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We have a caring staff that is eager to help. Whether we are answering initial questions or explaining complex provisions, you will find our team is patient and dedicated to providing the solutions you need to best represent your client

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Nobody likes listening to automated phone options, or waiting for someone to come back from lunch – especially when you are in court and need an answer! We are available when you need us. We coordinate staff schedules so that someone is always ready to take your call and we freely provide our direct dial phone numbers.

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In the field since 1985 and authors of leading texts, our staff of fourteen has unrivaled depth of expertise. Our actuarial and legal experts can handle any issue whether common or complex. From discovery to final approval, we walk with you through the entire process and take pride in helping you secure a family’s best possible future following divorce.

Defined Benefit vs Defined Contribution Plans

Defined Benefit vs Defined Contribution Plans

Kapp v. Kapp, 2d Dist. Clark No. 2018-CA-133, 2019-Ohio-133 (October 4, 2019).

Issue: Did the trial court err by dividing the defined contribution plan at issue using a coverture fraction and ruling the alternate payee could not collect her share until participant retires?

Decision:  In this case, the Second District Court of Appeals determined the trial court did err in its division of the Husband’s 401(k), a defined contribution plan.  Prior to the hearing before the trial court, the parties stipulated that the marital portion of the 401(k) plan was $11,849.75.  However, the trial court mistakenly believed this amount was the value of the entire account.  The trial court ordered the $11,849.75 to be divided using a coverture fraction (with the numerator being the Husband’s number of months of service in the plan during the marriage and the denominator being the Husband’s total months of service in the plan at retirement).  The trial court further ordered that the plan assets were not to be divided until Husband either retired or otherwise started payment from the plan.

As the Second District Court of Appeals noted, this type of division using a coverture fraction and waiting until the time of retirement to value the benefits is common in defined benefit plans—not defined contributions plans.  This type of division is not appropriate for a defined contribution plan, which has an easily determined value and the value of the marital portion will only increase after divorce due to market forces (whereas the marital portion of a defined benefit plan will increase with a higher average wage earned in subsequent years of service).  Accordingly, the Second District held the trial court abused its discretion in its division of the 401(k).  It continued by stating the reasonable division in this matter was to immediately divide the $11,849.75 in half and award Wife gains/losses on her share from the date of assignment until her amount was segregated.  

Discussion:  It is important to remember that dividing retirement plans at divorce can be complicated.  It should not be taken for granted that anyone in the room understands the plan(s) at issue during a divorce.  As such, you, as the attorney in the case, must know the plan(s) at issue and be able to explain them to everyone involved, even the court.

How we can help:  We have decades of experience in this area.  We can help you to understand the plan(s), make exhibits for trial, and/or offer expert testimony at the hearing.  Please feel free to give us a call.  We pride ourselves on having friendly, available experts that are ready to help you protect your client’s interests with respect to the retirement benefits.

QDRO Group on the Road

On October 24th and 25th we sponsored ICLEF’s 17th Annual Family Law Institute in Indianapolis. The above picture shows staff attorney James Myers who is licensed in both Ohio and Indiana and is a frequent contributor to this blog.

In addition to sponsoring events like this, we also speak frequently at CLE seminars. Let us know if you like to see us at an upcoming event near you.

Plan Loans/Withdrawals Taken During the Marriage

Plan Loans/Withdrawals Taken During the Marriage

Daugherty v. Daugherty, Butler County Court of Common Pleas No. DR18 06 0563 (August 30, 2019).

Issue:  When a defined contribution plan contains both separate and marital property, are loans/withdrawals during the marriage considered separate or marital in nature?

Decision:  In this case, the Butler County Court of Common Pleas, Domestic Relations Division, found that the loans/withdrawals taken out of the defined contribution (DC) plan were marital in nature.  The Husband and Wife were married 1999.  At the time of marriage, the Husband had funds in his Federal Thrift Savings Plan (TSP) that were his separate property.  During the marriage, Husband continued to contribute to the account but also took multiple loans and withdrawals—some of which were not repaid by the date of divorce in 2019.  During the trial, Husband offered unrebutted testimony that all of the loans/withdrawals were spent on marital debt.

One of the issues at trial was whether the loans/withdrawals should be considered marital in nature—thereby excluded from the calculation of the marital portion.  Or if the loans/withdrawals, or any portion thereof, should be considered separate property and imputed against Husband’s portion of the benefits.  Wife hired an expert who testified that all the loans/withdrawals taken against the TSP during the marriage should be allocated using a proportional method.  The expert claimed that the assets in the TSP account were 40 percent marital and 60 percent separate property.  He then proposed that all the loans/withdrawals, regardless of how the money was spent, should be considered 40 percent marital and 60 percent separate in nature.

The Wife’s attorney hired QDRO Group for expert testimony.  Dave Kelley and Jim Coco testified that, since the loans/withdrawals were taken during the marriage and Husband testified that they were used to pay marital debts, 100% of the loans/withdrawals should be considered marital in nature.  Dave and Jim explained that it is our company’s position, which is held by many others in the field, that loans/withdrawals taken from a retirement account during the course of the marriage should be assumed to have been spent on marital debts/assets and are therefore marital in nature.  This assumption can only be overcome by demonstrating that the funds from the loans/withdrawals were spent on something that is separate in nature. 

After considering the expert testimony and Husband’s unrebutted testimony, the trial court found the loans/withdrawals from the TSP account were marital in nature.  As such, the loans/withdrawals should be excluded from the calculation of the marital portion of the TSP account.

Observation:  In a divorce, it is important to discover if any loans/withdrawals were taken from a retirement plan, when the loans/withdrawals were taken, and what the funds were spent on.  This discovery can make a difference whether the loans/withdrawals are considered marital or separate in nature, which will affect the amount your client ultimately receives.

How we can help:  We produce reports that trace the growth on the separate property component of defined contribution plans and can also help you choose how to treat plan loans/withdrawals in a way that will stand up in court.  Call us anytime to discuss the specifics of your case.

Did the Separation Agreement/Judgment Entry cause the court to choose a frozen coverture QDRO over your traditional Hoyt-coverture Order?

Did the Separation Agreement/Judgment Entry cause the court to choose a frozen coverture QDRO over your traditional Hoyt-coverture Order?

Unfortunately, the answer to that question is increasingly “Yes.” We base this on our extensive case law review of retirement division language in Judgment Entries and our two-hour Ohio Judicial College interactive presentation in June.

Part of that Responder system interaction was having the judges and magistrates read actual Judgment Entry and then vote if the language was clear or ambiguous and whether it leaned towards freezing the benefit or adopting traditional coverture. After the judges voted, we then put the actual court decision on the screen and discussed the Court of Appeal decision. The five of us doing the presentation worked hard on the presentation and even harder on the materials – which we now offer you.

If you have any questions regarding traditional versus frozen coverture, survivorship, the dangers of awarding offsetting assets and tracing separate property, the materials will be useful. While the Judicial College responses remain confidential, the case reviews in the materials are illuminating and clearly demonstrate the inconsistency between various districts in interpreting Judgment Entries.

The cases that discussed how various courts interpreted Judgment Entry language were:

Hoyt v, Hoyt, 53 Ohio St.3d 177, Keller v Keller, 5th Dist. 18 CAP 01 0008-0010, 2018-Ohio-3141, Cameron V. Cameron, 10th Dist. No. 12AP-349, 2012-Ohio-6258, Cook v. Cook, 9th Dist. Summit C.A. 28575, 2017-Ohio-8848, George v. George, 9th Dist. Summit C.A. No. 18866 (Sept. 23, 1998), Nappi v. Nappi, 11th Dist. Ashtabula Case No. 2013-A-0041, 2014-Ohio-2696.

The cases discussed in our extensive Contract Construction section were:

State v. Porterfield, 106 Ohio St.3d 5, Meyer v. Meyer, 12th Dist. Butler No. CA2015-12-225, 2016-Ohio-8100, Houchins v. Houchins, 5th Dist. Stark No. 2006CA00205, 2007-Ohio-1450, Graham v. Drydock Coal Co., 76 Ohio St.3d 311 (1996).

How we can help: The best help we can provide is our free separation agreement language, especially our assignment clause language and survivorship clause. However, our ERISA attorneys can also help after that as well. For example, if the court signals that it will sign or intends to sign a frozen coverture order give us a quick call for our advice.  Our attorneys can help you understand how each court will look at the language de novo and how straightforward it should be to establish the ambiguity of JE language by simply using our research to demonstrate how other districts have taken virtually (or exactly!) the same language and come to a different conclusion. That establishes the underlying legal necessity of having two “reasonable” interpretations, unless, of course, you reject the other districts as unreasonable.

Disability Payments Taken in Lieu of a Pension Are—Sometimes—Considered Marital Property

Disability Payments Taken in Lieu of a Pension Are—Sometimes—Considered Marital Property

Grisafo v. Hollingshead, 8th Dist. Cuyahoga No. 107802, 2019-Ohio-3763 (Sep. 19, 2019)

Issue:  Is an individual entitled to a portion of his/her former spouse’s disability benefits?

Decision:  In this particular case, at the time of the court’s decision, no.  In this case, the parties’ separation agreement provided, in part, that Wife was entitled to 50% of her former Husband’s pension benefit from the Ohio Police and Fire Pension Fund (OP&F).  After the separation agreement was executed and incorporated in the final divorce decree, the parties completed a Division of Property Order (DOPO)—the Order that must be used to divide all State of Ohio retirement benefits in a divorce.  The DOPO has multiple types of payments that can be selected to divide, including disability monthly benefit.  The DOPO completed for this matter only indicated that Wife would receive part of Husband’s age and service retirement benefit—the standard retirement benefit.

Subsequent to the divorce and the filing of the DOPO with OP&F, Husband was deemed disabled and awarded full disability pension benefits.  Because the DOPO filed with OP&F only provided Wife with a portion of time and service retirement benefits, she did not receive any portion of Husband’s disability benefits.  Wife filed multiple motions with the trial court requesting that she immediately receive a portion of Husband’s disability benefits.  Wife argued that Husband would never receive retirement benefits and therefore, unless the court awarded her a portion of the disability benefits, she would be denied any portion of his OP&F benefit.

The trial court rejected Wife’s arguments.  Instead, the trial court found that as of the time Wife filed her motions, Husband was not eligible for a time and service retirement—he could not retire under OP&F until September 2020 at the earliest.  As such, currently, the disability payments were considered income replacement, which is not marital property.  As the trial court explained, if Husband was not disabled but still working, then Wife would have no claim to his wages.  However, the court noted that once Husband reaches retirement age, and assuming he chooses to continue his disability benefit instead of converting to a retirement benefit, then Wife may have a claim for a portion of Husband’s disability benefit at that time.  Although the disability benefit is still separate property in nature, when it is taken in lieu of a retirement benefit, courts have held that they represent retirement benefits and can be divided.  See Cockerham v. Cockerham, 2017-Ohio-5563, 83 N.E.3d 999 (5th Dist.).

Wife appealed the trial court’s decision.  The Eighth District Court of Appeals affirmed the trial court’s decision and, again, informed Wife that she may have a claim to a portion of the disability payments after Husband is eligible for retirement.

Discussion:  This case represents two main points.  First, although the DOPO may seem simple on its face, unwary drafters can find out, often too late, that the way the plans interpret the DOPO is actually complex.

Second, this case demonstrates that disability payments can be considered marital property.  We agree with the trial court and Eighth District’s assessments that, in general, disability payments are income replacement until the disabled individual reaches retirement age.  At that point, at least a portion of the benefit, is taken in lieu of retirement benefits, which are marital in nature and can be divided.

How We Can Help:  We have experienced experts available to discuss the division of disability benefits.  Having devoted a full chapter of Dividing Pension in Divorce, 5th Edition to the topic and having testified in many of the most important cases on disability, we can help you craft a winning argument for your client.

How the Certainty of Death Causes Uncertainty in Dividing Retirement Benefits

How the Certainty of Death Causes Uncertainty in Dividing Retirement Benefits

As the oft-quoted line attributed to Benjamin Franklin goes, “In this word nothing can be certain, except death and taxes.”  In dividing retirement benefits at divorce, practically all interested parties are aware of and discuss tax issues.  However, are you properly addressing the issues that can arise if one of the parties dies unexpectedly?  After all, death is inevitable and it can have a significant impact on the benefits, if any, your client receives.

The issue of survivorship is especially important in regard to dividing a defined benefit plan in divorce.  A pension is meant to a benefit for life.  As such, the benefit ends upon death.  If the separation agreement/divorce decree and/or the order dividing the pension does not properly address the issue of survivorship, then your client could receive nothing.

There are two big questions of survivorship that need to be addressed when dividing a defined benefit pension at divorce: What happens if the participant dies prior to commencing the benefit and what occurs if the participant dies after commencing the benefit?  For the first question, that matter is generally addressed by naming the alternate payee as a beneficiary for a Qualified Preretirement Survivor Annuity (QPSA).  The second question is generally addressed by dividing the benefit using a separate interest approach (if the plan allows for such an approach), which adjusts the alternate payee’s benefits to his/her life so the participant’s death has no effect on the payments.  In the alternative, if the benefits are divided on a shared payment basis, then the alternate payee needs to be named as a beneficiary of the Joint and Survivor Annuity (J&S) to continue benefits after the participant’s death.  Each of those solutions then brings on different questions such as can the participant name a subsequent spouse as another beneficiary for QPSA and/or J&S?  If so, how much of a benefit can the subsequent spouse receive? 

Aside from defined benefit plans, there can be issues with 401(k) plans and Individual Retirement Accounts if a party dies unexpectedly.  If the money has not been segregated from the account and the participant dies, you may have to sue the estate to attempt to get the money your client is owed.  Further, if the participant forgets to change his/her beneficiary on the account after divorce, then the former spouse may be getting a windfall that is difficult to claw back.

It is important to consider and properly address issues of survivorship when dividing retirement benefits in divorce.  This is a complicated subject, one entire chapter of the Dividing Pensions in Divorce, the treatise authored, in part, by our own Dave Kelley, is dedicated to the issue of survivorship.  Further Dave Kelley and James Myers from our office wrote an article on how Ohio courts are treating the issue of survivorship titled “Survivorship: Inherent Right or Ancillary Asset in a Pension?” that will be published (or has been published depending on when you read this post) in the September/October issue of the Domestic Relations Journal of Ohio. Although survivorship issues can be complicated, we can help.  Reach out to us and we can point you in the right direction or set you up with a service to aid you.  We’re here to help you through the entire divorce process to help protect your clients’ interests in retirement benefits.