• Pension Benefits

  1. Traditional Defined Benefit  (government)
  2. Traditional Defined Benefit (private sector)
  3. Cash Balance Plans
  4. Money Purchase Plans
  5. Hybrid & Other Plans 

  • Defined Contribution Benefits

  1. 401(k)
  2. Simple Profit Sharing
  3. ESOP'S
  4. 457 (Government)
  5. Thrift Plans
  6. Hybrid & Other Plans

  • Stock Options
  • Executive Compensation
  • Buyout Clauses
  • Workers Compensation (applying state law)
  • Disability Benefits (applying state law  & discounting for federal restrictions)

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  • Measuring Accrued Benefit
  • Measuring Marital Portion
  • Determining Value of Secondary Benefits

  1.  Early Retirement Subsidies
  2.  Benefit Feature Subsidies
  3.  Survivor Benefits
  4.  Tack-on Service Benefits (military & other)

  • Distinguishing Active from Passive Accruals

  1. Utilizing State Law (where divorce occurs)

  • DROP Benefits
  • Applying Discounts for Form of Payment

  1. For ½ Marital Portion Payable to other Spouse
  2. For Non-marital Portion Payable
  3. Identifying Dissipation of Marital assets**
  4. Identifying Special Equity Adjustments

              (not applicable in Community Property States)

  • Contingency Clauses 

  1. Of Executive Compensation Benefits
  2.  Buyout Clause in Merger/Acquisition Contract

** Commonly associated with DROP & marital misconduct  

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Pensions  are by far one of the two most complicated properties divided in family  law and they account for vast majority of significant errors.   Oftentime these errors are only discovered when the employee or his/her  spouse begins receiving benefits.  A big surprise at retirement will  have the most devastating impact.  Spouses receiving alimony cannot  learn they were short changed because alimony frequently ends at  retirement and the pension income is intended to substitute for the  income they lost.  The participant spouse planning to retire will be  extremely unhappy to learn that he or she cannot because the sharing  spouse receives far more than originally thought. 

Accrued pensions  include various optional forms of benefit some of which typically  include non-marital portions, that once elected, will be paid to the  sharing spouse.  Unless proper valuation is performed the sharing spouse  will receive far more than half the benefit.  Subsidies can comprise  more than half the benefit.  Some subsidies are marital property while  others should not be.  Divisions should limit divisible benefits earned  at the date of filing.  Attorneys unfamiliar with pension often don't  have a clue how to restrict what is shared.  Aggressive "experts"  oftentime assist in settling cases dividing far more than half and the  other side wasn't protected because they failed to retain a qualified  expert.    It is more often than not too late to correct these errors  after the parties enter settlement agreements or try the matter in  court. Only actuaries fully understand these benefits and are qualified  to address marital portions.  We are licensed by Congress and designed  plans ourselves and advised employers on compliance issues.

Valuation  requires education and training seldom offered in the forensic market  because such expertise is valuable and the real expert charges for such  expertise. Yet the cost of not retaining competent services can be  huge  because a  $500 or more  savings  in  fees is often offset  by losing  tens of thousands of  dollars in marital  property and many times even  hundreds   thousand   dollars.    

Only  an   actuary   is   equipped   to   value    retirement   and   executive compensation   benefits.   But  the  education  required  to  offer  such  services   does not  stop there.   Proper  valuation requires understanding family  law principles and a complete knowledge of the state law for  which  those principles are to be applied. Far less than 1% of all experts  offering forensic valuation services are actuaries. Of that 1% only very  few are knowledgeable about the state laws that apply to the   valuation  process.   Sometimes  it  requires knowledge of the case law  on child and spousal support issues.  When this last  criterion is   applicable the valuation  often overstates the results, often double the  amount it should have been  and  this occurs far  too  often.  For  example, under Florida law, Pimm v. Pimm, 601  So.2d 534 (Fla 1992) functionally prevents early retirement when it  ignores the lesser income produced by an early retirement in granting a  reduction of alimony.  This early retirement subsidy is paid only when  the participant actually retires and receives it.  This applies to ERISA  plans, as well.  Why then should the retirement benefits be valued at  the early retirement age where an early retirement subsidy is involved  when this supreme court ruling effectively prevents the participant from  retiring at the earlier age?  Valuation of pension plan benefits seldom  factor in alimony rulings that drive when a participant can retire.   When the participant paying alimony cannnot retire on the early  retirement date, valuing the pension as if that is possible serves to  penalize that person with a double discount.

Valuation   requires  a  special  understanding  of  the  benefits  that  are   offered.    This  requires  past  experience  both with designing    and   implementing   these  benefits  for   employer   sponsors   and    it   also  requires   experience   with  the administration  of  these   benefits  because  that  experience  brings  with  it  knowing  what  to  look for in the valuation process.   The  valuation  requires first  reading  the plan document.   This legal document establishes rights to  benefits that  the employee has  as  a  result of employment.   When a  dispute develops between the employer and an employee this is the first  thing that the court looks to in resolving the dispute.   The  plan  document  also contains information as to  what  conditions  must  be   met  before  an  employer  can  pay  the  benefit.    This  not  only   establishes  rights  to  a spouse sharing  secondary  benefits not  listed on the employer-provided accrued benefit statement,  but it  establishes discounts   that  should  apply  to  receipt  of  even  the   basic  benefit.    This  complex  process  then  aids  both  the  employee  and  the spouse.  The cheap valuation costing a few hundred  dollars skips reading the document altogether. The cheap valuation  fails  to  factor in the state law governing the process. 

The Spouse wishing to share the benefit is short changed when the employee lies about what benefits he or she has.  The participant earning it is hurt badly when elected options are not valued because oftentimes non-marital portions are automatically paid and only by a proper valuation can a participant  receive offsetting credit.  This is particularly true with police and firefighter pensions  where typical mistakes cost hundreds of thousands of dollars overpaying their spouses in basic benefits and DROP, and is exacerbated when alimony payments are made which directly impacts DROP and never considered by most attorneys and experts. (Call for a free consultation to discuss your situation.)