Why Should the Participants Accrued Benefit Be Checked for Accuracy?
If the wrong accrued pension benefit is used in the present value report either with the actuarial method or the PBGC method, the resulting present value will be erroneous. As a general rule, a letter of discovery should be sent to the plan administrator to determine the accrued pension rather than relying on the evaluator. Many times evaluators and attorneys are unaware of plan formula components, such as grandfather clauses, for certain participants. Also, unbeknownst to the evaluator, the employee may have incurred one or more breaks-in-service during his working career, which will have a direct impact on the calculation of his accrued benefit. The most frequent mistake in estimating accrued pensions occurs with many state plans when two benefit formulas are used: a salary-related formula, and a money purchase formula that credits contributions with statutory interest to provide a benefit.
