Baggs v. Baggs

Decision Date15 November 2016
Docket NumberCase Number: 111780
Parties In re the Marriage of: Jennifer D. BAGGS, Petitioner/Appellant, v. Steven J. BAGGS, Respondent/Appellee.
CourtOklahoma Supreme Court

Ann Hadrava, Edward Goldman, Oklahoma City, Oklahoma, for Petitioner/Appellant.

Sherman A. Reed, Edmond, Oklahoma, for Respondent/Appellee.

KAUGER, J.:

¶ 1 The first impression issue on appeal is whether a firefighter's alternative DROP/Plan B retirement option is divisible in a divorce, even though the option may or may not be chosen by the firefighter at retirement?1 We hold that in the event the Plan B option is chosen by the firefighter upon retirement, it is divisible to the extent any funds were deposited into it attributable to the marital years.

FACTS

¶ 2 The petitioner/appellant, Jennifer D. Baggs (wife) married the respondent/appellee, Steven J. Baggs (husband) on October 17, 1995. The couple had two children together, a daughter and a son.2 After approximately the first 18 months of marriage, the wife did not work outside the home during the marriage. Rather, she "ran the home," took care of the finances and the children, and home schooled the children. The husband had been employed with the Oklahoma City Fire Department for approximately five years prior to the marriage, and he continued to work there throughout the marriage. He also worked a secondary job as an adjunct instructor at Oklahoma State University (OSU) in Oklahoma City for nearly a decade during the marriage, and he intermittently did yard and handyman work for extra money as well.

¶ 3 The wife filed for divorce in the District Court of Canadian County, Oklahoma on July 8, 2011. In August of 2011, the wife started nursing school at OSU in Oklahoma City in an attempt to become a registered nurse by 2016. She paid for school with loans and grants. The judge held a trial on July 27, 2012. At the beginning of the trial, counsel for the wife informed the court that the parties had reached an agreement regarding custody of the children, and the husband's 457 deferred compensation retirement account. Both parties agreed to joint custody of both children, with the father primary joint custodial residential parent of the girl, the mother primary joint custodial residential parent of the boy, and each parent having standard visitation of the child who was not in their primary custody. The counsel also noted that the court had already signed a Qualified Domestic Relations Order (QDRO) regarding the deferred compensation account, and that it had already been submitted to the Oklahoma City Fire Department pension board.

¶ 4 The parties also agreed that the wife would be awarded the marital residence, and that she had already redeemed it from foreclosure by paying nearly $16,000.00 which she borrowed from family members. The remainder of the trial concerned alimony, child support, real property and personal property division, and other financial issues, as well as discussion of the value of the husband's pension with the Fire Department. In addition to his deferred compensation plan in which the parties had reached a division settlement, the husband, when he chooses to retire, will have the option to make an election between a traditional pension retirement and what is known as a Plan B or Deferred Retirement Option Plan (DROP/Plan B) which we detail forthcoming.

¶ 5 The wife sought any portion of the Plan B which might be attributable to the marital years, in the event the husband later decides to chose this retirement option after the divorce is granted. On April 24, 2013, the trial court issued the decree of dissolution of marriage, and awarded the wife of the husbands retirement benefits, but declined to award any interest in a DROP/Plan B option stating:

The Court herein declines to order Respondent to change the current form of the fund since this Court believes that it should not make investment decisions for the Parties, but it is empowered to equitably divide the marital assets as they currently exist.

¶ 6 The Court of Civil Appeals affirmed the trial court in so far as the Plan B issue was concerned and modified the trial court's property division. Regarding the Plan B, the appellate court relied on Ballinger v. Ballinger, 2014 OK CIV APP 92, 340 P.3d 644, a strikingly similar case in which the court determined that the Plan B retirement option available to a spouse post divorce is not divisible. The wife appealed on March 2, 2016. We granted certiorari on September 20, 2016, to address the first impression question of the divisibility of the DROP/Plan B option.

IN THE EVENT THE PLAN B OPTION IS CHOSEN BY A FIREFIGHTER UPON RETIREMENT, IT IS DIVISIBLE TO THE EXTENT ANY FUNDS WERE DEPOSITED INTO IT ATTRIBUTABLE TO THE MARITAL YEARS.

¶ 7 The wife argues that: 1) the husband became vested during their marriage to be eligible to elect the Plan B when he retires; 2) if he does elect Plan B, it will then be funded and a portion of those funds are attributable to the pension he accrued during the marriage; and 3) because it was partially accrued during the marriage, it is at least partially marital property. She also argues that the fact that Plan B is a contingency that the husband has yet to enroll in is irrelevant, and does not cause the loss of its marital character. The husband argues that because there is no Plan B account in existence as of the date of the parties divorce, there can be no distribution to the wife. He insists that there is no reason to require a court to speculate about a contingent future distribution of a non-existent retirement benefit.

A. The DROP (Deferred Retirement Option Plan)/Plan B.

¶ 8 Title 11 O.S. 2011 49–100.1 –143.6. govern the Oklahoma Firefighters Pension and Retirement System (the System).3 The eligible retirement date for a member of the System is the date in which the member completes 20 years of credited service or 22 years of credited service plus attainment of the age 50, depending on whether the member's start date is before or after November 1, 2013.4 Under the traditional path to retirement, any firefighter who reaches the retirement date and retires from service, is paid a monthly pension equal to their accrued retirement benefit.5

¶ 9 An alternative to the traditional route is that a member may elect to participate in what is known as the DROP or commonly called Plan B. Under the DROP plan, in lieu of terminating employment and accepting the traditional retirement pension,6 an eligible member may elect to defer the receipts of benefits under the plan and continue working, but not continue to increase their years of creditable service.7 Eligibility under this plan is also 20 years of credible service or 22 years, if employment was on or after November 1, 2013.8 The duration of participation may not exceed five years and, at the conclusion of participation, employment terminates.9

¶ 10 When the member participates in the DROP, the contributions of the member cease, but the employer contributions continue and interest are credited to the DROP account.10 The monthly traditional retirement benefits that would have been payable had the firefighter chosen to retire on the date they join the DROP plan are deposited into the DROP account.11 This is the first time the DROP account is funded.

¶ 11 At the end of the DROP period (not more than five years), the participant may then receive a lump-sum payment from the account equal to the payments which were made into the account.12 In other words, once a firefighter is vested in the pension system, he or she will also be eligible to elect the DROP plan when the firefighter retires. The day the firefighter does elect the DROP plan, their pension payments would be calculated and deposited monthly into the DROP account as long as the firefighter continues to work for up to 60 months maximum. Employer contributions and interest are also credited to the account. Upon leaving employment, the firefighter would then receive both a lump-sum payment, and a monthly pension payment (calculated as if they had retired on the day they elected to participate in the DROP plan.)13

¶ 12 Enrolling in the DROP is merely another way for firefighters to begin receiving pension benefits. The advantage of not opting to do the DROP would be a higher pension benefit based on a longer number of creditable service years. On the other hand, the advantage of opting to do the DROP, would be receiving a lump-sump payment, and continuing to receive a salary for a few extra years, even though ultimately, the monthly pension benefit would be lower than if they had started collecting traditional retirement benefits.

B. Retirement Benefits May be Divisible Marital Property Even if They Rest on a Contingency Such as Plan B.

¶ 13 A district court possesses power in a divorce proceeding to divide the marital estate.14 Title 43 O.S. 2011 121 requires a fair and just division of jointly acquired property upon divorce.15 While 121 has specific provisions for military retirement, it does not generally address any pensions much less "contingent" type pensions such as the Plan B.16 ¶ 14 Generally, a pension right burdened with a conjugal interest is a type of marital asset divided between the parties to a divorce.17 We have said that "absent a specific statutory exception... a trial court may consider the pension as jointly acquired, make a grant of that property to one spouse and then make a compensating award to the other spouse."18 The contingent nature of a pension is irrelevant. For example, in Carpenter v. Carpenter, 1983 OK 2, 657 P.2d 646, we addressed pensions acquired through spousal efforts during the marriage and determined them to be divisible marital property under the predecessor to 43 O.S. 2011 121.19

¶ 15 Carpenter concerned the divorce of a couple who had been married for thirty-six years. At the time of the divorce, the husband had a pension and a profit sharing plan, in which he was a participant,...

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1 cases
  • Clements v. Clements
    • United States
    • United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma
    • May 12, 2020
    ...not yet vested when the decree was entered, we see no credible or equitable reason to draw this distinction as to its division. In Baggs v. Baggs , 2016 OK 117, ¶ 14, 385 P.3d 68, the Court said: "Generally, a pension right burdened with a conjugal interest is a type of marital asset divide......

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