Figuring out Earnings

[geunwyvar1978]

I am in the process of finishing a QDRO with my ex-Husband. It has taken some time. The original 401k company was changed to a new company for my exhusband. I need to find out the amount of earnings on his 401k from the time our divorce until this summer.

I need to know earning from 9/8/11 - 6/30/16

9/8/11 closing balance including loan and deemed loan balance = $64,641.55

9/8/11 loan balance = $7,254.40

9/8/11 deemed loan balance = $17,265.37

Contributions from 9/8/11 – 6/30-16 = $67,229.79

Loan Payments from 9/8/11 – 6/30/16 = $7,721.34

Amount that transferred out on 6/30/16 = $153,119.76

The award was for $25,987.09 as of 9/8/11 including earnings until date of segregation.

Any help that any could offer would be greatly appreciated. (Basically I need to know what amount I am owed in addition to the award amount of $25,987.09)

[hr for me]

I am going to take a shot at it, but realize without seeing all the documentation, it is hard to give an accurate answer. And I am not exactly sure what your difference is between the loan balance and "deemed loan balance" at 9/8/11. Did they assign some of that to you as the AP such that some of the repayments over time came back to your part of the balance? If so, you might also have some partial loan repayments to add to your total, not just earnings.

Since he was earning interest on his part of the 9/8/11 balance PLUS his repaid loan payments and new contributions during that same time period, it is going to be difficult unless you can get some quarterly/annual balances and do the calculation for each period. Because as time goes on more of the earnings belong to him than to you (your $26k gets to be a smaller percentage of his account for each contribution/loan repayment that he makes).

That will take time and probably more money than you want to spend to gather the information and have it calculated by a professional (can run into the hundreds of $s if not more depending on how complicated it gets which might eat up any earnings that you would be entitled to). I would try to ask for a reasonable approximation and err on his side personally. I am showing total earnings for the period around $13K, which is a little less than 9% of his current balance. Personally i would argue somewhere around $2k (or less) is reasonable if you don't want to go through the whole process (and it might be hard if no one kept the quarterly participant statements/snapshot information at different points to be able to do the same calculation over smaller periods of time to add them up).

Did the new recordkeeper get any historical information from the prior? Does the employer themselves have any historical information? It's going to be tough if those answers are NO.

[geunwyvar1978]

The prior company is being very difficult to work with. Their thoughts on this are that they no longer have the money in their accounts and have basically moved on to other things and won't be bothered with this. I did not think about what you mentioned. Basically the 26k that is mine will become a smaller part of the whole thus earning less interest, not simply entitling me to half of the earning from then until now. I do see and understand why that is now. Can you explain to me how you came up with the earnings amount and why $2k would be a fair number? Thank you in advance for your next post and for your last as well.

[hr for me]

Current balance - his contributions - his loan repayments- 9/11 balance (ignored loan balances because you said that was included in the $64k number). So that got me to $13527.08.... as the total amount of earnings over the time period.

you can't use that against the 9/11 balance because of compounded earnings, loan repayments and contributions. So I took that over the current balance to get 8.8% of the current balance was earnings over that time period taking into account all new contributions and all new loan payments. Probably not a great assumption, but the best I could do easily with the information you gave. Others here might have a better way of approximating....8.8% time your $25987 is a little more than $2k. And you really shouldn't be getting the portion of earnings that deals with his contributions and loan repayments....So that's why it is more of a maximum....

You could try to argue some standard earnings rate such as the chagne in the Dow Jones Industrial Average which would give you a 55% return over that same time period or $14832 in earnings, but you can see that's less than his account balance actually made in earnings. Unfortunately, your money was invested with his choices until they actually split the account balance out and probably included some fund fees, etc. So he could have invested better/worse than the market and you get the results of that. But if you decide to go the way of some standard earnings rate, you will be in for a larger fight....

[geunwyvar1978]

Thank you for all of that information. I understand now and I see what you are talking about. Thank you this is a great help.

[geunwyvar1978]

Ok hold on. The numbers didn't seem correct to me. At 8.8% compounding interest after 4 years on $25987.09 wouldn't the number be closer to 9k than 2k. I guess I am not understanding.

[ESOP Guy]

Am I missing something here? Are you just wanting to do this so you can know if the amount you get seems reasonable or is someone demanding you do this?

I have been in the TPA business since the early '90s and no firm I have worked for would ever make such a demand of a Alt Payee. Nor has any client of ours thought it was the Alt Payees job to figure out what they were owed.

I have seen it where we charge for this calculation and it is passed on to the two people involved in the divorce but not once has someone demanded the Alt Payee prove what they are owed. That is the job of the plan administrator. Like I said the Plan Administrator can pass through costs if the plan is set up that way but it is their problem to come up with the correct benefit payments-- period end of statement. It is also their job to keep the needed records to compute the earnings and benefits over time. I know that doesn't always happen in transitions (even for clients I worked on it can be hard to get great records from the prior firm) but someone hopefully kept some kind of records that were produced annually about your spouses' annual account balance.

Once again if you are just doing this because you want to know if it is reasonable fine. But if people are putting the work on you that doesn't seem right based on facts on hand.

[hr for me]

I didn't compound interest, I just used a simple interest calculation since you can't really know the interest during any time period within those years unless you get quarterly or annual number... That was 8.8% over the whole time period not 8.8% per year. The % would be much less than 8.8% per year....

And I do agree with ESOPGuy that in my past, the recordkeeper always did the calculations because they had access to all those numbers I was asking about. But it sounds like the new recordkeeper doesn't have them and the old recordkeeper is being a pain. They should have some reasonable way of calculating the earnings owed. But sometimes they do charge the cost of the calculation time back to the participant and the AP and that's why I said it might be better to come up with a reasonable estimate that you and the participant could agree to without having to dive too deep into research and calculations that will eat up some or all of those earnings!

I remember back in the quarterly valuation days having to go back decades for some QDROs and my mentor was one who did most of the 401k QDRO calculations and often had me review the thought behind them. And that was back in the day when we could pull numbers at different times (mostly quarterly)..... And often there was a starting balance before marriage and then during and then a balance after....not easy at all!

[geunwyvar1978]

The firm that originally had the 401k says that they do not have the records. I think that is BS, but the person I am in contact with at the new firm says that happens sometimes because the old firm just wants to wash their hands of it.

I see now what you are saying about the interest.

[hr for me]

In the end though, I am a strong proponent that the employer should also have the records (we used to give printed quarterly reports and a copy of participant statements to every client for them to have a copy). I think in the world of daily online that recordkeepers may not be doing their due diligence thinking that their systems will always be available.

I will say this...back around 2009, I had to go back to a very old recordkeeper (Shout out to Great West) due to the fact that some 5500s were never filed by our internal administrator and they were still able to pull up information on their system on us, even though we hadn't been a client for literally years. They asked for no fee to do so.

So I do agree the old firm/recordkeeper should have something (however systems change and not all backup gets moved into the new system and at some point the old system goes away along with the information it held). But you truly aren't asking back that far. 5 years and they don't have it? We had a minimum standard of 7 years! (And you never know how much this specific employer pissed them off or even things like unpaid final fees by the employer might get the response you are getting)

[ESOP Guy]

When I say someone ought to have the records to me that someone is the plan sponsor. In all the years as a TPA we always gave the client (the plan sponsor) either a paper (until some time in the mid to late 2000s) or pdf copy of all the data that showed everyone's account balance and the change from period to period.

I know they don't always do a good job of keeping them but your ex-spouses employer ought to have the data needed to compute this accurately. I would ask their HR department or the person in charge of the plan to search their records.