Retirement accounts which were accrued during a marriage are considered marital property. Generally, a retirement fund will be equitably distributed as part of a divorce.
However, what if, after the divorce, a layoff leads to additional retirement benefits for one of the spouses? Would this lead to an increase in the payment to the supported ex-spouse? The Third Circuit United States Court of Appeals discussed this issue in the case of Gruber v. PPL Retirement Plan.
An early retirement forced by a layoff
The ex-husband had worked for a corporation for more than 30 years, and had participated in the company’s retirement plan. When the husband and wife divorced, as part of the settlement, the parties agreed to a “Qualified Domestic Relations Order” or QDRO.
A QDRO can designate that a former spouse receive a portion or all of the benefits of a retirement plan. The couple’s QDRO at the time of the divorce specified that the wife would receive 53 percent of the present value of the husband’s accrued benefit. When the husband reached the age of 55, making him eligible for early retirement, the ex-wife elected to begin receiving her share of the benefit at that time. The wife received the monthly benefit for approximately three years.
However, the ex-husband was then forced into early retirement as part of a company-wide layoff. The husband now qualified for additional money and benefits as part of the layoff. The ex-wife requested that her monthly payments be recalculated on that basis, but the company refused on the theory that the additional benefits were due to the layoffs and not due to early retirement The District Court agreed with this assessment and the ex-wife appealed.
Should the ex-wife receive additional payment?
In reviewing the case, the Third Circuit noted that the enhanced benefits the ex-husband received only benefited employees eligible for early retirement, and thus it was a subsidy provided by the employer related to retirement. The fact the subsidy was provided as a result of the reduction-in-force did not alter that the ex-husband’s pension payment was greater than his actuarially calculated amount. In that respect, it was definitely intended for early retirement purposes.
The QDRO was intended to assure that the ex-wife received an equitable distribution of her ex-husband’s retirement benefit. Because the benefit was an “employer subsidy for early retirement,” it was within the scope of the language of the QDRO and the ex-wife was entitled to her share of the benefit.
Seeking solutions
It is important to consider all aspects of retirement accounts and pension funds when you are contemplating a divorce. Seek the advice of an experienced family law attorney who can work to find solutions that meets your needs for this and other divorce-related issues.
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