Opinion ID: 2265862
Heading Depth: 1
Heading Rank: 2

Heading: Deferred Distribution

Text: Where there exists a substantial probability that the employee-spouse will not overcome the contingencies affecting realization of the pension benefit, the pension benefit is too speculative for present valuation and immediate offset distribution. Additionally, where the pension benefit can be presently valued but there are insufficient other marital assets of comparable worth to award to the nonemployee-spouse, the benefit cannot be equitably divided and distributed through an immediate offset. In either of these instances, the court must defer valuation and distribution of the pension benefit until the benefit becomes payable. Deferred distribution cannot be based upon the present value of the pension benefit at the time of the marital dissolution. As we explained in King, [i]f the non-employee spouse is to wait until the pension enters pay status to receive [a] share of the marital property, [the non-employee spouse] should not receive only that portion of the benefit that it seemed likely [the non-employee spouse] would receive at an earlier date [ i.e., the present value of the benefit at the time of marital dissolution]. Instead, [the non-employee spouse] should receive that portion of the actual payment attributable to the years of the marriage. Id., 332 Pa.Super. at 535, 481 A.2d at 917. Hence, the total benefits entitlement of the employee spouse must be ascertained by the court. To determine the percentage of the pension benefits entitlement ascribable to the marriage, the court must apply a coverture fraction whose numerator is the period of the employee-spouse's pension plan participation during the parties' marriage from the date of marriage to the date of separation and whose denominator is the total period of the employee-spouse's participation in the pension plan. Multiplying the total pension benefits entitlement by the coverture fraction yields the portion of the pension benefits entitlement which is marital property. Division and distribution of the marital property portion of the pension benefits entitlement may occur in two distinct ways. At the time of marital dissolution, the court may equitably divide the marital property portion of the benefits entitlement by determining the nonemployee-spouse's percentage share of the benefits marital property. Deferred distribution of the benefits is then accomplished by distributing to the nonemployee-spouse the predetermined percentage share of the pension benefits when the benefits are paid. Alternatively, the court may reserve both equitable division and distribution of the marital property portion of the pension benefits entitlement until the pension benefits are payable. The advantages of deferred distribution are that both parties bear the risk of nonpayment of the pension benefits and that the court can base its division and distribution of the pension benefits upon the payments that are actually made rather than upon an actuarial calculation [present value] of the payments that may be made. However, the disadvantages of deferred distribution are numerous. Deferred distribution forces parties who desire to dissolve their relationship by divorce to continue to deal with one another, and deferred distribution continues to burden the court. In our highly mobile society it may be difficult to resolve the distribution because the residence of the parties and the situs of the pension fund may no longer be in the forum where equitable division was had. The following scenarios illustrate some additional avenues by which a nonemployee-spouse's right to a portion of the pension entitlements may be defeated. The nonemployee-spouse may predecease the employee-spouse whereupon the employee spouse might receive a windfall, since the employee spouse might resume full right to the benefit entitlements. An employee-spouse may choose a straight life annuity option which guarantees maximum benefits for the life of the employee but ceases all payments upon the employee's death. The employee-spouse may remarry and elect a joint survivor annuity which, upon the death of the employee-spouse, will pay the annuity to the employee's new spouse as survivor. If the employee-spouse's pension plan has a death benefit, the employee-spouse can attempt to thwart the nonemployee-spouse's right to an equitable portion of the pension entitlements by naming a new beneficiary of the death benefit. While the employee-spouse may secure restoration of the death benefit beneficiary status through a court action, the fact remains nevertheless that such litigation is not only costly in time and money for the nonemployee-spouse and the court but also delays the desired final resolution of the parties' rights. Additionally, deferred distribution requires the court to continue supervision and enforcement of the marital property award and may result in the proliferation of administrative problems as, for example, proper notification to pension plan administrators of any restrictions on payment of plan benefits stemming from the marital property award.