QDRO - sex distinct mortality

[Effen]

A participant with a QDRO recently came forward to request a benefit illustration. He is the participant; she is the alternate payee. The QDRO calls for her portion of the benefit to be converted to a benefit payable over her lifetime.

The previous actuary did an illustration for them 4 years ago and used sex-distinct mortality. In other words, the participant is 65 at his NRD. When he is 65, she would be 63. The previous actuary (large national firm) multiplied his benefit by a male factor at 65 and divided by a female factor at 63. Is it appropriate to use sex distinct mortality for this conversion?

I guess if the document said you always used male mortality for the participant and female mortality for the survivor, then it may be ok, but this document is silent regarding actuarial equivalents. It just lists the factors used to convert benefits, but never defines the underlying assumptions.

[MGB]

What does the QDRO say?

You are leaving a tremendous amount out of the question.

[david rigby]

Don't forget that the QDRO cannot require an increase in the value of total payments. But who pays for this "adjustment" might be covered by the QDRO, or should be.

[Effen]

I guess the fact that neither of you immediately said it was improper tells me that it is not as bad as I might have thought.

From the QDRO:

"Form of Payment to the Alternate Payee: The Alternate Payee shall receive her benefit as a separate entitlement, payable for her lifetime. The Alternate Payee will be paid a monthly amount actuarially adjusted for the Alternate Payee's life expectancy and the form of benefit under which she elects to receive payments. ... However, the foregoing shall not be construed to require the Plan to provide any type or form of benefit nor any option that is not available under the Plan."

"Actuarial Calculations: Actuarial calculations made pursuant to this Order shall be performed by or on behalf of the Plan Administrator in accordance with the actuarial assumptions and methods used for similar calculations under the Plan. "

If you think it is ok to use sex distinct mortality, how do you get around the fact that you would get a different answer if the genders were reversed.

[MGB]

What is the definition of "her benefit"?

Frankly, I don't think there are "similar calculations" under the plan because the plan has no sections on how to compute a division of benefits under a QDRO. Therefore, the contruction of the QDROs language should have been questioned in the beginning. But, I am jumping ahead here.

[david rigby]

After further thought, I believe the issue of different ages is more important than gender differences, which can be "handled" by a unisex table. But, as MGB states, the QDRO might need more clarification.

[Effen]

MGB - "her benefit" is simply 50% of his accrued benefit - they were married the entire time of his participation.

Also, the DRO became a QDRO before I was ever involved. I had no control over the language. The prior actuary used a sex distinct mortality table to calculate a previous estimate. The participant is now asking for another estimate and my initial thought was that sex distinct mortality should not have been used. (I have never used it on any other QDRO's in the past, but that certainly doesn't mean anything.)

Obviously if I use sex neutral mortality for her, I will get a much higher benefit than she was illustrated before.

I was just looking to find out if anyone uses sex distinct mortality to convert a benefit payable on "his" life, to a benefit payable on "her" life. I recognize to be true actuarial equivalents you should, but I assumed that since it was a "benefit calculation", sex neutral mortality should be used otherwise females would get lower benefits than males

[AndyH]

Effen, I think you have a very good point, although I cannot tell you what the answer is.

Just an aside about pax' comment about a QDRO "not increasing the value of total payments". Tell that to the PBGC and IRS. I had a QDRO payable to the owner of a company worth about $2,000,000 which was assigned to the spouse using a unisex table per the plan's equivalence definition. Guess what happened to current liability when that benefit converted from 83 Male to 83 Female to people in their 60s? And it is being paid monthly because it is restricted, so guess what the result will end up being? Many more payments.

[Effen]

I was just faxed a page from the document that was in effect when the participant terminated and when the DRO became a QDRO.

Actuarial Equivalent:... Until and unless the Plan is amended to change such assumptions, the mortaltiy rates used shall be those of the 1971 Group Annuity Mortality Table as specified for males in the case of Participants and for females in the case of any eligible Spouse, Beneficiary, or contingent annuitant. ..."

At least this tells me why they did what they did.

[RTK]

The plan document provides that male mortality is used for participant and female mortality used for spouse, beneficiary and contingent annuitant. If the Plan treats all alternate payees as a beneficiary for this purpose, i.e., as female, then presumably no sex discrimination issue.