A QDRO Only Implements a Settlement Agreement; It Cannot Change the Agreement

A QDRO Only Implements a Settlement Agreement; It Cannot Change the Agreement

Reynolds v. Turull, 12th Dist. Butler No. CA2018-10-197, 2019-Ohio-2863 (Decided July 15, 2019).

Issue: Is a QDRO valid that contains a different coverture fraction from the Separation Agreement, even if one of the parties claimed the change was bargained?

Decision: The Twelfth District Court of Appeals affirmed the trial court’s determination that such a QDRO is invalid.  In this case, the parties agreed that the Wife “shall be granted a [QDRO] granting to her fifty percent (50%) of the portions of the Husband’s Pension and 401(k) plans” that were accrued during the marriage.  That Separation Agreement was then incorporated into the final Divorce Decree. 

Wife had a QDRO drafted that calculated the marital portion of the Husband’s pension by using a coverture fraction “the numerator of which [was] the number of years of the marriage, and the denominator of which [was] the number of years of continuous service” since the date of divorce.  The trial court pointed out the formula proposed by the QDRO differed from the division agreed to in the Separation Agreement.  As Hoyt v. Hoyt, 53 Ohio St.3d 177 (1990) and its progeny have established, in Ohio, the marital portion of the pension is generally determined by using the traditional coverture fraction (years of service during the marriage divided by the participant’s total years of service).  As numerous courts have determined, when parties agree to divide the marital portion of a pension, they are agreeing to use the traditional coverture fraction unless otherwise agreed (except for certain pensions such as Taft-Hartley plans).  As the parties in this case agreed to divide the marital portion of Husband’s pension, they agreed to implement the coverture fraction set forth in Hoyt.  By changing the denominator in the fraction to exclude the years of service the parties were married, the trial court found Wife “significantly changed the ratio” in a manner that would benefit her.

In her defense, Wife claimed the parties agreed to employ the new ratio through negotiations.  However, the trial court rejected this argument because the alleged agreement was not reflected in the Separation Agreement, which was incorporated into the final Decree.  As indicated, the Twelfth District affirmed.

Observations: (1) Any agreement regarding the division of a retirement benefit must be included in the Separation Agreement and/or the Divorce Decree.  A QDRO cannot modify the Separation Agreement/Decree. (2) Dividing pension benefits can be perilous to those who are unfamiliar.  How and when a pension is divided makes a drastic difference to the parties.

How we can help: We have noticed an increasing issue with how and when pensions are divided.  As discussed above, pursuant to Hoyt, the default is to divide pensions using the traditional coverture fraction.  However, we have seen multiple cases where the pension was divided on a frozen basis, depriving the alternate payee over 50% of the value of his/her benefit.  We believe the issues with dividing pensions is simple – they are becoming more and more rare so people are unaware of the pitfalls pensions present.  Because of this, we are working on a new package to help attorneys properly divide pension benefits.  This defined benefit package will help attorneys throughout the entire process from recognizing the most beneficial way to divide the pension, to offering testimony at a reduced rate, and a reduction on the price of drafting a QDRO.  We intend to announce this new product in the next few months.  Please stay tuned and be sure to subscribe to stay up-to-date.

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