View Single Post
  #8  
Old 01-01-2018, 02:41 PM
DiscreteAndDiscreet DiscreteAndDiscreet is offline
Member
AAA
 
Join Date: May 2016
Posts: 467
Default

Quote:
Originally Posted by Fuzzy View Post
Let me lay out some facts so we see if anyone wants to comment directly about whether this interpretation is outrageous of justifiable rather than with generalities:
1. If the participant had terminated on the day of the divorce division, he would have been entitled to an Accrued Benefit of $2,726.29, payable monthly at his NRD (FOMF 65) as a 10C&C annuity.
2. The PA determined that a QDRO was qualified and notified the AP that she was entitled to 50% of his benefit, $1,363.15, but payable at her age 65 (6.5 years after his age 65) as a 10C&C annuity over her lifetime. At the time of qualification, she was offered a lump sum, using then current published tables, of $66,602.15.
3. Using the same Plan tables (the Plan apparently uses the same tables for participants and beneficiaries), the participant would have been eligible to elect a lump sum payment of $195,126.74 for his Accrued Benefit at the same time. 50% of this is $97,563.37.
Question: can anyone think of anything which would make the PAís determination of her award a valid interpretation of a divorce decree and QDRO which stated that she was entitled to 50% of his Accrued Benefit?
(I'm leaving out all of the other typical divorce questions, such as whether the award was equitable, whether there were any subsidized benefits subject to division, whether any survivor benefits which should have been considered, etc. Let's just assume that all of the typical restrictions were included (no increased benefits, nothing that the Plan wouldn't normally pay, etc.) and concentrate on whether this interpretation makes any sense to anyone.)
Technically, youíre asking things that are more like legal questions and not actuarial questions. The ASOP on QDROs says that actuaries should avoid unlicensed practice of law when providing advice in relation to QDROs. I am not a lawyer and I would not suggest that this be treated as legal advice.

For most plans I work on, the lump sum conversion basis at the time of the divorce is used for QDROs. In this setup the 97563.37 would be the PV assigned to the AP and it would be converted to an annuity on her lifetime at such time that she elects payment. I donít do much single employer work and donít work on any cases with full lump sum distribution, but the AP would need to be offered a lump sum distribution option on this converted annuity, presumably based on the conversion basis for the plan year that payment is elected. I actually might ask plan counsel about converting the 1363.15 to a lump sum on the participantís age at the time payment is elected in lieu of conversion from a lump sum at divorce to an annuity back to a lump sum on a different basis.

I do not know the specific ramifications of offering an annuity at the APís age 65 but Iíve been told this is very bad juju.

As noted, I havenít worked on a plan with full lump sum distribution and I havenít seen the details of the calculation or the plan document, but the 66602.15 lump sum sounds like bad juju too. I would expect an appropriately calculated lump sum for the AP to be higher than 50% of the participantís lump sum at divorce since interest rates havenít increased and elapsed time should cause deferred annuity factors used for conversion to increase. Paying the lower lump sum is not needed to keep the plan whole. Adjustments based on the APís lifetime are only used to compensate the plan for a change in the annuitant and that doesnít happen for a lump sum.

Unless the APís lawyer is asleep at the wheel, this seems like a train wreck, but again, I am not a lawyer and this is just my idle speculation.
Reply With Quote
 
Page generated in 0.11587 seconds with 9 queries