Koelsch v. Koelsch

• Decision Date: 28 February 1984
• Docket Number: No. 1,CA-CIV,1
• Citation: 713 P.2d 1245,148 Ariz. 187
• Parties: In re the Marriage of E. David KOELSCH, Petitioner-Appellee, v. Elizabeth R. KOELSCH, Respondent-Appellant. 6091.
• Court: Arizona Court of Appeals

Page 1245

713 P.2d 1245

148 Ariz. 187

In re the Marriage of E. David KOELSCH, Petitioner-Appellee, v. Elizabeth R. KOELSCH, Respondent-Appellant.

No. 1 CA-CIV 6091.

Court of Appeals of Arizona Division 1, Department D.

Feb. 28, 1984.

Stevens & Leibow, P.C. by Charles T. Stevens, Phoenix, for petitioner-appellee.

George M. Sterling, Jr., Phoenix, for respondent-appellant.

OPINION

JACOBSON, Chief Judge.

This appeal again presents the thorny issue of the proper distribution upon dissolution of a marriage of the community interest in retirement benefits, particularly where such benefits have both vested and matured. "Matured" means that the employee has met all prerequisites including length of service to make him immediately eligible to receive benefits. Johnson v. Johnson, 131 Ariz. 38, 638 P.2d 705 (1981). The facts are not in material dispute.

The parties were married on November 22, 1956, and thereafter the husband, E. David Koelsch, was employed by the Department of Public Safety. Under the Public Safety Personnel Retirement Fund, he was eligible for retirement after twenty years of service, and that point was reached on August 16, 1981. On October 17, 1980, the husband filed a petition to dissolve his marriage to Elizabeth R. Koelsch. A decree dissolving the marriage was entered on April 16, 1981, which provided in part:

With respect to the Public Safety Retirement Fund said property is the community property of the parties and there is hereby set aside to the respondent as her sole and separate property, a sum equal to one-half of the amount which is determined after calculating the fraction by which 234 is the numerator and the total months of enrollment is the denominator. Said sum shall be paid to the respondent at the same time and in the same manner as it is paid to [p]etitioner.

At the time of the dissolution, the husband was 44 years old and had recently been promoted to supervise security at the Arizona State Senate, a position that he enjoys and wants to keep. Under the provisions of the husband's retirement plan, if he retires after twenty years of service he would receive benefits equal to 50% of his annual salary averaged over the five years when his earnings were highest. However, if he continued to work after twenty years, his retirement benefits would increase by 1% per year from the base of 50% of his salary to a maximum of 60% at the end of thirty years. There are no minimum age limits to obtain retirement benefits nor are there any limitations on obtaining other employment after retirement, except the retiree cannot receive retirement benefits if he is hired by another employer covered under the Public Safety Retirement Fund. The death of the employee terminates retirement benefits, and survivor's benefits are specifically restricted to married spouses. It was agreed that if the husband retired on August 16, 1981, after twenty years of service, he would receive a retirement benefit of $867.01 per month. At that time he would have a life expectancy of 24.4 years.

The sole issue on appeal is whether the trial court properly disposed of the community interest in the retirement fund. The wife agrees that the trial court's formula in determining the community interest in the retirement plan was in conformity with that used in Van Loan v. Van Loan, 116 Ariz. 272, 569 P.2d 214 (1977), and that the lack of other community assets to "buy out" the community interest in the retirement plan made immaterial a determination of present cash value of that interest. See Johnson v. Johnson, supra; Provinzano v. Provinzano, 116 Ariz. 571, 570 P.2d 513 (App.1977). The supreme court in Van Loan held that a wife had an interest in her husband's military pension to the extent that the same derived from community labor. This was true even though the pension had not vested. Since the portion of the pension that derived from the husband's labor following dissolution would not be community property, a formula was devised to fix the community interest. During the entire seventeen years of marriage, the husband had been serving in the U.S. Air Force. The trial court awarded the wife an interest in the pension equal to one-half of the amount derived from the division of seventeen by the number of years the husband would have served in the U.S. Air Force if and when he received the pension.

The wife argues that the formula for calculating the community interest in future retirement benefits acceded to in Van Loan and its progeny ¹ presupposes that the onset of benefits and their amount was independent of either party's control, that is, it presupposes that when eligibility for retirement arrives, retirement will occur. She argues that when this factor is not present and instead, because of youth or other reasons employment continues after the date of eligibility for retirement it is inequitable to allow, in the sole discretion of the spouse covered by the plan, a diminution of the other spouse's interest in the retirement benefits.

The wife is correct in her observation that the longer the husband continues his employment after the dissolution the wife's share in the benefits will grow progressively less. This is true because under the Van Loan formula the number of years the husband serves to obtain the pension grows while the number of years the community labor contributed to the pension is static. By way of illustration, in this case if the husband had retired in 1981 the wife, under the Van Loan formula would be entitled to one-half of 97.5% of the pension payments. ² If the husband waits until 1991 to retire the wife would receive one-half of 65% of the pension he receives. ³ To put the matter in even more concrete terms, if we assume an annual salary increase of 5% (a figure by which the state historically has increased wages) at retirement after thirty years, the wife would receive a monthly benefit of $556.78 per month as compared to the sum of $422.67 per month if retirement occurred after twenty years. However, if the husband retired after twenty years he would have had a life expectancy of 28.6 years which would produce for the wife, over his lifetime, the sum of $145,060 ($422.67 per month X 28.6 years). If retirement is deferred for ten years the husband's life expectancy would be 20.4 years so the wife's total income from the benefits over the husband's lifetime would amount to $134,830 ($550.78 per month X 20.4 years), a net decrease in the total amount of benefits the wife could reasonably be expected to receive.

The wife also argues that while it may be equitable for both parties to share the risk of untimely death and consequent loss of any benefits where rights under the pension plan have not matured, it is inequitable to shift this risk solely to the wife where the husband controls the timing of when benefits can be received. She urges that these inequities mandate our adoption of the approach taken by California in the case of In re Marriage of Gillmore, 29 Cal.3d 418, 174 Cal.Rptr. 493, 629 P.2d 1 (1981). There the California Supreme Court was faced with the same fact situation presented by this case, that is, a working spouse who is eligible to retire but wants to continue working, thus postponing the collection of retirement benefits. The California Supreme Court held:

[The husband's] retirement benefits are both vested and matured. [Citations omitted]. He will not forfeit his benefits if he leaves his employment voluntarily, is terminated or retires. The only condition precedent to payment of the benefits is his retirement, a...