16.04Glossary of Pension Terms

Exhibit 16-3 is a glossary of terms used in pension valuation and distribution.

EXHIBIT 16-3 Glossary of Pension Valuation Terms
Accrued Benefit:	Portion of ultimate benefit earned as of certain date.
Alternate Payee:	Former spouse awarded a component of a participant's pension under a QDRO.
Benefit:	DB = monthly pension; DC = account balance.
Contribution:	DB = employer pays; DC = employer and sometimes employee pays.
COLA:	Cost of Living Adjustment; yearly increase in a pension benefit, tied to the consumer price index. Common in government plans, but very rare in private pension plans.
Coverture Fraction:	Fractional portion of benefit attributable to marriage. Sometimes defined as length of time from date of marriage or date employment commenced if after date of marriage to date of marital separation divided by total years of employment through the current date.
Cutoff Date:	The point in time after which the nonemployee spouse has no claim on the additional pension benefits earned by the employee. Varies from jurisdiction to jurisdiction.
DB:	Defined benefit pension plan, formula benefit, no individual accounts.
DC:	Defined contribution plan, all individual accounts, no specific benefit.
Deferred Distribution:	Delayed payment of pension to divorced spouse, usually pursuant to a QDRO.
Early Retirement:	Retirement with a reduced pension before normal retirement.
Early Retirement Enhancement:	Retirement before normal retirement age, when the pension in unreduced, slightly reduced, or a bonus is added to the pension.
ERISA:	Employee Retirement Income Security Act; Act of Congress subjecting private pension plans to federal regulation, establishing tax-free status in plans that conform to ERISA.
Immediate Offset:	Approach whereby pension's present value is determined and offset against other asset given to nonemployee spouse (e.g., marital home).
Normal Retirement Age:	Age to receive full, unreduced pension.
PBGC:	Pension Benefit Guaranty Corporation; insures most DB plans.
QDRO:	Qualified domestic relations order for plan to pay divorced spouse.
REA:	Retirement Equity Act; Act of Congress that amended ERISA, providing for QDROs (exception to the anti-alienation rule in ERISA).
Valuation Date:	Computation date base for present value, usually current date.
Value:	Present worth of a future pension, or present account balance.

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

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