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Jerry Reiss ASA**

Be the Boss of your Money

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1st Step (Essential)
Benefit Valuations
QDRO'S
Legal Malpractice
Transmutation Issues
BENEFIT VALUATIONS INCLUDE
 
  • Pension Benefits
  1. Traditional Defined Benefit  (government)
  2. Traditional Defined Benefit (private sector)
  3. Cash Balance Plans
  4. Money Purchase Plans
  5. Hybrid & Other Plans 
  • Defined Contribution Benefits
  1. 401(k)
  2. Simple Profit Sharing
  3. ESOP'S
  4. 457 (Government)
  5. Thrift Plans
  6. Hybrid & Other Plans
  • Stock Options
  • Executive Compensation
  • Buyout Clauses
  • Workers Compensation (applying state law)
  • Disability Benefits (applying state law  & discounting
    for federal restrictions)

 

 

 

    Listed in Best Experts in America.®                

 VALUATIONS INCLUDE:

 

  • Measuring Accrued Benefit
  • Measuring Marital Portion
  • Determining Value of Secondary Benefits
  1.  Early Retirement Subsidies
  2.  Benefit Feature Subsidies
  3.  Survivor Benefits
  4.  Tack-on Service Benefits (military & other)
  • Distinguishing Active from Passive Accruals
  1. Utilyzing State Law (where divorce occurs)
  • DROP Benefits
  • Applying Discounts for Form of Payment
  1. For ½ Marital Portion Payable to other Spouse
  2. For Non-marital Portion Payable
  3. Identifying Dissipation of Marital assets**
  4. Identifying Special Equity Adjustments

              (not applicable in Community Property States)

  • Contingency Clauses
  1. Of Executive Compensation Benefits
  2.  Buyout Clause in Merger/Acquisition Contract

 

** Commonly associated with DROP & marital misconduct  

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Pensions are by far one of the two most complicated properties divided in family law and they account for vast majority of significant errors.  Oftentime these errors are only discovered when the employee or his/her spouse begins receiving benefits.  A big surprise at retirement will have the most devastating impact.  Spouses receiving alimony cannot learn they were shortchanged because alimony frequently ends at retirement and the pension income is intended to substitute for the income they lost.  The participant spouse planning to retire will be extremely unhappy to learn that he or she cannot because the sharing spouse receives far more than originally thought.  Accrued pensions include various optional forms of benefit some of which typically include non-marital portions, that once elected, will be paid to the sharing spouse.  Unless proper valuation is performed the sharing spouse will receive far more than half the benefit.  Subsidies can comprise more than half the benefit.  Some subsidies are marital property while others should not be.  Divisions should limit divisible benefits earned at the date of filing.  Attorneys unfamiliar with pension often don't have a clue how to restrict what is shared.  Aggressive "experts" oftentime assist in settling cases dividing far more than half and the other side wasn't protected because they failed to retain a qualified expert.    It is more often than not too late to correct these errors after the parties enter settlement agreements or try the matter in court. Only actuaries fully understand these benefits and are qualified to address marital portions.  We are licensed by Congress and designed plans ourselves and advised employers on compliance issues.

 

Valuation requires education and training seldom offered in the forensic market because such expertise is valuable and the real expert charges for such expertise. Yet the cost of not retaining competent services can be  huge because a  $500 or more  savings  in  fees is often offset  by losing tens of thousands of  dollars in marital  property and many times even well   over   one-hundred   thousand   dollars.    Only  an   actuary  is   equipped   to   value    retirement   and   executive compensation  benefits.   But  the  education  required  to  offer  such  services  does not  stop there.   Proper  valuation requires understanding family law principles and a complete knowledge of the state law for  which those principles are to be applied. Far less than 1% of all experts offering forensic valuation services are actuaries. Of that 1% only very few are knowledgeable about the state laws that apply to the  valuation  process.   Sometimes  it  requires knowledge of the case law on child and spousal support issues.  When this last  criterion is  applicable the valuation  often overstates the results, often double the amount it should have been  and  this occurs far  too  often.  For example, under Florida law, Pimm v. Pimm, 601 So.2d 534 (Fla 1992) functionally prevents early retirement when it ignores the lesser income produced by an early retirement in granting a reduction of alimony.  This early retirement subsidy is paid only when the participant actually retires and receives it.  This applies to ERISA plans, as well.  Why then should the retirement benefits be valued at the early retirement age where an early retirement subsidy is involved when this supreme court ruling effectively prevents the participant from retiring at the earlier age?  Valuation of pension plan benefits seldom factor in alimony rulings that drive when a participant can retire.  When the participant paying alimony cannnot retire on the early retirement date, valuing the pension as if that is possible serves to penalize that person with a double discount.

 

Valuation  requires  a  special  understanding  of  the  benefits  that  are  offered.    This  requires  past  experience  both with designing   and   implementing   these  benefits  for   employer   sponsors   and   it   also  requires   experience   with  the administration  of  these  benefits  because  that  experience  brings  with  it  knowing  what  to look for in the valuation process.   The  valuation  requires first reading  the plan document.   This legal document establishes rights to benefits that  the employee has  as  a  result of employment.   When a dispute develops between the employer and an employee this is the first thing that the court looks to in resolving the dispute.   The  plan document  also contains information as to  what  conditions  must  be  met  before  an  employer  can  pay  the  benefit.    This  not  only  establishes  rights  to  a spouse sharing  secondary  benefits not listed on the employer-provided accrued benefit statement,  but it establishes discounts   that  should  apply  to  receipt  of  even  the  basic  benefit.    This  complex  process  then  benefits  both  the employee  and  the spouse.  The cheap valuation costing a few hundred dollars skips reading the document altogether. The cheap valuation fails  to  factor in the state law governing the process. Both are where most of the  time is  needed. Proper  valuation  also  benefits  both  parties  because  the   employee  is  not  always  aware  of  all  benefits  and  most employers today fail  to  communicate them to their employees because that saves them money and frees up its usage to the most important employees who were instrumental in the negotiations with the employer.