IN RE THE MARRIAGE OF DAVID A. BROWN AND PAMELA S. BROWN Upon the Petition of DAVID A. BROWN, Petitioner-Appellant, And Concerning PAMELA S. BROWN, Respondent-Appellee.
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IN THE COURT OF APPEALS OF IOWA
No. 9-108 / 08-0948
Filed May 29, 2009
IN RE THE MARRIAGE OF DAVID A. BROWN
AND PAMELA S. BROWN
Upon the Petition of
DAVID A. BROWN,
Petitioner-Appellant,
And Concerning
PAMELA S. BROWN,
Respondent-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Woodbury County, Mary Jane
Sokolovske, Judge.
David Brown appeals following entry of the district court’s order dividing
his pension. AFFIRMED.
R. Scott Rhinehart of Rhinehart Law, P.C., Sioux City, for appellant.
Francis L. Goodwin of Baron, Sar, Goodwin, Gill & Lohr, Sioux City, for
appellee.
Heard by Sackett, C.J., Vogel, J., and Nelson, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2009).
2
NELSON, S.J.
David Brown appeals the district court’s order regarding construction of
the Qualified Domestic Relations Order (QDRO) dividing his pension. We affirm.
I. Background Facts and Proceeding.
David and Pamela Brown’s nearly twenty-seven-year marriage was
dissolved by decree on June 30, 1999.
Paragraph twenty of the decree
governed dispersal of David’s retirement account:
20. David has an IPERS pension plan which is currently valued at
approximately $22,500.00. This plan should be divided so that
David receives 60% of it and Pamela receives 40% of it. This is to
account in the disparity in value of the property previously awarded
the parties. A separate Qualified Domestic Relations Order should
be entered in such regard. The parties should submit such an
order to the Court for its signature.
Both parties submitted proposed QDROs to the court in March 2007, after
the error had been discovered. David’s proposed QDRO divided the pension so
that Pamela would receive $9000 plus interest from June 30, 1999. 1 Pamela’s
proposed QDRO divided the pension under the percentage method, as adopted
by our supreme court in In re Marriage of Benson, 545 N.W.2d 252, 255-56 (Iowa
1996) (stating Iowa law gauges the value of the spouse’s share in the pension
plan from the time of maturity at actual retirement, rather than freezing the
spousal share at the time of dissolution). David contended Pamela’s proposed
1
David calculated the $9000 amount using the dissolution decree’s award to Pamela of
forty percent of David’s IPERS pension, which the court valued at $22,500. According to
David’s proposed QDRO, his pension would be divided as follows:
IPERS is directed to pay benefits to the Alternate Payee [Pamela] as a
marital property settlement under the following formula: $9,000 plus
interest accumulated from June 30, 1999, of the Member’s [David] gross
lump sum payment at the time of distribution if paid as a lump sump
benefit, or $300 or the Member’s gross monthly payment at the time of
distribution if paid as a monthly allowance until $9,000 plus interest is
reached.
3
QDRO was not appropriate because the formula incorporated, for Pamela’s
benefit, the eight years of contributions by David since the 1999 dissolution
decree.
A hearing on the entry of the QDRO was held on April 7, 2007.
On
August 30, 2007, the district court issued its order adopting Pamela’s proposed
QDRO. The court concluded the Benson percentage method applied and the
pension should be divided at the time of maturity, not frozen at the time of
dissolution. As the court stated:
The court finds that in considering the case law set out in Benson
and the arguments of counsel in relation to the Decree of
Dissolution, paragraph 20, that it is appropriate in this instance to
apply the percentage method as proposed by the respondent
[Pamela]. The court agrees with the reasoning set forth in Benson
at pages 256 and 257 wherein the court examined the inequity that
would result to the non-pensioner spouse if her benefit was “frozen”
on the date of dissolution.
Therefore, according to the court’s order, David’s pension was to be divided as
follows:
IPERS is directed to pay benefits to the Alternate Payee [Pamela]
as a marital property settlement under the following formula: 40% of
the gross monthly or lump sum benefit payable at the date of
distribution to the Member multiplied by the “service factor.” The
numerator of the service factor is the number of quarters covered
during the marriage period of October 7, 1972 through June 30,
1999 and the denominator is the Member’s [David] total quarters of
service covered by IPERS and used in calculating the Member’s
benefit.
David appealed on August 30, 2007. Meanwhile, on August 27, 2007,
Pamela filed a motion pursuant to Iowa Rule of Civil Procedure 1.904(2), to
resolve several wording issues of the proposed QDRO, which David later
resisted. David’s appeal was dismissed as premature while Pamela’s motion
4
was pending, and on April 18, 2008, the court granted Pamela’s motion.2
Thereafter, David filed a rule 1.904(2) motion to amend, enlarge, and clarify on
April 23, 2008, contending the court incorrectly applied the Benson percentage
method to the distribution of his pension.
The court denied the motion on
May 16, 2008. David appeals.
II. Scope and Standards of Review.
We review dissolution decrees de novo.
Iowa R. App. P. 6.4; In re
Marriage of Fennelly, 737 N.W.2d 97, 100 (Iowa 2007). Though we are not
bound by them, we give weight to the district court’s factual findings and
credibility determinations. In re Marriage of Sullins, 715 N.W.2d 242, 247 (Iowa
2006).
III. Merits.
Pensions are divisible marital property. Id.; In re Marriage of Branstetter,
508 N.W.2d 638, 640 (Iowa 1993). Iowa recognizes two accepted methods for
dividing pensions:
the present-value method and the percentage method.
Sullins, 715 N.W.2d at 248. Furthermore, “there are two main types of pension
plans: defined-benefit plans and defined-contribution plans.” Id. IPERS is a
defined-benefit plan. Id. at 249. As our supreme court recognized in Benson,
IPERS uses a “percentage of earnings per year of service formula.” Benson, 545
N.W.2d at 254-55.
Such formula “provides a benefit that is related to the
employee’s earnings and length of service.” Id. at 255.
2
The court’s ruling (1) prohibited David from taking a lump sum distribution that would
effectively deny Pamela her entitlement and (2) allowed for any interest on both
preretirement and postretirement death benefits.
5
Although both methods can be used to divide both types of pension plans,
it is usually preferable to use the percentage method when dividing a definedbenefit plan such as IPERS. Sullins, 715 N.W.2d at 248. Under the percentage
method, a QDRO awards the non-pensioner spouse a percentage of a fraction of
the pensioner’s benefits (based on the duration of the marriage), and the QDRO
is paid off when the benefits mature. See id. at 250; Benson, 545 N.W.2d at 255.
With regard to calculation under the percentage method:
The fraction represents the portion of the pension attributable to the
parties’ joint marital efforts. The numerator in the fraction is the
number of years the pensioner accrued benefits under the plan
during the marriage, and the denominator is the total number of
years of benefit accrual.
Sullins, 715 N.W.2d at 250 (internal citations omitted).
We first note that the decree was unresolved at the time the district court
received the parties’ proposed QDROs in 2007, as the QDROs were never
submitted to the decretal court for approval in 1999. Therefore, the district court
was correct in making an initial valuation and distribution.
With such an
undistributed asset, it was appropriate for the court to make the delayed
distribution.
Although we find merit in David’s contention that the decretal court
intended for the pension to be divided under the present-value method,3 we
conclude the court correctly interpreted Iowa law and entered a QDRO ordering
David’s pension to be divided under the percentage method. Division of David’s
The decretal court specifically stated the pension was “currently valued at $22,500” and
then proceeded to divide it so that David received sixty percent and Pamela received the
remaining forty-percent in order to “account for disparity in value of the property
previously awarded to the parties.”
3
6
pension under the present-value method would be inequitable and unacceptable
under the circumstances of this case.
The decretal court specified the
percentage to be divided was of the plan, not of the current value.4 Furthermore,
the decretal court’s determination of the present value of David’s pension was
not based on actuarial evidence. David’s affidavit of financial status accounted
for the “current cash value” of his IPERS pension plan, based on his personal
contributions to the plan (and interest earned on those contributions) over the
years of his employment. However, the present value of David’s IPERS pension
is more than the present value of his contributions.5
Under Iowa law, the percentage method is the accepted method for
division of IPERS pension plans. See, e.g., id. at 248; Benson, 545 N.W.2d at
254-56; In re Marriage of Scheppele, 524 N.W.2d 678, 679-80 (Iowa Ct. App.
1994). We conclude the most equitable solution in this case is to divide David’s
pension under the percentage method.
We further find the district court’s
delayed distribution under that method was appropriate. We therefore affirm the
district court’s order entering a QDRO dividing David’s pension according to the
percentage method, as well as the court’s subsequent rulings with regard to such
order. Costs on appeal are assessed to David.
AFFIRMED.
Vogel, J., concurs; Sackett, C.J., dissents.
As the decretal court stated, “This plan should be divided . . .” (emphasis added).
David’s pension has no relation to the present value of his future benefits and is not
limited to the value of his vested contributions because such contributions are not used
to calculate benefits. See Iowa Code § 97B.49A(3) (2007); Sullins, 715 N.W.2d at 249.
“Instead, the benefits are ultimately tied to a percentage of the of the employee’s
average wages.” Sullins, 715 N.W.2d at 249.
4
5
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SACKETT, C.J. (dissenting)
I dissent. I believe the district court and the majority have impermissibly
modified the property provision of the Brown’s dissolution decree in changing the
allocation of David Brown’s IPERS benefits made in the original decree.
Pension benefits are a form of property. In re Marriage of Martin, 641
N.W.2d 203, 204 (Iowa Ct. App. 2001); see also In re Marriage of Wilson, 449
N.W.2d 890, 892 (Iowa Ct. App. 1989); In re Marriage of Jensen, 396 N.W.2d
367, 369 (Iowa Ct. App. 1986); In re Marriage of Byall, 353 N.W.2d 103, 106
(Iowa Ct. App. 1984). Ordinarily, a dissolution decree settles all property rights
and interests of the parties. Prochelo v. Prochelo, 346 N.W.2d 527, 529 (Iowa
1984); see also Walker v. Walker, 203 N.W.2d 320, 322 (Iowa 1972); Carr v.
Carr, 185 Iowa 1205, 1211, 171 N.W. 785, 787 (1919). In the context of a
modification proceeding, the property division of a decree is not subject to
change in the absence of extraordinary grounds. In re Marriage of Johnson, 299
N.W.2d 466, 467 (Iowa 1980). In divorce proceedings, property rights that have
not been otherwise settled must, of necessity, be settled by the decree, and it
can make no difference where the title rests. Prochelo, 346 N.W.2d at 529. If
title is left undisturbed, it is, in effect, adjudged in the party who holds it. Id. In
other words, property rights are settled and are adjudged in a divorce decree
whenever the parties own property. Id.; see also In re Marriage of Ruter, 564
N.W.2d 849, 851 (Iowa Ct. App. 1997).
In the original decree entered in June of 1999, the district court
determined the parties’ respective interests in David’s IPERS pension account.
8
The court valued it at approximately $22,5006 and the plan was divided so that
Pamela was to receive forty percent of the $22,500, meaning that Pamela
received about $9000 in value on June 30, 1999, and nothing more. David’s
proposal for a QDRO that would allow Pamela to receive $9000 plus interest
from June 30, 1999, is in accord with the division made in the decree. No appeal
was taken from this decree, consequently the valuation and division made there
of the IPERS account is no longer subject to challenge. Yet, the order approved
by the district court and the majority opinion gives Pamela a greater interest in
the pension account than she was ordered to receive under the original decree.
The majority has justified the modification of the property division of the
original decree under the guise that the decree was “unresolved” 7 because the
QDRO was not yet entered. I see the majority’s reasoning taking us down a
slippery slope. It seems the majority is holding that a decree is “unresolved” and
the property division is subject to modification after it is issued until that time
when divisions of property ordered in the decree are actually accomplished.8 I
believe the “unresolved decree” the majority is attempting to create conflicts with
authorities that say a dissolution decree settles all property rights and interests of
the parties. See Prochelo, 346 N.W.2d at 529; Roberts v. Playle, 150 Iowa 279,
280, 129 N.W. 945, 946 (1911); Ruter, 564 N.W.2d at 851.
6
This represented David’s contributions to IPERS to the date of the dissolution.
They cite no authority nor do I find any that defines an “unresolved decree.” Nor do
they cite authority to support a finding that we recognize an “unresolved decree.”
8
For example, is the majority saying the allocation of the proceeds of a particular piece
of property ordered transferred to one party or sold, can be modified at any time until a
conveyance of the property or sale is accomplished?
7
9
I recognize that in In re Marriage of Benson, 545 N.W.2d 252, 257 (Iowa
1996), the court, in an appeal from an original decree, found it preferable to set
the value of pension benefits at maturity.9 However, unlike the majority, I do not
find this case controlled by Benson.
First and most importantly, we are
interpreting a decree, not making an initial valuation and division of the IPERS
account. Second, I believe that Benson does no more than suggest a way to
divide pension accounts to allow the nonpension spouse to receive benefit from
the fact his or her interest is locked in until retirement. David’s proposed QDRO
gives Pamela credit for her interest remaining in the account until his retirement
by providing that she shall have interest on her $9000. Third, the valuation and
division of the account was made in the original decree, and the fact that another
division may have been more equitable is not the question. Fourth, I disagree
with the majority’s reasoning that the result they reached is justified because the
dissolution court specified the percentage to be divided was of the plan, not its
current value. We value property at the time of the decree.
The date of the
dissolution is the only reasonable time when an assessment of the parties’ net
worth should be undertaken. Locke v. Locke, 246 N.W.2d 246, 252 (Iowa 1976);
Schantz v. Schantz, 163 N.W.2d 398, 405 (Iowa 1968). We value property for
division purposes at the time of the dissolution. See Locke, 246 N.W.2d at 252.
It is the net worth of the parties at the time of trial which is relevant in adjusting
property rights. In re Marriage of Muelhaupt, 439 N.W.2d 656, 661 (Iowa 1989);
In re Marriage of McLaughlin, 526 N.W.2d 342, 344 (Iowa Ct. App. 1994).
9
Justices Lavorato, Larson, and Ternus dissented from this holding. See Benson, 545
N.W.2d at 258-62.
10
The majority also appears to suggest the result they reached is justified by
the fact that the pension value was not based on actuarial evidence.10
This
suggestion takes us further down the slippery slope indicating that a property
division can be modified later when a party may have missed getting a high
enough valuation on a piece of property. In Ruter, this court addressed an issue
similar to what we have here, where a wife filed an application for modification,
claiming it was equitable to award her a portion of a husband’s IPERS account
even though she had received no portion of it in the original decree. Ruter, 564
N.W.2d at 850.
Her financial statement filed in the original proceedings
acknowledged that she was aware her then husband made biweekly
contributions to his IPERS account and there was evidence it had been
discussed.
Id.
The district court found the husband’s IPERS benefit was
personal property that escaped disposition in the decree and awarded her a part
of his monthly benefits. Id. This court determined the resolution of the issue
required an interpretation of the decree dissolving the Ruters’ marriage. Id. at
851. This court determined the district court’s conclusion that the IPERS benefits
were not distributed by the decree conflicted with the rule of Prochelo, 346
N.W.2d at 529, and Roberts 150 Iowa at 280, 129 N.W. at 946, that a dissolution
decree settles all property rights and interests of the parties. Id.
For these reasons, I would reverse and direct the district court to approve
David’s proposed QDRO.
10
Both parties had the same information as to the pension value, consequently there
can be no claim that its value was misrepresented by David.
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