Month: July 2019

Interplay of Local Rules and Separation Language Decision

Interplay of Local Rules and Separation Language Decision

Tekamp v. Tekamp, 12th Dist. Warren No. CA2018-08-092, 2019-Ohio-2382 (Decided June 17, 2019).

Issue: How should a court address gains and/or losses on the alternate payee’s portion of a defined contribution (DC) plan when the agreed-upon divorce decree is silent on the matter and an applicable local rule states gains and/or losses are assumed?

Decision: The Twelfth District Court of Appeals affirmed the Warren County Court of Common Pleas Domestic Relations Division’s (trial court) decision that the Wife’s portion of the Husband’s 401(k) benefit was to be adjusted for gains and/or losses between the date of divorce and the distribution—even though the decree was silent on the matter. The divorce decree in this case, which reflected the parties’ agreed-upon division of the Husband’s 401(k) account, simply stated, in relevant part, that said account was to be “divided 50/50 by QDRO.” The Husband contested a proposed Qualified Domestic Relations Order (QDRO) that awarded the Wife gains and/or losses from the period between divorce and distribution of the funds because the decree was silent on that issue. The trial court disagreed with the Husband’s argument because the trial court’s local rules explicitly state:

Unless otherwise agreed, a QDRO for a defined contribution plan shall contain the following provisions or be governed by these assumptions:

                                *                                             *                                             *

b. the alternate payee’s share of the benefits shall be credited with investment earnings and/or losses from the date of division until contribution[.]

(emphasis added).

The trial court determined, and the Court of Appeals affirmed, that, the above local rule establishes an assumption in the Warren County Court of Common Pleas Domestic Relations Division that, without explicit language to the contrary, gains and/or losses are included for the division of all DC plans.

Observation: For those of you that regularly read our blog, you will notice a theme that we have noticed over the years, the division language for retirement benefits matters. This is just another example. If, as the Husband claimed, the parties truly intended to exclude gains and/or losses from the Wife’s share of the 401(k) benefits, they should have explicitly included this intent in the agreed-upon divorce decree language.

Be aware of the local rules of the court you are in and be careful about the division language in the divorce decree or separation agreement. Otherwise, your client may not be receiving what he/she expected.

How we can help: We offer free separation agreement language on our website, our legal services section can help draft custom separation language for your case; we offer solutions for negotiations, and we of course can draft the QDRO for you.

Discover Retirement Assets Early and Completely

Discover Retirement Assets Early and Completely

Over the years we have witnessed too many retirement assets that could not be divided as intended, or at all, because the asset was either not timely discovered or fully understood.  Pensions are often the single largest asset a couple has, so you should take full advantage of the discovery process to ensure your client receives what you and your client intended.

Early Discovery:  Absent special circumstances, a court will typically not amend or revise a final divorce decree or settlement agreement.  Even if such circumstances exist, most courts won’t disturb a final decree if the issue is not raised within one year. However, many attorneys wait until after the final decree to conduct thorough discovery of retirement assets.  You have more leverage before the final decree to force the opposing party (or a plan sponsor) to comply with discovery requests.

Also, don’t rely on or wait for your QDRO preparer to conduct discovery, especially since far too many parties delay having the QDRO prepared till well after the divorce is finalized.  For example, the Wife in Semmelhaack v. Semmelhaack, 2013-Ohio-3568, did not request a QDRO till two years after the final decree.  The QDRO preparer discovered that Husband had a second pension plan (with the same employer as the first plan) that was not addressed in the separation agreement, and that had a much larger marital benefit than the first plan.  The Court mentioned it was suspicious of Husband’s failure to disclose the second plan, but still refused to modify the “unambiguous” separation agreement that did not include the second plan.  Interestingly, Husband mentioned in his brief that if Wife had timely requested a QDRO she might have been able to file a Rule 60(B) motion.  To avoid making this same mistake, we recommend sending discovery requests to all the opposing party’s present and past employers early in the proceedings, and to begin the QDRO process promptly.

Complete Discovery:  Not all retirement assets are the same.  Many retirement assets have unique and complicated provisions regarding benefit accrual, vesting, distribution, division, etc.  You need more than a plan name and account balance to fully understand the amount and nature of a retirement asset.

For instance, we are aware of a major manufacturer’s union pension plan that won’t pay any portion of a special benefit to a former spouse unless the QDRO specifically directs the plan administrator to do so.  Furthermore, the model QDRO for this plan makes no mention of the special benefit.  An attorney (who had used the plan’s model QDRO) recently asked us to help him understand why his client was receiving so much less per month than the participant.  Not completely discovering how the plan works cost his client hundreds of dollars per month.

How We Can Help:  We have tools and services to help you discover and understand all the couple’s retirement assets before the property division is finalized.

DROP Decision

DROP Decision

Archer v. Dunton, 9th Dist. Summit C.A. No. 29091, 2019-Ohio-1971 (Decided May 22, 2019). 

Issue: What is a trial court to do when a 1993 divorce decree states that “the Wife is entitled to one-half of the Husband’s pension through the Police and Fire Pension Fund for the State of Ohio as of the date of the divorce”  and the plan participant enters the Deferred Retirement Option Plan (DROP) in 2003? Keep in mind that the DROP program did not exist at the time of the divorce and was not mentioned in the separation agreement.

Decision: The Ninth District court of appeals reversed the trial court which had held that the funds in the DROP account were not marital property. Instead, the court of appeals awarded the non-participant a share of the DROP account. However, the non-participant’s share of the DROP account was limited to half of the benefit accrued as of the date of the divorce in 1993 (frozen coverture) and not a traditional coverture share (“proportionate share”) of the pension at retirement as explained in Hoyt v. Hoyt, 53 Ohio St.3d 268 (1990) and Daniel v. Daniel, 139 Ohio St.3d 275, 2014-Ohio-1161.

Observation: The court of appeals detailed how under a DROP account “is funded, in part, by marital property in the form of Ohio Police and Fire Pension Fund Benefits [Mr. Dunton] earned during the course of the marriage.” It noted that because “Marital assets retain their character…” the DROP account is “continually funded by both marital property, in the form of benefits earned during the course of the marriage, and nonmarital property, in the form of benefits earned before and after the marriage as well as current contributions.”

How we can help: We offer model separation agreement language on our website for free. We are also available to help you draft custom settlement agreement language to ensure that your client receives the benefit that he/she agreed to and prevent claims of ambiguity in the separation language.

Perils in Delaying Filing a QDRO and the Complex World of Taft-Hartley (Multiemployer) Plans

Perils in Delaying Filing a QDRO and the Complex World of Taft-Hartley (Multiemployer) Plans

Davis v. Boilermaker-Blacksmith National Pension Trust, ND Ohio No. 3:16-cv-2746 (March 4, 2019).

Issue: Was the Plan’s determination that the former spouse of the participant should receive zero benefits from the Plan proper simply because the deceased participant failed to redesignate his former spouse as the beneficiary of his survivorship benefits after divorce?

Decision: The United States District Court for Northern Ohio, Western Division, determined the Plan’s decision to deny the former spouse survivorship benefits was rational and in accordance with the Plan documents. As such, the Wife received zero benefits from her former spouse’s pension. This case had some unique facts. The Husband and Wife were divorced on August 25, 2014. At the time of divorce, Wife was designated as the beneficiary of Husband’s survivorship benefits from his pension held by the Boilermakers-Blacksmith National Pension Trust (a retirement plan administrated by a board comprised of half union representatives and half representatives of the employers who participate in the Plan; this type of plan is commonly referred to as a “Taft-Hartely plan,” “Multiemployer plan,” or a “Union plan”). After the divorce, Wife and Husband reconciled and planned to remarry in December 2015. However, Husband died on November 28, 2015—15 months after the divorce and one month prior to the planned remarriage. At the time of Husband’s death, Wife was still designated as his beneficiary for the survivorship benefits of his pension but this designation was made prior to the divorce.

When Wife attempted to claim the survivorship benefits, the Plan denied her the benefits and cited to the following Plan provision:

[I]n the event a Participant’s marriage is dissolved, any designation of such Participant’s spouse as beneficiary shall be deemed null and void as of the date of dissolution unless the Participant redesignates such spouse as his beneficiary subsequent to dissolution. (emphasis added).

Courts give retirement plans broad discretion to interpret the provisions of their plan. The plan’s interpretation of its own provisions will be upheld as long as the interpretation is rational; even in the face of another equally rational interpretation. Because the Husband failed to redesignate his former spouse as the beneficiary, and presumably there was no QDRO filed with the Plan, the only argument Wife could make is that the Plan states a designation for survivor benefits of a former spouse are only null and void when after a “dissolution”—not a “divorce.” However, the court rejected the Wife’s argument. The court found the Plan’s interpretation of its provisions that a “dissolution” is the same as a “divorce” for the purposes of rendering a survivor beneficiary designation null and void was rational. As such, the Husband’s retirement benefits reverted to the Plan—they were not paid to the Wife.

Observation: This case demonstrates two key points. First, Taft-Hartley Plans are generally more complex than other retirement plans. Most have very specific requirements when it comes to dividing a retirement benefit. It is extremely difficult to get a court to reverse the plan’s determination after it has been made. As such, the unwary can lose everything.

Second, it is imperative to complete and submit a QDRO or other order dividing retirement benefits as soon as possible after divorce. Unexpected things happen, people die, plan record keepers change, plans change their procedures, etc. Those who wait may end up like the wife in this case—receiving absolutely no benefits.

How we can help: We are keenly aware of Taft-Hartley plans and their complexity. We have drafted tens of thousands of QDROs dividing retirement benefits held by Taft-Hartley plans. Further, we can help you to timely take the correct action to protect your client’s interests. Once we are provided with all necessary information, we complete an order dividing retirement benefits in five to seven business days. We also provide advice to our attorney clients, including making sure to have the participant redesignate former spouse as his/her beneficiary for survivorship benefits immediately after divorce.

Tool for Attorneys: Present Value Calculator

Tool for Attorneys: Present Value Calculator

We offer an online present value calculator as a tool for attorneys needing a ball park value of a pension asset. When your client provides an accrued benefit statement, this tool can help you know how large of an asset you are dealing with – and how much of your attention it should demand. It can also help you in negotiations at the courthouse on the day of trial.

Our calculator uses the PBGC Method of calculating actuarial present values which replicates the cost of purchasing an annuity. This market-based approach is the most appropriate method when valuing pensions in divorce because it is similar to how other marital assets are valued. The home value is determined based on what it might sell for in the market. The value of a vehicle is determined based on Kelley Blue Book or some other market standard. The pension value should also be market-based.

If you determine that you need a written report or expert testimony, we can help in a more traditional way. We’ve been preparing present values and testifying as pension experts since 1985.

Pension & Expert Smorgasbord

Pension & Expert Smorgasbord

Hine v. Hine, 6th Dist. Wood No. WD-18-023, 2019-Ohio-734 (Decided March 1, 2019).

Issue: How should the court value and divide eight different retirement plans, including a state pension where a potential Social Security offset is involved? And what evidence must an attorney present to the trial court to comply with the guidelines established by the Ohio Supreme Court in Hoyt v. Hoyt (53 Ohio St.3d 177, 1990)?

Introduction:  Hine provides the most thorough airing of retirement valuation and division issues since the Third District ruled in Forman v. Forman (2014-Ohio-3545) five years ago.With some $2.7 million of retirement assets in play in eight plans, the trial produced over 300 pages of transcripts from the dueling pension experts – who, interestingly, were the same experts in the Forman case: David Kelley of QDRO Group and William Napoli, Jr. of American Benefit Evaluators – as well as the experts from two other cases mentioned in the decision.

Decision: After considering the testimony of the dueling experts and the parties’ arguments, Wood County Magistrate Michael E. Hyme drafted a thoughtful 90-page decision (Case No. 2017-DR-0018 Wood County Dec. 12, 2017) . Magistrate Hyme’s opinion was adopted by Judge Alan R. Mayberry. The trial court decision was then appealed by the defendant citing four assignments of error: 

  1. That it was wrong to divide a retirement account in payout status;
  2. That the appellant’s ill health was not factored into the valuation of the pensions;
  3. That the survivorship tail of the pension was not factored in; and
  4. That the wrong standard of care was used.

None of the assignments of error were well taken and the Sixth District affirmed the trial court’s decision. However, the most instructive elements of the case were not those four assignments of error. Instead, the detailed trial court decision on eight major issues (detailed below), the transcripts, the lengthy “Plaintiff’s Findings of Fact and Conclusions of Law,” and the Briefs by the attorneys contained the most meticulous research and argumentation that we have seen in 34 years in the field, including our review of national cases for our legal treatises.

The eight major retirement plan issues raised at the trial court level are listed below. The trial court’s conclusions of law on each issue, which were affirmed by the Sixth District, are listed in italics.

• Is the PBGC market-based present value methodology or the corporate bond method (typically known as the IRS 417(e) method) more appropriate in domestic relations? The trial court chose the PBGC market-based valuation system deciding that “the court cannot confidently consider a compromise” based on a careful review of the testimony, the briefs and at least seven other valuation cases.

• Should survivorship benefits be valued and incorporated into either offsetting assets or the QDRO? The trial court decided it should not. Because a 50% Joint and Survivor annuity is a right that the non-participant spouse would have to waive at retirement, there is no survivorship issue unless the survivorship exceeds the mandated amount.

• How should Hoyt v. Hoyt, 53 Ohio St. 3d 177 (1990) be applied when drafting QDROs? In excluding the present values of survivorship benefits, the trial court decided to continue using the proportionate share (coverture method) as the Ohio Supreme Court spelled out in Hoyt v. Hoyt in which the credited service earned during the marriage is the numerator in the fraction while the credited service at retirement is the denominator. That fraction is then multiplied by a percentage to determine the former spouse’s portion of benefits (the percentage is typically 50% unless there is a government plan from which a Social Security offset is taken or the parties agreed to another percentage).

• What have other DR courts said about pension present values and incorporating survivorship values in drafting orders? The trial court focused its survivorship attention on the Cleveland case of Giuliano v. Giuliano (Cuyahoga C.P. No. DR12 343002 – Magistrate’s Decision Dec. 31, 2013) where the court found that factoring in the survivorship tail was a direct conflict with Hoyt v. Hoyt (53 Ohio St.3d 177, 1990). On the present value issue, the Hine trial court reviewed Forman; Beirele v. Joliot (Franklin C.P. No. 11 DR 1440 – Oct. 10, 2013); Conant v. Conant (9th Dist. Summit, 1994 WL 122193); and Reitano v. Reitano (5th Dist. Fairfield No. 50-CA-1993, 1994 WL 369412), where either the PBGC or the annuity replacement cost was adopted as the preferred method for valuing a pension.

• How have Title VII issues recently entered domestic relations cases especially in light of Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris (463 U.S. 1073 1983)? The Hine trial court found that Giuliano v. Giuliano case was the most factually similar case to the Hine matter and that case (Giuliano) stood “for the proposition that a woman cannot be offered a lesser benefit than a man simply because she is a woman.” The Hine trial court, like the Giuliano court, did not directly rule on the Title VII issue but raised the specter that if the decision did not violate Hoyt, there could still be a Title VII issue to overcome if women were discriminated against as a class.

• What directions does the Actuarial Standards Board’s Actuarial Standard of Practice Number 34, “Actuarial Practice Concerning Retirement Plan Benefit in Domestic Relations Actions,” provide to experts in the field? The Hine trial court did not dwell on this except to note that the standards were broad allowing for the use of a replacement annuity, the use of U.S. Treasury bonds of comparable duration, or a published index reflecting yields for high-quality bonds. Of course, the Treasury bond interest rates would typically yield a present value even higher than the PBGC method which typically is significantly greater than the corporate bonds.

• How should Social Security be factored into the division of a state pension plan? Both experts agreed that the actual, not hypothetical, Social Security of the covered plan participant should be subtracted from the OPERS of the state plan participant to adjust the percentage that would be multiplied by a coverture fraction. However, again the court used the PBGC numbers for the offset.

• What evidence is required for the court to consider a party to have a diminished life expectancy? Here, the court decided – as the Giuliano court did – that because no medical evidence was presented it had no basis to know how to factor in a diminished life expectancy.

Observation: Presenting good evidence at the trial court is essential, especially evidence related to the guidelines established by the Ohio Supreme Court in 1990 in Hoyt v. Hoyt which said that “the trial court must have evidence before it detailing the intricacies and terms of the particular plan.” As winning attorney Carla B. Davis explained in the lead article, “Hine v. Hine: Dueling Experts and a Treasure Trove of Retirement Research,” of the May/June Domestic Relations Journal of Ohio, her goal was straightforward:

“My goal in the case was to present sufficient evidence to the magistrate so that he could understand the method that you [QDRO Group] used and the method that was used by the opposing expert. I also want to show that adopting his method [opposing expert from ABE] would change how we practice domestic relations. It would be contrary to Hoyt in terms of the proportionate share QDROs that we historically use.”

“I relied heavily on Hoyt because it is an equitable division of marital assets case which discussed doing proportionate share [traditional coverture fraction] QDROs so that folks end up with 50% of the marital assets. Our Court of Appeals has often relied in domestic relations cases upon Hoyt in reviewing the trial court decisions to make sure that it’s consistent with Hoyt and with the statute.”How we can help: As you will see from our blog posts, articles, and upcoming revisions to our treatises, we have noticed that there is a major issue brewing related to how the Hoyt guidelines are argued and implemented in domestic relations cases. As such, we are currently working on a package that will provide DR attorneys help with dividing a pension for the entire duration of the case, including the drafting of the QDRO. We will be announcing the particulars of our DB division package shortly.

Welcome to the QDRO Group Blog

Welcome to the QDRO Group Blog

Since 1985 we’ve been partnering with family law attorneys to wisely divide retirement assets and secure a family’s best possible future following divorce.  After decades in the field we’ve learned a few general principles that have come to shape the way we do business. 

  • There is no substitute for deep and precise expertise. 
  • People appreciate clear and candid communication. 
  • Reputation is built by consistency with creativity.
  • Life-long learners are more willing to share their knowledge.

These are some of the values that have motivated us to start this endeavor.  This blog will be mostly educational though at times we expect to also post items of interest related to our business.  For more details on who we are and what we do you can check out

Our intention is to provide a resource to family law attorneys tasked with valuing and dividing retirement assets in divorce.  Having worked with the legal community for so long, we know the most frequently asked questions about retirement.  Not only have we answered these questions on the phone from our office but from podiums of continuing legal education seminars and from the witness stand.  

In addition to addressing some of the most common issues in the field, we anticipate posting regular summaries of cases that relate to retirement assets and even cases of interest related to other types of marital property.

Some might wonder why the authors of several leading texts in the field would start a blog.  The answer is simple.  Writing books is hard, writing a blog is not.

We recognize that as we present our views not everyone will agree with our perspective.  While we encourage comments, and even disagreement, we ask that you keep your thoughts on topic and respectful in order to add value and depth to the discussion.  We will moderate comments and will remove any that are offensive, disrespectful or irrelevant.

Thanks for taking the time to visit us here!  We hope you will come back and consider subscribing to receive future posts by email.