Part II of the ruling on retirement benefits in the Boyett case has some important consequences. It means that when an employee reaches retirement age, they may be working for less pay than they could be getting from retirement benefits. This could encourage employees to retire early, and allow the employer to replace them with younger workers who are willing to work for less money. If the employee doesn’t share their retirement benefits with their spouse, it ends up helping the employer by keeping the employee working for less pay. Other states have handled this issue differently, and came to a different conclusion. If a spouse continues to work and earn a higher retirement benefit, the value of the benefit they would have received immediately decreases. So, if the court doesn’t account for this, the other spouse might not get as much of the retirement benefit as they should. For example, if a husband could get a $2,000 per month retirement benefit at age 60, but waits until 65 and gets a $3,100 per month benefit, the value of the original benefit decreases. If he waits until 70 and gets a $4,000 per month benefit, the original value decreases even more. This means the other spouse might not get the 50% share they were originally supposed to get. Early retirement subsidies are benefits that allow employees to retire earlier than normal and receive a higher value of benefits. However, courts sometimes have trouble determining if these benefits should be considered marital property.
An early retirement incentive is any benefit that encourages an employee to retire. Some incentives are earned, while others are not. Early retirement subsidies are earned when certain age and service requirements are met and cannot be taken away by the employer. This type of benefit can be divided as marital property in a divorce.
Other incentive benefits are only earned when the employee chooses to retire and if they fail to do so during a specific period, the benefit goes away. Early retirement subsidized benefits are coordinated with other retirement benefits to provide a consistent monthly amount, even if the employee retires early. Both types of incentives can be found in government and private pension plans.
For example, if an employee-wife meets the requirements for early retirement and a plan-sponsored subsidy, she could retire immediately and receive the same monthly benefit she would have received at a later retirement age after working longer. The wife worked until age 65 and retired with a monthly benefit of $6,400. The husband was awarded 50 percent of this amount, but because the benefit was subsidized, his share was only worth 23 percent of the total value. The husband’s benefit would decrease if the wife retired early, and he would not be able to earn any increases in the benefit amount. This situation was used as an argument in a legal case. Mr. and Mrs. Boyett had a retirement plan where if Mr. Boyett delayed retiring, Mrs. Boyett would receive less money if he died before retiring. Mrs. Boyett argued that she should still get a fair share of the retirement money even if Mr. Boyett delays retiring. The plan also didn’t give Mrs. Boyett any extra money if Mr. Boyett’s salary increased. If Mr. Boyett delayed retiring by five years, Mrs. Boyett’s share of the retirement money would be cut in half. In the Furia case, the nonemployee spouse argued that state law divided the retirement plan unfairly because it resulted in a smaller portion compared to a private corporation. This raised a question about the Equal Protection of Law Clause of the U.S. Constitution. The Rhode Island Supreme Court ruled that the concern could be resolved with Koelsch relief. However, there are still unanswered questions about dividing post-retirement COLA increases as marital property. Previous rulings have failed to distinguish between benefit increases from cost of living raises and promotions. This issue is important and needs further clarification. The main issue in the Boyett court case was whether retirement benefits earned during a marriage could be accurately measured at the time of divorce, or if they should only be measured at the time of actual retirement. The court ruled that only the termination benefit, or the benefit earned at the time of divorce, should be considered. This is known as the “bright line theory.” However, the “marital foundation theory” argues that retirement benefits are built on a foundation of efforts and should be considered in their entirety, not just at the time of divorce. An example is given of a retirement plan that provides a benefit based on average salary and years of service. The marital foundation theory argues that the benefits earned during the marriage cannot be achieved in the same way after the marriage ends. Ultimately, the question is whether the employee could have achieved the same benefit amount without the foundation laid during the marriage. Retirement benefits can consist of many different parts, like early retirement benefits, normal retirement benefits, and post-retirement health benefits. The “bright line theory” rejects the idea that marital years should be counted for these benefits. Some court rulings believe that pay increases from promotions should be considered in retirement benefits, but the “marital foundation theory” says that all pay increases are connected to the years of work before. This can cause issues when trying to figure out the marital portion of the benefits. Overall, retirement benefits are different from termination benefits and can have many parts. When a government worker has control over when their spouse receives property in a divorce, the spouse may end up getting less than they should. This is because the employee can manipulate the situation to their advantage. According to the U.S. Supreme Court, the non-employee spouse’s property interest should be a fixed amount that they receive at a specific time. If the employee spouse has too much control over the situation, the non-employee spouse may not actually have a true property right. To protect the non-employee spouse’s rights, the court may need to intervene and make sure the employee spouse doesn’t unfairly benefit from the situation. This article discusses different court cases and their outcomes regarding marital property division. It is written by Jerry Reiss, who is an expert in this area, and David Thompson, who is a lawyer specializing in taxation. The article is submitted on behalf of the Family Law Section. If you want to learn more about this topic, you can read the full article in the Bar Journal.
Source: https://www.floridabar.org/the-florida-bar-journal/dividing-pension-property-after-boyett-part-2/
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