Thayer v. Thayer

• Decision Date: 14 July 2016
• Docket Number: No. 20140179–CA,20140179–CA
• Citation: 378 P.3d 1232,2016 UT App 146
• Parties: Diane J. Thayer, Appellant, v. Richard W. Thayer, Appellee.
• Court: Utah Court of Appeals

378 P.3d 1232

2016 UT App 146

Diane J. Thayer, Appellant

v.Richard W. Thayer, Appellee.

No. 20140179–CA

Court of Appeals of Utah.

Filed July 14, 2016

Paige Bigelow, Attorney for Appellant

Douglas B. Thayer and Jordan K. Cameron, Lehi, Attorneys for Appellee

Judge Stephen L. Roth authored this Opinion, in which Judge J. Frederic Voros Jr. and Senior Judge Russell W. Bench concurred.¹

Opinion

ROTH, Judge:

¶1 Diane J. Thayer (Wife) appeals the district court's order regarding the division of Richard W. Thayer's (Husband) retirement pay. We reverse and remand for further proceedings.

BACKGROUND

¶2 Husband and Wife married in April 1978. The parties' stipulated decree of divorce was entered in September 2013. During the marriage, both parties earned retirement pay through their employers. Wife has a pension plan through her employment as a teacher in Alaska and should become eligible in the future to receive a pension from her employment as a teacher in Utah. Husband has a pension plan through his employment with the United States Public Health Service Commissioned Corps (USPHS).

I. The Divorce Decree

¶3 At the time of the divorce, Wife was “not yet receiving payments from the Alaska Teacher Pension,” and accordingly, the decree stipulated that the “monthly compensation ... of the Alaska Teacher Pension should be divided equally between [Husband and Wife].” The decree defined “monthly compensation” as “gross retirement pay less authorized deductions, including amounts properly deducted for federal, state, or local taxes and disability benefits.” The parties stipulated to identical language regarding the portion of Wife's Utah teacher pension to be equally divided, if she becomes eligible to receive a pension.

¶4 With respect to Husband's pension through USPHS, the stipulated decree provided,

All of [Husband's] years of employment with USPHS accrued during the marriage, and [Husband] is currently receiving the payments of the retirement benefits from the USPHS Pension. The “disposable retired pay” amount of the USPHS pension benefit shall be divided equally pursuant to Johnson v. Johnson , 2012 UT App 22, 270 P.3d 556 [,] and 10 U.S.C.A. § 104(a)(4)(C).² “Disposable retired pay” is defined as gross retirement pay less authorized deductions, including amounts properly deducted for federal, state, or local taxes and disability benefits.

Commencing with the June 2013 pension compensation, [Wife] is awarded fifty-percent (50%) of the disposable retired pay. The U.S. Office of Personnel will calculate the “disposable retired pay” per existing regulations, and both parties will be responsible for reporting their complete income and paying taxes on their income. Neither party assumes liability for the other party's tax obligation. The United States Office of Personnel Management is directed to pay [Wife's] share directly to [Wife].

¶5 Anticipating the possibility of delays in implementing the payment plan with USPHS, the decree also provided an interim payment mechanism:

Commencing with the June 2013, pension compensation, until the time that the division of the USPHS Pension is implemented, [Husband] shall pay [Wife] the monthly sum of $2,389.93. Payment shall be due within ten (10) days of [Husband] receiving any retirement distribution. [Husband] shall not pay [Wife] directly once the plan administrator implements the division of the USPHS Pension.

A. Wife's Pensions

¶6 Following the entry of the divorce decree, Husband proposed a qualified domestic relations order that would require the plan administrator to pay Husband one half of each of Wife's gross pension payments. Wife objected, contending that the decree defined the amount to be paid to Husband as “gross retirement pay less authorized deductions,” such as taxes and disability, and that only her net payments should be subject to division. Husband responded that there were no “authorized deductions” from her pay under applicable law. In particular, he argued that Wife was not disabled and that both Alaska's and Utah's retirement systems are required by law to divide pension payments prior to tax deductions.

¶7 The district court sided with Husband, ruling that “the divisible amount is [Wife's] ‘gross retirement pay.’ ” The court reasoned that “the decree of divorce identified possible deductions (for example, taxes and disability benefits) that may be made before the division of the retirement benefit, so long as those deductions are authorized.” (Emphasis in original.) However, the court determined that “there are no authorized deductions that may be taken before the assets are divided between the parties.” In particular, it found that neither the Alaska nor the Utah retirement systems “permit[ted] the tax deductions prior to the division of gross retirement pay” and that Wife “does not receive disability benefits that would be available for deductions.” Neither party contests this ruling on appeal.

B. Husband's Pension

¶8 Wife submitted to the Personnel Center in charge of administering Husband's pension a request that she be paid monthly the portion of Husband's retirement pay awarded to her in the decree. In December 2013, the Personnel Center advised Wife that “[a]bsent a successful objection from your former spouse ..., your direct payment will begin on February 1, 2014.” The Personnel Center estimated that she would receive each month the sum of $3,455.02, which was fifty percent of Husband's “disposable retired pay,” as calculated by the Personnel Center.

¶9 However, in January 2014, Husband objected to the Personnel Center's proposed division of his retired pay. Husband asserted that the Personnel Center's proposal was not consistent with the decree of divorce because the proposed payout to Wife did not calculate Husband's disposable retired pay according to Johnson and 10 U.S.C. section 1408(a)(4)(C) of the Uniformed Services Former Spouses' Protection Act (the USFSPA), as the decree required. He argued that Johnson and the statute required that federal, state, and local taxes and disability benefits be subtracted to arrive at his disposable retired pay and that the Personnel Center's proposed calculation instead improperly divided his gross pay.

¶10 As a result of Husband's objection, the Personnel Center notified Wife that it “disapprove[d] [her] request for division of [Husband's] retired pay.” It explained to Wife that Johnson, the case the divorce decree referenced as a guide for the division of Husband's retirement pay and a source for the definition of “disposable retired pay,” “cite[d] federal law as it existed prior to 1990 and not as it exists today” and that under current federal law, while “[d]isability payments are excluded,” “[t]axes are not excluded from gross retired pay to arrive at disposable retired pay.” The Personnel Center noted, as well, that its “implementing regulations ... also contain the definition of disposable retired pay” and that under that definition, “[t]axes are not excluded for divorces that occurred on or after February 3, 1991.” As a consequence, the Personnel Center disapproved Wife's request “[b]ecause of the conflict between [the] Decree and [current federal law], and based on [Husband's] objection to [the Personnel Center's] proposed implementation.”

¶11 Wife then submitted a proposed military retired pay division order that provided that she be “awarded fifty percent (50%) of [Husband's] disposable military retired pay.” Husband objected—this time to the district court—on the same ground that he had objected to the Personnel Center's proposed division, namely, that Wife's proposal did not incorporate the stipulation in the divorce decree that Husband's disposable retired pay be “divided equally pursuant to Johnson v. Johnson , 2012 UT App 22, 270 P.3d 556 [,] and 10 U.S.C.A. § [1408](a)(4)(C).” In this regard, he argued that the court in Johnson “defined the ‘authorized’ deductions for a military pension as federal and state taxes and held that it was not authorized to ‘treat gross [military] retirement pay as marital property divisible upon divorce.’ ” (Alteration in original) (quoting Johnson v. Johnson , 2012 UT App 22, ¶ 23, 270 P.3d 556, aff'd in part, rev'd in part , 2014 UT 21, 330 P.3d 704 ). As a result, according to Husband, “Utah Courts only have authority to divide [his] net retirement income” and the Personnel Center's proposed disbursal of $3,455.02 per month to Wife was “actually 50% of [Husband's] gross retirement pay,” not fifty percent of his net pay. He asserted that even if the division the parties had agreed upon was inconsistent with current federal law or the Personnel Center's implementing regulations, the parties had “specifically recognized, discussed, and agreed to the applicability of Johnson to [Husband's] military retirement account” and that “Johnson cannot ... be arbitrarily removed from the Decree.” Husband further argued that the decree itself “provides for the remedy” in the event that the Personnel Center could not implement the division, in the form of the $2,389.93 per month designated as the interim payment Husband was to make “until the time that the division of the USPHS Pension is implemented.”

¶12 In response, Wife argued that Johnson does not stand for the proposition that military retirement income may only be divided net of tax deductions. Rather, she pointed out, as had the Personnel Center, that Johnson involved a pre–1991 divorce and applied a federal statute and regulations “which at the time did deduct taxes prior to division.” She argued that rather than adopting a specific formula, Johnson “stands for the proposition that Utah law cannot order a division of Federal retirement that exceeds federal regulations.” Thus, the Personnel Center's original proposed division of Husband's retired pay was “in keeping with Johnson ” because it had “calculated the division of the USPHS Pension per existing Federal regulations.”

¶13 The district court sustained Husband's objection, stating that...