Valuing a benefit for a divorce settlement

[dmb]

I have been asked to value a benefit as of a certain date for a divorce settlement and haven't done something like this one in a long time, if ever. A retired participant is currently receiving $1,000 per month as a J&S annuity. The benefit also provides that if the participant outlives his former wife his monthly annuity would then be $1,100 per month as a life annuity. While it is easy enough to value the J&S portion of the benefit, how do i value the increase if the participant outlives his former wife?? Any help would be appreciated. Thank you.

[david rigby]

Commutation functions? You may have to derive your own, by creating a spreadsheet incorporating two lives.

However, it is not clear that the "pop-up feature" is relevant to such present value determination. Ask a few questions before getting in too deep.

[dmb]

I actually was thinking that the life annuity portion was actuarially equivalent to the J&S portion and therefore would not need to be accounted for in addition to the J&S value, but I'm told that one of the attorneys needs to see how the life annuity portion is accounted for in the calculation. Thanks.

[rcline46]

I would think you can satisfy the attorney by showing the J&S was computed as an actuarial equivalent of the original Life Annuity. (Or in some cases by the use of a table in the document).

In a perfect world, the reverse is also true at any age, but I would not want to try to prove it!

[SoCalActuary]

I agree with pax on the approach, and I would also use commutation functions in a spread sheet.

It seems that you have a life annuity of $1,000 during the life of the spouse, with an $1,100 survivor annuity to the participant. If you computed an APR assuming the spouse was primary, and compared to an APR for joint life, you could find the value of the participant's survivor annuity APR. Then your total value is $1000 x spouse APR, plus $1100 x his survivor APR.

[david rigby]

... assuming the $100 increase is relevant. Former spouse can't really get any of it since he/she will be dead.