We provide speedy, accurate answers
to complex actuarial questions at reasonable prices, including
Pension Evaluations & Analysis and
Domestic Relations Orders (QDRO) Services for both
Equitable Distribution Purposes and Community Property Matters
* Pension Evaluations * QDROs * Personal Injury *
* Wrongful Death * Wrongful Termination * Expert Testimony *
Pension Evaluations for Divorce
We determine the present value of defined benefit pension plans and defined contribution retirement plans for the court, family law attorneys, mediators, collaborators, divorcing couples or retirees. Our report shows the present value of the entire pension as well as the portion earned during marriage. When everyone understands the report, unnecessary confrontations are avoided. Your report will be backed by Troyan, Inc.® the nation's expert in pension Evaluations who will testify to the report if needed.
When a couple divorces, they probably focus first on dividing the property that's easy to see the home, furniture, cars, etc. The property they can't see their -- intangible property -- is also affected by divorce.
For many families, a pension is the largest asset, after the family home. Even if the pension is earned solely by the efforts of one spouse, the portion of it that was earned during the marriage is still marital property subject to division by the court. Many courts prefer to give full rights to a pension to the party who earned it as long as the other party will have a sufficient amount of income and property from other sources.
If, however, the pension is the primary source of income that a spouse would have and there are no other significant sources of income, the court is likely to divide rights to the pension. The court can divide the pension between the spouses by Domestic Relations Order.
Congress has passed a law facilitating division of pensions. The law allows entry of orders by a court called Qualified Domestic Relations Orders (QDROs). These orders, when properly entered by a court, require the administrator of a pension plan to send pension checks not only to the worker, but also to the worker's former spouse. The court cannot order a pension check to be written before the worker is entitled to the pension, nor can the court change the total amount of the pension that is due. But the court can direct that when a worker is eligible for a pension (even if he or she has not yet retired and is not drawing a pension), checks must be sent to the worker's former spouse.
In matrimonial actions, the basic logic behind the need for determining the present value of an individual's accrued pension benefit is to determine the replacement cost of that benefit. While the parties were married, there was an expectation that they would share in this benefit at retirement. Now, upon divorce, since marital assets must be distributed equitably between the parties, there is a need to determine the value of each of these assets, including the replacement cost of the pension benefit. Once the values of all assets are determined, the parties can offset the values of these assets so that they are distributed equitably.
Defined Benefit Plans - Determining Present Value
A Defined Benefit plan is a traditional pension plan in which there will be a monthly amount payable at retirement based upon a formula as described in the plan's Summary Plan Description. When calculating the present value of pension benefits, many factors affect the ultimate determination of this value. In general, if a person is young, has many years of deferral until the commencement of pension benefits and the payments begin at a later age, such as age 65, these factors will result in a lower present value. Conversely, if the person is close to retirement age and can begin collection of benefits at a relatively young age, the value would tend to be higher because the payments commence earlier and continue for many more years. The other major factor in determining the value is the choice of an interest rate assumption. Our firm currently uses the immediate interest rates in accordance with Actuarial Table No. 34.
Defined Contribution Plans
- Determining Present Value
Defined Contribution Plans consist of any type of tax deferred plan which has individual accounts for participants. Contributions into the account may come from the employer and/or employee. Investment risk is borne by the employee. The common types of defined contribution plans are profit-sharing, 401(k), thrift/savings, Keogh and Target plans. The value of these plans is based upon the current value of invested assets at any given point in time. When examining these plans for equitable distribution purposes, the value is relatively easy to determine when all of the value has been earned during the marriage. If a portion of the account was in existence prior to the marriage, the pre-marital portion has to be established. There are several methods used to determine the marital and non-marital portions of an account. The Tracing / Segregation Method are the most accurate and preferred methods used to determine the marital and non-marital portions. Unfortunately, the Tracing Method requires an analysis of all account statements from the date of marriage to the date of the action for divorce. Often these records are not available. Alternative methods of determining the marital portion of a defined contribution plan account are the Subtraction Method and the Coverture Method. The Subtraction Method is calculated by determining the account balance as of the Marital Asset Cutoff Date and subtracting from it, the account balance as of the Date of Marriage. The difference in the balances is the portion of the account that accumulated during the marriage. The Coverture Method is calculated by dividing the number of years married while participating in the plan by the total years in the plan. This calculates a Coverture Fraction, which is then multiplied by the account balance on the Evaluation date.
Establishing the value of a defined contribution plan is easy. Just read the statement. If the account balance has been accumulated entirely during the marriage, the parties may use the balance for the appropriate date and decide how it is to be divided. Our service become necessary when there was a balance in the account prior or subsequent to the marriage.
Utilizing the Tracing Method is without a doubt, the most accurate method to determine the marital and non-marital portions of defined contribution plan accounts. This method examines the actual investment experience of the account during the whole marital period. Any earnings or losses are determined on a proportionate basis from quarter to quarter. Also, any loans or distributions which were made during the marital period can be properly accounted for.
Coverture Fraction Isolation Method
This method creates a fraction of total years in the plan through the account balance as of the End of Marriage Date over the total martial years contributing to the plan. A fraction is created and run against that balance. This method creates the actuarial reduction to marital / community value based on the length of plan contribution to the End of Marriage Date. In other words, that account balance is multiplied by the coverture fraction to determine the value of the account for marital / community property. In sum the coverture fraction isolation method is based on time sensitive calculations which are applied to the account balance as of the End of Marriage Date, creating the coverture fraction to that balance. The result is the value of the account for Marital / Community Property. Required is account balance as of the end of marriage date.
This method as it states, subtracts the pre-marital amount from the amount on or about the End of Marriage Date. The account balance as of the End of Marriage Date is then subtracted from the account balance as of the Date of Marriage. The difference in the account balances is the value of the account for Marital/Community Property. Required is the account balances as of the date of marriage and as of the end of marriage date.
The account balance on the Date of Marriage, plus the gain/loss investment experience attributable to this sum is subtracted from the account balance on the End of Marriage Date. The difference is the value of the account for Marital / Community Property. Required are the statements with Investment experience from the Date of Marriage to the End of Marriage Date.
What is a Pension Evaluation?
A Pension Evaluation is a report that provides the lump sum present value of pension benefits earned during a marriage (for divorce purposes) or during an entire career (for retirement planning purposes). The lump sum present value provided by a Pension Evaluation is determined by a number of actuarial assumptions, including mortality rates (life expectancy), interest rates, retirement ages and probability of plan insolvency.
Why might I need a Pension Evaluation?
The most common reason for a Pension Evaluation is to compare the value of a pension to the value of other marital assets (for example, equity in the marital home, a 401(k), etc.) when dividing assets in a divorce. Another common reason for obtaining a Pension Evaluation is to compare retirement benefit elections, such as, which age to retire or which form of benefit to elect (e.g. survivor annuity, single life annuity or lump sum) since such elections affect the amount and duration of pension benefit payments.
What is the process for obtaining a Pension Evaluation?
You may contact us or download forms from our website to provide us the information and retainer required to provide you a Pension Evaluation.
How much is my benefit?
You may request the plan administrator to provide you an estimate of your benefits, along with a copy of a Summary Plan Description which describes in plain language the benefits and rights you have as a plan participant. Alternatively, we can calculate your benefits as part of our Pension Evaluation service.
When will I receive my money?
When you receive your money from the plan is determined by the plan's benefit payment provisions. As a general rule, plans which have account balances (for example, a 401(k) savings plan, 403(b) tax sheltered annuity and profit sharing plan) will allow an immediate tax-free rollover to the alternate payee's IRA, or pay an immediate taxable lump sum cash distribution to an alternate payee. Furthermore, pension plans don't typically pay monthly benefits to an alternate payee until the participant has satisfied the plan's age and service requirements to be eligible for early retirement. Your eligibility for benefit payments will be described in detail in the Summary Plan Description and the plan administrator's QDRO procedures.
Can I receive a lump sum payment?
As a general rule, plans which have account balances (for example, a 401(k) savings plans, 403(b) tax sheltered annuity and profit sharing plan) will allow an immediate taxable lump sum cash distribution to an alternate payee. However, very few pension plans pay lump sums since they typically only pay monthly lifetime benefits.
If a retirement plan has a model (i.e. sample) order, should I use it?
It depends on whether the model order protects both the alternate payee's and participant's interests. Since most model orders don't contain clear, thorough or fair provisions which protect both the alternate payee's and participant's interests, we don't typically use them unless the plan administrator specifically mandates such usage. In this case we still apply our legendary guidance through qualification process and conform the plan shall abide by the parties agreement.
What are your fees?
Our fees are detailed in our fee schedule provided in this website. If you have any questions about our fees or services, please contact us.
How do I get started?
You can contact us at email@example.com, or download forms on the forms page from our website to provide us the information we need to get started. An analyst or staff assistant from the office will contact you after you provide the items we need to get started should something be questionable or not supplied with further input.
QDRO Preparation Services
Qualified Domestic Relations Orders can be applied to pensions of most private employers. If a spouse has a military pension or certain types of government pensions, different types of orders with different types of forms may be required, but in most cases, the result can be the same: with a properly entered order by a court, the pension can be divided between the spouses. In 1974 Congress passed the Employees Retirement Income Security Act (ERISA). This act defined, clarified, standardized and protected employees' rights to pension benefits. It also stated that pension benefits were "non-assignable", thereby shielding these pension benefits from all creditors. Realizing that there was an inequity concerning the marital property rights of spouses and former spouses, in 1984 Congress passed the Retirement Equity Act (REA). This Act defined the rights of spouses, former spouses and dependents, and stated that pension benefits could be assigned pursuant to a "Qualified Domestic Relations Order" (QDRO). As defined under the REA, a "Qualified Domestic Relations Order" (QDRO) means a Domestic Relations Order (DRO) which "creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee, the right to receive all or a portion of the benefits payable with respect to a participant under the plan."
We have prepared over 15,000 Domestic Relations Orders for our clients. It is important to note that we are a full service firm. We prepare the DRO based upon the specifics of the agreement. Upon approval of the requesting attorney that the DRO accurately reflects the terms of the agreement, we then forward the draft to the appropriate pension / retirement plan to obtain pre-approval. This is a very time consuming but important step in the process. It has been our experience that if there is the slightest inconsistency in conforming to the plan's rules, the plan will not pre-qualify the Order. We will not stop working for you until your DRO is Qualified by the plan. Many of our competitors will provide you with the DRO, but will not provide the extra service of having it pre-approved by the plan. If a Court certified Order is rejected by the plan, the whole process must be repeated.
What is a QDRO?
A "QDRO" is an acronym for Qualified Domestic Relations Order. A QDRO is a court order that requires a retirement plan to pay a portion of the retirement benefits of an employee or retiree (who is called the "participant") directly to the participant's spouse, former spouse, and/or dependent children (who are each called an "alternate payee"). QDROs generally apply to retirement plans provided by corporations and other businesses.
What must a QDRO contain?
A QDRO must contain the following information: identification of the plan, the participant, and the alternate payee; the amount of the benefits to be paid to the alternate payee; when benefits are to be paid to the alternate payee; and how benefits are to be paid to the alternate payee (for example, a lump sum or monthly benefits).
What are the tax effects of a QDRO?
Benefits paid directly to any alternate payee by a plan as the result of a QDRO are generally included in the alternate payee's taxable income in the year that the alternate payee receives benefit payments. Also, benefits paid directly to an alternate payee by a plan as the result of a QDRO are not subject to the 10% early withdrawal penalty which is generally applicable to withdrawals from retirement accounts prior to age 59-1/2.
Do I need an order to Split an IRA?
Yes, per IRC 408 (d) 6 an "IRA SPLIT ORDER" is required indicative to a marital dissolution action. An IRA SPLIT ORDER is a court order that requires a retirement plan to pay a portion of the retirement benefits of an employee or retiree (who is called the "participant") directly to the participant's spouse, former spouse, and/or dependent children (who are each called an "alternate payee"). In other words, IRA SPLIT ORDERs are almost identical to QDROs as described above, except they are found under a different section of the code and have a different set of approval phases and processes.
What is a DRO?
A "DRO" is an acronym for Domestic Relations Order. A DRO is a court order that requires a retirement plan or plan participant to pay a portion of the retirement benefits of an employee or retiree (who is called the "participant") to the participant's spouse, former spouse, and/or dependent children (who are each called an "alternate payee"). In other words, DROs are similar to QDROs and EDROs as described above, except DROs apply to non-qualified deferred compensation plans (for example, stock options) and retirement plans which are only provided to executives of corporations. Also, the tax effects of a QDRO (as described above) do not usually apply to DROs.
Why might I need a QDRO, or DRO?
The most common reason for needing a QDRO or DRO is that the parties in a divorce do not have sufficient assets (e.g. cash, retirement accounts, home equity) to permit the plan participant to keep his/her entire plan benefit in exchange for the non-participant spouse being awarded another asset. A second common reason is that the parties may not agree on the present value of the pension to be offset against other assets (see "What is a Pension Evaluation" above). A third common reason is to provide spousal support and/or child support payments from a retirement plan to an alternate payee (spouse, former spouse and/or dependent of the participant) by monthly pension payments or a lump sum payment from a retirement account. A fourth common reason is to pay off marital debt with retirement accounts at the time of divorce or legal separation.
What is the process for obtaining a QDRO,or DRO?
You may contact us or download forms from our website to provide us the information and retainer required to provide you a QDRO, or DRO. After we draft the appropriate order, we send it to you and/or your attorney(s) as we are instructed. The attorney(s) should then review the order for legal content, obtain the required signatures and enter it with the court. After the order is entered with the court, the attorney or attorney's client must send it to the plan administrator for qualification and implementation by the plan administrator. If you have not received a written response from the plan administrator within a reasonable time (usually 4 to 6 weeks) regarding the qualification of the order, you should contact the plan administrator for the status of the plan administrator's review of the order.
Usually, we complete a proposed order within 1 to 2 weeks of receiving all information from the parties which we need to draft an order. After we have drafted an order it will usually take the parties 1 to 2 weeks to review the order, obtain signatures, and enter it with the court. Finally, the order must be reviewed by the plan administrator which usually takes 4 to 6 weeks. Based on the above time frames, the entire process usually takes 6 to 10 weeks.
What should I do if my ex-spouse will not sign a QDRO or DRO?
Contact your attorney for possible legal remedies.
What happens if a QDRO is rejected by a plan administrator?
Since we guarantee that we will provide you an order which will be qualified under the plan administrator's procedures, we will make any required changes to obtain the plan administrator's approval of an order. After we receive a copy of a plan administrator's rejection notice, we will promptly review the reasons for rejection and provide a revised order which satisfies the plan administrator's requirements as stated in the rejection notice. If a plan administrator rejects an order due to its form, we will make the necessary revisions at no additional charge.
How long does the QDRO process take?
Pension Evaluators® at Troyan, Inc.®, can help matrimonial practitioners avoid many of the pitfalls associated with distributing retirement assets. Troyan, Inc.®, is the name to be known when it comes to assisting attorneys in calculating the marital / community value of pension and retirement benefits, offsetting assets and dealing with retirement plans, and drafting domestic relations orders. We have extensive knowledge of retirement plan rules and requirements.
Our Settlement Agreement Consultation service will assist attorneys throughout the whole process, that may include, but not be limited to, the determination of the value of the retirement assets, offsetting the assets if necessary, preparing the appropriate and complete language for the Agreement and preparing the appropriate QDRO(s) and obtaining pre-approval from the retirement plan(s). The fee for this service will depend upon the complexity of the case.
NationwideVoice: (800) 221-0706
Fax: (732) 212-1113
Address: P.O. Box 8722, Red Bank, NJ 07701
Pension Evaluators® at Troyan, Inc.® is the nation's largest consulting firm specializing in actuarial consulting Divorce, and Economic Loss matters. To date we have provided actuarial Evaluations for over 497,000 cases in all 50 states.
Our mission is to provide speedy, accurate answers to complex actuarial questions at reasonable prices. We believe that by doing so we not only assist our clients, but also speed up the process and make it less expensive.
Our Pension Analysts provide a range of expertise that is just a phone call or email (firstname.lastname@example.org) away. Our newest generation proprietary software allow many cases to be evaluated without the need for independant discovery. We follow up any Evaluation with a written report the same day. Our pension analysts are available to provide expert testimony to support our reports.
Nationally Recognized Experts: Pension Evaluators® at Troyan, Inc.® is a nationally recognized expert on litigation economics. Courts and attorneys routinely check with Troyan when the issue of evaluating or dividing the Pension is at large. Articles about the firm have appeared innumerous publications.