Opinion ID: 1298550
Heading Depth: 1
Heading Rank: 1

Heading: Divisibility of Supplemental Employee Benefits

Text: The court's conclusion that SBS and social security benefits should be treated similarly overlooks the important legal justification for a state court's inability to divide federal social security benefits. The doctrine of federal preemption prevents state courts from dividing social security benefits. Under the doctrine of federal preemption, when a state law and federal law conflict, state law must yield. See Webster v. Bechtel, 621 P.2d 890, 897 (Alaska 1980). In Hillerman v. Hillerman, 109 Cal. App.3d 334, 167 Cal. Rptr. 240 (1980), the California Court of Appeal concluded that there was a substantial conflict between California community property laws and the social security family benefit plan. [1] The court reasoned that under the doctrine of federal preemption, it could not order the invasion of an employee spouse's social security benefits on divorce. 167 Cal. Rptr. at 244-52. Accord Swan v. Swan, 301 Or. 167, 720 P.2d 747, 751-52 (1986); see also Hisquierdo v. Hisquierdo, 439 U.S. 572, 590, 99 S.Ct. 802, 812, 59 L.Ed.2d 1, 16 (1979) (federal Railroad Retirement benefits not subject to state community property laws). Unlike social security benefits, the division of state SBS benefits does not involve an infringement on federal law. The SBS system is created and governed by state law and regulations. AS 39.30.150-39.30.180. SBS is a substitute for social security. AS 39.30.150(a), 39.30.170. Unlike social security, an employee has an absolute contractual right to receive SBS benefits. AS 39.30.150; cf. In re Marriage of Nizenkoff, 65 Cal. App.3d 136, 135 Cal. Rptr. 189 (1976) (social security is a scheme of social insurance which significantly differs from ordinary deferred compensation plans). This court has repeatedly held that to the extent retirement benefits have been earned during marriage, they constitute marital assets and are subject to equitable division. Rice v. Rice, 757 P.2d 60, 61 (Alaska 1988). This court has found that the list of divisible marital assets includes non-vested pensions, Laing v. Laing, 741 P.2d 649, 655-58 (Alaska 1987), federal military retirement benefits, Chase v. Chase, 662 P.2d 944, 946 (Alaska 1983), federal civil service retirement benefits, Monsma v. Monsma, 618 P.2d 559, 561 (Alaska 1980), and accrued personal leave for State employment, Schober v. Schober, 692 P.2d 267, 268 (Alaska 1984). We conclude that because SBS benefits are earned during marriage, they are similarly subject to equitable division upon divorce. [2] If Gregory's SBS benefits are subject to current redemption, and the court adopts that approach rather than offsetting the present value of his future benefits against other assets, the court should take taxes and any penalties for early withdrawal into account in its equitable division. We therefore hold that SBS benefits are marital property subject to equitable division at divorce.