreement or court order in place. It is worth taking a few minutes to read the specific terms that apply to you.
If you have questions, either as the payor or the recipient of support that is affected by the RCMP Collective Agreement, we at Connect Family Law would be happy to talk with you further.