Calculation method for DC Allocation

[Guest Jfors]

I have a client that is requesting us to calculate earnings and losses on the AP's award. I have been provided with 2 different spreadsheets for use in doing this calculation. It is based on the average account balance vs. actually following shares from the allocation date to date of division. The difference in the 2 spreadsheets is one adds back a PT distribution after the allocation date, but prior to the date of division. When I use the exact same numbers other than adding back a PT distribution, the earnings allocated to the AP's award is decreased by a small percentage, therefore giving the PT the larger percentage of the earnings. While I understand the mathematical aspect of this, is this the correct way to do the calculation. Regardless of the reason or timing of the distribution, why should the PT benefit from this?

Thanks!

[masteff]

The only time I would use an average account balance to allocate earnings on a QDRO is when date-by-date transactional data isn't available or is so excessive as to be infeasible. An excellent example is when older records consist only of quarterly statements. (Anyone else still have a microfiche machine just for looking at old qtrly stmts?)

Since you've already done the more detailed date-by-date calculation, thus proving it is not infeasible, why would you not use that method?

[Guest Jfors]

I have not already completed a transactional calculation. My client has approved the average method. I just wanted to know what the consensus would be on the distribution issue. I would appreciate any input.

Thank you!

[masteff]

Sorry, my bad, I took the wrong emphasis.

I'm trying to clarify your question on the distribution. Let me try to reword: you have two methods at hand; disregarding the PT distribution, the variance is minor and can be explained; so that just leaves what is the proper handling of the distribution, should it be added back or not? Is that a fair assessment so far?

What is the impact of adding back the distribution? The problem is that the funds liquidated for the distribution ceased to generate earnings. So adding it back to the PT's side of the equation will give PT more earnings/losses than otherwise. But I'd go back to two things: materiality and documented client direction. How big is the distribution relative to the overall account balance and how big are the earnings in question. And "could you send me an email stating you want me to use the spreadsheet and method you provided versus my normal method, so I can document the reason for the change of procedure" (I apologize if I made a bad assumption there about which method is whose).

Anyone else have any insights?