HUSBAND AWARDED 150% OF RETIREMENT BENEFITS

Posted on February 18, 2016

Once upon a time, John Peterson met Annette. They were both attorneys and John was smitten by Annette's beauty and intelligence, so he decided he wanted to share his life and surname with Annette. John and Annette married in 1994 and they entered into marital and financial bliss as they embarked on their journey in life together.

In his law practice, John chose a life of solitude as he entered into private practice. He steadfastly made regular contributions to social security through payroll deductions. Annette, equally fastidious, began working for the County of Los Angeles as a Deputy District Attorney. She was exempt from social security deductions as her employment required her to participate in the LACERA defined-benefit retirement plan. Both parties could enjoy a certain level of satisfaction that they were being responsible citizens and marital partners in preparing for their old age.

Fast forward fourteen years and their love for one another was now lost. John and Annette are in divorce court fighting over the division of retirement benefits. John effectively says, "I get all of my social security because it's separate property, and I get half of your (Annette's) retirement plan." Annette effectively replies, "No way John! That's not fair! If I have to share my retirement plan, then I should get an off-set for half of the value of your social security." They continue to duke it out through the trial court and up to the California appellate court. Both the trial court and the appellate court agreed with John, and here's why:

The Social Security Act, 42 U.S.C. § 415(a)(7), which is called the Windfall Elimination Provision, prevents certain employees from receiving either some or all of their previous, or their spouses, social security benefits in certain conditions. In this case, the WEP applies to Annette because she was employed by a governmental agency (the LA District Attorney's Office) whose defined-benefit retirement plan (LACERA) barred its members from contributing to Social Security. See, https://www.ssa.gov/pubs/EN-05-10045.pdf.

Under California law, Annette's defined-benefit retirement plan was community property to the extent the participation occurred during marriage. However, under federal law, the social security contributions and entitlements of John are his separate property. 42 U.S.C. § 401, et seq. Because federal law preempts state law, the Appellate court could not even offset John's social security benefits against Annette's pension benefits. Thus, John was awarded all of his social security and one-half of the community portion of Annette's retirement plan through the County of Los Angeles.

Seemingly unfair, the full case analysis goes into far greater depth than I have summarized (and personalized) above. The relevant laws involved in this case could cause another fact pattern to result in a different decision, depending upon employment and exact factual circumstances.

Not surprisingly, there is currently legislation submitted as HR 711 that seeks to repeal the current Windfall Elimination Provision.