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Keogh Plan: Named for late Congressman Eugene Keogh (D-NY), Keogh plans are retirement plans for self-employed persons. Keogh plans are sometimes called "H.R. 10 plans" because Congressman Keogh's bill was the tenth bill introduced in the House of Representatives in 1962. ERISA and its amendments and other federal laws, rules, and regulations now make no distinction between Keogh plans and any other qualified plan. Most Keogh plans were profit-sharing plans, although there were a few defined benefit Keogh plans. Many Keogh plans were frozen as the laws changed, accepting no additional contributions but remaining invested as tax shelters. If a party in a divorce case has ever been self-employed or a member of a partnership, it should be determined whether there is an old Keogh plan with funds still in it. Such a plan is subject to valuation for equitable distribution and is also subject to a QDRO.

Life Expectancy: Life expectancy is both a concept and a mathematical function. In general, all defined benefit pension plans must take into account the probability of death before or after retirement. Although sometimes loosely called life expectancy, the mathematics involves the calculus of probabilities, which is not merely looking up in a table the number of years of a person's expected remaining lifetime. Published life expectancy figures are byproducts of actuarial mortality tables. For example, a standard table for white males would list the average number of years of life remaining to a white male age 40 as 34. Taken literally, this would mean the subject dies at age 74. However, the mathematical probability that a white male age 40 dies at age 74 is only 53.8 percent. That is, more than one-half of all white males who are currently age 40 will die at age 74. The rest will die either before or after they reach that age. Life expectancy is not an accurate means for developing the present value of a pension. It is an interesting mathematical concept, but it is too gross a function to be used with any precision.

Loans: A qualified ERISA plan may permit loans to participants but is not required to make loans available. If loans are available, they must be nondiscriminatory. To apply for a plan loan, a married participant must have the written consent of the spouse, witnessed by a plan representative or notarized. If a QDRO is involved, it should be made clear whether the order applies to benefits or account values net of any loans. Receipt of a loan from one's pension plan is not a taxable event unless the participant defaults on the loan or otherwise fails to repay the plan, in which case the loan will be recharacterized as a lump-sum distribution.

Malpractice: The failure of an attorney to protect a nonemployee-spouse's pension rights may result in a malpractice award against the attorney. In 1987, a Maryland jury awarded a wife more than $75,000 in damages against her divorce attorney. Pickett, Honlon & Berman v. Haislip, 533 A.2d 287 (Md. Ct. Spec. App. 1987). The lawyer was found negligent, in part, for failing to employ experts to evaluate the husband's assets. In 1990, the failure of a Missouri attorney to protect a wife's rights to a share of the husband's military pension resulted in a malpractice award of over $100,000. The attorney had originally advised his client correctly that a military pension was not considered marital property, but the law changed before the case was over, and the attorney was found negligent for ignorance of the new law that recharacterized military pensions as marital property.

Marital Property: Contributions made to a pension fund after the cutoff date for measuring marital property are the separate property of the employee-spouse, not available for equitable distribution in marital dissolution. The value of the pension at the cutoff date may be credited with passive increases, but not contributions, up to the date of trial or other settlement of the property issues in the divorce case. (Depending on the jurisdiction, the cutoff date may be the date of marital separation, the date of filing of the divorce complaint, or the date of the divorce.) In a defined benefit pension plan, the employer's contributions to the general pension fund are for all employees covered by the plan, not earmarked for individuals. The continuation or the absence of contributions in such a plan has no bearing on the employee's pension benefits. The proper value for marital property purposes is determined in a two-step process, reflecting two time frames. First, the pension benefit is determined that has accrued for pay and service up to the cutoff date. No increase in the pension benefit is counted after the cutoff date. Second, the value of that pension is determined currently by actuarial factors using the employee's current age and current interest rates. The result is the current present value of the cutoff date pension benefit.

Military Pensions: The Armed Forces Retirement System provides generous pensions to its members who retire with 20 or more years of active duty service. There is no vesting as such, so if a member never completes 20 years' service, there will never be a pension under this system. From time to time, however, the system makes available special limited programs for retirement with fewer than 20 years of service. Military service credits may count in other pension systems to increase a pension, such as in plans for civilian employees of the federal government, certain teachers' retirement plans, or pension programs for police officers and firefighters. In a divorce, such plans will accept a form of QDRO, but the order applies only when the pension enters pay status. The retirement age in the Armed Forces Retirement System is the age at which the person retires after 20 years of service. For participants in the military reserves there is a different pension system, with retirement at age 60.

Modification of Judgment: A husband's pension was not considered in a Florida divorce case. Some years later, the wife asked for equitable distribution of the ex-husband's pension because it had been overlooked. The court chose not to reach back to modify a judgment to redistribute the assets in the divorce, including the pension. Lapinta, 13 Fla. L. Weekly 1969 (1988). However, a 1990 case in West Virginia allowed the decree of final judgment to be reopened because the parties had misunderstood the value of the pension. The schoolteacher husband had received a statement from the retirement system stating the amount he would receive if he left employment at that time. Later, he realized that the stated amount represented only the return on his contributions and that the actuarial pension value was much greater. The court allowed the mistake to be corrected. Langdon v. Langdon, 391 S.E.2d 627 (W.Va. 1990).

Money-Purchase Pension Plan: A defined contribution plan under which the employer's contributions are mandatory and are based on each participant's compensation. Retirement benefits under the plan are based on the amount in the participant's individual account at retirement.

Mortality: The probability of mortality is a vital element in the computation of the present value of a pension. In pricing an annuity, the probability of the death of the annuitant at any future time must be included in the calculations. Several standard mortality tables, which fall into two broad categories, are available for use. Within a particular category there is not much significant variation unless it is a very old table - say, 50 years old. However, the categories are important. There are mortality tables for life insurance that are dramatically different from pension or annuity mortality tables. Mortality rates in life insurance tables are higher because they anticipate more deaths. In annuity or pension tables, mortality rates are lower because they anticipate fewer deaths and longer lives with more payouts. This structure allows for variations among the covered population and has proved to be a financially stable arrangement over many years.

Need for Attorney: In a 1990 California case, the parties to the divorce agreed on property distribution without the knowledge of their respective attorneys. As part of their agreement, each party would keep his/her own pension plan. At trial three years later, the attorneys first learned of the agreement. There was no evidence of the value of the pension plans and no proof that the wife's pension was equal to the husband's. The court decided that whenever a party is represented by counsel, a stipulation or agreement affecting the party should not be accepted without the knowledge and consent of the attorney. In re Marriage of Maricle, 269 Cal.Rptr. 204 (Cal.App. Dist. 1990).

Net/Gross Pension: In determining the present value of a pension in pay status, it is important to distinguish between the net and the gross pension. The gross pension is the amount of the payment the retiree is entitled to receive from the pension plan. The net pension is the actual amount of each pension check after deductions. The deductions may be mandatory or voluntary. They may include union dues, health insurance premiums, life insurance premiums, withheld taxes, charitable contributions, and other miscellaneous items. Deductions from the gross pension may include loan amounts being repaid, missed employee contributions being made up, and purchase of prior service credits. For valuation purposes, it is usually appropriate to focus on the amount of the gross pension, although taxation may be taken into account in some venues. In deferred distribution by use of a QDRO, it is essential for the order to clearly specify whether the net or gross pension is involved.

Normal Form: Every plan establishes benefits on the basis of a "normal form." In a defined contribution plan, it is to be expected that the normal form will be a lump-sum distribution. In a defined benefit pension plan, it is usually a straight lifetime annuity, ceasing at the death of the retiree. A typical plan will offer, at retirement, options to convert the normal form into some other form. The conversion may be determined as the actuarial equivalent of the normal form, or it may be somewhat better than the mathematical adjustment so that the pension is subsidized. A defined benefit pension plan covered by ERISA must provide for a qualified joint-and-survivor annuity (QJSA) if the participant is married. However, a QJSA need not be the normal form, because it may be reduced by the plan to adjust for the coverage of two lives. The normal form is one of the determinants of the present value of a pension. If a QDRO is served on the plan, the form of pension should be addressed.

Normal Retirement Age: The normal retirement age (NRA) in a plan is the age that, when attained, permits the participant to voluntarily cease employment and receive a full, unreduced benefit, whether a lump-sum distribution or an annuity. NRA is also the measuring point for vesting. For example, if a participant has not attained full vesting under the plan's vesting schedule for years of service, upon reaching NRA, full vesting becomes automatic. The NRA may be a fixed age (such as 65) or may be derived from a formula or from a combination of age and service. Some examples are (1) age 60 with 10 years of service, (2) age 55 with 20 years of service, (3) any age with 35 years of service, (4) a "magic number" (such as 85) consisting of the total of the employee's age (58) and years of service (27 years).

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