QDRO on pension

[johnw2011]

What is the name of your state (only U.S. law)? GA
An uncontested divorce, and no attorneys have been hired for.
My wife and I have had the agreement on IRAs, 401k divisions. Add all up and then 50/50.
There may be one issue: Her company offers employees the pension after 5 years in the service of the company. She is in the no 4 year. How can we take her potential pension into the account?

 

[mistoffolees]

What is the name of your state (only U.S. law)? GA
An uncontested divorce, and no attorneys have been hired for.
My wife and I have had the agreement on IRAs, 401k divisions. Add all up and then 50/50.
There may be one issue: Her company offers employees the pension after 5 years in the service of the company. She is in the no 4 year. How can we take her potential pension into the account?

It's going to be complicated and have a lot of assumptions (rate of return, etc). I would suggest paying an accountant to put a value on it and then offsetting it with an equal value of IRA or 401K.

The first assumption is that she will stay there another year. If she doesn't, the value is zero. If she does, there will be value.

From the assumption that she will stay there another year, it becomes necessary to calculate the net present value of the pension. That will involve a thorough understanding of the terms of the pension and back-calculating a net present value. In order to do that, various factors must be considered:
- rate of return on the pension
- guaranteed pension payout vs estimated payout
- retirement age
- inflation

An educated amateur could probably come up with an estimate, but there would be a lot of error. Of course, the value of 4 years worth of employment in a pension is probably fairly modest, so an estimate might be good enough (most pensions accumulate very slowly at first and then accelerate over time).

 

[Bali Hai]

What is the name of your state (only U.S. law)? GA
An uncontested divorce, and no attorneys have been hired for.
My wife and I have had the agreement on IRAs, 401k divisions. Add all up and then 50/50.
There may be one issue: Her company offers employees the pension after 5 years in the service of the company. She is in the no 4 year. How can we take her potential pension into the account?

Whew!, that storm was a monster.

If she doesn't stay employed there another year, I suggest that you INSIST to the court that she does so. If she doesn't, seek damages. She doesn't have the luxury of just thowing her hands up in the air and saying, screw you Charlie!

Don't rely on an educated amateur, because you'll get screwed. If you don't know what that means, look it up.

Hire a lawyer to represent your interests, if that lawyer doesn't, fire them and hire one who will.

 

[stealth2]

If she doesn't stay employed there another year, I suggest that you INSIST to the court that she does so. If she doesn't, seek damages. She doesn't have the luxury of just thowing her hands up in the air and saying, screw you Charlie!

And if she's laid off?

 

[Bali Hai]

And if she's laid off?

We will have to review the case on its owm merits, if OP provides any further factual information. In the meantime, I'm going beddy-bye. Nite nite sweety.

 

[mistoffolees]

Whew!, that storm was a monster.

If she doesn't stay employed there another year, I suggest that you INSIST to the court that she does so. If she doesn't, seek damages. She doesn't have the luxury of just thowing her hands up in the air and saying, screw you Charlie!

Don't rely on an educated amateur, because you'll get screwed. If you don't know what that means, look it up.

Hire a lawyer to represent your interests, if that lawyer doesn't, fire them and hire one who will.

Bali, would you please stop with the nonsense?

First, you can't insist that someone stay on a job for a period of time. Slavery was outlawed. It is conceivable that a court would order ex to pay damages if she quits voluntarily, but that's a different matter.

As for the rest, the pension value after 4 years on the job is probably quite small - a few thousand dollars - not hundreds of thousands.

 

[tuffbrk]

Misto -I was under the impression that you could only split what is actually owned and in hand at the time of the divorce? There is no guarantee that the lady will remain employed there for another year. If she is laid off or becomes ill and can't continue, etc. then she is shortchanged...

I'll google in the meantime but thought perhaps you had some first hand knowledge?

 

[mistoffolees]

Misto -I was under the impression that you could only split what is actually owned and in hand at the time of the divorce? There is no guarantee that the lady will remain employed there for another year. If she is laid off or becomes ill and can't continue, etc. then she is shortchanged...

I'll google in the meantime but thought perhaps you had some first hand knowledge?

You can divide anything with a current value. It would be open to interpretation as to whether an unvested pension had value. Some states have determined that an unvested pension DOES have value and others have determined that it does not. I haven't found anything regarding which side of the fence Georgia falls on.

There are many ways to deal with that uncertainty:
1. The court could determine that ex gets a portion of the distribution if/when it occurs. If the pension is never vested, that would be zero, but if it's vested, then ex would get a percentage - perhaps based on the number of years they were married divided by the total number of years of the pension (although I would argue that this greatly over-values the marital portion since pensions increase in value slowly at first and much faster toward the end).
2. The judge could put an estimated value on it and simply order that the ex's portion only has to be paid if the spouse is still employed at the company long enough to be vested or if the spouse voluntarily quits.

There are other ways to deal with it, as well.

 

[FlyingRon]

There are professional pension appraisers that do exactly this sort of thing.

In addition, there are some quirks in the labor/pension laws that allow the pension to be cracked to satisfy a QDRO. This was exploited by a few senior Continental pilots a couple of years ago which got "paper" divorces to get their pensions out before management had a chance to gut them.

 

[mistoffolees]

There are professional pension appraisers that do exactly this sort of thing.

In addition, there are some quirks in the labor/pension laws that allow the pension to be cracked to satisfy a QDRO. This was exploited by a few senior Continental pilots a couple of years ago which got "paper" divorces to get their pensions out before management had a chance to gut them.

That may be true, but I don't think it's going to allow someone to become vested ahead of time.

 

[tuffbrk]

You can divide anything with a current value. It would be open to interpretation as to whether an unvested pension had value. Some states have determined that an unvested pension DOES have value and others have determined that it does not. I haven't found anything regarding which side of the fence Georgia falls on.

There are many ways to deal with that uncertainty:
1. The court could determine that ex gets a portion of the distribution if/when it occurs. If the pension is never vested, that would be zero, but if it's vested, then ex would get a percentage - perhaps based on the number of years they were married divided by the total number of years of the pension (although I would argue that this greatly over-values the marital portion since pensions increase in value slowly at first and much faster toward the end).
2. The judge could put an estimated value on it and simply order that the ex's portion only has to be paid if the spouse is still employed at the company long enough to be vested or if the spouse voluntarily quits.

There are other ways to deal with it, as well.

Aha - I see. That makes sense. Thank you for sharing your time and knowledge.

 

[Bali Hai]

Bali, would you please stop with the nonsense?

First, you can't insist that someone stay on a job for a period of time. Slavery was outlawed. It is conceivable that a court would order ex to pay damages if she quits voluntarily, but that's a different matter.

As for the rest, the pension value after 4 years on the job is probably quite small - a few thousand dollars - not hundreds of thousands.

If slavery was outlawed, why am I slaving to pay someone else who is healthy and employed?

Debtors prison was also outlawed, if I don't pay, I go to jail, go figure.

 

[Bali Hai]

You can divide anything with a current value. It would be open to interpretation as to whether an unvested pension had value. Some states have determined that an unvested pension DOES have value and others have determined that it does not. I haven't found anything regarding which side of the fence Georgia falls on.

There are many ways to deal with that uncertainty:
1. The court could determine that ex gets a portion of the distribution if/when it occurs. If the pension is never vested, that would be zero, but if it's vested, then ex would get a percentage - perhaps based on the number of years they were married divided by the total number of years of the pension (although I would argue that this greatly over-values the marital portion since pensions increase in value slowly at first and much faster toward the end).
2. The judge could put an estimated value on it and simply order that the ex's portion only has to be paid if the spouse is still employed at the company long enough to be vested or if the spouse voluntarily quits.

There are other ways to deal with it, as well.

Getting terminated for cause would be the same thing.

 

[mistoffolees]

Getting terminated for cause would be the same thing.

Yes, it would. Termination for cause is generally considered to be voluntary loss of the job.

 

[LdiJ]

What is the name of your state (only U.S. law)? GA
An uncontested divorce, and no attorneys have been hired for.
My wife and I have had the agreement on IRAs, 401k divisions. Add all up and then 50/50.
There may be one issue: Her company offers employees the pension after 5 years in the service of the company. She is in the no 4 year. How can we take her potential pension into the account?

How much is the present value of her potential pension? Even if vested at 4 years rather than 5, I suspect that any value of a marital share would be pretty negligible at this point. You would not be entitled to 1/2 of the full value of the pension at retirement, but only 1/2 of the present value and its growth.

Just to give you an example, I have many tax clients who have pensions from companies where they worked for only a few years after being vested, and many of them receive only tiny amounts of money a month...because the payout is over their expected lifespan.

You don't want to spend any significant time or legal bucks if any pension payout at retirement is going to be 35.00, monthly, for example.

Therefore I would be looking at the value of the pension account now, and if its only a few thousand, I wouldn't spend a great deal of time or money trying to divide it...because the future payout won't be worth it.