16.05 Documents Needed for Pension Valuation or Distribution

Whether the choice is immediate offset or deferred distribution, counsel needs to obtain the following documents and information regarding the employee's pension:

1. Obtain authorization from the plan participant early in the case, in order to obtain needed information directly from the plan administrator.
2. A copy of the plan booklet, known as the summary plan description, or SPD.
3. Any supplements containing plan amendments, known as summary of material modifications, or SMM.
4. If the plan is defined benefit, a benefit statement showing the benefit accrued as of a certain date, payable at normal retirement. The date may be the cutoff date in the jurisdiction, or the current date, depending upon case law in the jurisdiction. The issue of cutoff date versus current date will be explained in detail later in this Introduction.
5. In certain cases, such as employee termination, the benefit statement showing the benefit payable at early retirement may be appropriate. If the employee has actually taken early retirement, the early retirement statement is needed.
6. If the plan is defined contribution, the account statements from the cutoff date to the valuation date. These statements are used to calculate the earnings on the account. If the hire date is before the marriage, the account statement as of the date of marriage is needed. In some jurisdictions, all the statements during the marriage are needed.
7. If warranted by the size or complexity of the plan, it may be advisable to obtain the formal plan document, which may run anywhere from a few pages to over 100 pages. This is usually needed to prepare a thorough QDRO.
8. Every private defined benefit pension plan, and most non-ERISA plans, have an actuarial valuation report for the plan. This report lists the aggregate assets and liabilities of the plan, and may list the participants with their accrued and projected pension benefits and their individual present values, as viewed by the plan's actuary. However, an individual's present value in the report may not be appropriate for property distribution purposes. The plan's actuary may have used a set of composite actuarial assumptions for the plan in total but not for anyone individual.
9. The plan may prepare a present value calculation for an employee under the assumption of plan termination. Divorce counsel may want to use this value. However, the plan's assumptions may not be appropriate for calculating the marital value of the pension. The benefit used is unlikely to be the benefit accrued at the cutoff date, nor will a coverture fraction be applied.
10. Account statements showing any loan balances, the dates and amounts of the loans taken out, and the dates and amounts of any repayments.
11. Any standard form QDRO prepared by the employer. However, be advised that many standard QDROs may not meet a client's needs. A well-informed pension consultant can usually tailor a QDRO for a client and secure its approval, so long as the QDRO does not require a plan amendment.
12. Any company booklets with respect to employee benefits and QDROS.

Reprinted with permission. © 2007, Aspen Publishers, Inc., from Valuing Specific Assets in Divorce, edited by Robert D. Feder.

Click here for the next chapter