Appellate Court Untangles Twelve Year Old Marital Settlement Agreement Regarding Pension
May 17, 2016
In a 2016 non-precedential appellate court decision, Grothey v. Grothey, the court attempted to untangle an agreement by husband and wife reached in 2004. The agreement provided that wife was to receive 65% of husband’s “defined benefit” pension plan and 65% of husband’s deferred compensation plan. The parties did not transfer wife’s 65% share immediately after the agreement. Thus, the parties disputed whether wife was entitled to approximately 10 years’ worth of increases on her share due to the delay in transfer. The appellate court determined that the trial court improperly calculated the amount wife was to receive by ignoring post-separation enhancements.
In 2004, the parties agreed that wife would receive 65% of the “marital” portion of husband’s deferred compensation and defined pension plan. Often, as in this case, the retirement account administrators required a “Domestic Relations Order” (“DRO”) and a “Qualified Domestic Relations Order” (“QDRO”) to transfer funds from husband to wife. Although the parties reached an agreement in 2004, several years passed without actually transferring the funds.
The parties had two disagreements. First, regarding the deferred compensation, wife believed that she was entitled to interest and other increases on her share of the deferred compensation plan. Husband believed that wife was not entitled to any increases. The court decided that since wife’s attorney prepared the QDRO, and the QDRO did not provide for any post-separation increases, Wife was not entitled to an increase. The approximate 10 year delay in preparing the QDRO (or not including language that wife was entitled to increases and income earned on her 65% share) likely resulted in a significant loss by wife.
Second, regarding the pension, wife believed that she was entitled to a percentage of husband’s post-separation enhancements, including a 20 and 25 year bonus. Wife argued that she should be awarded a portion of those adjustments since the 20 and 25 year bonuses were partially earned during the marriage. Husband argued that Wife was not entitled to any post-separation enhancement.
The appellate court agreed with wife that post-separation increases, which were not entirely the result of husband’s post-separation contributions or efforts, should have been included in determining wife’s 65% share.
As evidenced by the Grothey v. Grothey appellate matter, significant issues can arise if proper documentation is not prepared to transfer assets immediately after parties reach a marital settlement agreement.