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Pension Valuations

Pension valuations are used in determining the value of a retirement plan for purposes of trying to offset the retirement plan against the value of other marital assets, and most often pertain to defined benefit pension plans.

Voit Econometrics Group, Inc. is nationally recognized as experts in the valuation of pensions and 401(k)s in divorce having testified in most states, from Connecticut to California to Montana and most every state in between. We have also provided valuations in other countries, such as Germany, England, New Zealand to name a few.  Voit Econometrics prevails because we base our valuations on common sense and court tested methodologies.

Defined Contribution Plans

Retirement plans fall under the broad classification of either Defined Benefit or Defined Contribution plans. A Defined Contribution Pension Plan requires a “contribution” to be made now, with the future value of the benefits left uncertain. Generally the account balance as of any given point in time is the present value, however, this is complicated when pre-marital contributions are involved.  When a pre-marital portion exist it is important to remember that 401(k) plan administrators will NOT calculate marital values nor contributions between two points in time. There is not a program or application equipped to determine varying contributions and earnings on a multitude of funds within a 401(k)/TSP account, therefore calculations have to be separately by an outside expert.  Voit Econometrics has been calculating marital values of defined contribution plans for 30 years and provide highly defendable results. Generally calculating the marital component of a 401(k) account favors the plan participant because of the growth of the pre-marital portion.  The fee charged for such calculations is a fraction of the amount determined non-marital and the amount saved by the participant spouse.

Defined Benefit Plans

A Defined Benefit Plan is expected to pay a monthly benefit at a certain retirement age, in most cases based on your the employee’s length of service and salary. Defined Benefit Plans are generally 100% employer funded, but calculating the monthly benefit is a two-stage process.  Calculating a present value incorrectly can lead to mistakes resulting in an inequitable distribution of assets, in many cases by tens of thousands of dollars.  Pension valuations, or the value of a lifetime stream of income, is not as speculative as many would think.  Mathematically most of the present value is in the near-term cash flows with the cash flows further into the future having less influence on the present value.  Other factors such as cost-of-living-adjustments, mortality (probability of death), and retirement age play an important role in determining an accurate value for purposes of an offset.Cost-of-living-adjustments (COLAs) or post-retirement increases applied to the monthly retirement benefit will increase the present value. Keep in mind that nearly all government plans have COLAs, whereas most private non-governmental plans do not.

Government Defined Benefit Plans

From municipal, state, and federal pensions to military and State Department, Voit Econometrics Group, Inc. has the experience to accomplish the goals of your clients of offsetting the values.  We provide options and alternatives to valuation to strengthen your client’s position.

Our team at Voit Econometrics provide accurate pension valuations for divorces in any state.

Do You Need a Pension Valuation?

Voit Econometrics does not provide you with just a number or a computer generated form letter, rather, Voit will provide all the pertinent text, and supporting statements, necessary to enhance your negotiating position. Although we will not alter the present values by altering assumptions, we will emphasize certain points of interest that can result in substantial savings for your client.

For instance:

If you represent the plan participant spouse who is already receiving their pension, determine whether your client elected their soon-to-be ex-spouse as a survivor at the time of retirement, since this election is irrevocable, then subtract the value of the survivor annuity the non-participant will receive upon the participant's death from the overall present value.

If you represent the non-plan participant spouse be certain that if the plan applies cost-of-living adjustments to the retirement benefits that, whoever the evaluator may be, incorporates this into their calculations. Cost-of-living-adjustments (COLA) can increase the present value up to 40% or more, depending on the size of the COLA.

If you represent the non-plan participant spouse you may emphasize the present value at the earliest retirement age since this could result in a present value larger than the present value at the normal retirement age. Our studies have shown that when the early retirement benefit is more than approximately 42% of the normal retirement benefit, the present value will be larger at the earlier retirement age. An argument for emphasizing the earliest retirement age, aside from the fact that several state judicial systems will only consider the earliest retirement age, is eligibility, where the participant has the non-forfeitable right to retire at that point.

Other factors that come into play and should be accounted for include:

  • Marriage Coverture Adjustment (length of marriage vs. length of service)

  • Marital Value of a 401(k) or similar plan

  • Discount rate to determine present value

  • Appropriate Retirement Age for corresponding monthly pension benefit

Consider Voit Econometrics Group when valuing City, County, Federal, or State Retirement System Plans.

Accurate and Impartial Evaluations

Our goal is to provide accurate and impartial evaluations. It is not our firm's goal to manipulate pension calculations solely for the purpose of artificially increasing or decreasing the end result. Pension valuation parameters are uniform and the procedure is standardized, yet able to account for any individual anomalies.

Get a Free Consultation

We can help you with your pension valuations, QRDOs, and answer any investment questions. Fill out the from below for a free consultation and let’s get started.

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