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Do I Need a Present Value Evaluation If I Am Waiting Until Retirement For My Pension Benefit Distribution?

Tony P. of New Jersey wants to know: Do I need a Present Value Evaluation if I am waiting until retirement for my Pension Benefit Distribution?

Brett, from Pension Evaluators®at Troyan, Inc.® writes:New Jersey Case Law is clear that a present value evaluation performed at the time of divorce is irrelevant if the alternate payee waits for a deferred distribution which will occur when the participant retires.

New Jersey's Appellate Division has addressed this issue in the past. "As it would be unjust to require the pensioner to pay a full share of a future entitlement at the time of the divorce without discount, so it would be unthinkable to require the pensioner's spouse to defer receipt of an equitable share of the pension until a future date but reduce that entitlement to its value as of the time of the divorce. Simply put, future benefits should not be paid in present dollars without a discount and present benefits should not be discounted to the value of past dollars." Whitfield v. Whitfield, 222 N.J. Super. 36, 51-52 (App. Div. 1987). See also, Risoldi v. Risoldi, 320 N.J. Super. 524 (App. Div. 1999).

Many Of these Cases Required the Expertise of Troyan®

Whitfield v Whitfield, 222 N.J. Super. 36 (App. Div. 1987).

Husband's unvested pension subject to equitable distribution. Cites coverture fraction as an approved method of distributing the pension.

Marx v Marx, 265 N.J. Super. 418 (Ch. Div. 1993).

Defined benefit plan must be distributed by way of coverture fraction at time of husband's eligibility for retirement benefits. Also, husband's unnecessary prolonging of litigation on issue of QDROs for 2 years warranted imposition of counsel fees.

Reinbold v Reinbold, 311 N.J. Super. 460 (App. Div. 1998).

Husband's enhanced pension for early retirement was subject to equitable distribution. 2.) Denominator of coverture fraction should reflect actual years worked and not additional years added for early retirement benefit (resulting in a greater portion for the wife.)

Eisenhardt v Eisenhardt, 325 N.J. Super. 576 (App. Div. 1999).

Where husband retired prior to the divorce and received early retirement benefits, proper coverture fraction to be used in determining wife's share of pension must be based on actual years worked and not additional years added for early retirement benefits, affirming the principle set forth in Reinbold.

LaSala v LaSala, 335 N.J. Super. 1 (App. Div. 2000) certif. denied, 167 N.J. 630 (2001).

Trial court ordered immediate monthly benefits to be paid to wife from husband's Police and Firemen's Retirement System (PFRS) pension plan even though husband was not retired and not currently eligible to collect benefits. App Div reversed, finding that the trial court impermissibly required the PFRS to provide a benefit which was not authorized by the plan. Court says that the coverture formula (Marx) must be used to determine wife's benefits. Good description of 3 methods of distributing pensions: deferred distribution, immediate offset, and partial deferred distribution.

Menake v Menake, 348 N.J. Super. 442 (App. Div. 2002).

Parties divorced in 1992 and QDRO entered in 1996 distributing husband's pension using coverture formula. 2nd QDRO entered in 2000 using a value of the pension with a fictional retirement date which was the date of the divorce. This 2nd QDRO resulted in wife being awarded substantially less of husband's pension. App Div reversed, finding that the 1st QDRO which used the coverture formula was the proper method for distributing the pension.

Monteforte v Monteforte(unreported) 2002 WL 32862137 (App. Div. 2002).

Trial Court entered QDROs distributing Husband's PERS pension and military pension using the coverture formula. Husband appealed claiming that using the coverture formula improperly gave wife share of post-divorce salary increases which were solely attributable to husband's efforts. App Div affirmed the trial court's use of the coverture formula. This case contains a very good discussion of why the Husband's argument is incorrect and the coverture formula is the most appropriate method for distributing a deferred defined benefit pension.

Genovese v Genovese, 392 N.J. Super. 215 (App. Div. 2007).

Husband filed for divorce in New York and a Judgment of Divorce was entered in 1994. Wife appealed and Judgment was vacated and complaint dismissed due to insufficient evidence to support the cause of action. Husband later filed complaints for divorce in New Jersey in 2001, 2002, and 2003, all of which were dismissed for lack of prosecution. Husband filed again in New Jersey in 2005 and case was tried and a Dual final Judgment of Divorce was entered. Trial Court found that for purposes of equitable distribution of husband's pensions, the marriage ended in 1994 when husband filed his first complaint for divorce and that date was used for the coverture fraction for distributing the pensions. Wife appealed and App Div affirmed. [Note: the facts in this case are somewhat unusual and the date of the complaint which results in a final judgment is still the rule which is most often followed by the courts for determining the end of date of a marriage and determining which assets accrued "during the marriage" for purposes of equitable distribution. Portnor v Portnor, 93 N.J. 215 (1983), Brandenburg v. Brandenburg, 83 N.J. 198, (1980), Painter v. Painter, 65 N.J. 196, (1974)]

In many divorce cases in which a retirement plan is an asset subject to equitable distribution, the parties agree that the participant spouse shall assign to the non-participant spouse, or alternate payee, a percentage of the monthly retirement benefit that he receives when the pension goes into pay status. This is accomplished by a Qualified Domestic Relations Order (QDRO) signed by the judge and sent to the employee's company.

Pension evaluations are performed in the event the participant wishes to buy-out the alternate payee's share of the pension with another asset. The evaluation is based on assumed interest rates, mortality rates, date of retirement and future compensation. This figure is then discounted to present day dollars.

Please Contact our Office if you should have any questions or to begin working with our firm, today!

Brett Disdale

Lead QDRO Consultant

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