Division of pension due to divorce

[Gary]

a participant gets divorced and a determination of the value of the non-qualified benefit is required.

It is no problem to compute the present value of the accd ben.

the couple is considering to just treat the non-qual. plan as an asset.

the pvab = 100,000.

however, the participant is not vested for another 8 years.

it seems as if the pvab s/b payable at the time the benefits vest and not now, since participant may never vest.

any thoughts on this?

Non-qual plan does not address division of pensions due to divorce.

thanks.

gary

[mbozek]

Whether a plan benefit is considered an asset of the marital estate is determined under state law. In some states the value of non vested benfits can be included in the estate or be subject to continuing jurisdicton of the court grantaing the divorce until the benefits become vested. Counsel will be able to answer the question.

[Mike Preston]

The determination of value for a non-vested benefit just involves another decrement: the probability of continued employment.

It is similar in nature to a pre-retirement decrement, but it is a pre-vesting decrement. The method I tend to use is what I refer to as the ratio method. Essentially one determines that the probability of working until one is vested is the ratio of the years completed to date to the total number of years needed to become vested. Hence, if you have a SERP that doesn't vest until retirement age and somebody has 20 years in, but will not vest until they have worked 30 years, they have a 67% probability that the benefit will vest.

It is just another actuarial assumption as far as I can tell.

Yes, state laws might require that the ratio to use be 1. They might also require that the ratio be 0 until vesting, at which point it is 1. Gotta check.

If you find any state rules let me know.