Jennings v Brown
Annotate this CaseDecided on May 30, 2014
Supreme Court, Seneca County
Vera E. Jennings f/k/a Vera E. Brown, Plaintiff
against
William R. Brown, Defendant
45047
Attorney for the Plaintiff: Carla M. McKain, Esq., McKain Law, PLLC
Attorney for the Defendant: Robert A. Groff, Jr., Esq., Law Office of Robert A. Groff, Jr.
Dennis F. Bender, J.
The parties in this post judgment matter were divorced pursuant to a divorce decree entered in the Steuben County Clerk's Office on March 11, 2005. Both parties were represented by different attorneys during the divorce action. Pursuant to their judgment of divorce it was "ordered, adjudged and decreed that all pensions, 401Ks, retirements, and/or deferred compensation plans will be settled by Qualified Domestic Relations Order using the Majauskas formula..." . Referenced in the parties judgment of divorce was an annexed stipulation entered into in Steuben County on January 13, 2005 that provides "your Honor, as far as any pensions, retirements, deferred compensations, 401Ks, all that will be settled by the proper application on Majauskas." (Transcript page 5).
There are two applications by the Plaintiff in this matter, upon submission. The first application requests that the Court interpret the foregoing language that references "Majauskas" to mean that the marital portion of the Defendant's Storage Tek 401-k account should be determined by a "tracing" method and not by use of a coverture fraction. (Majauskas v Majauskas, 61 NY2d 481(1984)). In opposition, the Defendant submits that indeed, the Majauskas formula does mean that a coverture fraction is to be used.
The second application by the Plaintiff seeks enforcement of a default judgment entered on September 6, 2013, against the Defendant in the Seneca County Family Court, by means of a Domestic Relations Order. In opposition, the Defendant asserts he has a meritorious defense and that the underlying default judgment should be vacated because he was not served with the summons. The Defendant, however, has not sought to vacate that default by motion to the Support Magistrate, Seneca County Family Court.
[*2]Division of Defendant's Storage-Tek 401 K.Plan
The husband was employed for a period of time for a company called Storage-Tek. He was already employed there, however, at the time of the parties' marriage and there was a separate property component to that account. According to the Defendant, which has not been contradicted by the Plaintiff, he worked with Storage-Tek from September 28, 1978 through October 17, 1992. The parties were married on February 14, 1986 and the divorce action was commenced on or about June 15, 2004. Thus, the marital portion of the accrual of funds in the Storage Tek 401K was from the period February 14, 1986 through the end of his employment with that Company on October 17, 1992.
The Defendant alleges, and again has not been contradicted by the Plaintiff, that he rolled over the Storage Tek funds into a Fidelity IRA on or about December 14, 2005 when it had a balance of $75,948.10.The husband's position is that approximately 43% of that account accrued during the marriage and that the Plaintiff would have an approximate 21.5% interest, plus or minus any gain/loss on that account since December 14, 2005, in accordance with the Majauskas coverture fraction. The Defendant's attorney believed the figure was $18,045.27, plus or minus any gain/loss. The Plaintiff's attorney had proposed $32,696.03, plus or minus any gain or loss. This was purportedly derived from taking the Defendant's $10,556.04 pre-marital contributions to the account from the $75,948.10, and then dividing by two. This initial proposal, however, would not have provided the Defendant with his separate gain on those funds from the date of marriage, until the present. (See McKain November 6, 2013 letter). Now, the Plaintiff submits the appropriate methodology is a tracing method, which would trace the gain or loss on the Defendant's separate property contributions to the account, and segregate that amount from the marital portion of the account. She argues that using a coverture value fraction on a 401K or IRA account is improper.
While the Plaintiff's counsel makes a compelling argument, this Court is bound by the language contained in the judgment of divorce. In the treatise by Brett R. Turner, Equitable Distribution of Property, he says "It is generally error to classify a defined contribution retirement plan using the time-based coverture fraction used to classify defined benefit plans. The time-based coverture fraction assumes that equal contributions are made to the plan and each (of the years) of the employee's service. This assumption is untrue in a defined benefit plan, for the employer's contribution to such a plan will almost always differ from year to year. To make an example; assume that an employee has twenty years of service, the first of which occurred before the marriage period. During that first year, he made a large voluntary separate property contribution of $500,000 using retirement benefits rolled over from a previous position. For the remaining nineteen years, he contributed a modest $2,000 per year. By any reasonable standard, the great majority of the retirement account is separate property. Yet, a coverture fraction approach would classify it as 95% (19/20) marital property. This situation shows, in a nut shell, why time based fractions are not applied to defined contribution plans. Classifications of defined contribution plans provide proration of funds, not proration of time." 2 Equit Distrib. Of Property, 3d § 6:24. This is the same logic set forth in the affidavit of Plaintiff's expert, C.P.A. Maureen M. Rutecki, in support of the Plaintiff's request that the Court interpret the parties' reference to the Majauskas formula as meaning a tracing [*3]methodology as opposed to use of a coverture fraction.
Despite that, its noted in the aforementioned Brett R. Turner article "Over the past few years, a small minority of cases have started to hold that use of a time-based fraction to determine the marital share of a defined contribution plan is permitted" Citing McGrath v McGrath , 261 AD2d 369 (2nd Dept 1999) (with no discussion, dividing an IRA using a coverture fraction); and McCarthy v McCarthy, 57 AD3d 1481 (4th Dept 2008) (along with other case law from other states). The rationale has generally been simplistic; a defined contribution plan is a retirement benefit and the marital share of a retirement benefit can be divided using the coverture fraction. None of these cases have cited case law adopting a majority rule or shown any awareness that a strong majority of the cases have ruled otherwise. The case law relied upon for the proposition that retirement benefits can be divided by a time-based fraction has almost always involved defined benefit plans. Some of the cases also rely on statutory references to a time-based fraction, failing to realize that a majority of states construe these references to apply only to time-based defined benefit plans." 2 Equit Dist of Property 3d, § 6:24 supra.
In summary, although it may be preferable that 401K accounts and IRA accounts be divided by the tracing methodology as opposed to the use of a coverture fraction as called for in Majauskas, it does not mean that this cannot be done, and here, the language on how the account in question was to be divided in the parties' judgment of divorce is unequivocal. Both parties were represented by counsel. The Court has no basis for looking beyond the unequivocal language contained in the parties' agreement and judgment of divorce. Gursky v Gursky, 93 AD3d 1127, (3 Dept, 2012). This court is bound by the Fourth Department which has indeed approved the use of the Majauskas formula under similar circumstances McCarthy v McCarthy, supra.
Based upon the foregoing, this Court finds that a Domestic Relations Order for dividing the wife's interest in the Defendant's Fidelity IRA account should be submitted in accordance with a coverture fraction as referenced in the Majauskas formula. Counsel for the Plaintiff should submit a proposed Domestic Relations Order in accordance with this decision on notice to counsel for the Defendant within 20 days. Counsel for the Defendant will have 10 days thereafter to submit any objections to the proposed Domestic Relations Order.
With regard to the request that the Court sign a Domestic Relations Order regarding the entry of a default judgment, the Court takes judicial notice of the Family Court file in this matter that indicates personal service was not effectuated upon the Defendant, William R. Brown. The Defendant is afforded a period of 30 days to make the appropriate motion to vacate the default judgment before the Seneca County Support Magistrate. Counsel for the Defendant shall advise the Court within 30 days whether such an application is pending. If he fails to so, then this Court shall sign the proposed Domestic Relations Order as submitted by counsel for the Plaintiff for purposes of enforcing the default judgment entered against the Defendant.
This constitutes the decision and judgment of the Court.
DATED: May 30, 2014
HON. DENNIS F. BENDER
Acting Supreme Court Justice
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