What Is the Most Popular Method for Determining the Present Value of Pensions in Domestic Relations Litigation?
The PBGC Method ranks as the dominant methodology for determining present values. It allows evaluators to approximate annuity costs closely because it utilizes the mortality tables and interest rates employed by the Pension Benefit Guaranty Corporation (PBGC) to reflect that marketplace. As part of its initial charge from Congress under the Employee Retirement Income Security Act of 1974 (ERISA), the PBGC established objective formulas to oversee the financial health of defined benefit pension plans by establishing exact funding and reporting requirements. The PBGC Method was updated in November 1993. The interest rates it employs are based on a quarterly interest rate survey of annuity-writing insurers and are fine-tuned each month. In addition, the new PBGC Method uses an updated mortality table, the GAM-83, which reflects current actuarial practice in the insurance industry. Because the new PBGC Method tracks the annuity marketplace and is the funding yardstick for plans, it stands
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