How Might the Nonparticipant Spouse Benefit from Choosing Offsetting Assets?
The following may be reasons for the nonparticipant spouse to agree to offsetting assets: 1. It helps parties disentangle their affairs 2. The nonparticipant may build an estate 3. Investing the lump sum may beat the value secured with a QDRO 4. It protects the nonparticipant from losing the pension if the participant dies (under non-ERISA plans). Keep in mind that few defined benefit pension plans allow alternate payees (nonparticipants) to choose a survivor on their portion of the pension. Upon their death, the value of the pension drops to zero. However, by converting the defined benefit plan, in essence, to a defined contribution plan by accepting offsetting assets, the nonemployee creates a possible estate. Whether a lump sum can surpass the value of a QDRO is a complex assessment that ultimately rests on the size of the offset and the performance of the chosen investment. Nonparticipants may reap greater gain by investing the offsetting assets rather than waiting for their share
