What happens if.....pensions are abolished down the road?

[Baffled_Dad]

I do not know if this has been asked in the past but for all of us going thru a divorce ( speaking for most men and the few bread winning woman) where we have all had our so called pensions calculated for final settlement and 10, 15 ,20 years down the road the companies we work for get rid of our pension plans? He we are most have bought out our spouses out of our pensions with a dollar figure and in the end, no pension! I suppose there is no recourse for this if any of us were in this situation god forbid. The way things are now this is where family law has to take a second look. Yeah right! How do you make this right? Just a thought.

[sahibjee]

I do not know if this has been asked in the past but for all of us going thru a divorce ( speaking for most men and the few bread winning woman) where we have all had our so called pensions calculated for final settlement and 10, 15 ,20 years down the road the companies we work for get rid of our pension plans? He we are most have bought out our spouses out of our pensions with a dollar figure and in the end, no pension! I suppose there is no recourse for this if any of us were in this situation god forbid. The way things are now this is where family law has to take a second look. Yeah right! How do you make this right? Just a thought.

Or if they lay you off before that but the retirement is already calculated in. Once the settlement is paid to the ex and you get laid off after that I dont see how you can find justice at that point. (or even before)

[billm]

Or if they lay you off before that but the retirement is already calculated in. Once the settlement is paid to the ex and you get laid off after that I dont see how you can find justice at that point. (or even before)

This is where expensive lawyers and accountants are supposed to have it all that figured out.

Risk = $$$, so if there is risk associated with an asset (like a pension), the risk should be shared or the value lowered. Simple, but somehow I'll bet that $400/hour lawyers do not considered that, despite doing essentially the same thing day after day....that is why I self represent.

[OrleansLawyer]

Equalization payments may be made out of most pension plans. This reduces the risk assumed by the pensioned party.

[Mess]

Equalization has to be based on the current value of the plan, not a hypothetical value. Yes the company could go out of business. Or you could be injured, on Worker's Compensation, and not paying into the plan again. Or a thousand other things. The current value is the current value. Split that. If you think your judgement is not doing that, then please explain why.

[billm]

Equalization has to be based on the current value of the plan, not a hypothetical value. Yes the company could go out of business. Or you could be injured, on Worker's Compensation, and not paying into the plan again. Or a thousand other things. The current value is the current value. Split that. If you think your judgement is not doing that, then please explain why.

I assume we are talking about potential problem of the current value of the pension not being given to the pension holder one day, but that pension holder had to give half (after considering taxes) to their ex spouse at time of separation.

If it is a buy out (cash), then the current value should be evaluated considering risks (and tax consequences). If two strangers wouldn't do the deal, neither should two spouses. ie. it should be "6 of one vs. half a dozen of another" for both parties - both sides get essentially the same thing.

The post tax cash equivalent sounds like the better part of the splitting - the money is free from the pension investment constraints (if any), and the additional risk of losing the pension through unfortunate circumstances associated with pension is gone.

However, I've always been self employed and have not dealt with pensions. I'm not even sure what the risk of losing a pension is as compared the same investment privately held.

What is the common way to split a pension anyway - create two pensions, or a cash buy out?

[Mess]

Let's say I have stock valued at 300k on the date of separation.

10 years from now, that company may be bankrupt. That doesn't change the fact that on V-date, I owe my ex 150k. The future value is not what the current value is based on.

[OrleansLawyer]

What is the common way to split a pension anyway - create two pensions, or a cash buy out?

Depends on the people and pension company.

Some people want to keep the pension whole - and so they pay whatever is needed for it not to be touched. In other cases, the other party wants a substantial asset (usually the house) without encumbrances, which is balanced by the other keeping their pension intact.

With many pensions, particularly government ones, a sum from the pension's value (up to 50% max) can be taken from the total value of the pension and paid to the other party. This usually needs to be locked in to a retirement vehicle. The pension is reduced in value by that amount (ie, split half of a 16 year pension, suddenly you have an 8 year pension remaining).

Some pension companies will permit division at source. This is where a pension is paid out to both parties - instead of Alice getting 4k/month, Alice and Bob both get 2k/month (assuming equal pension division).

The future value is not what the current value is based on.

Well put.

[billm]

Let's say I have stock valued at 300k on the date of separation.

10 years from now, that company may be bankrupt. That doesn't change the fact that on V-date, I owe my ex 150k. The future value is not what the current value is based on.

I agree.

But if you were locked into keeping that stock and could not access it until retirement, it is not, in my opinion, worth 300K cash today. That should be reflected in the split. Perhaps not much of an issue practically, but technically I think it may be.