Johnson v. McCarthy, 10th Dist. No. 17AP-655, 2019-Ohio-3489 (August 29, 2019).
Issue: What is the date of valuation used for dividing a defined benefit pension plan when no specific date is listed?
Decision: The Tenth District Court of Appeals determined that the judgment entry language at issue in this case “clearly” required the defined benefit plan to be divided using the “frozen” method—meaning the benefit is valued at the time of divorce and not at the time of retirement. In this case, the parties were divorced in 2005. Two retirement plans were divided in the divorce—one of which was an IBM pension. In regard to the IBM pension, the judgment entry stated, in part:
[Wife] is awarded an equal division of the [IBM] personal pension plan . . . [Husband] shall promptly and fully cooperate with the transfer of the one half interests awarded to [Wife] in each of the above retirement plans to [Wife’s] name via a Qualified Domestic Relations Order, rollover or other appropriate instrument.
In 2015, the Husband retired. In 2017, nearly 12 years after the parties’ divorce, Wife moved the court for clarification of the 2005 judgment entry regarding the IBM pension. Wife contended that the pension was meant to be divided using the traditional coverture approach, which values the marital portion of a pension at retirement. Husband argued that the judgment entry valued the marital portion of the pension at the date of divorce (i.e., the frozen method).
The trial court determined that the language of the judgment entry was “unambiguous” meaning no cannons of contract construction needed to be employed to interpret the judgment entry. The trial court determined that the judgment entry meant for the IBM pension to be valued on the date of divorce. The trial court acknowledged that no date of valuation was listed but determined that where the judgment entry fails to designate a date of valuation then the date of the marriage’s termination controls. On appeal, the Tenth District affirmed the trial court’s decision.
We will be following this case and provide any updates if it is appealed.
Discussion: This case represents an unsettling trend that we have noticed in recent years. Ohio courts of appeals are ignoring and contradicting the Ohio Supreme Court’s decision in Hoyt v. Hoyt, 53 Ohio St.3d 177 (1990), and its progeny, which held defined benefit plans are, generally, to be divided using the traditional coverture method as said method is, generally, the most equitable manner of division. See Cox v. Cox, 12th Dist. Warren Case Nos. CA98-04-045, CA98-05-054, 1999 Ohio App. Lexis 227; see also Blair v. Blair, 3rd Dist. Paulding No. 11-15-04, 2016-Ohio-256. The difference of valuing a pension using traditional coverture method instead of a frozen benefit method can be drastic. See Napi v. Napi, 11th Dist. Ashtabula No. 2013-A-0041, 2014-Ohio-2696 (if the court applied a frozen method of dividing the pension, the non-participant spouse would have received a monthly benefit of $77.82; if the court applied the traditional coverture method, which the court did, the non-participant spouse’s monthly benefit would be $302.77 per month). We find this topic of courts moving further away from Hoyt to be particularly interesting. We made a presentation to the Ohio Judicial College and wrote an article for the July/August 2019 Issue of the Domestic Relations Journal of Ohio, titled “Essential but Frequently Missing Pension Evidence in Divorce” on this subject.
Domestic relations attorneys should carefully review the language in their separation agreements and judgment entries regarding the division of retirement assets. A few omitted words or the wrong language can make a world of difference to your clients. Worse, the mistake may not become apparent until years later—or like this case over a decade later.
How we can help: We are always available to help attorneys with dividing retirement benefits in divorce, including before the separation agreement/judgment entry is final. Also, we offer free recommended agreement language at qdrogroup.com and are willing to discuss your case and point you in the right direction.