Divorce Tips Database

1993 News

By: Marvin Snyder

In our last newsletter we discussed the lowest PBGC interest rates ever - up to that time - with a primary rate of 5.75%. In February 1993 they hit another record low: 5.50% as the primary rate. These rates have no matching Set designator, such as Set A or Set B, or whatever. There is no published PBGC table that contains them. These rates differ from the usual internal structure so those computer programs that were able to produce prior PBGC rates would have to be reprogrammed.

The PBGC rate structure has been in use for almost twenty years, following the passage of the federal law ERISA that created the Pension Benefit Guaranty Corporation. In January 1993 PBGC announced a proposal to revamp its rate structure. The mortality basis would be modernized and the internal interest rate pattern would be revised. Also they may use the same table for males and females instead of the present gender-different tables. Watch this space for further developments.

Our newest example and analogy to explain the difference between pension benefits and values, and how they change over time involves a married farmer. The only property of value is a milk cow.

The farmer's wife asks for a divorce and at that time the cow has two calves. Some time passes while they retain lawyers and work out the details of the divorce settlement. When the time comes to settle the case, the cow has three calves, the two that were there when the marriage broke up, plus one new calf. The price of milk and the value of a milk cow and the value of calves has risen in the meantime. What is the value for equitable distribution?

The farmer maintains that the marital value is the value on the date the marriage ended of the cow and the two calves then. The farmer's wife says it is the value now of the cow and its present three calves, multiplied by a fraction to take into account the length of the marriage.

A common, but not universal, opinion would be that it is the value now of the cow and the calves that existed at the date of marital breakup. If the farmer owned the cow and calves before he got married, then a coverture fraction would be used to separate out the pre-marital property. In any event, the third calf that was born after the cut-off date for marital property would not be counted.

What if there is a court order, such as a QDRO (qualified dairy relations order), to attach some of the cow property to be awarded to the wife? The order could award, say, fifty percent of the ownership of the cow and the two calves or of all three calves, adjusted for the length of the marriage.

When the cow and/or calves are sold, the proceeds would be divided between the former spouses. What if additional calves are born before the sale? The court order could apply only to property existing at the date of the marital break-up, or at the time of settlement of the case, or it could apply to the future which would include all new calves as yet unborn. Note: if the farmer is a participant in a pension plan, call us, and we'll use the appropriate PBGC rates to determine the value.

PAC provides pension valuations, QDROs and actuarial reports for divorce attorneys and marriage dissolution mediators nationwide. Our Philadelphia offices are located in the suburb of Elkins Park, Pennsylvania, from where we serve the needs of legal professionals nationally, including east coast states such as New York, New Jersey, Virginia, North Carolina, Florida, Washington, D.C., and Maryland. Our Florida office located in Coral Gables, FL serves Florida family attorneys.
DivTips
Pension Analysis Consultants, Inc.

Contact Us For Specific Information About Your Case:

P.O. BOX 7107
Elkins Park, PA 19027
(215) 782-9845

4000 Ponce de Leon Blvd., Ste. 470
Coral Gables, FL 33146
(305) 777-0468

Toll-Free: (800) 288-3675
Fax: (888) 782-9852
E-Mail: pac1@pensionanalysis.com


Mark K. Altschuler
President

ASPPA Member

Email Us

We Value The Future. ®