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Bankrupcty of Employer Reduced Payment from Retirement Plan
© 2004 National Legal Research Group, Inc.
INDIANA: Beike v. Beike, 805 N.E.2d 1265 (Ind. Ct. App. 2004).
When the husband's employer went bankrupt, his monthly payment from his defined benefit retirement plan was reduced to only 62% of the amount he had previously anticipated. The trial court did not err by construing a previous QDRO to award the wife 36% of the husband's benefit, rather than the absolute amount of $353 per month, so that the wife would share proportionally in the loss attributable to the employer's bankruptcy.
Given the significance of pension benefits today regarding their proportion of the marital estate and also considering their potential fluctuation in value in light of the volatile nature of the market and the economy, it becomes incumbent upon attorneys representing the parties in a divorce to draft orders respecting retirement and pension benefits in such a way as to cover contingencies that may arise. The failure to do so can result in injury to the spouse relying upon a share of such pension benefits as a significant portion of his or her future support.
In this case, the parties agreed to a distribution of the husband's vested pension benefits forming a part of the marital estate which granted a 36% share, amounting to $353 per month, to the wife. A qualified domestic relations order (QDRO) was entered in 1996. The husband had been an employee of a steel manufacturing company. That company declared bankruptcy in 2002. Fortunately for both parties, the pension plan was protected by the Pension Benefit Guarantee Corporation (PBGC). However, the husband's benefits were reduced from $1,918.77 to $1,195, or approximately 62% of the amount he had anticipated. The husband filed a motion for relief from the order granting the 36% share to the wife, requesting that the trial court modify the QDRO to reflect the change in circumstances. That court granted the motion reducing the wife's monthly share to $219. The wife then appealed.
The court on appeal first concluded that, despite the finality of the 1996 QDRO, the trial court did have the authority to consider the husband's motion for relief as a court has the power to interpret the meaning of an order. Although the value of the pension plan was not completely settled, both parties believed they understood the value of the plan at the time of the dissolution decree and, subsequently, a change which neither party could have predicted affected the value of the pension plan. The court next took upon itself the task of interpreting the QDRO in light of its purpose and the language employed therein. It held that to give to the wife the full 36% share would be to thwart the trial court's intentions toward the husband. It stressed that the award was a percentage of the pension plan rather than the set figure of $353 per month. The court admitted that had the award been the latter the result in the case would have been different. The issue became, therefore, whether the wife and the husband should bear the rewards and risks associated with the pension plan. Here, there was no allegation that the decline in value of the husband's pension was caused by or contributed to by any of his actions. Rather, such decline was due to the bankruptcy of the husband's employer and the pension plan provider. Moreover, there was no express language in the QDRO stating that the parties would not share in the risks and rewards. This the court on appeal found to be determinative. Absent express language stating otherwise, the QDRO implicitly contemplated that both would indeed share in these potentialities associated with the pension plan. There was no abuse of discretion, therefore, in the trial court interpreting the dissolution to reflect the decrease in the husband's pension plan.
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