Financial matters in divorce are sometimes less about who you know, and more about what you know. Our CFL course features several different forms of income that may be subject to division, including common types of retirement accounts.
Under the law, it’s not always easy to determine if a salary is actually retirement income. For instance, the recent Pennsylvania Superior Court case of Connor v. Connor centered on whether the ex-husband’s judicial income (an annuity) was a retirement pension subject to equitable distribution.
Trial Summary
Christopher and Katherene E. Holtzinger Conner married in July 1984 and had four children, now grown. The couple eventually separated in 2014.
In April 2015, the husband filed a divorce complaint. In February 2017, the trial issued a divorce decree and awarded Katherene $3,900 monthly in temporary alimony.
Christopher worked for 20 years as an attorney in private practice, and in 2002, was appointed U.S. District Judge for the Middle District of Pennsylvania. In 2013, he became a federal judge.
When he retires, he will be entitled to receive an annuity equal to the salary he received at the time of retirement. He can also participate in a judicial survivors’ annuity system (JSAS), “a voluntary survivor benefit plan that provides annuities to the survivors of certain Article III judges.”
At the time, Katherene was unemployed but received a pension through the Pennsylvania State Employee Retirement System (SERS).
In September 2017, the trial court found Christopher’s judicial income and JSAS to be marital property subject to equitable distribution. The trial court denied his motion for reconsideration.
The court later divided the parties’ assets and awarded Katherene $2,500 monthly in alimony until Christopher “reaches pay status for his Judicial [Income],” at which time “Wife shall immediately begin receiving her share of Husband’s retirement….” In January 2018, the trial court granted reconsideration. By April, the trial court issued a final order and opinion that disposed of the equitable distribution and alimony claims.
Christopher appealed and Katherene cross-appealed, challenging the final equitable distribution order.
Superior Court of Pennsylvania Ruling
On the issue of whether the trial court erred in preparing its equitable distribution award, the appeals court found no “clear and convincing evidence” for an abuse of discretion.
Regarding whether Christopher’s judicial income was a retirement benefit under equitable distribution, Christopher urged the court to classify his judicial income as a salary guarantee instead. He believed that Section 371 of the U.S. Code provided authority to find that his judicial income wasn’t a retirement plan.
In its analysis, the appellate court highlighted the “stark differences” between a traditional pension and Christopher’s judicial income. It also weighed Katherene’s rebuttal that concluded the availability of statutory options for the judge’s years beyond regular, active service constitutes a retirement plan.
Past Pennsylvania cases also held that a judicial annuity was subject to equitable distribution and that state retirement benefits were marital property that could be divided equally.
The appeals court “failed to uncover persuasive legal authority from either the federal courts or this Commonwealth from which we may determine definitively that Husband’s Judicial Income is salary or retirement. We further acknowledge the restricted relationship a state court has in applying a federal statute when that statute has been the subject of interpretation and application by a federal governmental body.”
It found several additional resources in its interpretation of the law, including that Pennsylvania pensions aren’t subject to the state income tax. Several federal judges in Pennsylvania have also retired and received income pursuant to Section 371.
“Consistent with the foregoing, we are constrained to remand this issue for further proceedings. As this Court has held, ‘where there is insufficient evidence to support the trial court’s order, the judgment is manifestly unreasonable.’ Strawn v. Strawn, 664 A.2d 129, 131 (Pa. Super. 1995).’”
On the issue of whether Christopher’s judicial income is marital property subject to equitable distribution, the appeals court believed the trial court erred in using its own actuarial calculation to determine a present value. The parties agreed to use a deferred distribution method. Christopher asserted that the trial court erred in applying the immediate offset method. The appeals court “expressly recognized that the marital estate lacks sufficient assets to offset the marital value of Husband’s Judicial Income.”
The ruling concluded that the trial court abused its discretion in adopting a present value for Christopher’s judicial income, which affects the overall equitable distribution award. The appeals court remanded the issue to the trial court to apply the deferred distribution method to divide the judicial income equally.
Find out more about dividing retirement and other forms of income in our CFL course. See why it’s not always who you know, it’s what you know that helps you attract new clients with our free information packet today.
About the author