Around 300 BC, Master Gongsun Long asked his pupils, in the famous White Horse Dialogue,

Can it be that a white horse is not a horse?

2,300 years later and half a world away, the Minnesota Court of Appeals finds itself answering a different version of the same paradox in Ertl v. Ertl, __ N.W. 2d __, No. A15-0163 (Minn. Ct. App. 2015):

Can it be that a pension retirement benefit is not a pension benefit?

Regrettably, none of our appellate judges bothered to cite Gongsun.  I assume because the Baima Lun is notoriously difficult to Bluebook.

Despite the omission,  Ertl stands as a helpful reminder that words matter, particularly when dividing pension assets in a divorce.

When is a Pension Benefit Not a Retirement Benefit?

Husband and Wife in Ertl divorced after a thirty year marriage.  As part of their property division, the parties agreed to award Wife a portion of Husband’s Teachers Retirement Association (TRA) pension benefits as follows:

[Husband’s] TRA retirement benefits shall be divided between the parties.  [Wife] is awarded a fifty percent (50%) interest in these benefits determined as of December 31, 2014, deferred…

To implement the division of Husband’s pension, the parties also entered a Qualified Domestic Relations Order (QDRO), providing:

The state of Minnesota [TRA] will pay benefits to [wife] as follows: [wife] is awarded a fifty percent (50%) interest in [husband’s] benefits determined as of December 31, 2014, deferred…

Anyone see the problem yet?

Apparently neither did anyone else, until Husband applied for and started receiving disability benefits under his TRA pension, and TRA began cutting Wife a check each month for nearly half of Husband’s disability benefits.

Unsurprisingly, Husband quickly returned to court, seeking an order that the division of his TRA retirement benefits in the divorce specifically did not include any of his TRA disability benefits.

The District Court denied Husband’s request, interpreting the Decree as dividing all of Husband’s TRA pension benefits (including disability benefits), rather than just the retirement portion of those benefits:

Construing [the Judgment and Decree] as a whole and interpreting TRA benefits according to its plain and ordinary meaning, the term TRA benefits includes both retirement and disability benefits.

Husband appealed, and Judge Reilly, writing for the panel, reversed, excluding Husband’s disability benefits from the division contained in the Judgment and Decree.

Though the Court of Appeals agreed with the lower court that pension benefits include both a retirement and disability component, the Court observed that here Husband and Wife’s divorce decree specifically divided only retirement benefits.  C.f VanderLeest v. VanderLeest, 352 N.W.2d 54 (Minn. Ct. App. 1984).  Remember:

[Husband’s] TRA retirement benefits shall be divided between the parties.  [Wife] is awarded a fifty percent (50%) interest in these benefits determined as of December 31, 2014, deferred…

Because a divorce decree is a binding contract whose terms are all presumed to have meaning, the Court declined to read the adjective “retirement” out of the Decree.

And that QDRO that created all these problems in the first place by dividing all benefits rather than just “retirement benefits”?

The Court of Appeals went on to drop a fairly lengthy footnote for the proposition that QDROs must conform with the underlying divorce decree, and can be amended where they don’t. See, inter alia, Trustees of Dir. Guild of Am.-Producer Pension Benefits Plan v. Tise, 234 F.3d 415 (9th Cir. 2000).

The end result: Wife must wait until Husband reaches age 65 to begin receiving her portion of Husband’s TRA benefits. ‘Til then, she’ll receive $500 in spousal maintenance from Husband, rather than $2,090.37 in pension benefits from TRA.

But hold on just one second.

Even accepting the Court’s holding that Husband’s disability benefits were not explicitly divided in the Decree, his (undivided) disability benefits are just as much marital property as his (divided) retirement benefits.[1]

Why, then, does Husband receive 100% of their value?[2]

Might these benefits reasonably be considered “omitted property,” divisible at Wife’s request?[3]

I don’t see a motion on the Court’s calendar, which may be one answer to that question.

Pension Problems Abound

To some, this case will surely seem among the most pointy-headed of legal issues from an already abstruse area of the law.

But pointy-headed though it may be, it’s certainly not unusual.

Just within the last year, two cases have made their way to the Minnesota Court of Appeals on very similar pension issues.

In the first, In re Marriage of Moore v. Jacobson, the Court faced a question nearly identical to Ertl.  Except, unlike Ertl, the Decree in Moore awarded Wife:

fifty percent of the marital portion of [Husband’s] [PERA] pension valued as of November 1, 2009.

Husband began receiving disability pension benefits following the divorce, and the parties engaged in a battle of dueling QDROs—each submitting their own proposed orders to the Court.

At its core, the debate centered on Husband’s argument that the decree awarded Wife only a portion of his PERA retirement benefits, not his PERA disability benefits. As in Ertl, Husband pointed to the explicit language of the decree which divided his pension benefits under the  heading “Retirement Account Awards.” Thus, Husband reasoned, the Court only awarded the retirement portion of his pension benefits, not the disability portion.

Both the District Court and the Court of Appeals disagreed.

Unlike Ertl, the Court held Moore’s Decree divided “pension benefits” broadly, rather than the narrower “pension retirement benefits,” a conclusion which could still be reached despite the reference to “retirement” in the section title (though not the specifically in the body of the Decree).

Moreover, the Court of Appeals noted, even if disability benefits had not been included, the District Court could have divided them later as omitted assets.

Further reinforcing our theme that words matter (a lot), just a few months prior to Moore, in Lusso v. Lusso Quiggle, an ex-Wife was unable to obtain any portion of her Husband’s pension earned during their 16-year marriage.

Under the parties’ stipulated divorce decree, Wife in Lusso was to receive a portion of Husband’s Air Force retirement benefits once Husband retired from the active military after 20 years of service.

Two years shy of qualifying for his military pension, Husband resigned his commission and accepted a civilian job with the federal government which allowed Husband to roll his 18 years of military service (15 of which were during the marriage) into the Federal Employee Retirement System (FERS) for a one-time payment of $9,700.

In 2012, Wife sought to amend the divorce decree to recognize her marital interest in Husband’s civilian pension due to the credit Husband received for his marital, military service.

Both the District Court and the Court of Appeals denied Wife’s request.

Adopting reasoning similar to Ertl, both Court’s held that the explicit language of the divorce decree entitled Wife only to “an interest in a military pension benefit.”  Since no such benefit existed (having been transformed into a FERS pension benefit), Wife’s motion was denied, and she received nothing.

In an impassioned dissent, Judge Minge attempted to salvage something for Wife, based on a more liberal reading of the terms “benefit,” “result,” and “service,” (with a nod to the possibility of an “omitted asset” type argument).  To no avail.

Words, Words, Words

Lesson being: words matter. A lot.

And by words I mean the words in your divorce decree, not your QDRO.

For those looking for a Protip: Understand what benefits are available under different pension plans, and divide them carefully.

Because you may not get a second shot at it.

File this under reasons I’m not afraid of DIY divorce.

Notes

[1] See Walswick-Boutwell v. Boutwell, 663 N.W.2d 20 (Minn. Ct. App. 2003)

[2] Miller v. Miller, 352 N.W.2d 738 (Minn. 1984) (an equal division of wealth earned through the efforts of both parties is appropriate on dissolution of long-term marriage).

[3] In re Marriage of Moore v. Jacobson, No. A13-2264 at *n.2 (Minn. Ct. App. Mar. 2, 2015) citing Neubauer v. Neubauer, 433 N.W.2d 456, 461 n.` (Minn. Ct. App. 1988)

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