Benefit Value for divorce settlement

[dmb]

After calculating 50% of the value of a Joint & 2/3 Survivor benefit currently in pay status, there is a question as to how the value of the former spouse's benefit should be converted to an annuity (as a reduction to the participant's benefit), as a life annuity or a J & 2/3 S annuity. The argument has been made that since the survivor benefit was accounted for in the 50% calc that the conversion should be done using a life only factor. the argument also has been made that since the benefit is a J&S benefit, it should be converted using the J&S factor. Does anyone have a definitive answer?? Please let me know if more details are necessary. Thanks.

[Effen]

50% of the value of a Joint & 2/3 Survivor benefit currently in pay status

By this statement I assume the benefit is in pay status, and therefore, I would argue that there should be no "conversion" of any sort. If she is entitled to 50%, then you just take 50% of each payment and give it too her. If she dies first, the 50% you were giving her can revert back to him. If he dies first, she should get 2/3 of the original benefit.

The form of payment has been elected and normally can't be changed. You need to work within the Plan provisions which probably don't allow a second bite at the benefit election apple. Otherwise you have adverse selection problems.

[QDROphile]

Since plans usually do not allow benefits to be reformed after the benefit starting date, I generally agree with Effen. But I can see an argument that the AP should get more or less than 50% of each payment while the participant is alive, depending on how one values the benefit now. The value of the death benefit that the AP will get (assuming survival) may be a reason why the AP should not get 50% of each payment otherwise scheduled to go to the participant. Perhaps the AP should get less than 50% if you are trying to redivide the value of the benefit to provide 50% of the value of the entire benefit to each while staying within the confines of the form of benefit in place.