The Present Value of Mr. Jones' Defined Pension Benefit as determined by the PBGC Actuarial and Mortality Tables Method is $63,320.04. This calculation was derived from the following facts and assumptions:

If Mr. Jones started receiving benefits at age 60 instead of 62, and all other facts and assumptions remained the same, including the monthly benefit of $842.14, what would be the present value of his benefit?

Answer:

$75,638.35

Analysis:

The value is higher because Mr. Jones will receive $842.14 per month for two additional years. Conversely, the value would be less if Mr. Jones retired at age 65.

If the Interest Rate Assumption was 5.30% and 4.75% instead of 5.80% and 4.75%, and all other facts and assumptions remained the same, what would be the present value of his benefit?

Answer:

$67,492.58

Analysis:

To accumulate the same total amount of money over a given period of time, more money would initially have to be invested at 5.30% and 4.75% than at 5.80% and 4.75%. Conversely, the value would be less if the rate were higher than 5.80% and 4.75%.

If the Jones' were married on March 1, 1965 instead of April 30, 1970, and all other facts and assumptions remained the same, would the present value of his plan change for Equitable Distribution purposes?

Answer:

Yes - the value would be $75,633.11

Analysis:

Only benefits attributable to the period starting with the marriage and stopping on the date of separation are considered marital property. Mr. Jones started working after the date of marriage. Therefore, 100% of the present value of the plan was earned during the marriage. This percentage is called the "Coverture Fraction."

If the monthly vested benefit were $1,200 instead of $842.14, and all other facts and assumptions remained the same, what would be the present value of his benefit?

Answer:

$90,227.34

Analysis:

Provided all other assumptions and facts remain constant, the present value will increase as the monthly benefit increases and visa versa.

If he is expected to live longer, will the present value of his benefit increase?

Answer:

Yes

Analysis:

He would be receiving his monthly benefit for a longer period of time.

If the Date of Valuation changed to October 1, 1996, would the present value of the benefit change?

Answer:

Yes - the value would be $65,067.59.

Analysis:

The value is higher because he has a shorter time left until benefits start.

If the monthly benefit increases to $900, and the interest rate increases to 6.00%, what would happen to the present value of the benefit?

Answer:

$65,979.75

Analysis:

The increase in the monthly benefit is counter balanced by the increase in the interest rate , and will tend to produce the same present value.

Monthly Benefit      Interest Rate           Present Value
    Increases           Decreases               Increases
    Decreases           Increases               Decreases
    Decreases           Decreases               Counter Balance

If Mr. Jones starts receiving benefits at age 58 instead of 62, and his monthly benefit is reduced in half to $600.00, what would happen to the present value of the benefit?

Answer:

$63,888.20

Analysis:

Generally, a decrease in both retirement age and the monthly benefit will also tend to counter balance each other; thus producing the same present value.

Monthly Benefit      Interest Rate            Present Value
   Increases           Increases               Counter Balance
   Increases           Decreases               Increases
   Decreases           Increases               Decreases