Marriage of Oddino, In re
| Citation | 55 Cal.Rptr.2d 811,48 Cal.App.4th 965 |
| Decision Date | 24 July 1996 |
| Docket Number | No. B068557,B068557 |
| Parties | Previously published at 48 Cal.App.4th 965 48 Cal.App.4th 965, 96 Cal. Daily Op. Serv. 6166, 96 Daily Journal D.A.R. 10,040, Pens. Plan Guide (CCH) P 23925W In re the MARRIAGE OF Mary K. and James M. ODDINO. Mary K. ODDINO, Appellant, v. James M. ODDINO, Respondent; Hughes Non-Bargaining Retirement Plan, Claimant and Respondent. |
| Court | California Court of Appeals |
Glasser and Smith and Robert Glasser, Irvine, for Appellant.
O'Melveny & Myers, Wayne S. Jacobsen and Todd R. Wulffson, Newport Beach, for Claimant and Respondent.
Paul, Hastings, Janofsky & Walker, Ethan Lipsig, Proskauer Rose Goetz & Mendelsohn, Jeffrey A. Berman, Los Angeles, U.S. Department of Labor, Office of the Regional Solicitor, Paula J. Page, Oakland, ERISA Counsel, U.S. Department of Labor, Office of the Solicitor, Karen L. Handorf, Washington, DC, Counsel for Special Litigation, Barbara A. Matthews, Trial Attorney, California Manufacturers Association and Bettina Redway, General Counsel, for Amici Curiae on behalf of Claimant and Respondent.
No appearance for Respondent.
This appeal arises out of a marital dissolution action. Appellant wife, Mary K. Oddino, appeals following a May 8, 1992, order which, inter alia, denied her order to show cause seeking a different calculation of her community share of the retirement benefits of her husband, James M. Oddino. According to the interpretation of respondent, Hughes Non-Bargaining Retirement Plan (hereinafter, the Hughes Plan), which administers husband's retirement plan sponsored by Hughes Aircraft Company, wife's proportionate share (i.e., 36.6231%) of her husband's retirement benefit should be calculated as if husband were eligible to retire at age 65, rather than at age 55, which was husband's earliest retirement age under the Plan by virtue of his years of service and the so-called Rule of 75. 1 The terms of the Qualified Domestic Relations Order (hereinafter, QDRO), 2 filed on March 24, 1989, which converted wife's benefit under the pension from a lifetime annuity to a benefit payable in 60 monthly installments, provided that payments to wife were to be determined as if husband had retired on April 1, 1988, with payments to commence on April 1, 1988, "or as soon thereafter as practical." 3 The Hughes Plan interpreted the QDRO by using the age 65 vested retirement benefit which provided wife with monthly payments of $1,563.70; use of the early retirement benefit of Rule of 75 would have provided her with monthly payments of $3,689.60 calculated commencing from April 1, 1988, plus any cost-of-living adjustments. The Hughes Plan ultimately commenced payment of wife's share of the benefits on March 1, 1990.
We hold that the trial court erred in denying the order to show cause. The Rule of 75 early retirement was not a subsidy, the QDRO thus did not improperly require payment
greater than the actuarial equivalent of the permissible retirement benefits, and the Rule of 75 benefit was an accrued benefit to which wife was entitled pursuant to the QDRO and ERISA. We also find that the Hughes Plan must pay interest on delayed benefit payments to wife and on the unpaid balance due, but we need not discuss the calculation of such interest, which should be addressed in the first instance by the trial court.
The crux of the problem in the present case is whether the Rule of 75 early retirement provision constitutes an employer subsidy for early retirement or constitutes an accrued benefit. The significance of this distinction arises because ERISA limits the amount of benefits which may be paid pursuant to a QDRO, where the employee has not actually retired but has attained "the earliest retirement age." (29 U.S.C. § 1056(d)(3)(E)(i)(I).) ERISA limits the benefits amount by "taking into account only the present value of benefits actually accrued and not taking into account the present value of any employer subsidy for early retirement...." (29 U.S.C. § 1056(d)(3)(E)(i)(II).) If payment to the nonemployee spouse was not based on the present value of benefits actually accrued, but rather was based on an employer subsidy, the domestic relations order could direct payment of benefits in excess of the employee spouse's benefits, thus precluding the order from constituting a valid QDRO. (29 U.S.C. § 1056(d)(3)(D)(ii) ().) Moreover, a domestic relations order cannot be a QDRO if it requires "a plan to provide any type or form of benefit, or an option, not otherwise provided under the plan...." (29 U.S.C. § 1056(d)(3)(D)(i).)
In assessing whether the Rule of 75 early retirement provision in the present case is an employer subsidy or an accrued benefit the parties herein have addressed conflicting pre-QDRO case law; i.e., cases prior to the amendment of ERISA by the Retirement Equity Act of 1984 (hereinafter, REA; see Pub.L. No. 98-397, 98 Stat. 1426 (Aug. 23, 1984), discussed in In re Marriage of Baker (1988) 204 Cal.App.3d 206, 213-220, 251 Cal.Rptr. 126), which more clearly delineated a spouse's interest in an employee's pension benefits. (See, e.g., American Stores Co. v. Retirement Plan (10th Cir.1991) 928 F.2d 986 (); Amato v. Western Union Intern., Inc. (2d Cir.1985) 773 F.2d 1402, 1413 ().) REA resolved the controversy between cases such as American Stores and Amato by providing that early retirement benefits are treated as accrued and may not be reduced or eliminated even if the benefits constitute a retirement-type subsidy. (29 U.S.C. § 1054(g)(2).) REA also, however, set forth QDRO procedures and established a distinction between "benefits actually accrued" and an "employer subsidy for early retirement" (29 U.S.C. § 1056(d)(3)(E)(i)(II)), as previously discussed. ERISA had defined the term "accrued benefit" as meaning in the case of a defined benefit plan, as here, "the individual's accrued benefit determined under the plan ... expressed in the form of an annual benefit commencing at normal retirement age...." (29 U.S.C. § 1002(23).) Nonetheless, REA provided no definitional guidance as to "employer subsidy for early retirement."
We note that the court in Amato, supra, 773 F.2d 1402, struggled to find a definition of subsidy and concluded that "the term 'subsidized early retirement benefit' is not defined in the I.R.C. [Internal Revenue Code], the Regulations promulgated thereunder, ERISA, the [terms of the] present [pension plan at issue in Amato ], or in the contemporaneous legislative history." (Id. at p. 1413.) The Hughes Plan acknowledges the following parenthetical definition from REA legislative history on plan amendments: "benefit subsidy (the excess of the value of a benefit over the actuarial equivalent of the normal retirement benefit)." (1984 U.S.Code Cong. & Admin. News, at p. 2574.) Significantly, ERISA defines "normal retirement Accordingly, a benefit subsidy would thus be defined as the excess of the value of a benefit over the actuarial equivalent of whichever is greater between (1) the early retirement benefit under the plan, or (2) the benefit under the plan commencing at normal retirement. An early retirement benefit does not necessarily entail a subsidy, rather than an accrued benefit. Contrary to the contention of the Hughes Plan, a subsidy is therefore not simply the excess of the value of an early retirement benefit over the value of the normal retirement benefit payable at normal retirement.
benefit" as "the greater of the early retirement benefit under the plan, or the benefit under the plan commencing at normal retirement age." (29 U.S.C. § 1002(22).) As here, where the Rule of 75 benefit is defined from the date of early retirement and not from normal retirement age, a retirement plan's early retirement benefit must be actuarily increased for deferment to normal retirement age before comparing it to the actuarial value of the normal retirement age benefit annuity payments. Then the benefits compared are in comparable forms, and the larger of the two benefits becomes the normal retirement benefit. (See I.R.S. Treas. Regs. 26 C.F.R. § 1.411(a)-7(c)(2)(ii) (1988).)
Nor is there any support for the position of the Hughes Plan in traditional California case and statutory law. It is undisputed that a nonemployee spouse is entitled to receive payments from the employee spouse's interest in the employer's retirement fund prior to retirement if the employee is eligible to retire (In re Marriage of Gillmore (1981) 29 Cal.3d 418, 174 Cal.Rptr. 493, 629 P.2d 1), and that a divorce must not increase the obligations of an employer's retirement plan (29 U.S.C. § 1056(d)(3)(D)(ii) & (E)(i)(II); see also former Civ.Code, § 4800.8, continued without substantive change in Fam.Code, § 2610, subd. (b)). Indeed, " 'the employer is entitled to certainty concerning its obligations under its retirement program and must not be required to do more than is required by its contract with the employee spouse....' " (In re Marriage of Nice (1991) 230 Cal.App.3d 444, 450, 281 Cal.Rptr. 415.) We thus turn to the Hughes Plan and the particular terms of the contract with the employee spouse.
The Hughes Plan asserts on appeal that the Rule of 75 benefit is a subsidy because Hughes subsidizes this early retirement inducement by its contributions to the retirement plan. However, there is no support in the record for the assertion that the Rule of 75 benefit was funded any differently than any other plan benefit; i.e., funded by...
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Marriage of Oddino, In re
...K. ODDINO, Appellant, v. James M. ODDINO, Respondent. No. S055819. Supreme Court of California. Nov. 13, 1996. Prior report: Cal.App., 55 Cal.Rptr.2d 811. Petition for review GEORGE, C.J., and KENNARD, WERDEGAR, CHIN and BROWN, JJ., concur. ...