Pensions & Divorce: Appraisal Methods:
PBGC Actuarial and Mortality Tables Appraisal
This approach is based upon information promulgated by the Pension Benefit Guaranty Corporation (PBGC), a U.S. Government Agency established by the Employee Retirement Income Security Act of 1974 (ERISA). PBGC administers insurance programs that guarantee the payment of retirement benefits to participants of private pension plans. Present Value is determined as follows:
- Calculate the amount of the monthly pension benefit assuming the employee was of
retirement age and eligible for a fully vested pension based upon compensation and plan
provisions as of the Date the Marriage Ended.
- The PBGC Mortality Tables and Interest Rates are utilized to determine the present
value of the immediate and deferred annuities as of the Date of Valuation.
- The present value is reduced if the plan is not vested.
- If a portion of the pension was earned outside the marriage, a coverture fraction is
applied.
This method utilizes the interest rate for 30-Year U.S. Treasury Bonds and Group Annuity Mortality Tables (Presently "GAM 83" ) to determine present value. The steps involved are as follows:
- Calculate the amount of the monthly pension benefit assuming the employee was of
retirement age and eligible for a fully vested pension based upon compensation and plan
provisions as of the Date the Marriage Ended.
- The "GAM 83" mortality tables are utilized to determine present value based upon the
30-Year U.S. Treasury Bond rate as of the Date of Valuation.
- The present value is reduced if the plan is not vested.
- If a portion of the pension was earned outside the marriage a coverture fraction is
applied.
This approach is based upon Life Expectancy and the application of Internal Revenue Service Regulation 1.72.9 Annuity Table 1 (Ordinary Life Annuities of One Life).
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