Category: QDROs

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.

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.

Divorce Decrees are Final; Make Sure all Retirement Benefits are Addressed

Divorce Decrees are Final; Make Sure all Retirement Benefits are Addressed

Schaad v. Schaad, 5th Dist. Morgan No. CV05-098, 2019-Ohio-2553 (Decided June 19, 2019).

Issue: Can a court redistribute property/order spousal support at the time of retirement, in a manner that differs from the divorce decree, to make the division “equitable?”

Decision: The Fifth District Court of Appeals determined the trial court did not have the ability to order a division of retirement benefits/spousal support, which were inconsistent with the divorce decree.  The Wife in this case had a pension from the State Teachers Retirement System of Ohio (“STRS”).  The parties divorced in 2007.  At the time of divorce, the decree stated that Husband would receive half of Wife’s STRS pension offset by his social security benefit (this is common in State of Ohio plans such as STRS because the Participant’s social security benefit is reduced by virtue of participating in the plan).  With the social security offset, Husband’s portion of Wife’s STRS was calculated to be 43.27%.

In 2010, Wife retired so both her and Husband began receiving their respective portions of the STRS benefit.  After her retirement, Wife became aware that Husband was receiving veterans benefits, which, when combined with his portion of Wife’s STRS benefit, resulted in Husband receiving a higher monthly income than Wife.  In 2018, Wife filed a motion claiming her STRS benefit was divided improperly, in part, because Husband’s veteran benefits were not addressed in the divorce decree.  Husband argued his veterans benefits were separate property and that is why they were not addressed in the decree.  The trial court granted Wife’s motion and vacated the division of property order dividing Wife’s pension – thereby rescinding Husband’s right to the STRS benefit.  The trial court further ordered Husband to pay Wife spousal support, which was never mentioned in the divorce decree, to “equalize” the parties’ monthly incomes.

On appeal, the Fifth District Court of Appeals found the trial court exceeded its authority in altering the divorce decree by revoking Husband’s right to the STRS benefit and requiring Husband to pay spousal support.  The Fifth District held the trial court was without authority to modify the decree after it had been ordered.  Courts are permitted to clarify divorce decrees; however, they cannot not alter them after they are final.

Observation: Divorce decrees, like executed settlement agreements, are final and binding.  It is vitally important that the language in decrees/settlement agreements are correct and cover all retirement assets.  The post-divorce litigation in this matter could have been avoided by simply addressing the Husband’s veterans benefits in the divorce decree.  If the benefits were addressed, even if simply to state they were separate property, there would have been no grounds for Wife to bring her motion.  Although Husband was eventually successful in this action, he incurred additional costs.

How we can help: We can help you with all stages of litigation to ensure that your client receives his/her correct share of the marital retirement benefit.  We provide assistance in discovery of assets, we provide advice on the most advantageous division of the benefits for your client, we help draft/review division language, we help in negotiating settlements, and we can be your expert witness at trial.