BENEFIT VALUATIONS INCLUDE:
Listed in Best Experts in America.®
(not applicable in Community Property States)
** 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 cannot 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.)