|MONTHLY PENSION PLANS
Larger employers usually provide their employees with some kind of a retirement scheme. Traditionally, it was a defined benefit pension plan. This is what we know as a monthly pension for life based on salary, length of service and age at retirement. Think GM and other large corporations, most government employees and union workers. Since the early 1980’s the majority of private employers have abandoned their defined benefit plan pensions.
Pensions were a great deal for the employees because they had income for life, survivor benefits for their spouses and they knew exactly what their monthly income was going to be so they could intelligently plan for their retirement. Back in the 1980’s some airline pilots were retiring at age 60 with pensions of over $100,000 per year. We prepare reports detailing the present value of the marital portion of the pension (whether the participant is working or not) using actuarial calculations based on data obtained monthly from the Pension Benefit Guaranty Corporation, a division of the U.S. Department of Labor. We have been providing our attorney clients with these objective pension appraisals for use in case settlement for 24 years. If there are enough marital assets (house, cars, stocks and bonds, etc.) an offset can be made by awarding the non-participant spouse a greater share of the marital assets and the participant retaining his/her pension. If that is not the case then you will have to use a Qualified Domestic Relations Order (QDRO) to distribute the non-participant’s share. Our goal is to be objective and fair with our attorney clients and their clients. The price for an objective (the only kind we prepare) pension appraisal is $200.00.
DEFINED CONTRIBUTION PLANS
Many private employers have abandoned their defined benefit plan pensions and are now providing some kind of defined contribution plan. There were many reasons for doing this. A defined contribution plan (401(k), for example) is similar to a bank account. Some upward bound mobile employees like these because of portability. You can take your account to your next employer with no tax penalties if you do it with a trustee-to-trustee transfer. The benefit part comes in because the participant makes contributions and the employer matches a portion of that. These changes shift the investment risk, and the burden of managing assets, to the employee. The employer has figured a way to get himself off the hook.
The high cost of maintaining a defined benefit plan under ERISA rules make them troublesome and expensive. The employees lost their lifetime, guaranteed future retirement and now have to maintain their own accounts. These plans are valued by simply identifying the account balance on the appraisal date. If there is substantial time between the marital property appraisal date and the date these funds are paid to the alternate payee - then the non-participant spouse should receive the passive growth on the portion being awarded to them.. Passive growths are items like interest, earnings, but do not include any contributions made to the plan.
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Submission form here
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