When Virginia’s pension division statute was first sold to and passed by the Legislature, the assumption on everyone’s part, and the way you explained it to people, was that the non-employee spouse gets her cut of each monthly pension check if, as, and when received – so she doesn’t get paid until he gets paid. And if he retires early and gets a lump sum she gets a lump sum, and if he takes it out monthly over the rest of his remaining years that’s how he gets his and she gets hers, and what could be fairer than that? But now it appears, from a Court of Appeals opinion known as Lewis v. Lewis, 53 Va. App. 528, 673 S.E.2d 888, (3/24/09), there is a whole moral and sexual-political dimension to this, of which we hitherto have been totally unaware. But the Court of Appeals, if you give them time, will explain it all to you in their fifteen-page opinion.
Most Virginia lawyers, if you asked them what happened in the Lewis case, would probably answer “Oh some kind of huge QDRO mess.” But FLN, having had to do so, sought to explore it fully and will do its best at an explanation which it at least hopes is accurate.
A Chesterfield husband apparently executed a separation agreement dividing his pension from Philip Morris, as well as his profit-sharing plan. The separation agreement more or less contemplated a retirement date much later than the one that husband in fact took. As the Court of Appeals saw it, the separation agreement didn’t deal – or at least didn’t deal satisfactorily – with the apparently unforeseen eventuality of his “retiring early.” The Court of Appeals uses lots of morally judgmental terms, such as “unilateral” which by now has a whole pejorative subtext, to describe what he did to the hapless wife by taking this early retirement date. So just what exactly did he do to her by pulling the rug out from under the agreement’s comfortable assumptions? He deprived her of the sacred and inalienable right to choose between getting her pension in measured increments over the course of her remaining life. To say that the unilateralness deprived her of a choice is a bit confusing, since the Plan seemed not to let her choose lump sum if the husband didn’t choose lump sum, but as with alimony, losing the periodicity was an enormously churlish deprivation of a major substantive benefit. Could the trial court give effect to the intent of the separation agreement and afford wife a remedy for this delict? Indeed it could, and it did, and properly so, according to the Court of Appeals. This husband worked for Philip Morris throughout the 20-year marriage, and was still working there when the parties separated in 2003. They signed a separation agreement in 2004 that gave her alimony, but only until the time of his retirement. Upon retirement, the agreement did not exactly give wife an if/as/when award as such, but stated that “the marital share of Husband’s pension shall be divided 50/50 by a QDRO, by applying a coverture fraction to the accrued benefit as of the date of separation, and Wife shall receive a separate share paid to her for her lifetime based on her actuarial life expectancy.” Apparently the ambiguous relationship between actual life and actuarial life was not clarified very much by this agreement, but the word coverture did throw some law clerk for a loop, as a lengthy footnote hastens to explain to us all that this oft-used legal term “is an archaic term referring to the condition of being a married woman” according to Black’s, and goes on to explain at great length, with citations to Turner, etc., that some archaic persons use a “coverture fraction” to do that mysterious thing that we do all the time with marital pensions.
Now the old-fashioned lawyers who drafted this archaic agreement also divided a profit-sharing plan, requiring the trial court to enter a QDRO directing Philip Morris to pay an appropriate part of the profit-sharing account to wife, and another one directing the same from his monthly pension payments. The Court entered the divorce decree, leaving the QDROs still being fine-tuned and argued over, but this decree specifically stated that it was not final but was reserving QDRO authority. But before any QDROs got entered, the husband “unilaterally retired” and stopped paying the alimony, and then filled out his retirement forms by checking a box indicating that he wanted his pension “as a single life annuity, and without any survivor benefit.” He thus got the full pension amount each month until his employer froze the pension benefits because of the pending case. Wife got her pension split for the term of his life, not hers, and (something on which “the parties agree”) that was because the rule at Philip Morris seems to be that after retirement begins, “the current payouts under the pension plan cannot be altered to provide wife with benefits for her lifetime,” and thus for this couple all payments stop upon husband’s death.
As for the profit-sharing account, husband withdrew the entire balance of $1,114,905 without consulting wife, and bought himself two annuities – which he certainly did not share with her. And although he withdrew $44,565 from one and $8,242 from the other over the next six months, the combined balance of the two accounts still grew by over $24,000 over that period. Apparently it was stipulated that at the time of separation, wife’s part of the profit-sharing account would have been $187,517. The wife then filed a motion asking the court to enter a QDRO to give her $1,658 per month from the date of retirement, and that husband be ordered to procure life insurance to make up for her ill-treatment. The court agreed and awarded the wife $1,246 per month from the pension, required that he obtain $200,000 in life insurance and awarded wife her share of the profit-sharing account, with interest from the time of separation, plus attorneys’ fees.
Husband argued, first, that the court’s award gave wife pension benefits based on and earned by his employment after the 2003 separation date. The evidence, the Court says, supports the trial court’s finding that the pension benefit was worth $3,719.92 per month on the June 1, 2003 separation date, and that the appropriate value was used in applying the coverture fraction to determine the statutory “marital share.” The evidence did not, however, support husband’s argument that wife was getting, by virtue of the $3,719.92 per month valuation a split of the benefits that he earned after separation. A very lengthy footnote explains that divorcing parties usually divide the marital portion of a pension by an if/as/when award without needing to know the actual amount of the future monthly benefits. Thus the court did not err either in the valuing nor the dividing of the pension plan. As to the profit-sharing account, the agreement gave the wife “half of the marital share” of that account, and husband conceded that wife was due $187,517 of the balance on the separation date. But he contended that she could not get any interest that accrued after that date, and that the trial court erroneously awarded her the growth on that account after separation. Concluding that neither Fahey v. Fahey, 24 Va. App. 254, 481 S.E.2d 496 (1997), nor Baker v. Baker, 38 Va. App. 384, 564 S.E.2d 164 (2002), applies to a separation agreement provision like this one, the Court upheld the trial judge. Here, no court order nor agreement provision stated that the wife was entitled to half the marital share “as of” any particular date. The agreement nowhere specifically states that wife was intended to have only half the actual amount in the account as of the separation date, but just says that she gets half of the marital share. The marital share, the Court says, is something which accrued passive interest after the separation and after the agreement’s execution. The interest is clearly not part of his separate portion of the account, nor of his part of the marital share. The interest on wife’s portion of the marital share belongs to her. And moreover, in this case “husband took from wife the ability to control her portion of the profit-sharing account, without her permission. He exerted control over her portion after the PSA had specifically divided that account so that husband was no longer entitled to control that money.” In awarding the wife the growth on her part of the account after the husband took the money and put it into the annuities, “the trial court simply gave effect to this intention of the PSA, which husband had frustrated.” In fact, the cCourt says, with even more indignation, “husband acted unilaterally, taking upon himself the responsibility for wife’s money,” and he should not be entitled to profit from that.