The need for pension calculation accuracy has never been more apparent. Equalizing payments is already difficult, but subject clients to an inaccurate pension report and it could spell disaster. In fact, the complex impact of inaccuracies can be devastating, especially for people going through a divorce.
Typically, pension benefit reports have categories like “family law value” that are used to help accountants and lawyers determine the family property’s net value. As simple as that sounds, it’s a vital calculation when equalizing payments during the resolution of a marriage. If the numbers are off even a little bit, the payor could render incorrect payments to each spouse. In some cases, that can be the difference a few hundred dollars and a few thousand.
While mistakes and miscalculations can be easily caught if the client has a well-trained lawyer or accountant look over the documents prior to equalization, fixing problems after checks have been cashed is a lot more difficult. If errors are discovered too late it could have an enormous impact on each spouse’s quality of life. An incorrect figure could result in a catastrophe that makes repayments and corrections nearly impossible.
The issue of pension benefit miscalculations is not uncommon, and untimely discoveries are more prevalent than some people realize. Unfortunately, losing money isn’t the only concern tied to inaccurate math. According to Canadian news sources, a woman in Ottawa is being held up in divorce court because she can’t produce accurate numbers to the judge.
Although the case involved a Canada Revenue Agency retiree, human error still played a role in the miscalculations. In an effort to fix the glitches, pension valuations recently came under review by pension plan administrators. Having been done primarily by actuaries in the past, January 2012 marked the start of what could be a massive policy transformation in the future.
As it stands, calculations are derived from several bits of information, most of which comes directly from the client. This exclusivity is exactly why lawyers, accountants and judges are urging clients to take a closer look at their pension documents to ensure the algorithms used to come up their “family law value” is fair and accurate.
Typically, a significant asset is kept as security until equalization, at which time the equalization gets paid from the sale of the asset. If your pension benefit calculations are off, even by a small percentage, you eventually lose any security that’s been kept.
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