Hoyt v. Hoyt
| Decision Date | 29 August 1990 |
| Docket Number | No. 89-98,89-98 |
| Citation | 53 Ohio St.3d 177,559 N.E.2d 1292 |
| Parties | , 12 Employee Benefits Cas. 2584 HOYT, Appellee, v. HOYT, Appellant. |
| Court | Ohio Supreme Court |
Syllabus by the Court
1. When considering a fair and equitable distribution of pension or retirement benefits in a divorce, the trial court must apply its discretion based upon the circumstances of the case, the status of the parties, the nature, terms and conditions of the pension or retirement plan, and the reasonableness of the result.
2. The trial court should attempt to preserve the pension or retirement asset in order that each party can procure the most benefit, and should attempt to disentangle the parties' economic partnership so as to create a conclusion and finality to their marriage.
The parties to this action, Christine A. Hoyt, appellee, and Frederick J. Hoyt, appellant, were married in 1969. During their eighteen and one-half year marriage, appellant was an employee of the General Motors Corporation ("GMC"). Through his employment, he had accumulated a vested, but unmatured retirement asset based upon the number of years of service with GMC. He had been working for GMC approximately sixteen months before the marriage. Although appellee worked part-time intermittently, she primarily worked as homemaker and caretaker for the parties' four children. Her accumulated pension, in the amount of $10, was for the volunteer ambulance service she performed for Eaton Township.
The appellee initially filed a complaint for alimony only, but amended her complaint to request a divorce on the ground of extreme cruelty after appellant filed an answer and counterclaim on this same ground. In April 1988, the Lorain County Court of Common Pleas, Division of Domestic Relations, granted appellee's request for a divorce. Among other things, the decree provided for child custody, child support, visitation, and division of the parties' marital assets. As part of its division of marital property, and pertinent here, the trial court did not assign a present value to appellant's pension asset but instead adopted a deferred distribution of appellant's future pension benefits. The trial court issued a qualified domestic relations order ("QDRO") 1 which ordered that appellee shall retain a vested interest in appellant's GMC pension plan. The QDRO also provided that appellee was entitled to full survivorship benefits under the plan. When the decree of divorce was rendered, both parties were thirty-eight years old and apparently in good health.
Appellant herein appealed the judgment of the trial court to the court of appeals. Specifically, appellant asserted that the trial court erred by not attributing a present value to his pension plan and in awarding appellee full survivorship rights under the plan. The appellate court affirmed the trial court. Thereafter, the appellate court, finding its judgment to be in conflict with the judgment of the Sixth Appellate District in Schrader v. Schrader (Oct. 12, 1984), Lucas App. No. L-84-029, unreported, 1984 WL 14395, 2 certified the record of the case to this court for review and final determination.
Sherry Newman Spenzer and Allen S. Spike, Elyria, for appellee.
Mark E. Stephenson, Lorain, for appellant.
This court is presented with an opportunity to develop guidelines for a trial court to follow when exercising its discretion in considering pension or retirement benefits in a divorce. The general rule is that pension or retirement benefits earned during the course of a marriage are marital assets 3 and a factor to be considered not only in the division of property, 4 but also in relationship to an award of alimony. 5 However, general rules cannot provide for every contingency and no specific rule can apply in every case. 6 The purpose of the guidelines is to provide a fair and equitable division of property and an award of alimony, if applicable, while simultaneously providing the employed spouse with an incentive to continue in the same employment and to enhance his or her pension or retirement benefits. Accordingly, this court holds that when considering a fair and equitable distribution of pension or retirement benefits in a divorce, the trial court must apply its discretion based upon the circumstances of the case, the status of the parties, the nature, terms and conditions of the pension or retirement plan, and the reasonableness of the result; the trial court should attempt to preserve the pension or retirement asset in order that each party can procure the most benefit, and should attempt to disentangle the parties' economic partnership so as to create a conclusion and finality to their marriage.
Our analysis begins with the Qualified Domestic Relations Order ("QDRO") which the trial court issued in dividing appellant's vested, but unmatured GMC retirement plan as part of the division of property and alimony in the divorce proceedings between the parties.
A QDRO is a qualified domestic relations order "which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan * * *." Employee Retirement Income Security Act of 1974 ("ERISA"), Section 206(d)(3)(B)(i)(I) 7 and Section 414(p)(4)(A)(i), Title 26, U.S.Code. 8 Under the Retirement Equity Act of 1984 ("REA"), the QDRO allows the transfer of retirement benefits to an alternate payee (generally the former spouse) without triggering the anti-assignment or alienation provision of a retirement plan. Under Section 414(p)(8), Title 26, U.S.Code, the former spouse is an alternate payee and thus, is considered to be a beneficiary, and not a participant under the plan. The QDRO must be drafted to include very specific information with explicit instructions to the plan administrator. 9 It is then the responsibility of the plan administrator to review the order of the trial court and determine whether it constitutes a QDRO pursuant to Section 414(p), Title 26, U.S.Code.
When considering pension or retirement benefits, a trial court must be given discretion. This court has consistently held that " * * * flat rules have no place in determining a property division." Cherry v. Cherry (1981), 66 Ohio St.2d 348, 356, 20 O.O.3d 318, 323, 421 N.E.2d 1293, 1299; see, also, Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 5 OBR 481, 450 N.E.2d 1140; Berish v. Berish (1982), 69 Ohio St.2d 318, 23 O.O.3d 296, 432 N.E.2d 183; and Koegel v. Koegel (1982), 69 Ohio St.2d 355, 23 O.O.3d 320, 432 N.E.2d 206.
The trial court must have the flexibility to make an equitable decision based upon the circumstances of the case, the status of the parties, the nature, terms and conditions of the pension plan, and the reasonableness of the result. Thus, any given pension or retirement fund is not necessarily subject to direct division but is subject to evaluation and consideration in making an equitable distribution of both parties' marital assets.
The rights and obligations associated with pension and retirement funds are contractual in nature. 10 Pension and retirement plans are diverse since they may (1) be derived from public or private employment; (2) be vested or nonvested; (3) consist of contributions from employee only, employer only, both or neither 11; (4) include contingencies for payment; (5) and be subject to garnishment and execution. In some instances, the parties' pension and retirement funds may be the most significant marital asset of one or both spouses. 12 Thus the trial court must understand the intricacies and terms of any given plan and, if necessary, require both of the parties to submit evidence on the matter in order to make an informed decision. See Willis v. Willis (1984), 19 Ohio App.3d 45, 48, 19 OBR 112, 115, 482 N.E.2d 1274, 1277.
In exercising its discretion the trial court must recognize that while state law governs the division of marital property upon divorce, private employee benefit plans are subject to ERISA 13 as amended by the Retirement Equity Act of 1984. 14 The purpose of the REA amendment is to:
" * * * [I]mprove the delivery of retirement benefits and provide greater equity under private pension plans for workers, their spouses and dependents by taking into account changes in work patterns, the status of marriage as an economic partnership, and the substantial contribution to that partnership of spouses who work both in and outside the home, and for other purposes." P.L. 98-397, 98 Stat. 1426 (1984).
When considering the pension or retirement fund, the trial court must obtain a result which will preserve the asset so that each party can procure the most benefit. Thus, the trial court must have evidence before it detailing the intricacies and terms of the particular plan. Then, the trial court must make an equitable determination based upon the parties' overall financial situation, whether a direct division, or some other alternative, would be most appropriate to preserve the pension or retirement asset so that each party may derive the most benefit. There are several alternatives to a direct REA division, such as an immediate offset or a current assignment of proportionate shares, with either a current distribution or a deferred distribution. A deferred distribution may consist of either a current assignment or a division of the asset at such time that the plan directs distribution based upon the employee's eligibility. 15 It is important to note that the trial court cannot violate the terms of the plan when fashioning a division of the asset. 16
In the instance of vested matured retirement benefits, the amount is currently due and payable and the value is fixed and easily ascertainable. 17 For example, where an employed spouse is receiving a pension at the...
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