Opinion ID: 2133083
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Heading: Distribution of Dennis's Pension Benefits.

Text: A. General legal principles governing pensions in dissolution actions. Iowa law requires that the assets of parties in a dissolution-of-marriage proceeding be divided equitably between them. See Iowa Code § 598.21(1) (2001) (listing factors to consider). [P]ensions are characterized as marital assets subject to division in dissolution actions just as any other property. Benson, 545 N.W.2d at 255. Although the particular benefits at issue in this case are derived from a statutory retirement plan, see generally Iowa Code chs. 410, 411 (providing for retirement system for police officers and fire fighters), this court has held that a fireman's pension is marital property subject to division in a dissolution proceeding. See In re Marriage of Branstetter, 508 N.W.2d 638, 640-42 (Iowa 1993). The issue in the present case goes a step beyond the divisibility of pension benefits, however. At stake here is the former spouse's rights to such benefits in the event the retired employee-spouse dies first. Because the benefit plan at issue here is statutory in nature, we must look to chapters 410 and 411 in the first instance to determine the rights of a former spouse. Although chapter 410 provides for the payment of pension benefits to a member's surviving spouse under certain specified conditions, see Iowa Code § 410.10, a former spouse is not considered a surviving spouse unless the division of assets in the dissolution of marriage decree ... grants the former spouse rights of a spouse under this chapter, id. § 411.1(19) (now found at Iowa Code § 411.1(20) (2003)). The governing statutes and the System's rules set out a procedure for granting the former spouse such rights. Chapter 411 permits the assignment of benefits payable under the retirement plan in order to enforce marital property orders. See Iowa Code § 411.13. The System has adopted by rule a model marital property order. See Mun. Fire & Police Ret. Sys. r. 12.10. One requirement for such an order is that it set out the [e]xtent (if any) to which a former spouse is to be treated as the surviving spouse upon the death of the member. Id. r. 12.10(1)(d). This rule further provides that [a] former spouse shall be treated as a surviving spouse only if specifically designated as such pursuant to section 411.1(19). Id. r. 12.10(3)(a). If the dissolution decree states that the former spouse shall be designated as the surviving spouse, the System's rules require the decree to also state the dollar amount or percentage of the total surviving spouse benefit to be paid by the system to the former spouse. Id. r. 12.10(3)(b). B. Rebecca's entitlement to survivorship rights. Although the relevant statutes and rules set forth the procedure for designating a former spouse as the surviving spouse, the circumstances under which that designation should occur depend on the facts of each case and whether the allowance of survivorship rights effectuates an equitable distribution of the parties' assets. Here, it has been properly determined that Dennis's monthly benefits, earned entirely during the parties' marriage, should be divided equally between Dennis and Rebecca. As noted earlier, these benefits are guaranteed for ten years. Under the court of appeals' decision, Dennis and Rebecca will each receive one-half of these payments, but only during Dennis's lifetime. Upon Dennis's death the remaining benefits payable during the ten-year period will go to his designated beneficiary because the current dissolution decree makes no provision for Rebecca's designation as the surviving spouse. Therefore, only by giving Rebecca survivorship rights as to her share of the payments can we ensure that she will receive her one-half share of Dennis's pension plan. [2] Dennis argues that giving Rebecca survivorship rights is unfair because she was not required to designate him as the beneficiary on her pension plan. We think, however, that the parties' pension benefits are not sufficiently similar so as to require identical treatment. Rebecca's pension plan was rolled into an IRA prior to the dissolution and the value of the IRA was included in the court's division of marital property. Thus, Dennis has already received his share of Rebecca's pension plan. Rebecca, on the other hand, will receive her share of Dennis's pension benefits in the event of his untimely death only if she is designated as his surviving spouse. For this reason, we modify the disposition of this case by the court of appeals to provide for the designation of Rebecca as Dennis's surviving spouse under his retirement plan to the extent of fifty percent of the benefits payable under the plan. C. Rebecca's entitlement to cost-of-living increases. Rebecca also complains of the court of appeals' failure to award her one-half of any cost-of-living adjustments to the monthly benefits payable under Dennis's retirement plan. Dennis contests Rebecca's entitlement to a proportionate share of any increases, relying on language from our decision in Benson. In Benson, this court stated that any posttrial increase in pension benefits should not be considered marital property subject to division in the dissolution action. 545 N.W.2d at 255. In making this statement, we relied on the general rule that [o]nly the net worth of the parties at the time of trial is relevant in adjusting their property rights. Id. (emphasis added). The rationale for this rule is the notion that [a]n 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 and therefore should not be included in the allocation of assets of the marital estate. In re Marriage of Klein, 522 N.W.2d 625, 628 (Iowa Ct.App.1994) (emphasis added). An examination of the rationale for the rule reveals why the rule does not apply in this case. While the cost-of-living increases at issue here will accrue after the parties' marriage has been dissolved, they will also occur after the employee-spouse has retired. Thus, these increases are passive in the sense that they are not attributable to any efforts made by Dennis, the employee-spouse, after the dissolution. Rather, these increases flow from Dennis's employment during the marriage; in other words, they are a result of the joint efforts of the parties. Thus, we hold cost-of-living adjustments accruing postdissolution should be treated as marital property where the employee-spouse is retired at the time of trial. See Moore v. Moore, 114 N.J. 147, 553 A.2d 20, 23 (1989) (holding that postretirement cost-of-living increases should be included in equitable distribution award to the extent they are attributable to portion of pension earned during the marriage). Accordingly, Rebecca is entitled to one-half of any such adjustments. D. Repayment of pension benefits already received. Dennis asserts Rebecca should not receive her share of the pension benefits to the extent they have already been paid to him. To adopt this argument, however, would be contrary to the general rule that we divide the property the parties own at the time of the dissolution. See In re Marriage of Muelhaupt, 439 N.W.2d 656, 661 (Iowa 1989). We see no reason to depart from this rule and reduce Rebecca's interest in this marital asset simply because Dennis has received more than his rightful share. Although he claims to have already spent the benefits paid to him, his exhaustion of this asset is no reason to reduce Rebecca's share of the marital property. Dennis certainly has other assets that can be liquidated or used as collateral for a loan to repay Rebecca and thereby effectuate the equitable division of assets envisioned by Iowa law.