As always, prior to reading this post, please review my disclaimer by clicking on the link above, or by clicking on this link. Any legal principles discussed apply only to the Commonwealth of Virginia.
Introduction
In this day and age, saving up for retirement is a critical part of any person's career. When you get divorced, however, your retirement savings generally do not escape unscathed. After all, if your spouse has been staying at home to take care of the kids, allowing you to work and make substantial income, is it really fair for your spouse to get stuck with none of your retirement savings?
The law surrounding what happens to one's retirement in a divorce is very complicated. One blog post cannot possibly hope to capture the scope of this issue, but in this post, I hope to provide a basic outline of how retirement assets are handled in a divorce in Virginia.
Retirement Benefits Earned During Your Marriage are Marital Property - With One Big Exception
First of all, like all money earned while you are married, and property purchased with money earned while you are married, retirement benefits earned while you are married are marital property, and subject to division by a divorce court. There is one big exception to this, however, and that is Social Security benefits. Your Social Security benefits are always your separate property (this is by mandate of federal law), so a divorce court cannot touch your Social Security.
Now, you might already be thinking of some questions. How do I determine what benefits were and weren't earned during the marriage? What time period counts as "during the marriage"? How does a court determine how to divide those benefits? Moreover, since I can't touch my retirement until I'm a certain age, how does a court physically divide those assets?
The Basic Rules for Dividing Retirement Benefits
Well, first of all, the basic rules for dividing retirement benefits are laid out in the Code of Virginia - specifically Section 20-107.3(G)(1), where the Code states that "upon consideration of the [equitable distribution factors]... the court may direct payment of a percentage of the marital share of any [retirement account]... the court may only direct that payment be made as such benefits are payable. No such payment shall exceed 50 percent of the marital share of the cash benefits actually received by the party against whom such award is made. 'Marital share' means that portion of the total interest, the right to which was earned during the marriage and before the last separation of the parties, if at such time or thereafter at least one of the parties intended that the separation be permanent."
So, let's parse all of that out. The first part tells us that retirement assets are divided upon consideration of the equitable distribution factors listed in Section 20-107.3(E). So this tells us that the division of a retirement account is, generally, subject to the same rules as division of all other marital property - meaning there is no automatic 50/50 division of the property, rather the court must decide what is fair based on the list of factors.
The next part just tells us that the court can divide retirement accounts. After that, we see that the court cannot require those benefits to be paid until they are actually payable - so you can't face a penalty for having an early withdrawal from a 401(k) since the court cannot force you to make such an early withdrawal.
Next, we see a requirement that the non-owning spouse cannot be awarded more than 50% of the marital share of the benefit. This is an important difference between how retirement benefits and other marital property are divided. While the court may generally conclude that the 20-107.3(E) factors warrant your ex getting 65% of the marital property, the court cannot award your ex more than 50% of the marital share of your retirement account.
Note also that the rule does not restrict the other direction. In other words, if the court determines that the factors under 20-107.3(E) warrant your ex only getting 35% of the marital property, then the court also has the option to only award your ex 35% of the marital share of your retirement benefits.
Finally, the section tells us that the "marital share" of those benefits is the rights in the benefits that are earned between the date of marriage and the date of separation (not the date of divorce), so all benefits earned after the separation are your separate property.
How to Calculate the Marital Share
So, saying how the marital share is defined is one thing - actually calculating it is quite another. So, what does all the legal jargon about "that portion of the total interest, the right to which was earned during the marriage" actually mean? Well, it depends on what type of retirement account you are referring to.
There are two types of retirement accounts - defined contribution plans, and defined benefit plans. A defined contribution plan is a plan where you contribute certain amounts over time, and then, within certain rules, once you reach a certain age you withdraw what you want to withdraw. Examples of defined contribution plans are 401(k)'s, federal Thrift Savings Plans, and IRAs. A defined benefit plan is one where, upon certain conditions being met, you become entitled to certain regular payments for the rest of your life (or until a set time). Examples of defined benefit plans are your standard pensions, retirement annuities, federal FERS and CSRS benefits, and Virginia state VRS benefits.
For defined contribution plans, the marital share is all contributions made between the date of marriage and the date of separation, plus all earnings and losses attributable solely to those contributions.
For defined benefit plans, the marital share is usually defined by a formula. You take the total number of months (a) between the date of marriage and date of separation, and (b) where you were employed by the employer whose plan you are dividing, and then divide that by the total number of months you were employed by the employer whose plan you are dividing (both during and not during the marriage).
An example would be that if you began work for an employer with a defined benefit plan on January 1, 2010, got married on January 1, 2011, separated on January 1, 2012, and left that employer on January 1, 2013, your numerator would be 12 (total months you were employed during the marriage), and your denominator would be 36 (total months you were employed), for a fraction of 1/3.
Similarly, if you got married on January 1, 2010, began work for an employer with a defined benefit plan on January 1, 2011, separated on January 1, 2012, and left that employer on January 1, 2013, your numerator would be 12 (total months you were both employed and married), and your denominator would be 24 (total months you were employed), for a fraction of 1/2.
Once you get your fraction, you then multiply it by your periodic payments, to give you the portion of those payments that is marital. This is not the portion your spouse gets - it's just the portion that is marital. That is the portion that gets divided.
How do courts physically divide the retirements?
So, this probably sounds very complicated, especially if you have to do it yourself. Moreover, since the benefits can't be kicked in until you'd normally be eligible, you might be wondering if you have to keep this in mind for potentially decades, then meticulously calculate a division of each payment. Fortunately, you do not - rather, the Court will enter an order directing your retirement benefit administrator on how to divide your retirement assets. It is then on your administrator to make sure it is done properly.
A federal law called the Employee Retirement Income Security Act of 1974 (ERISA), which has been amended multiple times since 1974, creates a large number of protections for retirement accounts, and also provides the means of dividing most retirement accounts. ERISA creates a concept known as the "Qualified Domestic Relations Order" (QDRO, generally pronounced like "quad-row"). QDROs are universally recognized orders that, if they meet certain conditions, will require a retirement administrator anywhere in America to properly divide a retirement account.
For defined contribution retirement plans, the QDRO will lay out the relevant dates, and then require the plan administrator to calculate the marital share, divide the marital share, then take the other spouse's portion of the marital share and open a 401(k), IRA, or other equivalent account in that spouse's name with the funds. Once the new account has been created and the money removed from one and put in the other (known as the funds being "segregated"), the process is complete and you are back to having complete control of your account. No penalties are given for early withdrawals, taxes, etc.
For defined benefit plans, the QDRO will contain the formula mentioned above, and the plan administrator will retain that until the denominator is determined (since you may still be working at that employer when you divorce). Once the denominator is determined, the administrator will determine the share of funds your ex will be entitled to, and once you retire and start earning funds, the account administrator will divert your ex's share directly to your ex.
Note, however, that ERISA does not apply to federal employees. As a result, federal retirement plans are divided by what is known as a "Court Order Acceptable for Processing" (COAP). Rules for COAPs are put out by OPM on a routine basis. Note that TSPs and FERS/CSRS plans have different administrators, so you will need a separate order for division of a TSP and for division of a FERS/CSRS plan.
Finally, the State Department and military each have their own systems separate from the rest of the federal government. The military will divide military retired pay via an allotment, which can be done if the proper language is included in the Final Decree of Divorce itself. State Department retirement plans must be divided per State Department rules.
Conclusion
Remember how I said at the beginning of this post that retirement division is far too complicated a topic for one post? Then do you see how complicated this post was? Well, I stand by what I said at the beginning - this post is only a basic overview. Once you get into the details, it gets very muddy. If you are involved in a divorce and there are substantial retirement assets involved, I cannot strongly enough recommend that you get an attorney. If you would like to discuss your case with an attorney, please feel free to call (703)281-0134 or e-mail me at SLeven@thebaldwinlawfirm.com to set up a consultation. Our initial consultations are free for up to half an hour!
Friday, September 25, 2015
Friday, September 11, 2015
Legal FAQ Part V
As always, before reading this post, please review my disclaimer by following the link above, or by clicking on this link. As always, any legal principles discussed apply only to the Commonwealth of Virginia.
Introduction
Once a staple of this blog, I discovered today that I haven't done a true Legal FAQ since February of last year! As with my previous FAQ's, today I will answer questions that I am frequently asked by friends, family, clients and others, but which, in my opinion, don't really warrant a full blog post of their own. As you will see, one topic from the news has been dominating my discussions with people who have these kinds of questions lately, so it will also be dominating this FAQ. You can find my previous FAQ's here:
FAQ Part I
FAQ Part II
FAQ Part III
FAQ Part IV
Why was it constitutional to jail Kim Davis?
This is the question I've gotten from non-attorney friends the most recently - and not surprisingly. In case you've been living under a rock, Kim Davis is the county clerk in Kentucky who refused to issue marriage licenses because if she did so, she would have to issue them to same-sex couples, and doing so violates her religious beliefs. A federal judge said that her religious beliefs do not allow her to refuse to do her work duties and ordered her to resume issuing licenses. When she refused, she was sent to jail for contempt of court.
Here's the thing - when someone works for the government, they act as an arm of the government while they are working. If your religious beliefs prevent you from performing your duties as a government official, you simply cannot hold that title. You have a right to believe whatever you want, to worship who you want and how you want, but you do not have a right to impose that belief on others, and when you are in a position of power in the government, that generally means you cannot use your own religious beliefs in a way that prevents you from providing services to the public. As such, Ms. Davis had no right to withhold those licenses - she needed to either resign, or issue the licenses. When she refused, she was correctly jailed for contempt. It would be the same result for, say, a conservative Muslim DMV clerk who didn't want to issue driver's licenses to women, or an Orthodox Jewish SBA employee who didn't want to approve loans to businesses that would be open on Saturdays.
Now, unfortunately, a lot of misinformation out there has caused this case to be compared to a recent Supreme Court opinion in which Abercrombie and Fitch was found to have discriminated against a Muslim woman because they wouldn't hire her since she couldn't abide by their employee dress code. This is a false comparison for a wide variety of reasons. First, the issue in front of the Supreme Court was largely unrelated to the underlying issue - Abercrombie actually essentially admitted they discriminated, but claimed that because they'd only guessed she was Muslim (rather than her having actually told them that she was) then the relevant federal civil rights law didn't apply. The Supreme Court (in my opinion correctly) said that argument was ridiculous. Now, on the broader law, federal civil rights laws say that it is religious discrimination not only if a company refuses to hire someone solely because of their religion, but also if the company refuses to hire someone or fires someone because the practice of their religion conflicts with the policies of the employer, so long as it is possible to reasonably accommodate the employee's practices.
So, you not only can't refuse to hire someone because of their religion, you also must allow them to practice their religion so long as doing so would be reasonable. So, what is a "reasonable accommodation"? Generally speaking, this is something where it would not particularly burden the employer or hurt the company to accommodate the practice. What is generally not seen as a "reasonable accommodation" however is changing one of the core functions of the job. In the Abercrombie and Fitch case, most people agreed that adhering to the employee dress code was not a core function of the job, and that accommodating the woman by allowing her to wear a head scarf was not a substantial burden of any kind. In other cases, however, it has been held to not be discrimination to, say, require people to work on certain religious holidays (so long as certain pre-conditions are met), to require Muslim waiters/waitresses to serve alcohol, and other actions where, again, one of the core functions of the job is involved.
Now, it's important to note first of all that these laws apply to private employers. Government employers actually have more flexibility in how they treat their employees because there is special consideration given to the fact that the employees speak for the government. Nonetheless, even if the government were treated the same way Ms. Davis would not fit into the discrimination category. Why? Kentucky law requires all court clerks to issue marriage licenses, and court clerks are the only people who issue marriage licenses in Kentucky. To that end, accommodating Ms. Davis would be doubly unreasonable - issuing licenses is a core function of her job, and failing to issue them substantially burdens the citizenry since they'd have to leave the county to get a license elsewhere.
Ultimately, I'm reminded of the quote of a constitutional law professor in Maryland some years back: "People place their hand on the Bible and swear to uphold the Constitution; they don't put their hand on the Constitution and swear to uphold the Bible." The moment Ms. Davis became a government official, she surrendered the right to use her religion as a basis to defy the law. Her proper course of action was to resign. When she failed to do that, the court did what it needed to do.
Is the Dred Scott decision really still the "law of the land" but just ignored by politicians and courts?
I had hoped my missive about Kim Davis would be all I'd need to write on this topic, but yesterday a completely bone-headed comment by presidential candidate Mike Huckabee caught my attention and led to more questions. In his quest to argue that the Supreme Court really doesn't have the "final say" in what is and isn't constitutional, Huckabee argued that the infamous Dred Scott decision of 1857, which declared African-Americans to be less than human, and subsequently incapable of being citizens of the United States, is still the "law of the land" but is simply disregarded by courts and politicians today. I can confidently say, however, that Mr. Huckabee is dead wrong.
You see, out of all the things he gets wrong, Huckabee gets one thing right - the Supreme Court doesn't have the "final say" of what is and isn't constitutional. Now, it does have the final say over what is and isn't constitutional at the moment that the court considers the case - and that has been the case since 1804 - but as anyone who passed middle school civics will tell you, that's not the end. Congress and the states have the power to change the constitution by way of an amendment, and any Supreme Court opinion to the contrary prior to the passage of that amendment is then effectively overruled. While Dred Scott was the law of the land in 1857, literally every single thing that it held was overturned by the 13th, 14th and 15th amendments, which were ratified in 1865, 1868 and 1870 respectively. As a result, Dred Scott has absolutely not been the "law of the land" since at least 1870.
How does Kim Davis differ from a conscientious objector?
Sigh... Yep, not getting away from the Kim Davis questions, am I? Ok, this is another one I've been asked about a lot because Ms. Davis's attorneys themselves brought it up. They pointed out that we have a long history in this country of recognizing conscientious objection, and Ms. Davis should be treated the same. For those who don't know, a conscientious objector is someone who belongs to a religion that believes war, in all circumstances, is morally wrong, and who subsequently will not join the military, even in a draft. The most well known religious group holding this view is the Quakers.
Now, historically, the US has honored conscientious objection. When we have had drafts, there is quite an extensive review to go through to make sure it's an honestly held belief - not just an effort to get out of the draft - but if proven, conscientious objectors have been exempt from drafts. What's important to note, however, is that the courts held multiple times that the US is not required to honor conscientious objection. There are many good reasons to do so, but the next time the US has a draft, the Congress could very well decide "eh, we'll just draft everyone" and that would be perfectly allowed. However, there's a more important distinction here. Conscientious objection allowed people to not be put into a position where they would have to violate their religious beliefs to do their job - Ms. Davis is already in that position. A more direct comparison would be a Quaker who voluntarily joins the army, collects an army paycheck, obtains army benefits, and then refuses to be deployed - that simply would not be allowed.
So does anyone other than the courts get a say in what's constitutional?
So, in light of the above, you might be thinking that it's fairly clear cut that only the court's opinion of constitutionality matters. This couldn't be further from the truth. Beyond the power to amend, every single government employee has also taken an oath to uphold the constitution. While the Supreme Court may have the final say on what is and isn't constitutional as the constitution is currently written, the other branches of government still have to make their own analysis and, within limits, can act accordingly even if they disagree with the Supreme Court.
First of all, when the Court rules a law unconstitutional, it is unenforceable, period. But when the Court finds something constitutional, the law can still be repealed because members of Congress and the President disagree. Members of Congress can vote against a law they believe unconstitutional, and a President can veto a law he or she believes unconstitutional - in fact, I would hope that they would in such a situation. A President even has the power to refuse to enforce a law he or she believes unconstitutional, unless and until a court orders otherwise. In other words, the Supreme Court may have the "final" say, but it does not have the "only" say.
Final Thought
Today is a rough day for many people in this country. Fourteen years ago, the horrors of war and terror were brought to our shores. Yet, we also saw this country's ability to stand together as one. As political discourse gets worse and worse in this country, I simply pray that we all remember that we are all Americans - and that "same" is far more important than any of our "differents."
Introduction
Once a staple of this blog, I discovered today that I haven't done a true Legal FAQ since February of last year! As with my previous FAQ's, today I will answer questions that I am frequently asked by friends, family, clients and others, but which, in my opinion, don't really warrant a full blog post of their own. As you will see, one topic from the news has been dominating my discussions with people who have these kinds of questions lately, so it will also be dominating this FAQ. You can find my previous FAQ's here:
FAQ Part I
FAQ Part II
FAQ Part III
FAQ Part IV
Why was it constitutional to jail Kim Davis?
This is the question I've gotten from non-attorney friends the most recently - and not surprisingly. In case you've been living under a rock, Kim Davis is the county clerk in Kentucky who refused to issue marriage licenses because if she did so, she would have to issue them to same-sex couples, and doing so violates her religious beliefs. A federal judge said that her religious beliefs do not allow her to refuse to do her work duties and ordered her to resume issuing licenses. When she refused, she was sent to jail for contempt of court.
Here's the thing - when someone works for the government, they act as an arm of the government while they are working. If your religious beliefs prevent you from performing your duties as a government official, you simply cannot hold that title. You have a right to believe whatever you want, to worship who you want and how you want, but you do not have a right to impose that belief on others, and when you are in a position of power in the government, that generally means you cannot use your own religious beliefs in a way that prevents you from providing services to the public. As such, Ms. Davis had no right to withhold those licenses - she needed to either resign, or issue the licenses. When she refused, she was correctly jailed for contempt. It would be the same result for, say, a conservative Muslim DMV clerk who didn't want to issue driver's licenses to women, or an Orthodox Jewish SBA employee who didn't want to approve loans to businesses that would be open on Saturdays.
Now, unfortunately, a lot of misinformation out there has caused this case to be compared to a recent Supreme Court opinion in which Abercrombie and Fitch was found to have discriminated against a Muslim woman because they wouldn't hire her since she couldn't abide by their employee dress code. This is a false comparison for a wide variety of reasons. First, the issue in front of the Supreme Court was largely unrelated to the underlying issue - Abercrombie actually essentially admitted they discriminated, but claimed that because they'd only guessed she was Muslim (rather than her having actually told them that she was) then the relevant federal civil rights law didn't apply. The Supreme Court (in my opinion correctly) said that argument was ridiculous. Now, on the broader law, federal civil rights laws say that it is religious discrimination not only if a company refuses to hire someone solely because of their religion, but also if the company refuses to hire someone or fires someone because the practice of their religion conflicts with the policies of the employer, so long as it is possible to reasonably accommodate the employee's practices.
So, you not only can't refuse to hire someone because of their religion, you also must allow them to practice their religion so long as doing so would be reasonable. So, what is a "reasonable accommodation"? Generally speaking, this is something where it would not particularly burden the employer or hurt the company to accommodate the practice. What is generally not seen as a "reasonable accommodation" however is changing one of the core functions of the job. In the Abercrombie and Fitch case, most people agreed that adhering to the employee dress code was not a core function of the job, and that accommodating the woman by allowing her to wear a head scarf was not a substantial burden of any kind. In other cases, however, it has been held to not be discrimination to, say, require people to work on certain religious holidays (so long as certain pre-conditions are met), to require Muslim waiters/waitresses to serve alcohol, and other actions where, again, one of the core functions of the job is involved.
Now, it's important to note first of all that these laws apply to private employers. Government employers actually have more flexibility in how they treat their employees because there is special consideration given to the fact that the employees speak for the government. Nonetheless, even if the government were treated the same way Ms. Davis would not fit into the discrimination category. Why? Kentucky law requires all court clerks to issue marriage licenses, and court clerks are the only people who issue marriage licenses in Kentucky. To that end, accommodating Ms. Davis would be doubly unreasonable - issuing licenses is a core function of her job, and failing to issue them substantially burdens the citizenry since they'd have to leave the county to get a license elsewhere.
Ultimately, I'm reminded of the quote of a constitutional law professor in Maryland some years back: "People place their hand on the Bible and swear to uphold the Constitution; they don't put their hand on the Constitution and swear to uphold the Bible." The moment Ms. Davis became a government official, she surrendered the right to use her religion as a basis to defy the law. Her proper course of action was to resign. When she failed to do that, the court did what it needed to do.
Is the Dred Scott decision really still the "law of the land" but just ignored by politicians and courts?
I had hoped my missive about Kim Davis would be all I'd need to write on this topic, but yesterday a completely bone-headed comment by presidential candidate Mike Huckabee caught my attention and led to more questions. In his quest to argue that the Supreme Court really doesn't have the "final say" in what is and isn't constitutional, Huckabee argued that the infamous Dred Scott decision of 1857, which declared African-Americans to be less than human, and subsequently incapable of being citizens of the United States, is still the "law of the land" but is simply disregarded by courts and politicians today. I can confidently say, however, that Mr. Huckabee is dead wrong.
You see, out of all the things he gets wrong, Huckabee gets one thing right - the Supreme Court doesn't have the "final say" of what is and isn't constitutional. Now, it does have the final say over what is and isn't constitutional at the moment that the court considers the case - and that has been the case since 1804 - but as anyone who passed middle school civics will tell you, that's not the end. Congress and the states have the power to change the constitution by way of an amendment, and any Supreme Court opinion to the contrary prior to the passage of that amendment is then effectively overruled. While Dred Scott was the law of the land in 1857, literally every single thing that it held was overturned by the 13th, 14th and 15th amendments, which were ratified in 1865, 1868 and 1870 respectively. As a result, Dred Scott has absolutely not been the "law of the land" since at least 1870.
How does Kim Davis differ from a conscientious objector?
Sigh... Yep, not getting away from the Kim Davis questions, am I? Ok, this is another one I've been asked about a lot because Ms. Davis's attorneys themselves brought it up. They pointed out that we have a long history in this country of recognizing conscientious objection, and Ms. Davis should be treated the same. For those who don't know, a conscientious objector is someone who belongs to a religion that believes war, in all circumstances, is morally wrong, and who subsequently will not join the military, even in a draft. The most well known religious group holding this view is the Quakers.
Now, historically, the US has honored conscientious objection. When we have had drafts, there is quite an extensive review to go through to make sure it's an honestly held belief - not just an effort to get out of the draft - but if proven, conscientious objectors have been exempt from drafts. What's important to note, however, is that the courts held multiple times that the US is not required to honor conscientious objection. There are many good reasons to do so, but the next time the US has a draft, the Congress could very well decide "eh, we'll just draft everyone" and that would be perfectly allowed. However, there's a more important distinction here. Conscientious objection allowed people to not be put into a position where they would have to violate their religious beliefs to do their job - Ms. Davis is already in that position. A more direct comparison would be a Quaker who voluntarily joins the army, collects an army paycheck, obtains army benefits, and then refuses to be deployed - that simply would not be allowed.
So does anyone other than the courts get a say in what's constitutional?
So, in light of the above, you might be thinking that it's fairly clear cut that only the court's opinion of constitutionality matters. This couldn't be further from the truth. Beyond the power to amend, every single government employee has also taken an oath to uphold the constitution. While the Supreme Court may have the final say on what is and isn't constitutional as the constitution is currently written, the other branches of government still have to make their own analysis and, within limits, can act accordingly even if they disagree with the Supreme Court.
First of all, when the Court rules a law unconstitutional, it is unenforceable, period. But when the Court finds something constitutional, the law can still be repealed because members of Congress and the President disagree. Members of Congress can vote against a law they believe unconstitutional, and a President can veto a law he or she believes unconstitutional - in fact, I would hope that they would in such a situation. A President even has the power to refuse to enforce a law he or she believes unconstitutional, unless and until a court orders otherwise. In other words, the Supreme Court may have the "final" say, but it does not have the "only" say.
Final Thought
Today is a rough day for many people in this country. Fourteen years ago, the horrors of war and terror were brought to our shores. Yet, we also saw this country's ability to stand together as one. As political discourse gets worse and worse in this country, I simply pray that we all remember that we are all Americans - and that "same" is far more important than any of our "differents."
Subscribe to:
Posts (Atom)