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Marital Portion of Pension Valued Before Retirement This screen explains the process by which you can decide that "the pension plan is worth $20,000" (or whatever amount). First, a pension valuation company asks for information about the defined benefit pension. This information includes the benefit the employee would earn if he or she retired at the earliest possible age (often age 55), and his or her salary remained unchanged until that time. The company calculates the value of the benefit as of retirement, and then reduces it for the time value of money. (Click here for an explanation of the time value of money). This gives you the pension's present value: Let's say the pension has a present value of $20,000. (By the way, the program also offers a Pension Evaluator in the Financial section, can also estimate the value of a pension.) Second, the company figures the marital fraction the Pension Evaluator can do this as well). A typical formula is:
Suppose this marital fraction worked out to 25%. Then $5,000 (25% of $20,000) would be divided between the parties. Let's say they would keep half each, which is $2,500 each. The remaining $15,000 would stay with the employee. In this case, the employee would end up with $17,500 ($2,500 + $15,000), and the non-working spouse would end up with $2,500. But now, let's suppose this marital fraction worked out to be 90%. Then $18,000 (90% of $20,000) would be divided between the parties, at, say, $9,000 each. The remaining $2,000 would stay with the employee. In this case, the employee would end up with $11,000 and the non-employee spouse would end up with $9,000. What this example shows is that the "marital fraction," though it may seem like a dry legal concept, really matters in the property division.
Disclaimer: We are not giving legal advice. No warranties. We disclaim all legal liability. More...
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