Opinion
2003–231
01-02-2018
Marlene A. STODDARD, Plaintiff, v. William M. STODDARD, Defendant.
Michael Bass, Esq., Rensselaer, New York, Attorney for Plaintiff John C. Rossi, Esq., Auburn, New York, Attorney for Defendant
Michael Bass, Esq., Rensselaer, New York, Attorney for Plaintiff
John C. Rossi, Esq., Auburn, New York, Attorney for Defendant
Richard A. Dollinger, J.In this matter, the court faces a nettlesome query: can a qualified domestic relations order ("QDRO"), which describes the procedure for determining an equitable share of a pension, be modified if the text of the QDRO specifies a specific dollar value for the non-participant's interest?
The facts in this matter are not disputed. In their settlement and opting out Agreement, this couple agreed that the husband's pension was "a marital asset" and that "it shall be allocated according to established formulas." The parties further agreed that the wife was entitled to a one-half share of the pension multiplied by a coverture fraction based on 24.75 years of marriage and further that the husband, the participant, had been enrolled in the plan for 30 years. While the agreement specifies the duration of the couple's marriage and the duration of the husband participation in the pension plan, the agreement does not contain the arithmetic calculation that would be utilized under the Majauskas formula for calculating the wife's marital share of the pension. Majauskas v. Majauskas , 61 N.Y.2d 481, 486, 474 N.Y.S.2d 699, 463 N.E.2d 15(1984).
The formula requires that the marital share is defined as one-half multiplied by a coverture fraction in which the number of months married is divided by the number of months in which the participant earned credits under the plan. In this case, the one-half is multiplied by 297 (the married months) over 360 (the months of earned credit), resulting in a marital share equal to 41.25 per cent of the pension benefit.
Instead, the agreement provided that the husband was receiving a benefit of $4,494.59 and the agreement stated: "the parties agree that the wife's share shall be $1,853 per month." The agreement also anticipated future changes in the payments under the plan. It provided that if the plan were amended "any such change shall inure to the benefit" of both former spouses and the benefit would be shared in "equal proportions." The agreement concluded by stating that the "wife shall benefit in the same proportion as the husband from any amendments to the plan." The agreement did not specify what would occur if an amendment in the plan inured to the detriment of either party.The subsequent filed QDRO provided that the annual payment for which the husband was eligible was $4,494.59. The QDRO added that the "the alternate payee shall be allocated and paid under a segregated account the sum of $1853.00." The QDRO also contained further language that the alternate payee would "receive a pro-rata share of the subsidized early retirement benefits, cost-of-living adjustments or any other economic improvements made to the Participant's benefits or after the date of retirement." The QDRO then described that the additional benefits would be "calculated as follows: 41.25 per cent" and added: "The alternate payee shall be paid on a percentage basis an equivalent or benefit of 41.25 percent."
In 2017, the participant learned that as a result of changes in federal law, the monthly benefit under the pension would be reduced to $3,191.16. When the participant inquired of the pension administrator for a proportionate reduction in the amount payable to the non-participant under the QDRO, the plan administrator refused to allocate any portion of the reduction to the non-participant recipient without a modification of the QDRO by this court. In response to the plan's decision, the participant moved before this court for an order to modify the terms of the QDRO to allocate the percentage reduction in benefits to the alternate payee. The ex-wife, in response, argues that the agreement specified that she would receive a fixed benefit—the hard-dollar amount of $1853—and that any reduction in the benefit was, as a result of the agreement, allocated solely to the participant.
In McCoy v. Feinman , 99 N.Y.2d 295, 755 N.Y.S.2d 693, 785 N.E.2d 714 (2002), the Court of Appeals advised if parties have legal capacity to negotiate and do in fact freely negotiate their agreement, the courts should not disturb a valid stipulation absent a showing of good cause such as fraud, collusion, mistake or duress or unless it suggests an ambiguity indicating that the words did not fully and accurately represent the parties' agreement. In this court's view, the agreement in this instance has a latent ambiguity in the text between the references to the fixed dollar amount and the references to "percentage basis." In reading the agreement alone—without reference to the text of the QDRO—it is readily apparent that the dollar amount was calculated through the Majauskas formula and was a result of a "percentage" calculation. The conclusion that a percentage calculation was the underlying concept is bolstered when the language regarding future additions to the payout is considered in conjunction with the remainder of the paragraph. While the parties's agreement anticipated a change in the plan or its payments, they only devised language that allocated any future increase in benefits and never considered the consequences if a future amendment reduced the available benefits. But, in calculating those benefit changes, the parties agreed that the new benefit would be calculated on the same percentage formula that had produced the hard-dollar amount set forth in the prior sentences in the agreement.
For these reasons, the Court concludes that an ambiguity exists regarding the intention of the parties when calculating the consequences of a reduction in the pension benefit.
The New York courts provide only partial guidance in resolving this ambiguity. In support of the claim that the court is bound by the fixed-dollar amount set forth in the agreement, the former wife cites Tolosky v. Tolosky , 304 A.D.2d 876, 757 N.Y.S.2d 629 (3rd Dept. 2003) which involved a lump-sum pension distribution in a judgment of divorce. The Third Department framed the issue as whether the payments pursuant to a judgment constituted maintenance or a pension distribution and held that the payment of a monthly amount from the pension did not convert the payment into a form of maintenance. For that reason, the case is easily distinguished, as the issue here is not the nature of the payments, but rather whether the specification of the dollar amount, in the agreement, precludes this court from modifying the marital payout when the underlying pension payment is reduced. The more pertinent authority in this instance lies in another precedent cited by the wife. In Kraus v. Kraus , 131 A.D.3d 94, 14 N.Y.S.3d 55 (2d Dept. 2015), the Second Department dealt with a modification in a pension payout caused by the participant's election of survivor benefits to his second wife. The court cautioned that courts should avoid modifications of QDROs if the effect was "to grant more expansive rights to the [beneficiary] than that which the parties had negotiated and agreed upon in the stipulation." Id. at 105, 14 N.Y.S.3d 55. The court in Kraus concluded that the impact on a marital share of a pension could be "subject to an employer's lawful amendment of the underlying pension plan." Kraus v. Kraus , 131 A.D.3d at 107, 14 N.Y.S.3d 55. The Court of Appeals gave similar guidance in Olivo v. Olivo , 82 N.Y.2d 202, 604 N.Y.S.2d 23, 624 N.E.2d 151 (1993), when it commented:
When Tolosky v. Tolosky has been cited, it has been cited to the effect that awarding a percentage of the pensions more accurately and equitably reflects the value to the wife of these assets earned during the long-term marriage. Bellizzi v. Bellizzi , 107 A.D.3d 1361, 968 N.Y.S.2d 235 (3rd Dept. 2013). In other instances, courts have noted that a court, after a trial, may award the marital share of a pension in a lump sum. Shapiro v. Shapiro , 91 A.D.3d 1094, 937 N.Y.S.2d 368 (3rd Dept. 2012). But, this matter is different: the resolution here hinges on interpretation of an agreement, not a trial court determination.
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parties' rights are generally subject to changes in the terms of a retirement plan, as well as to circumstances largely beyond their control, such as the salary level finally achieved by the employee and used to calculate the pension benefit. What the non-employee spouse possesses, in short, is the right to share in the pension as it is ultimately determined.
Id. at 209–210, 604 N.Y.S.2d 23, 624 N.E.2d 151. See Unser v. Fox , 83 A.D.3d 1429, 920 N.Y.S.2d 518 (4th Dept. 2011) (pursuant to Olivo , the right of plaintiff to a share of defendant's pension is contingent on the amount of pension benefits that are "actually obtained"); Lemesis v. Lemesis , 38 A.D.3d 1331, 834 N.Y.S.2d 597 (4th Dept. 2007) (a former spouse had no basis to seek a higher payout when the participant chose a lesser payout to benefit a second spouse). The Fourth Department has also held that post-retirement cost-of-living adjustments and "supplements and enhancements" to existing pension benefits should distributed to the non-participant spouse. Antinora v. Antinora , 125 A.D.3d 1336, 1340, 3 N.Y.S.3d 500 (4th Dept. 2015)
In citing these decisions, this court acknowledges that these decisions are not directly on point in this instance, in which the agreement states a specific dollar amount, but also references the Majauskas formula for calculating that dollar amount. In this court's view, the arc of the these precedents is that if an equitable formula is utilized to reach a hard dollar amount—in this case, by a strict application of the Majauskas formula—then that amount may be subject to downward modification by a court unless the parties have expressly assigned the risk of a future diminution solely to the participant. This conclusion, accords with the original intention of the parties; i.e., to give the non-participant—and the participant—the benefit of their full marital share under the equitable formula. These prior precedents have permitted modification of the benefits to the non-participant even if the participant's voluntary choices—e.g., granting a life annuity to a second spouse—cause a reduction in the benefit paid to the non-participant spouse. A modification seems especially pertinent if, as in this case, the benefits under the plan are curtailed through no fault of the participant.
While the precedents seemingly support the court's power to interpret this agreement as permitting an adjustment, several other facts guide this court. First, it is undisputed that the parties, in calculating the benefit to be allocated to the wife, used the proportionate formula under the Majauskas test. Second, the wife acknowledged, in her affidavit, that the Majauskas formula was the method by which her benefit was calculated. She states: "... this may have been how we arrived at the number calculated." Although falling short of an actual admission by the former wife, there is no dispute that the Majauskas formula was the source for both the percentage calculation of the wife's share and the actual dollar amount. Third, the QDRO text, when read in conjunction with the agreement, explicitly recognizes that the benefits were allocated on a percentage basis and explicitly states that the "alternate payee shall be paid on percentage basis an equivalent or benefit at 41.25 percent." Fourth, the agreement and the QDRO, read together, explicitly endorse a sharing by the participants of any amendments to the plan and the agreement refers to the participants dividing the impact of any the amendments to the plan in "equal proportions" or the "same proportion."
Because the parties clearly intended that any enhanced benefits under the plan would be shared "proportionately," it would be inconsistent for this court to decline to ascribe the same proportionate sharing to the participants caused by an unavoidable reduction of available benefits. If this court declined to allocate the burden of reduced benefit, an inequitable result occurs. The ex-wife's share of the pension, calculated at 41.25 percent of the monthly benefit at the time of the divorce, would total almost exactly the same amount as her ex-husband's—$1853 to her as the alterative payee and $1874 to the participant. The wife's proportionate share of the pension would jump from 41.25 percent to almost 50 percent, a consequence that is nowhere anticipated in the underlying agreement and one that would unjustifiable under the Majauskas formula.Finally, the wife makes an argument that she bargained for the exact benefit and never agreed to absorb the consequences of an amendment that reduced the benefit. However, there is nothing in the agreement that prohibits this court from re-allocating the consequences of the reduction in benefits. There is no language that directs that any future reduction in benefits would be financed solely through the husband's share of the pension. There is nothing in the agreement that suggests that the husband was accepting the entire risk if the pension benefit were reduced. There is nothing in the agreement that envisions that the wife would ever receive anything more—or anything less—than 41.25 percent of the total pension benefit. If her benefits are reduced, but she continues to get her marital share, she will get what she bargained for.
For these reasons, the participant's request for an order modifying the QDRO is granted to the extent of reducing the non-participant's benefit to 41.25 of the amended and reduced retirement benefit. Counsel for both parties are ordered to calculate that benefit and prepare an amended QDRO. The respondent's motion to dismiss the order to show cause is denied, as is the request for legal fees.SUBMIT ORDER ON NOTICE 22 NYCRR 202.48.