Jackson v. Sollie, 62
| Decision Date | 19 July 2016 |
| Docket Number | No. 62,62 |
| Parties | MILTON EVERETT JACKSON v. GAYLE ANN SOLLIE F/K/A GAYLE S. JACKSON |
| Court | Court of Special Appeals of Maryland |
MILTON EVERETT JACKSON
v.
GAYLE ANN SOLLIE F/K/A GAYLE S. JACKSON
No. 62
COURT OF APPEALS OF MARYLAND
Argued: February 8, 2016
September Term, 2015
July 19, 2016
FAMILY LAW — DIVORCE — MARITAL PROPERTY
Maryland is preempted by federal law from directly dividing Social Security benefits or indirectly dividing those benefits by way of an offset. This prohibition also prevents a judge from offsetting the hypothetical value of Social Security benefits within a CSRS pension when determining the distribution of marital property in a divorce proceeding.
Based upon the evidence presented to the court, when determining whether to grant a monetary award to adjust the equities and rights of the parties in marital property, a trial judge is required to consider the parties' actual or anticipated Social Security benefits as a relevant factor under Md. Code (1984, 2012 Repl. Vol.), § 8-205(b) of the Family Law Article.
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Circuit Court for Howard County
Case No. 13-C-14-101240
Barbera, C.J. *Battaglia Greene Adkins McDonald Watts Hotten, JJ.
Opinion by Greene, J.
Watts and Hotten, JJ., dissent.
*Battaglia, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution, Article IV, Section 3A, she also participated in the decision and adoption of this opinion.
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In this case, we address whether a trial judge has the authority to consider Social Security benefits, and whether a judge may offset those benefits against the marital portion of a Civil Service Retirement System ("CSRS") pension1 when determining the division of marital property.
Milton E. Jackson ("Jackson") filed for an absolute divorce2 from his spouse, Gayle S. Jackson ("Sollie").3 Concerning the distribution of marital property, the parties were unable to reach a consensus as to how to divide their respective pension plans. As an older federal employee, Jackson is a participant in the CSRS pension program.4 Upon retirement, he will be entitled to a pension, but only limited Social Security benefits. Sollie, however,
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participates in the Maryland State Retirement Service ("MSRS") plan, and will be entitled to a pension as well as full Social Security benefits.
Jackson acknowledges that generally, under Maryland law, in a divorce proceeding, retirement plans are considered marital property subject to division, and Social Security benefits are considered non-marital property, which are not subject to division. He argues, however, that the marital portion of the CSRS pension should be reduced in order to reflect an offset. The offset, he states, is an implicit embedded Social Security element representing the amount of Social Security benefits Jackson would have been entitled to had he not participated in the CSRS. By accounting for the offset, Sollie's share of the marital portion of the CSRS pension would be reduced, and, in Jackson's opinion, this would result in a more equitable distribution of the marital assets.
The Circuit Court rejected Jackson's offset argument, and ordered the retirement plans be divided so that each party would receive 50% of the marital share of the other party's retirement plan. For the reasons explained below, we agree with the Circuit Court on this point, and hold that, under the doctrine of federal preemption, a trial judge may not offset the value of hypothetical Social Security benefits against the marital share of a CSRS pension when dividing marital assets in a divorce proceeding. We, however, vacate the judgment of the Circuit Court, and remand the case for that court to take into consideration the parties' anticipated Social Security benefits as a relevant factor under Md. Code (1984, 2012 Repl. Vol.), § 8-205(b) of the Family Law Article ("FL").
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The parties were married on June 21, 1980. By this time, each party was already employed and contributing to their respective pension plans. After thirty-five years of marriage, Petitioner filed a complaint for an absolute divorce. Although the parties agreed to divide other marital assets equally, they were unable to reach a consensus as to how to dispose of their respective pension plans. On June 25, 2015, the parties appeared before the Circuit Court for Howard County for a trial. The trial judge bifurcated the case, and heard the grounds for divorce first, followed by testimony concerning the disposition of Jackson's CSRS pension, and Sollie's MSRS pension. In the latter proceeding, the trial judge heard testimony from Jackson, his expert witness, and Sollie's expert witness.
Jackson testified about his employment history, including twelve years in the private sector and over thirty-eight years with the Social Security Administration where he remains a full-time employee. As a federal employee, Jackson enrolled in the CSRS, and began making contributions on January 18, 1977.5 He explained that, as a CSRS employee, he does not qualify for Social Security benefits, because his employer does not withhold Social Security taxes from his salary. He further explained that he would be eligible to receive limited Social Security benefits, because he previously worked in the private sector, and contributed to the program.
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Jackson explained that when an individual, such as himself, is eligible for Social Security benefits as well as a pension from a position that did not contribute to the Social Security program, the individual will be adversely impacted by two statutory provisions enacted by Congress. First, under the Windfall Elimination Provision ("WEP"), a special formula is used to reduce the amount of Social Security benefits that the individual is entitled to receive. Windfall Elimination Provision, SOCIAL SECURITY ADMIN. (Jan. 2016), www.ssa.gov/pubs/EN-05-10045.pdf [https://perma.cc/DX2K-WF4X ]. If Jackson were to receive Social Security benefits starting at age 66, the WEP would reduce his estimated benefits of $381 per month to $131 per month. Second, under the Government Pension Offset ("GPO"), there is a similar reduction in the Social Security spousal or survivor benefits an individual, including a former spouse, may receive. Government Pension Offset, SOCIAL SECURITY ADMIN. (July 2015), www.ssa.gov/pubs/EN-05-10007.pdf [https://perma.cc/Y7W3-K5D6].
Jackson called an expert witness in the areas of the CSRS and pensions to testify on his behalf. The expert explained that a portion of Jackson's salary is withheld to fund the CSRS instead of Social Security. Therefore, in the expert's opinion, the Circuit Court should account for the embedded Social Security element that allegedly exists within the CSRS pension:
[T]he Social Security element means the amount of Social Security that [Jackson] would have had if he had been a private company employee or participated in the FERS program. So if you set that aside and allocate [the value of the embedded element] to Mr. Jackson and then divide the balance of
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that, the remainder, by the marital fraction, so in essence attributing some of Mr. Jackson's CSRS Pension to Social Security, then this, in my opinion, provides an equitable distribution of the retirement pensions.
In essence, because Social Security benefits are non-marital property, and thus, not subject to division by a court in a divorce proceeding, the expert proposed that the embedded Social Security element should be similarly treated as non-marital. Otherwise, according to the expert, an inequitable division would occur, because a portion of that embedded element would be distributed to Sollie.
Although Sollie did not testify, she did call an expert witness in the areas of pension, pension valuations, and Social Security benefits. The expert testified about Sollie's employment history, and explained that Sollie has contributed to the MSRS for over twenty-eight years, beginning on August 1, 1986, as well as to Social Security. As a result, upon retirement, Sollie will be entitled to a pension as well as Social Security benefits. Sollie's expert disagreed with the pension valuation calculations made by Jackson's expert. The expert explained that any attempt to value the hypothetical Social Security element would be speculative, because the element does not exist within the CSRS. The CSRS and Social Security are separate and distinct programs with distinguishing characteristics. Additionally, the expert explained that state courts are federally preempted from interfering with Social Security, and that Jackson was trying to circumvent Congressional intent by suggesting that the trial court could offset the value of Social Security benefits. Congressional intent is expressed by the interplay between the CSRS, the WEP, and the GPO: Jackson, as a CSRS
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employee, is entitled to reduced Social Security benefits.
On June 30, 2015, the Circuit Court entered its judgment granting Jackson an absolute divorce. On the issue of how to equitably divide the retirement plans, in its memorandum opinion, the Circuit Court stated:
It is not the role of the Court to make things equal, only to divide marital property equitably . . . . Each party's retirement shall be divided in accordance with the Bangs Formula, giving each party 50% of the marital share of the other party's retirement, with the marital share being defined as the number of months of the employee's qualifying participation in the plan from June 21, 1980 and June 25, 2015 and the denominator being the total number of months of the employee's qualifying participation in the plan.
On July 16, 2015, Jackson filed a notice of appeal in the Court of Special Appeals, and, on August 25, 2015, he filed a petition for writ of certiorari with this Court. Before the commencement of proceedings in the intermediate appellate court, we granted certiorari to answer the following question:
Should Maryland adopt the [position of a] maj ority of states and require a trial judge to...
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