In Re the Marriage of Benson

LAVORATO, Justice

(dissenting).

I dissent to division I and II of the majority’s opinion.

The majority states the issue this way:

The unresolved question is the time at which we are to set the “value” of the benefit for purposes of calculating the equation: the vested value accrued at the time of dissolution (i.e., the amount the pensioner would be entitled to receive if he or she were to retire immediately and begin drawing benefits) or the value accrued at maturity (i.e., the amount the pensioner actually receives when he or she finally begins to draw benefits — generally at retirement).

The majority thinks the value should be the amount the employee spouse actually receives at maturity. I think the value should be the amount the employee spouse would be entitled to receive if he or she were to retire immediately and begin drawing benefits.

The result the majority reaches does violence to two fundamental principles guiding our review of property division in dissolution of marriage cases. First, in such cases, marriage partners are entitled to “a just and equitable share of the property accumulated through them joint efforts.” In re Marriage of Tzortzoudakis, 507 N.W.2d 183, 186 (Iowa App.1993) (citation omitted). While we do not require an equal division, we do require what is fair and equitable in each particular case. Id. Second, we divide pi'operty the parties own at the time of the dissolution and do not consider property they may acquire after the dissolution. See In re Marriage of Muelhaupt, 439 N.W.2d 656, 661 (Iowa 1989) (husband not entitled to interest in wife’s expected future inheritance); In re Marriage of Griffin, 356 N.W.2d 606, 608 (Iowa App.1984) (property division in dissolution action would not be based on speculation of husband’s expected future inheritance).

Relying on these two principles, the court of appeals has, over the last several years, set the value of the pension benefits at the amount the employee spouse would be entitled to receive if he or she were to retire immediately and begin drawing benefits.

In re Marriage of Voss, 396 N.W.2d 801 (Iowa App.1986) dealt with an issue involving the present value method of valuation of a pension plan. Although here the method of valuation is different, the court’s reasoning would nevertheless apply. In Voss, the wife’s expert testified the husband would receive a pension of $1500 per month at age sixty-five and it would cost $188,000 to buy an annuity to pay a man the husband’s age $1500 per month commencing at age sixty-five. Id. at 803 . The husband was fifty-four at the time of trial. Id. at 802 . Rejecting the expei't’s testimony, the court said:

The difficulty with the testimony of [the wife’s] expert is it is based on the assumption [the husband] will continue to accrue benefits for ten more years. Furthermore, the additional accrual after dissolution is property [the husband] acquires after the dissolution. There is no basis to award [the wife] an interest in property [the hus *259 band] will acquire after the dissolution, The value of the plan at [the] time of dissolution is what is relevant. [The wife] should have no interest in the increase between the time of dissolution and retirement.

Id. at 803 (emphasis added). See also In re Marriage of Keifer, 451 N.W.2d 19, 21 (Iowa App.1989) (rejecting a future value method of pension valuation because it “would unduly extend [the wife’s] interest in the future financial affairs of [her husband] following the dissolution”).

In re Petition of Sturtz, 415 N.W.2d 173 (Iowa App.1987) (en banc) presents a different twist but the court implicitly followed its Voss reasoning. The court apportioned the husband’s pension benefits in the form of periodic alimony. The husband had vested pension rights at the time of trial totaling $448 per month. If the husband continued in his employment for five more years, his pension benefits would increase to $1000 per month. The court awarded the wife $250 per month based presumably upon the pension benefits of $448 per month at the time of trial instead of the $1000 per month benefits the husband would receive after the dissolution. Id. at 174 .

In the same year it decided Sturtz, the court of appeals rendered a modification decision in which it presented a cogent reason why a nonemployee spouse should not share in an employee spouse’s pension benefits accruing after the dissolution. See In re Marriage of Skiles, 419 N.W.2d 586 (Iowa App.1987). In Skiles, the district court extended the former wife’s alimony and determined she should receive thirty-five percent of her former husband’s pension. Id. at 587 . The court of appeals reversed the decision, terminated the alimony, and denied the former wife s request that she receive part of her former husband’s pension. In rejecting this request, the court reasoned this way:

[The former husband] does have a superior financial position. His income since the dissolution has been greater than [the former wife’s]. [He] has established a new family. He and his new spouse have made substantial contributions toward his retirement. We cannot ignore the efforts of his new spouse and her rights to share the pension benefits she has helped [her htis-band] accumulate.

In re Marriage of Skiles, 419 N.W.2d at 589 (emphasis added).

Like the case here, In re Marriage of Mott, 444 N.W.2d 507 (Iowa App.1989) involved a percentage of benefits valuation. At the time of trial, the husband had been working for the same company for twenty-six years, was still working, and his pension with the company was 100% vested. The parties had been married twenty-two years. Id. at 508 . The court determined that (1) the pension should be distributed according to its present worth, and (2) the wife should receive a percentage of the accrued benefits based on the years of marriage. At the time of trial, the accrued benefits were $1790 per month, of which $1515 constituted marital property. Contrary to the majority’s formula, the Mott court limited the wife to a percentage — thirty-five percent — of the accrued benefits considered to be marital property ($1515) as of the date of trial. Id. at 511.

Significantly, the formula the court used was this:

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Id.

In a case decided the same year, the court of appeals used the same formula it had used in Mott. See In re Marriage of Oler, 451 N.W.2d 9 (Iowa App.1989). Significantly, the court said:

*260 [The husband’s] pension benefits are calculated at the present to be $977.55 per month. All of this was earned during the marriage. This amount will increase in the future. [The husband] is entitled to 100% of any increase in the pension benefits accruing after the marriage. Since the present accrued benefits [are] 100% marital property, [the wife] should be entitled to fifty percent (50%) of those benefits.

Id. at 12 (emphasis added). The court went on to reverse the district court’s determination that those benefits should be paid when the husband is first eligible to retire. Instead, the court deferred payment until the husband actually retires, noting that this “will ensure that there is an equitable division of the benefits.” Id.

Again, in In re Marriage of Williams, 449 N.W.2d 878 (Iowa App.1989), the court of appeals used the same formula it had used in Mott and Oler. Again it noted that the pension should be distributed according to its present worth and should be paid when the husband retires. Id. at 882 . At the time of trial the accrued benefits were $839.51 per month. Of this amount, the court determined $665.81 constituted marital property, that is, the amount of benefits accrued during the marriage. The court awarded the wife fifty percent of this amount. Id.

In re Marriage of Fuchser, 477 N.W.2d 864 (Iowa App.1991) involved a military pension. The parties had been married sixteen years. The husband was in his nineteenth year of military service at the time of trial. He would be eligible for a pension of $1497.70 per month if he chose to retire at the end of twenty years. He had the option of continuing his military service, which would increase his pension fund and benefit. The court of appeals determined the wife was not entitled to a percentage of benefits accumulated in the pension if the husband elected to continue his military service beyond the twenty-year period. Id. at 866 .

In determining how much of the $1497.70 was marital property, the court used the same formula it had used in Mott, Oler, and Williams:

[The husband’s] accrued pension benefit at the end of twenty years of service is $1,497.70 per month. [The wife] should receive a percentage of the accrued benefits based on the year’s of the marriage. The appropriate portion of the pension accumulated during the marriage is 16/20. Sixteen represents the duration of the marriage. Twenty represents the total number of years [the husband] worked, accumulated and became eligible for pension benefits. The total benefits therefore, which are marital property, amount to $1,198.16 per month.

Id. at 866 . The court awarded the wife fifty percent of the pension benefits identified as marital assets or $600 ($1198.16 x 50%) per month as her portion of the military pension. The court (1) determined this to be a fixed amount, (2) expressly provided any increase as a result of continued military service belonged to the husband and would not be distributable to the wife, and (3) ordered that the $600 monthly benefit be paid to the wife as benefits were paid to the husband. Id.

Finally, as recently as 1994, the court of appeals emphasized that

[i]t is the net worth of the parties at the time of trial which is relevant in adjusting their property rights. Pension contributions made as a result of post dissolution employment is property acquired after the dissolution. An increase in pension rights resulting from contributions made after a decree of dissolution but before retirement is the result of efforts made after the dissolution.

In re Marriage of Klein, 522 N.W.2d 625, 628 (Iowa App.1994) (citations omitted).

In Klein, the dissolution decree entered in 1988 divided the husband’s defined benefits pension plan between the parties, awarding the wife one half of the pension benefit the husband was entitled to receive at the time of the dissolution. The decree provided for a later entry of a qualified domestic relations order. The wife sought such an order four years later and asked that she be designated the sole survivor under the pension plan. Id. at 626 . The district court adopted the wife’s position and required the husband to name the wife as his “surviving spouse for all purposes.” Id. at 627 . The husband contended *261 the oi’der provided a result that could likely result in the wife — who was younger than he — receiving not only one half but all of the pension benefits he earned and continued to earn. The husband was forty-six at the time of the dissolution, and if he retired at sixty-five, that meant the wife would receive an additional nineteen years of pension benefits accrued after the dissolution. The court of appeals agreed and modified the order requiring the wife to be named as a survivor to one half of the pension benefits accrued at the time of the dissolution. In doing so, the court referred to its Skiles’ opinion and noted that it could not ignore the rights of any new spouse to share in the pension benefits accruing during the subsequent marriage. Id. at 628 .

Other courts have followed the court of appeals’ approach. See, e.g., Ruggles v. Ruggles, 116 N.M. 52 , 860 P.2d 182, 197 (1993) (in case in which husband’s retirement benefit was vested and matured but he did not yet plan to retire, wife was to receive monthly payment from husband equal to her share of benefit amount husband would receive were he to retire at time of trial); Berrington v. Berrington, 534 Pa. 393 , 633 A.2d 589, 594 (1993) (same); Berry v. Berry, 647 S.W.2d 945, 946-47 (Tex.1983) (same). Rejecting a formula that set the value of the pension benefit at the time of retirement, the court in Berry said:

However, to the extent that the benefits do increase as a result of future increased earnings, the formula used by the trial court has the effect of awarding benefits accruing to [the husband] after the divorce from [the wife].

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Retirement and pension benefits are a mode of employee compensation. It is clear from the record in this case that twelve additional years of work following divorce, which included some twelve to fourteen pay raises, plus union contract negotiations for an improved benefits plan, brought about the increase in retirement benefits paid to [the husband]. These post-divorce increases cannot be awarded to [the wife], for to do so would invade [the husband’s] separate property, which cannot be done.

Berry, 647 S.W.2d at 946-47 (citations omitted).

As I mentioned, setting the value of the pension benefit at the time the employee spouse retires does violence to the principle that marriage partners are entitled to a just and equitable share of the property accumulated through their joint efforts. It also does violence to the principle that we divide property the parties own at the time of the dissolution and not property they may acquire after the dissolution. As the cases point out, this is especially so when the pension benefit increases post-dissolution because of increases in wages or improvement to pension plans brought about by union negotiations. This increase is not attributable to joint efforts of the parties but to the efforts of the employee spouse alone. To the extent the nonemploy-ee spouse shares in this increase, he or she is sharing in a post-dissolution asset belonging to the employee spouse.

Setting the value of the pension benefit at the time the employee spouse retires can also prove to be unfair. For example, the marriage may be of short duration, say five years. Subsequently, the employee spouse remarries, works another fifteen years, enjoys a hefty increase in pension benefits because of wage increases and good union bargaining, and then retires. Should we ignore the new spouse and that spouse’s rights in the pension? Should we penalize the employee spouse because he or she decided to stay on the same job for an additional fifteen years to enhance the pension benefits?

At the time of trial, Robert was fifty-five years old and had ten years to retirement. Under the union contract in effect at the time of trial, Robert would be entitled to receive $1060 per month at retirement. The majority mentions a figure of $1500 per month. The pension trustees were proposing this increase in pension benefits from $1060 to $Í500 per month, but the proposal was contingent upon ratification of a union contract. I would therefore set the value of the pension benefit at $1060 per month rather than $1500. The $1060 is the value of the *262 benefit Robert would be entitled to receive if he were to retire immediately. Using the formula set out in Mott and the other court of appeals cases cited, I calculate Camy’s share of the pension this way:

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Under this formula, Camy would receive $530 per month from Robert’s pension beginning at the time Robert retires.

LARSON and TERNUS, JJ., join this dissent.