The appeal involves a dispute between Anthony F. Stiel, Jr. and Susan M. Stiel regarding the interpretation and implementation of their 1995 Final Divorce Decree and a subsequent Qualified Domestic Relations Order (QDRO) from 1996. The ex-husband argues that the trial court incorrectly ruled that his ex-wife was entitled to a share of his early retirement supplements and that her benefits were based on post-divorce increases in his pension. Conversely, the ex-wife contends that the trial court erred by not granting her survivorship rights to the retirement benefits. The court affirmed the trial court's decisions.
The divorce, finalized in June 1995, included a settlement stipulating that the ex-wife would receive half of the value accrued in the husband's General Motors Retirement Plan during the marriage. The QDRO was agreed upon by the parties in August 1996 but was initially rejected by the Plan Administrator. An amended QDRO was accepted in February 1997, designating the ex-wife as entitled to early retirement benefits and survivorship rights.
In August 2009, shortly after retiring from General Motors, the ex-husband filed a petition to amend the QDRO, arguing that it granted his ex-wife benefits not specified in the divorce decree. He claimed she was not entitled to early retirement supplements, post-retirement increases, or survivorship rights. The ex-wife responded, and both parties subsequently filed cross-motions for summary judgment after discovery and depositions.
The trial court issued an order after a hearing, partially granting and denying motions while noting two relevant cases, Cohen v. Cohen and Croley v. Tiede. The court granted summary judgment to the Wife concerning the inclusion of the post-dissolution early retirement supplement and post-retirement increases in the divorce award, based on the Final Decree of Divorce. Conversely, it ruled in favor of the Husband regarding survivorship rights, determining they were not included in the decree. The court mandated a second amended Qualified Domestic Relations Order (QDRO), which was entered on May 29, 2010, leading to the current appeal.
The appeal stems from the grant of summary judgment, applicable when no genuine issues of material fact exist, allowing for a legal judgment. In this case, both parties agreed on the material facts, making summary judgment appropriate. The trial court's judgment is reviewed de novo, without a presumption of correctness.
The 1995 Final Decree of Divorce contains a single provision regarding the division of Husband’s General Motors pension and retirement benefits, stipulating an equal division of the Saturn 401k plan and the marital portion of the General Motors retirement plan. A QDRO was agreed upon fourteen months later, initially rejected but later accepted in an amended form, allowing the Wife to receive 50% of the marital portion of the Husband's accrued benefits. The marital portion is calculated based on the months of participation during the marriage compared to total participation. The QDRO also entitles the Wife to a pro-rata share of any early retirement subsidies based on her share of the benefits.
The Alternate Payee's benefit will be adjusted based on the Plan Administrator's practices and actuarial principles. If the Participant returns to work, the Alternate Payee's monthly benefit will be modified accordingly. Additionally, the Alternate Payee will receive a pro-rata share of any cost-of-living adjustments or economic improvements to the Participant's benefits after retirement, proportional to the Alternate Payee's benefit relative to the Participant's total accrued benefits.
The Husband retired from General Motors (GM) in August 2009 at age 50, having accrued 30 years and 6 months of credited service, equating to 366 months, with 169 months of that during the marriage. The Pension Plan Administrator, Preston Crabill, provided a detailed explanation of how the Husband's retirement benefit was calculated, emphasizing that the primary factors included credited service and the collective bargaining agreement between GM and the United Auto Workers (UAW).
For a retiree at age 50 with 30 years of service, the monthly benefit was set at $3,150. However, due to his early retirement, the benefit required complex calculations involving deductions for age, credits, and supplements. The "basic benefit" was initially $53.60 per year of service, yielding an accrued benefit of $1,640.16, which was then reduced by 60.6 due to early retirement. An "early retirement supplement" was added to adjust the benefit back to $3,150, which would continue until the Husband reached 62 years and one month, at which point the benefit would be reevaluated. Mr. Crabill confirmed that any hourly employee with over 30 years of service retiring in August 2009 was entitled to this monthly amount under the GM Pension Plan.
Husband's monthly retirement benefit was reduced by $82.01 due to costs associated with a survivor annuity and a Saturn pension deduction, resulting in a net benefit of $3,037.24, as explained by Mr. Crabill. Wife claims entitlement to the marital portion of this net benefit, which includes early retirement supplements and post-retirement increases. While Husband acknowledges Wife's right to a marital portion, he argues it should be based on a "reduced basic benefit" of $564.21, leading to a marital portion of only $121.65. The trial court ruled in favor of Wife, affirming that the early retirement supplement and post-retirement increases are included in the marital property award per the Final Decree of Divorce.
The court emphasized that a marital dissolution agreement, part of the divorce decree, is a binding contract subject to contract law interpretation. The 1995 Final Decree of Divorce, which predates the 1996 Qualified Domestic Relations Orders (QDROs), stated that Husband's retirement plans should be divided equally. The trial court concluded that Husband’s early retirement benefits and post-retirement increases were included in this division, supported by precedents such as Cohen v. Cohen, which established that unvested retirement benefits accrued during marriage are considered marital property in Tennessee.
The value of unvested retirement benefits must be assessed as close to the divorce date as possible. The court acknowledged potential difficulties in valuing these benefits but suggested that such challenges could be addressed using flexible, equitable methods. Two equitable techniques for valuation include the "present cash value method" and the "deferred distribution method," with the latter being favored when the retirement benefit is uncertain or represents the parties' primary economic asset. Under the deferred distribution method, the court establishes a formula for dividing the monthly benefit at the decree time, with actual distribution occurring when the benefits become payable. The marital property interest is calculated as a fraction of the employee spouse’s monthly benefit, based on the duration of the marriage relative to the total time for benefit accrual. Advantages of this method include equitable division without immediate payment for unaccrued benefits and shared risk of forfeiture. A drawback is the need for the court to retain jurisdiction for payment oversight, though this is manageable and does not justify inequitable property distribution. The Croley v. Tiede case exemplifies the application of this method, where the court addressed whether a wife could claim a portion of her husband's retirement based on his higher post-divorce salary, ultimately confirming that post-dissolution pension enhancements can be considered marital property under the deferred distribution approach.
Post-dissolution increases or decreases in pension benefits are considered marital property unless the nonemployee spouse receives the net present value of their share at the time of dissolution. This principle is based on the "marital foundation theory," which recognizes that both spouses contribute efforts during and after marriage that enhance the value of future benefits. The court prefers using the "time rule" formula over the "bright line" rule, which would require a complex separation of marital and separate portions of post-dissolution pension increases. The "time rule" simplifies the process and avoids inconsistent results and unnecessary court involvement.
In cases like Hunt and In re Marriage of Kelm, it has been established that post-dissolution pension increases should be factored into the benefits awarded to the nonemployee spouse at the employee spouse's retirement, particularly when a deferred distribution method is employed. The trial court correctly determined that the nonemployee spouse should receive a portion of the employee spouse's actual retirement benefits, including any early retirement supplements, as these were earned during the marriage. The court rejected the employee spouse's argument that the Final Divorce Decree was unambiguous and did not grant these benefits, referencing Pruitt v. Pruitt, which he claimed was relevant to his case.
The husband in Pruitt appealed a finding of willful contempt regarding the final divorce decree and the Qualified Domestic Relations Order (QDRO) from their 1997 divorce. The initial QDRO was rejected by the husband's pension plan administrator when submitted in 2004. A second QDRO submitted in 2006 altered the division of marital property, contradicting the original agreement that entitled the wife to 40% of retirement benefits and a pro-rata share of any early retirement subsidies. The original QDRO also guaranteed the wife a surviving spouse benefit. The 2004 QDRO, which denied the wife any early retirement benefits, was also rejected. Following this, the wife petitioned for contempt, and the trial court ruled in her favor, affirming her entitlement to a share of the husband's gross retirement payments as initially outlined in the 1997 QDRO. The court emphasized that the 1997 QDRO was incorporated into the marital dissolution agreement and final divorce decree, making it a binding part of the property division. It concluded that subsequent QDROs could not materially alter the original division of marital property. The husband argued that the court adopted the "Michigan Rule," which states that if a divorce decree does not address early retirement or survivorship rights, these are not granted unless a QDRO is contemporaneously entered. However, the court clarified that its ruling in Pruitt established that a QDRO cannot significantly change the awards in a final decree, and cited Thornton to support that a contemporaneous QDRO is part of the settlement approved with the divorce judgment. The current ruling aligns with the principles established in Pruitt.
The 1995 Final Decree of Divorce entitles Wife to a percentage of Husband’s pension plan value accrued during their marriage. The 1996 Qualified Domestic Relations Order (QDRO) establishes how to determine this value in accordance with precedent cases. Testimony from Mr. Crabill clarifies that the "early retirement supplement" and "post-retirement increases" are not benefits earned during the marriage; without the fourteen years of service accrued during the marriage, Husband would not qualify for these benefits. The trial court's ruling that these benefits are included in the marital property award to Wife is affirmed.
Regarding the survivor benefit, Wife argues that the trial court incorrectly determined that this benefit was not automatically included in the pension award. The Final Decree specifies that Husband’s retirement plan value earned during marriage should be divided equally. Although the QDRO designates Wife as the surviving spouse for the Qualified Preretirement Survivor Annuity (QPSA), the trial court concluded that the survivorship option was separate from the pension calculation and not negotiated by the parties. Wife contends she has a federally protected right to the survivor benefit under 42 U.S.C. 1055. However, the court finds this statute inapplicable since she is an ex-spouse and thus does not retain such protection post-divorce. The determination hinges on whether the survivor benefit was included in the Final Decree's language regarding the award of benefits to Wife.
The key issue is whether the survivor benefit is classified as marital property separate from the pension plan or as a part of the benefits earned during the marriage. The Husband argues that the trial court's decision denying the Wife entitlement to the survivor benefit is correct, citing Michigan case law which stipulates that survivor rights must be explicitly included in the divorce decree to be awarded. Since Tennessee law does not specifically address this matter, the court considers precedents from other jurisdictions. A Maryland case, Potts v. Potts, concluded that survivor benefits are distinct from pension benefits, a view supported by several states. Survivor benefits have been recognized as a unique marital asset in various rulings, distinguishing them from pension plans. The court finds the Maryland reasoning persuasive, asserting that survivor annuities are separate from pension benefits and noting that the time rule formula for pension distribution does not apply. Various jurisdictions have different perspectives; some treat survivor benefits as integral to the pension, while others view them as distinct assets. Overall, the court leans towards the interpretation of survivor benefits as separate, influenced by multiple case precedents.
A survivor annuity reduces the Husband’s pension benefit and is treated as a separate benefit, making it inadvisable to award it to the Wife based solely on implications. Federal law prohibits awarding this benefit to a subsequent spouse, impacting their eligibility if the Wife were to receive it. The absence of mention of the survivor benefit in the Final Decree of Divorce leads to the conclusion, supported by the trial court, that the Wife was not entitled to it, despite a non-contemporaneous Qualified Domestic Relations Order (QDRO). The document highlights issues arising from discrepancies between the Final Decree and subsequent QDROs, noting that ERISA does not mandate a QDRO be included in the divorce judgment, which can lead to confusion about the finality of judgments concerning pension benefits. The Potts case emphasizes the need to value pensions before any elections that may diminish their value, such as opting for a survivor annuity. It is recommended that attorneys draft QDROs concurrently with divorce decrees to prevent disputes. The trial court's judgment is affirmed, and the case is remanded with appeal costs split equally between the parties.
