QDRO Qualifies Pension Payout

January 14, 2003 (PLANSPONSOR.com) - The Vermont Supreme Court found a former wife is entitled to a percentage of her husband's pension at the same time he is receiving it, pursuant to an earlier agreed upon separation order, according to Washington-based legal publisher BNA.

Agreeing in part with a lower court’s decision in Tobin v Hershey, the state high court rejected the husband’s argument that his former wife was not entitled to part of his pension payments until he reached age 60, even though he was already receiving payments. The court found the two parties were intended to receive the IBM pension at the same time.

Early Out

John Tobin and Barbara Hershey separated in 1987, after 19 years of marriage. In 1988, a separation agreement and a Qualified Domestic Relations Order (QDRO) were agreed upon by the two parties.   One of the provisions of the QDRO stated Hershey would be entitled to 25% of Tobin’s pension from IBM, unless he retired before the age of 60.   In the event an early retirement was accepted, Hershey would receive a percentage of benefits that would provide her with the same amount of money as if Tobin had retired at age 60. At IBM’s request, the QDRO was amended to provide a specific formula for calculating benefits if Tobin retired before age 60.

When Tobin was 47 years old, in 1992, he informed Hershey he had accepted an early retirement program.   However, the early retirement program provided eligibility to begin receiving benefits in 1997, at age 52, a fact he did not mention to Hershey. Then in 1997, Tobin told Hershey he expected to begin receiving retirement benefits that summer, at which point Hershey wrote to IBM to ask about her share of the benefits. IBM responded that it interpreted the QDRO as allowing Hershey to receive benefits only upon Tobin reaching age 60.

In 2000, Hershey filed a motion to clarify her pension rights under the amended QDRO. A state trial court granted Hershey’s motion; awarding her one half of a lump-sum pension payment and a 49% share of the monthly core pension benefits her husband had been receiving since 1997. The court also ordered that the QDRO be amended to state that Hershey would receive a 49% share of Tobin’s pension benefits for so long as he received them.

Qualified Reasons

The Vermont Supreme Court agreed in part with the lower court; finding since the QDRO provided a statement that if Tobin was not employed at IBM at age 60, Hershey was entitled to receive a portion of Tobin’s pension commencing on his 60th birthday. Since, the QDRO’s assumption that Tobin would begin receiving his pension at age 60, even if he retired early, Hershey’s claim was then supported that the parties intended to receive benefits at the same time. “The specific language relied on by [Tobin] was intended only to provide a mechanism by which IBM could calculate benefits if [Tobin] retired early, not to limit the time frame in which wife could receive those benefits,” the court said.

However, the court found the lower court went too far in granting Hershey relief retroactive to the date the husband began receiving his pension in 1997. Instead, the court found the trial court should have limited Hershey’s request for relief to the period after which she filed her motion in 2000.