QDRO Catch-Up: Case Law & Legislative Updates in Ohio & Kentucky

I have felt your distress from my lack of monthly posts since February. I have felt your yearning for EZ QDRO Law Updates. I have felt your hunger for more more more. Alas, I have been juggling multiple QDRO balls lately, and let this one drop. Before I leave for my QDRO sabbatical (I bet those two words have never met before in the same sentence), I wanted to post a few recent case law updates for Kentucky and a legislative update for Ohio. Of note, the 12th District Ohio Court of Appeals & Supreme Court of Ohio have been QDRO-quiet so far this year.

Ohio

Thank you to Judge Kathleen M. Rodenberg of the Court of Common Pleas, Division of Domestic Relations, Clermont County, Ohio, for alerting the local bar to the latest revision to the Ohio Retirement Systems’ Division of Property Order (DOPO or DPO) statutory form.

The DOPO form was revised to include a new address for the Ohio Highway Patrol Retirement System, and is effective immediately. You can find the revised form on each System’s website, or here (PDF). The revised form is effective immediately, although the Ohio Retirement Systems will process either the former version or the revised version of the form to facilitate the transition in the short-term.

I was happy to see that there is now a Version Date at the bottom of the first page of the DOPO form (currently 04/2015), it used to drive me crazy to have to skim through the document to determine the version I was dealing with when reviewing orders.

Kentucky

Sadler v. Buskirk, No. 2012-CA-001157-MR (Ky. App. 2013); (2013-SC-000809-DG)
Despite Waiver, Former Spouse Maintains Rights as Beneficiary of Husband’s IRA

Rendered: November 22, 2013
Opinion Affirming 

Editor’s Note: This ruling was since overturned by the Supreme Court of Kentucky. Click here to read the final disposition of this case on December 17, 2015.

In my blog post dated December 7, 2013, I highlighted Sadler v. Buskirk, No. 2012-CA-001157-MR (Ky. App. 2013).  In Sadler, the Court of Appeals denied declaratory relief to a widow in her effort to prevent her deceased husband’s former spouse from receiving a beneficiary interest in his IRA. On September 10, 2014, the Kentucky Supreme Court granted discretionary review in this case, and on May 6, 2015 heard oral arguments (see briefs before the Supreme Court here). 
 
The issue before the Supreme Court is whether the property settlement agreement provision stating that the former spouse disclaimed her interest in the retirement account owned by the ex-husband was sufficient to rescind the form he filed with the investment company during the marriage naming her as beneficiary upon his death. I’d love to make a prediction on how the Supreme Court will go this, but after reading the briefs, arguments were strong on both sides. 
 
I don’t always agree with my opinions from yesteryear, but after reading my post from almost a year and a half ago, I still feel exactly the same regarding what this case means for the practitioner in terms of everyday malpractice avoidance. 
 
Thank you to Acena Beck, Esq. (Executive Director, Children’s Law Center), avid (forced) blog subscriber, for getting this back on my radar. 
 
Priest v. Priest, No. 2014-CA-000148-MR (Ky. App. 2015)
Disposable Military Retired Pay Can Be Divided via Methodology Set Forth Under Defense Finance and Accounting Service (DFAS) Guidance

Rendered: April 24, 2015
Not to be Published
Opinion Vacating and Remanding

http://opinions.kycourts.net/coa/2016-CA-001270.pdf

Editor’s Note: This ruling was since revised by the Kentucky Court of Appeals. Click here to read my office’s abbreviated case law review.

Husband was active in the military at the time of the parties’ divorce. The trial court ordered that Wife would be entitled to a division of Husband’s military pension pursuant to the formula presented in Poe v. Poe, 711 S.W.2d 849 (Ky. App. 1986). The trial court did not proceed with dividing the pension at the time of decree, since Husband was not yet eligible to retire. Husband retired several years later, and while his rank remained the same since the time of divorce, he did obtain basic pay increases after the divorce and until his retirement. After Husband’s retirement, the trial court issued an order awarding a “straight line percentage” to Wife of 21% of Husband’s military pension. 

At issue on appeal was how the trial court calculated the division of the pension. Husband argued, consistent with Snodgrass v. Snodgrass, 297 S.W. 3d 878 (Ky. App. 2009), that the trial court should have used the methodology set forth in the DFAS pamphlet, entitled “Uniformed Services Former Spouse’s Protection Act, Dividing Military Retired Pay.” Otherwise, Husband argued, if the trial court’s approach was utilized, Wife would enjoy in part of his post-marital salary increases in contravention of the law.

At the end of the day, the Court of Appeals sided with Husband, holding that the DFAS pamphlet was a proper consideration in the division of military pensions in divorce. The Court remanded the case for further proceedings consistent with its Opinion.

Keep in mind here that the trial court in this case failed to make sufficient findings of fact as to its reasoning and application of the law. Also keep in mind that parties can always agree upon whatever division method they so choose. So, this holding is somewhat limited to the extent it adds anything beyond what Snodgrass has already set forth. 

I will say this, every practitioner that touches a divorce case involving the division of a military pension must read the DFAS pamphlet in full. There is no substitute, and without such review, landmines await your every treacherous step.

Sigler, now Degner v. Sigler, No. 2012-CA-001332-MR (Ky. App. 2015)
Equalization Payment Ordered to Determine Marital Property Rights in Retirement Account Subject to Statutory Interest

Rendered: April 24, 2015
Not to be Published
Opinion Reversing and Remanding with Directions

The parties divorced in 2000; a subsequent order of the family court determined marital property rights, including the parties’ retirement accounts.  The relevant provisions of the 2000 Order stated:

Both of the parties have retirement accounts by reason of their employment with the Commonwealth of Kentucky. Ms. Sigler’s account is valued at $9,705.85. Mr. Sigler’s account is valued at $42,257.44.

Both of the accounts were earned by the parties during the marriage and are, therefore, marital property subject to division.

The total of the retirement accounts of the parties is $51,963.29. That amount shall be equally divided between the parties. The effect of this Order is that Mr. Sigler shall be required to pay to Ms. Sigler an amount of money which equalizes the amount the parties receive from the two marital retirement accounts.

This December 2000 Order, which was final and never appealed, did not indicate a specific amount that would equalize the accounts or state when the money was to be paid. After entry of this order, neither party took any steps or action to effectuate the division. There was no dispute that Wife should have received $16,275.79 to effectuate the court’s order in 2000.

In 2012, Wife filed a motion for entry of a QDRO to enforce the 2000 judgment. The trial court denied Wife’s motion, reasoning that the entry of a QDRO would amend the prior 2000 judgment, which it had no authority to do. Instead, the trial court ordered Husband to pay Wife the $16,275.79 equalizing payment within thirty days.

Wife filed a motion to alter, amend, or vacate the 2012 Order, arguing for the first time that she was entitled to interest on the judgment – 12% per annum, from December 2000 - pursuant to KRS 360.040. Husband defended against the accrual of statutory interest, countering that the 2000 order did not specify a judgment amount and that Wife had made no attempt to collect during the numerous court appearances on other matters occurring between 2000 and 2012.

The trial court denied an award of interest to Wife, finding that the equities of the case did not warrant such action, and interpreted the 2000 Order as not requiring the equalization payment until Husband began drawing benefits (i.e., at retirement). Despite his active employment, Husband paid Wife the full sum of $16,275.79 the next day.

The issue on appeal was Wife’s motion to alter, amend, or vacate the 2012 Order; the Court of Appeals’ review included both interpretation of the provisions of the December 2000 Order and application of the KRS 360.040.

As for the 2000 Order, the Court of Appeals took issue with the trial court’s interpretation thereafter that the equalization payment was triggered by Husband’s retirement, observing:

The 2000 order clearly and succinctly states that Sigler was required to pay Degner an amount of money to equalize the amount that each party was entitled to receive from the retirement accounts as of that date, not some future date. It is undisputed from the record of this case that the amount owed as of December 22, 2000, by Sigler to Degner was $16,275.79. This was a liquidated sum that was “[m]ade certain or fixed by agreement of the parties or by operation of law.” Nucor Corp. v. Gen. Elec. Co., 812 S.W.2d 136, 141, (Ky. 1991); see also KRS 403.190. Thus, the amount owed by Sigler was at all times determinable where the mere computation was all that was necessary to establish the amount owed. There is nothing in the record to support the conclusion that payment of Sigler’s obligation to Degner was in any way deferred. Accordingly, the family court abused its discretion by failing to award some amount of post-judgment interest. Any other result would constitute a manifest injustice to Degner. See CR 61.02.

In short, the Court of Appeals held that the December 2000 Order was a final order, and as such, Husband was obligated by law at that time to pay Wife $16,265.79, which he did not do. Thus, the Court held KRS 360.040 was applicable to the judgment owed as of December 2000. The Court was not swayed by Wife’s inaction to collect until 2012, opining:

Degner was under no legal duty to initiate a collection action and absolutely no prejudice accrued to Sigler by this delay. To the contrary, Sigler arguably has reaped a windfall from having the benefit of Degner’s funds in his retirement account for twelve years, without being accountable for interest accruing thereon. See Hoskins v. Hoskins, 15 S.W.3d 733 (Ky. App. 2000).

As for the applicable rate of interest, KRS 360.040 appears on its face to impose 12% per annum. However, the Court of Appeals noted a recent case before it addressing the same statute in the context of divorce, wherein the Court held that the trial court has discretion in determining if the 12% rate is not appropriate under the equities of a given case. See Ensor. V. Ensor, 431 S.W.3d 462 (KY. App. 2013). Consistent with Ensor then, the Court of Appeals directed that the trial court must determine a rate of post-judgment interest in consideration of the equities, remanding with directions.

There is not much to add here, from my perspective, except that once a trial order is issued determining the marital interest in retirement assets, make sure that you and your client are crystal clear on the court’s direction, otherwise use your ten days to seek clarification before the judgment becomes final. 

As an aside, and of much interest from my perspective, is a comment made in dicta at page 7 of this Opinion. The Court noted that “as a matter of law” Wife had fifteen years to collect on the December 2000 judgment indebtedness from Husband, pursuant to KRS 413.090. Why is this of such interest to me? Look no further than my blog post  highlighting Mullins v. Mullins, NO. 2013-CA-000605-MR (Ky. App. 2014). 

In Mullins, the trial court didn’t believe KRS 413.090 applied in the context of Wife not pursuing entry of a QDRO for approximately 20 years post-decree, as the QDRO was merely an enforcement mechanism to convey a vested property interest attendant to the decree. This issue was not ultimately decided by the Court of Appeals in Mullins, as the Court held the issue was not ripe. So, after reading the Court’s matter-of-fact presumption of KRS 413.090’s applicability in Sigler (albeit, an unpublished Opinion), it will be interesting to see how that presumption might play out in the context of a deferred distribution award via QDRO (versus immediate offset judgment indebtedness). I guess we shall wait and see.  

Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.