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Classification of Retirement Benefits/401k Plan
© 2003 National Legal Research Group, Inc.
ALABAMA: Brasili v. Brasili, 827 So. 2d 813 (Ala. Civ. App. 2002).
A 401(k) plan is a retirement benefit for purposes of the extreme Alabama statute allowing the division of retirement benefits only after marriages of 10 years or more.
The parties separated in 2000 after almost seven years of marriage. Following a hearing, the trial court granted a divorce on the ground of the husband's adultery. In addition to awards of rehabilitative alimony and child support, the court ordered that the husband pay to the wife $30,000 from his 401(k) retirement account, which had an approximate value of $72,000 as of the date of the trial. On appeal, the husband argued that the court lacked the authority to award any of the retirement account to the wife. The Alabama Court of Civil Appeals held that the 401(k) account was a retirement benefit subject to division but because the parties had not been married for 10 years it could not be equitably divided under the controlling statute.
The husband argued, based upon Ala. Code 30-2-51(b), which grants to a trial judge in a dissolution proceeding the power to award a portion of one spouse's "retirement benefits" to the other, but conditions the exercise of that discretion to instances where the parties were married for a minimum of 10 years, that the trial court had no authority to award any portion of his 401(k) plan to the wife because the parties had not been married for at least 10 years. The wife countered by asserting that the court could award her, as a noncovered spouse, a portion of the account of her husband, the covered spouse, where that account was a 401(k) benefit plan, as such did not fall within the definition of a "retirement account" under the statute. Therefore, the 10-year condition did not apply. The appeals court disagreed with the wife's assertion.
Looking to the Alabama case law beginning with the decision of Ex parte Vaughn, 634 So. 2d 533 (Ala. 1993), which first departed from the Alabama line of authority which had declined to permit courts the authority to distribute retirement benefits of one spouse to another, that appeals court reasoned that as military retirement benefits and IRA accounts had since been expressly treated as subject to equitable distribution, and because a number of subsequent decisions had equated 401(k) account funds with other "retirement benefits," the plain meaning of Ala. Code 30-2-51(b) required a reading of the term "retirement benefits" to include a 401(k) account. As a result of the court's determination that a 401(k) account was a "retirement benefit" under Ala. Code 30-2-51(b), it was subject to distribution only under the conditions further proscribed by the terms of that section, one of which was the requirement that the parties must have been married for 10 years. Since the husband and wife herein were married for only seven years, the appeals court concluded that the trial court had erred in making a division of this asset. In a footnote, the court did note that although the husband's 401(k) account was not subject to distribution it could be used by the trial court as a source of income to pay periodic alimony to the wife. (DB)
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