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Basic steps to determine the value of a pension plan

On Behalf of | Oct 8, 2019 | High Asset Divorce

Dividing assets is a huge part of the process that North Carolina couples go through when getting a divorce, especially if it is a high-asset divorce. It is important to understand the value of an asset before it can be divided fairly. One of the most difficult assets to value is a pension plan. Here are basic principles that apply to dividing pension plans in a divorce.

The first step is determining the type of pension plan a person has. A defined benefit plan guarantees a monthly benefit when a person reaches retirement age. A defined contribution plan is based on the performance of an investment fund.

Determining the value of a defined contribution plan is easy. A person just has to call or email the company that manages the fund and ask for the current value of the account. If a person has a defined benefit plan, the next step is determining their life expectancy. The person’s life expectancy would be deducted from their retirement age and then multiplied by the guaranteed annual benefits when the fund matures.

Another important calculation for determining the value of a pension plan is looking at the current day value of the plan. There is no specific formula for this calculation; a person would need to look at how the value of money would change when looking at receiving the plan now or at a future date.

Calculating the value of a pension plan can be complicated. Some individuals may decide to work with an attorney as they go through the divorce process. The attorney may be familiar with special rules that apply to pension plans during the divorce process and may provide legal advice regarding business assets, marital property and asset division.

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