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)?
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:
- That it was wrong to divide a retirement account
in payout status;
- That the appellant’s ill health was not factored
into the valuation of the pensions;
- That the survivorship tail of the pension was
not factored in; and
- 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
• 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
• 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.
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.