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PENSION INCREASES AFTER DISSOLUTION
1997 National Legal Research Group, Inc.

ILLINOIS: In re Marriage of Wisniewski, ___ Ill. App. 3d ___, 675 N.E.2d 1362 (1997).

The trial court did not abuse its discretion by using the husband's salary at the time of his retirement in 1994 to determine the marital share of his pension, despite his claim that this approach improperly allowed the wife to share in the increase in value of his pension after the parties' 1981 divorce.


This case involves the deferred distribution of a defined benefit pension plan and favors the nonemployee spouse on the question of how to handle postdissolution increases in pension benefits. The opinion includes a helpful summary of pension distribution methods as well as a discussion of the equities of dividing postdissolution increases in pension benefits.

The husband and wife divorced in 1981. On remand after an appeal, the trial court entered a new judgment, which reserved jurisdiction to apportion the marital interest in the husband's pension payments after he retired. Following his retirement in 1994, the trial court, applying what it referred to as the "proportionality rule," determined that the marital interest in the husband's pension was equal to the total pension benefits at the time of retirement times the ratio of years of marriage in which there was participation in the plan to the total years of participation in the plan.

The husband disagreed with this approach, arguing that the marital interest should be based on the amount of pension benefits accrued at the time of dissolution. He pointed out that his pension increased after the parties' 1981 dissolution for three reasons. First, he eliminated any early retirement penalty by working past age 60. Second, his salary continued to increase during this period, thereby increasing the final average salary for purposes of calculating his benefits. Finally, his pension multiplier the percentage of his final average salary that he was entitled to receive upon retirement increased each year that he continued to work after the parties' dissolution.

The Illinois Appellate Court approved the approach used by the trial court. In a detailed opinion, the court held that the husband's appeal was timely but that it was not inequitable for the wife to share in the increase in the value of his benefits after the parties' dissolution.

Timeliness of Appeal. The wife argued that the husband should have appealed the trial court's 1983 order reserving jurisdiction to apportion the pension upon retirement. That order provided that "[j]urisdiction is continued and retained to apportion between the parties according to marital share and supervise payments of the pension if, as, and when it becomes vested in and payable to [the husband]." 675 N.E.2d at 1365.

The appellate court held that the 1983 order was not appealable because it did not actually apportion the pension benefits. The apportionment was not made until 1996, so the husband's appeal was timely.

There are two alternate procedures for apportioning unmatured pensions upon marriage dissolution, the court observed. First, a court can "cash out" the pension at the time of dissolution by computing the present value of the pension with a discount to reflect the possibility that it will not vest. The court then determines the pension and divides it between the spouses, just like any other marital property. The court immediately awards the nonpensioned spouse other marital property to compensate for the award of the entire pension to the pensioned spouse.

But if it is too difficult to assign a present value to the marital interest, or if the cash-out approach is otherwise impractical, a court may use a reserved jurisdiction approach. Under such an approach, the court does not immediately compensate the nonpensioned spouse. Instead, it orders that the employee spouse pay the nonemployee spouse his or her portion of the marital share "if, as, and when" the pension becomes mature.

There are two variants of the reserved jurisdiction approach, the court noted. At the time of dissolution, the court can devise a formula that will later determine both the marital interest and the nonpensioned spouse's share of the benefits. This formula produces a percentage, which will be multiplied by the pension payments as they are actually received.

Under the other reserved jurisdiction variant, the trial court waits until the benefits are to be paid before it decides on the formula for determining the marital interest or the nonpensioned spouse's share. A trial court has authority to use this method, but should do so only when absolutely necessary, the court said. Because the parts of a dissolution decree are interdependent, delaying a decision on a part of a decree may delay the appeal of the rest of it. A property division that reserves jurisdiction to apportion a pension without deciding the method of apportionment is not final for purposes of an appeal, the court observed.

Here, the 1983 order did not apportion the marital interest in the husband's pension, the court decided. The "if, as, and when" language of the 1983 order did not necessarily imply an intent to determine the marital share by comparing years in the marriage with years outside the marriage. On the contrary, the marital share of a pension can be determined by comparing the amount of contributions during the marriage with the amount of contributions outside the marriage, or by comparing other factors. Since the marital portion and the wife's share were not determined until the 1996 order, the husband's appeal was timely.

Method of Apportionment. The husband argued that it was inequitable to award the wife increases in benefits that compensated him for work he performed after the marriage's dissolution. The wife countered that an award based solely on benefits that had accrued at the time of the dissolution would not compensate her for the delay between the dissolution and the payment of benefits.

The appellate court sided with the wife. The fact that she did not provide evidence of her lost interest was not determinative, the court decided, given that Illinois law has long recognized the time value of money. There would be little value in forcing the nonpensioned spouse to prove that proposition, the court declared.

Although a defined benefit plan is not designed to provide interest on contributions, contributions in the early years of a defined benefit plan are more valuable than are contributions in the last years, the court said. The wife should not be deprived of the interest earned on the marital contributions just because the pension plan does not specifically account for interest in determining the pension benefits, the court decided. Moreover, although the pension multiplier was higher in later years, those later years would not have been possible without the earlier years. "We cannot say the years after the marriage were more valuable than the years during the marriage. Because of the time value of money, the opposite would appear to be true, unless contributions were significantly greater in later years." Id. at 1369.

Emphasizing that his final average salary was based on his years of employment after the marriage, the husband argued that the marital interest in the pension should be limited to the amount of his salary at the time of the 1981 divorce. Any increase in pension benefits due to a higher salary was due solely to his postmarital efforts, he contended. The appellate court disagreed. The increase in pension benefits was due "solely" to postmarital efforts, since the final average salary was multiplied by a specified percentage for each year of the marriage. Because of the increase in the cost of living between 1981 and 1994, the husband's salary, and consequently his benefits, would be roughly equivalent. If the wife had received benefits in 1981, she would have been limited by the husband's salary at that time, but she did not receive benefits until 1994, the court commented.

The husband argued that the marital share should be limited to what he would have received if he had quit his job at the time of the dissolution of the marriage. The court responded by noting that the husband in fact did not quit his job at that time. If he had in good faith chosen to quit his job and forfeit any additional benefits, the wife would have been limited by what was available, and both parties would have been disadvantaged by the termination. "We see no reason, however, why [the wife] should receive all the disadvantages of a hypothetical termination, and [the husband] all the advantages of the actual continued employment, when those advantages are due in part to work during the marriage." Id. at 1370.

The court ended by faulting the husband for not presenting expert testimony to support his argument. If he believed that the proportionality rule being considered by the trial court overcompensated the wife and awarded her the product of his nonmarital interest, he was free to present such evidence at trial. The trial court did the best with what the parties gave it, the court concluded.

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