Court Opinion

ID: 2797516
Source: CourtListenerOpinion
Date Created: 2015-04-29 20:03:53.487566+00
Date Added: 2024-06-11T11:29:23.862315
License: Public Domain

REPORTED

IN THE COURT OF SPECIAL APPEALS

          OF MARYLAND

               No. 2426

        September Term, 2013

         JASON PULLIAM

                  v.

       JILL IRENE PULLIAM

   Zarnoch,
   Graeff,
   Leahy,

                JJ.

         Opinion by Leahy, J.

         Filed: April 29, 2015
      Appellant Jason Pulliam is a law enforcement officer employed by the Maryland

Transportation Authority Police Force. During divorce proceedings in the Circuit Court

for Harford County, Appellant and his then-wife, Appellee Jill Irene Pulliam, agreed, as

reflected in the consent judgment entered, that she would receive one half of the marital

share of his Law Enforcement Officers’ Pension System (“LEOPS”) pension. The parties

dispute whether, pursuant to the agreement and consent judgment, a voluntary Deferred

Retirement Option Program (“DROP”) benefit is part of Husband’s pension plan and

properly included in Wife’s eligible domestic relations order (“EDRO”). The circuit

court concluded that Husband’s LEOPS pension plan encompassed the DROP benefits

and entered the EDRO.

      We hold that the parties’ consent judgment was unambiguous and that DROP

benefits are part of the LEOPS pension as a matter of law for purposes of the parties’

EDRO. We affirm the judgment of the circuit court.

                                   BACKGROUND

      Jason and Jill Pulliam were married on June 4, 2005, and one child was born

during their marriage. On June 19, 2010, the parties separated, and ultimately filed for

divorce in the Circuit Court for Harford County.1 At the uncontested divorce hearing

held on February 7, 2012, the parties, through their counsel, placed the settlement

1
       On January 12, 2011, Appellee filed a complaint for limited divorce in the Circuit
Court for Harford County. Appellant filed a counter-complaint for limited divorce on
February 22, 2011. Thereafter, Appellant filed a supplemental counter-complaint for
absolute divorce on July 21, 2011, and Appellee filed an amended and supplemental
complaint for absolute divorce on August 25, 2011. Appellee filed a second Amended
and Supplemental Complaint for Absolute Divorce on October 19, 2011.

                                           1
agreement that they had reached on the record. Of particular relevance to this appeal, the

agreement addressed Husband’s membership in the LEOPS, in which he had been

enrolled since November 1, 1997 through his employment at the Maryland

Transportation Authority. The parties announced they had agreed that:

              Each party will retain [his or her] own 401-K retirement savings.

              Mr. Pulliam has a pension through his employer, a law enforcement
       pension. He will assign a portion of that to Mrs. Pulliam equal to one half,
       or 60 months, will be the marital share. She is entitled to one half of that
       portion of service.

               Mrs. Pulliam has, at her option and cost, to opt for survivor benefits
       at the time Mr. Pulliam retires.

Both parties accepted these terms on the record and affirmed their understanding that

neither party could “come back and ask for a marital award or for the Court to adjust

interest in marital property, or for the Court to take any action regarding property, other

than to enforce the terms of this agreement.”

       On March 23, 2012, the court entered a judgment of absolute divorce. In its order,

the court recognized that the parties had reached an agreement “as to all issues arising out

of their marriage”; that this agreement had been read into the record; and that the

judgment entered contained its terms. The judgment specifically addressed retirement

benefits as follows:

               ORDERED, that each party shall retain as their sole and separate
       property their respective interest in and to their own 401K Plans; and it is
       further

              ORDERED, that the Defendant shall assign to the Plaintiff an
       interest in the Pension System for Law Enforcement Officers of the State of
       Maryland, as follows: One half of the Marital Share of his entire

                                             2
      pension benefit. The Marital Share is a fraction, the numerator of which is
      the number of months of the Participant’s benefit credited service under the
      Plan during the parties’ marriage, which the parties deem to be 60 months,
      and the denominator of which is the total number of months of the
      Participant’s benefit credited service under the Plan. Plaintiff shall have the
      right, at her option, to request survivor benefits equal to her marital share
      provided she pays the cost of such benefits, and such benefits are
      available[.]

(Emphasis added).

      On August 21, 2013, Wife filed a motion requesting that the circuit court enter an

EDRO because Husband had refused to sign the order she had prepared, which

specifically addressed the DROP benefits as part of Husband’s pension. Accordingly,

Husband filed an opposition on September 11, 2013, asserting that the proposed EDRO

contained a provision directing that DROP payments were to be included in calculating

the marital share, and emphasizing that he was not even eligible to participate in the

DROP at the time. On January 17, 2014, the court issued an order and accompanying

memorandum opinion granting Wife’s motion and entering her proposed EDRO. In its

opinion, the court framed the issue as “whether a particular retirement asset known as a

DROP was or should be included in the Defendant’s retirement assets.” To resolve this

issue, the Court relied on Dennis v. Fire & Police Employees Retirement System, 390 Md.

639 (2006), which the court found to “completely address[]” the issue. The court adopted

the Court of Appeals’s conclusion in Dennis, id. at 656, that the DROP payments were to

be considered retirement assets within the meaning of the EDRO.2 The court noted that

2
       In its opinion, the circuit court refers to the requested EDRO as a “qualified
domestic relations order,” or a QDRO. Although both EDROs and QDROs serve the
(continued . . . )
                                            3
same purpose, EDROs involve benefits from the Maryland State Retirement and Pension
System and are governed by the Code of Maryland Regulations (“COMAR”)
22.01.03.03, whereas QDROs are governed by the Employment Retirement Income
Security Act of 1974 (“ERISA”). Use of the term “QDRO” in lieu of “EDRO” or other
acronyms for similar orders, though technically inaccurate, has become recurrent:

      [A]lthough the [QDRO] concept and acronym are creatures of ERISA, the
      label “QDRO” may have achieved a broader meaning. As is often the case
      with a living language, the term has sometimes leapt the boundaries of its
      formal meaning to encompass generically orders in divorces that distribute
      retirement plan benefits, much as “xerox copy” became a synonym for
      “photocopy” regardless of the machine used to produce it, and the verb
      “google” has come to mean searching the Internet regardless of the search
      engine being used.

Robinette v. Hunsecker, 439 Md. 243, 247 (2014). The acquired broader meaning of the
QDRO is understandable given its history.
        In 1974, Congress enacted ERISA, which sought to “provide better protection for
beneficiaries of employee pension and welfare benefit plans abounding in the private
workplace.” Rohrbeck v. Rohrbeck, 318 Md. 28, 30 (1989). One of the provisions
“preclude[ed] plan participants from assigning or alienating their benefits under pension
plans subject to the Act.” The Act provided that this anti-alienation provision, subject to
exceptions, “shall supersede any and all State laws insofar as they may now or hereafter
relate to any employee benefit plan [subject to the ERISA requirements.]” Id. at 31
(internal quotation marks omitted). This prompted uncertainty regarding the validity of
orders entered in State domestic relations proceedings assigning pension benefits to a
person other than the plan beneficiary. Id. at 32. Congress resolved this concern in the
Retirement Equity Act of 1984 (“REA”) by clarifying that the anti-alienation provision
applied to domestic relations orders except where they are deemed to satisfy certain
requirements for QDROs as set out in the REA. Id. at 34-35 (citing REA §§ 104, 204).
        The Court of Appeals recognized the distinction between a QDRO and similar
domestic relations orders in Robinette, 439 Md. at 247. The Court noted that because not
all retirement plans—i.e. government-sponsored plans—are subject to ERISA, courts use
orders “similar to QDROs” to allocate retirement benefits between divorcing spouses. Id.
(citing 29 U.S.C. § 1003(b)(1) and C. Callahan & T.C. Ries, Fader’s Maryland Family
Law (5th ed. 2012), § 12-3[c]). Thus, despite their functional similarity, the difference
between an EDRO and a QDRO is important when determining which order to file. For
example, COMAR 22.01.03.03(b)(11),(12) requires the order to be titled “Eligible
Domestic Relations Order” and that the order not reference QDROs or ERISA.
Nevertheless, an EDRO must comply with federal law governing QDROs for tax
purposes. See COMAR 22.01.03.10(C) (“For the limited purpose of minimum
(continued . . . )
                                            4
in the case under consideration, “the intention of the court in incorporating the agreement

of the parties was that all retirement assets be divided pursuant to the formula set by the

parties.”

       The signed and filed EDRO provided, inter alia, that the "Alternate Payee’s

[Wife’s] share of the Participant’s [Husband’s] allowance, including any DROP payment

not otherwise restricted under the terms of the Participant’s plan, shall be an amount that

shall be computed by multiplying Participant’s Basic Allowance by Fifty Percent (50%)

multiplied by the ‘marital share fraction.’”3 “The ‘marital share fraction’ is the following

fraction: the numerator is 60 months and the denominator is the total number of months

of Participant’s service credit in the [State Retirement and Pension System of

Maryland].” In the event of Husband’s untimely death, the EDRO also established (1)

that Wife would receive a marital share of any pre-retirement death benefit so long as

Husband was not survived by a spouse or minor child and wife, in fact, survives

Husband; (2) that if Husband is married at the time of retirement, his surviving spouse

would receive any post-retirement survivor benefits, and if Husband was not re-married,

he could not elect any optional form of post-retirement survivor benefits; and (3) that if

Husband is not survived by a spouse, minor child, or otherwise restricted by his plan,

distributions, taxation, and rollovers, benefits payable pursuant to an [EDRO] shall be
subject to and shall comply with 26 U.S.C. §414(p)[,]” which establishes the
requirements for QDROs).
3
       The EDRO also prohibited Husband from “diminish[ing] the benefits to be
provided to the Alternate Payee or in any way tak[ing] any action which would adversely
affect the Alternate Payee’s Share nor omit[ing] to take any action required for the
Alternate Payee to receive Alternate Payee’s Share.”

                                             5
Wife would receive the marital share of Husband’s DROP in the event of Husband’s

death before his participation in the DROP has concluded. Husband filed a timely appeal

on February 4, 2014. Additional facts will be discussed below as relevant to our

resolution of the issues.

                                        DISCUSSION

       Appellant raises one question, which we have rephrased for review:

           Did the circuit court err when it ordered that Appellant’s future
           potential DROP benefits should be included as part of his retirement
           assets to be distributed to Appellee under an EDRO pursuant to the
           agreement of the parties?

This question, raising issues concerning both the interpretation of the parties’ consent

judgment and a question of law regarding the DROP, are subject to de novo review by

this Court. See Dennis, supra, 390 Md. at 656; Schisler v. State, 394 Md. 519, 535

(2006) (“[W]here an order involves an interpretation and application of Maryland

constitutional, statutory or case law, our Court must determine whether the trial court's

conclusions are ‘legally correct’ under a de novo standard of review.”).

                                             A.

                            Interpretation of the Consent Judgment

       Generally, a court granting “a divorce has authority to determine which property is

marital property, to assess its value, to order the transfer of ownership of certain

categories of property, and to grant a monetary award to adjust ‘the equities and rights of

the parties.’” Robinette v. Hunsecker, 439 Md. 243, 245-46 (2014) (citing Maryland

Code, Family Law Article (“FL”) §§ 8-201 to -205 and Conteh v. Conteh, 392 Md. 436,

                                              6
437 (2006)).    “Among the property rights that may be allocated as part of such a

proceeding is a spouse's interest in a retirement plan earned during the course of the

marriage.” Id. at 246 (citing Deering v. Deering, 292 Md. 115 (1981)). The court has the

statutory authority to transfer ownership of an interest in pension and retirement benefits

deemed to be marital property. Md. Code (1984, 2012 Rep. Vol.), FL § 8-205(a)(2)(i).

“[I]n lieu of these judicial determinations, a divorcing couple may enter into an

agreement for the allocation of their property, including retirement plan benefits.”

Robinette, 439 Md. at 246 (citing FL § 8-101).

       In the instant case, the parties proceeded via the latter route by reaching a

settlement agreement. At the February 7, 2012, hearing, the parties placed this agreement

on the record, providing that “Mr. Pulliam has a pension through his employer, a law

enforcement pension. He will assign a portion of that to Mrs. Pulliam equal to one half,

or 60 months, will be the marital share. She is entitled to one half of that portion of

service.” The Judgment of Absolute Divorce entered on March 23, 2012 incorporated

this agreement and provided that Appellee would receive “[o]ne half of the Marital Share

of his entire pension benefit.”4 The pension benefit was specifically identified as the

“Pension System for Law Enforcement Officers of the State of Maryland.” The instant

dispute arose because the parties debate the meaning of “pension”; namely, whether the

4
       The Appellant did not seek to modify the wording of the Judgment of Divorce. We
highlight this fact in light of Appellant’s emphasis on the difference between the
agreement placed on the record (half of the marital share of his “pension plan”) and the
judgment of divorce (half of the marital share of his “entire pension plan”) in his briefing
on appeal.

                                             7
pension includes DROP benefits or whether Appellee was required to specifically

negotiate for them.

      In Maryland, consent judgments entered into by the parties and endorsed by a

court “have attributes of both contracts and judicial decrees.” Dennis, supra, 390 Md. at

655 (citing Chernick v. Chernick, 327 Md. 470, 478 (1992)). To interpret provisions in a

consent judgment, we apply the ordinary principles of contract construction. Id. at 656.

To this end, we apply the objective theory of contract interpretation, wherein “the clear

and unambiguous language of an agreement will not give way to what the parties thought

the agreement meant or was intended to mean.” Atl. Contracting & Material Co. v. Ulico

Cas. Co., 380 Md. 285, 301 (2004) (citations omitted). In applying the objective theory:

      A court . . . must first determine from the language of the agreement itself
      what a reasonable person in the position of the parties would have meant at
      the time it was effectuated. In addition, when the language of the contract is
      plain and unambiguous there is no room for construction, and a court must
      presume that the parties meant what they expressed. In these circumstances,
      the true test of what is meant is not what the parties to the contract intended
      it to mean, but what a reasonable person in the position of the parties would
      have thought it meant.

Gen. Motors Acceptance Corp. v. Daniels, 303 Md. 254, 261 (1985). A “contract is

ambiguous if it is subject to more than one interpretation when read by a reasonably

prudent person.” Sy-Lene of Washington, Inc. v. Starwood Urban Retail II, LLC, 376

Md. 157, 167 (2003). But it is not ambiguous “merely because the parties thereto cannot

agree as to its proper interpretation.” Fultz v. Shaffer, 111 Md. App. 278, 299 (1996). As

noted, “[u]nder Maryland law, the interpretation of a contract, including the question of

whether the language of a contract is ambiguous, is a question of law subject to de novo

                                            8
review.” Dennis, supra, 390 Md. at 656 (citing Towson v. Conte, 384 Md. 68, 78 (2004)).

      We cannot ascertain any ambiguity in the portion of the consent judgment under

contention in this case. A reasonable person in the parties’ position would read the

language to mean exactly what it says: “that the Defendant [Appellant] shall assign to

the Plaintiff [Appellee] an interest in the Pension System for Law Enforcement Officers

of the State of Maryland, as follows: One half of the Marital Share of his entire pension

benefit.” A reasonable person would also intend the word “pension” to encompass

whatever benefits are included in that pension—the Pension System for Law

Enforcement Officers—under applicable law. Appellant argues that Appellee could not

have intended to include DROP benefits in their settlement agreement, because at that

time, he was not participating in nor was he eligible for the DROP. That the parties

disagree as to what was intended or what is legally included in that pension does not

make the language ambiguous; instead, the issue becomes whether the DROP benefits are

included in the Law Enforcement Officers’ Pension System Retirement Plan as a matter

of law.

                                           B.

                                      The DROP

      Title 26 of the Maryland Code (1993, 2009 Repl. Vol. & 2013 Supp.), State

Personnel & Pensions Article5 governs the LEOPS.6 The traditional path to retirement

5
      All statutory references are hereinafter to the State Personnel & Pensions Article.
6
       The pensions afforded to members of LEOPS are funded by both employer
(continued . . . )
                                            9
for an LEOPS member who has either 25 years of eligibility service or is at least 50 years

old is to terminate his or her employment, at which time the member would begin

receiving his or her “normal service retirement allowance.” § 26-401(a). The normal

service retirement allowance “equals the number of years of the member’s creditable

service[7] multiplied by 2% of the member’s average final compensation[,]” so long as

that amount does not exceed 60% of the member’s final average compensation. 8 § 26-

401(b)(1)-(2).

       There is, however, an alternative route to retirement: a member may choose to

participate, if eligible, in the voluntary Deferred Retirement Option Program, a program

established in 2000. A member “is eligible to participate in the DROP if the member has

at least 25 and less than 30 years of creditable service.” § 26-401.1(c)(2). The member

may elect to participate in the program for the lesser of five years; the difference between

30 years of service and the member’s creditable service upon election to participate; or a

contributions, see §§ 21-304 to -310, and member contributions, §§ 21-312 to -315.
7
      “Creditable service” is defined as “the service credit of a member that is
recognized for computing a benefit.” § 20-101(m).
8
        To visualize the calculation, the Maryland State Retirement and Pension System
Benefits Handbook provides the following formula: “.02 x [Average Final
Compensation] x Years of Service (up to 30 years) = Annual Basic Allowance.” This
number is then divided by twelve to determine the monthly retirement allowance. Md.
State Ret. & Pension Sys., Pension System for Law Enforcement Officers of the State of
Maryland       Benefits      Handbook,       at     26      (2011),    available     at
http://www.sra.state.md.us/Participants/Members/Downloads/Handbooks/BenefitHandbo
ok-LEO.pdf & http://perma.cc/MC6F-JBJU [hereinafter LEOPS Benefits Handbook].
“‘Average final compensation’ means the average annual earnable compensation that is
computed as provided in § 20-204 [governing retirement systems] or § 20-205 [governing
pension systems].” § 20-101(g).

                                            10
term selected by the member. § 26-401.1(d)(2). In other words, a member may participate

in the DROP for a maximum of five years. When the member’s participation in the

DROP commences, the Board of Trustees of the Retirement and Pension System (“the

Board”) must begin to:

      (i)     deposit the DROP member’s normal service retirement allowance
              [as calculated under § 26-401(b)] in the DROP for the DROP
              member's benefit;

      (ii)    adjust the DROP member’s normal service retirement allowance
              each fiscal year [pursuant to the cost-of-living adjustments] as
              provided in §§ 29-401, 29-402, 29-406, and 29-408 of this article; [9]
              and

      (iii)   accrue interest on the amounts calculated under subparagraphs (i)
              and (ii) of this paragraph for the DROP member into the DROP at
              the rate of:

              1. 6% a year, compounded monthly if the individual is a DROP
                 member on or before June 30, 2011; or

              2. 4% a year, compounded annually, if the individual becomes a
                 DROP member on or after July 1, 2011.

§ 26-401.1(h)(2) (emphasis added). The Board does not have to establish individual

DROP accounts for each participating member. § 26-401.1(h)(6). During the period in

which a member participates in the DROP, the member “may not receive creditable

service or eligibility service.” § 26-401.1(h)(3). Indeed, a DROP participant is considered

“a retiree of the Law Enforcement Officers’ Pension System.” § 26-401.1(f)(2).

      At the conclusion of the DROP period, the Board must “pay to the DROP member

9
       Pursuant to these provisions, the retiree would also get cost of living adjustments
even if he or she did not participate in the DROP.

                                            11
or, if the DROP member has died, the designated beneficiary of the DROP member,[10]

the amount accrued in the DROP for the DROP member . . ., reduced by any withholding

taxes remitted to the Internal Revenue Service or other taxing authority, in a lump

sum[,]” unless the DROP member directs the Board to transfer all or a portion of the

DROP sum to a custodian of an eligible retirement plan. § 26-401.1(i)(1), (3). The

amount of benefits available to the DROP member depends on a spectrum of factors: the

amount of monthly retirement benefit deposited; the length of the member’s participation

in DROP; the amount and number of the cost-of-living adjustments applied to the

account annually; and the amount of accumulated interest. The Board “shall commence

and continue payment of the normal retirement allowance” to the member “as of the first

day of the month following termination of a DROP member’s participation in the

DROP.” § 26-401.1(j) (emphasis added). A DROP member must terminate employment

at the conclusion of the DROP period.

      Based on the foregoing provisions, we ascertain several features of the DROP

statute that, together, are key to our analysis. First, a member is officially considered a

“retiree” once he or she elects to participate in the DROP. § 26-401.1(f)(2). Second, the

DROP benefit equals the member’s normal service retirement allowance, calculated

based on the number of service years and final compensation at the time the member

begins to participate in the DROP. § 26-401.1(h)(2). The payment is deposited into an

10
       A “designated beneficiary” to receive those funds may be the DROP member’s
surviving spouse or, if there is no surviving spouse, each child of the deceased who is
under 18 years old, or, if there are no children, to the designated beneficiary in the
paperwork filed with the Board. § 26-401.1(i)(2).

                                            12
account during the member’s participation in the DROP, accruing interest. Once the

member’s participation in the DROP ends, the statute instructs the Board to “continue”

paying the same normal retirement allowance (with cost of living adjustments) directly to

the member, rather than into the DROP account. § 26-401.1(j). Stated another way, from

the time a member commences participation in the DROP to the time he or she terminates

his or her employment and thereafter, the Board will be continuously paying the same

retirement service allowance; those payments are first deposited into a DROP account

and then are given to the member directly. Thus, sections 26-401.1(j) and (h)(2), when

read together, reflect another way to begin receiving pension benefits via the DROP, not

a new type of benefit. We reject Appellant’s contention that the placement of the DROP

payments into a separate account is material; this is an administrative function.

       Third, by electing to participate in the DROP, the member stops accruing

creditable service to be used for computing the pension payment. § 26-401.1(h)(3).

Based on the statutory calculation of the basic allowance, which uses years of service and

average final compensation as variables, the more years of service a member has, the

higher his or her basic allowance will be. Conversely, all other things being equal, the

fewer years of service a member has, the lower his or her basic allowance will be. By

participating in the DROP, which halts the accrual of years of service, Appellant would

therefore be lowering the number of years to be used for computing his basic allowance

and, therefore, would be reducing his monthly basic allowance payments that he would

receive—and Appellee would share in—upon termination of his employment.              This

“freeze” precludes a member from getting the double benefit of starting to accumulate

                                             13
retirement benefits when still working and receiving his or her usual paycheck while

simultaneously increasing the pension benefits upon termination of his or her

employment by continuing to collect creditable service. Indeed, a member’s choice to

participate in the DROP and to receive the lump sum is made instead of receiving a

higher monthly pension payment in the future, thereby impacting the entirety of the

member’s employment. Cf. Balt. Cnty. v. Thiergartner, __ Md. __, ___, Nos. 44 & 58,

Sept. Term 2014, slip op. at 22 (filed April 20, 2015) (stating, in the context of Baltimore

County’s DROP system, that “[t]he lump sum is thus a benefit payment that relates to the

entirety of the employee’s retirement and not simply to the particular date on which it

happens to be paid”). In addition, that the money in the DROP account accumulates

interest during the member’s participation in the program does not render the underlying

principal to be a separate benefit; instead, it may incentivize members to participate.

       Together these features lead us to the conclusion that DROP benefits are part of

the overall pension for purposes of the parties’ EDRO. The regulations promulgated by

the State Retirement and Pension System to specifically address domestic relations orders

support this conclusion. Pursuant to COMAR 12.01.03.03(B)(2), an EDRO must

“create[] or recognize[] the right of the alternate payee to receive all or a portion of the

participant’s plan benefit if, when, and as paid by the Board of Trustees.” A “plan

benefit,” unless otherwise stated in an EDRO, means “an amount payable by the Board of

Trustees to a participant,” such as an allowance. COMAR 22.01.03.02(B)(10)(a)(i). An

allowance includes “a lump sum payment of the amount accrued in the Deferred

Retirement    Option   Program     on   termination    of   the   participation.”   COMAR

                                             14
22.01.03.02(B)(2)(b)(v). In other words, the regulations treat the DROP lump sum as a

“plan benefit” that may be subject to division under an EDRO.11

      Our reading of the DROP statute and attendant regulations is consistent with the

Court of Appeals’s opinion in Dennis, on which the circuit court correctly relied in its

final decision underlying this appeal.12 The Dennis case involved two Baltimore City

police officers, Edmund Lubinski and Elmer Dennis, who had civil pensions under what

is known as the Baltimore City Fire and Police Employees’ Retirement System

(“Retirement System”).     390 Md. at 642.      Both officers were divorced from their

respective wives, Edna Sullivan and Catherine Dennis. Id. at 643. The Judgment of

Absolute Divorce for Lubinski and Sullivan, dated February 22, 1990, was based on an

agreement reached by the parties. The Judgment stated that Sullivan’s “equitable interest

in [Lubinski’s Fire and Police Employees Retirement System of the City of Baltimore] is

. . . fifty percent (50%) of the ‘marital share’ of said pension benefits” and established

that Sullivan “shall receive fifty-percent (50%) of the aforesaid marital share of any

11
       As will be discussed infra, however, the regulations treat the “survivor benefits”
provision of the DROP statute differently.
12
        The Dennis case, along with its companion case Brown v. Fire & Police
Employees' Ret. Sys., 375 Md. 661 (2003), appear to be the only Court of Appeals
opinions addressing the DROP in this context. Recently, however, the Court of Appeals
addressed Baltimore County’s version of DROP in the context of whether the DROP sum
is included in the formula for capping workers’ compensation benefits. See Balt. Cnty. v.
Thiergartner, __ Md. __, ___, Nos. 44 & 58, Sept. Term 2014, slip op. at 2 (filed April
20, 2015) (holding that the statute imposing the cap on weekly workers’ compensation
benefits contemplates a comparison of payments paid on different time schedules and that
the DROP sum must be converted to a weekly number to apply the workers’
compensation formula).

                                           15
payments made from the pension to the participant, including death benefits, if, as, and

when, such payments are made.” Id. (emphasis omitted). Similar language was contained

in the Judgment of Absolute Divorce for Elmer Dennis and Edna Dennis dated June 7,

1993. Id. at 644. QDROs were issued in both cases.13

       Thereafter, both officers enrolled in the City’s DROP (similar to the State’s

LEOPS DROP plan) on August 1, 1996 and ceased participation on July 31, 1999. Upon

their retirement, the Retirement System notified both officers that the DROP payments

would be subject to the QDROs and disbursed accordingly to their former wives. After

pursuing their administrative remedies, which resulted in a denial of their challenges to

the DROP distributions,14 the officers filed a petition for writ of mandamus and

complaint for declaratory relief and/or petition for judicial review with the Circuit Court

for Baltimore City. Id. at 646. The circuit court, affirming the administrative agency,

ruled as a matter of law that the DROP is subject to the deferred division in the

Judgments of Divorce. Id. at 646-47. Granting certiorari before this Court addressed the

appeal, the Court of Appeals affirmed.

       On appeal, the officers contended that the QDROs did not require division of the

13
      We note that in Robinette, supra, in reviewing the broadened use of the term
“QDRO,” the Court of Appeals cited Dennis as an example of when Maryland courts
have used the term “QDRO,” which is subject to ERISA, even though the plan at issue—
the Baltimore City pension plan—is a government-sponsored retirement plan exempt
from ERISA. 439 Md. at 247 & n.3.
14
       In the parties’ first appeal, the Court of Appeals first concluded that the officers
failed to exhaust their administrative remedies before the Fire and Police Employees’
Retirement System Board of Trustees and vacated and remanded the decision for the
parties to exhaust their administrative remedies. Brown v. Ret. Sys., 375 Md. 661 (2003).

                                            16
DROP benefits “because the QDROs fail[ed] to reference DROP benefits specifically”

and that “the DROP is a separate program that provides benefits distinct from the pension

benefits payable from the Retirement System pension plan[,]” particularly because the

DROP did not exist at the time of divorce. Id. at 650-51. The former wives countered

that the DROP benefits were paid out of the Retirement System trust; that DROP

members must still contribute to the Retirement System Fund; and that “DROP is treated

as part of the Retirement System’s pension plan for federal tax purposes.” Id. at 651.

       The Court began by reviewing the Retirement System and the DROP as

established by the Baltimore City Code. Id. at 647-50. Notably, the DROP involved in

Dennis consisted of three components:

       (1) An amount equal to the annual retirement allowance (or prorated annual
       retirement allowance for partial years) the member would have received if
       he had retired from service at that time and actually begun receiving his
       maximum retirement allowance;

       (2) An amount equal to the mandatory contributions the member is required
       to make to the Retirement System for his retirement benefits; and,

       (3) Interest at 8.25% compounded annually until the member actually
       retires.

Id. at 648 (citation omitted). The Court also noted that the Retirement System is a “tax-

qualified plan” under the Internal Revenue Code and that “[a]ll DROP payments are

reported to the IRS on Form 1099R as having been paid from the retirement system.” Id.

(citation omitted).

       The Court then concluded that, based on the unambiguous language in the

QDROs, “all payments from the Retirement System pension to the appellants are subject

                                            17
to division.” To the extent that there was a dispute regarding whether the DROP benefits

were payments from the pension system, the Court relied on the IRS’s treatment of the

DROP under the Internal Revenue Code. Because the IRS treats the Retirement System

pension plan, including the DROP, as a qualified pension plan under the Internal

Revenue Code, and without any argument to the contrary, the Court deferred to the IRS’s

determination and held that the DROP benefits were subject to division as part of the

pension according to the terms of the officers’ QDROs.15 Id. at 660.

       Appellant attempts to distinguish the instant case from Dennis on two main

grounds. First, Appellant asserts that in Dennis, the officers had fully participated in the

DROP at the time of the litigation, whereas here, Appellant is not eligible to and

therefore has not elected to participate in the DROP, making DROP “future” and

“potential” benefits and received well beyond the parties’ marriage. Appellant fails to

recognize, however, that although he was not yet eligible for the DROP at the time the

parties separated, the five years of service accumulated during the parties’ marriage

contributes to his eligibility to participate in the DROP.16 Indeed, Appellee would not be

15
       Neither party in the instant case focused on the tax status of the LEOPS in arguing
whether the DROP benefits are part of Appellant’s pension. However, the Dennis
holding supports our interpretation of the LEOPS DROP statute, and without specifically
deciding the issue, we note that the Dennis Retirement System plan and the LEOPS here
are both government-sponsored plans, meaning that the LEOPS is likely also a tax-
qualified plan under the Internal Revenue Code.
16
       Moreover, even non-vested pensions are subject to division as marital property.
See Deering v. Deering, 292 Md. 115, 127-28 (1981) (“That a nonvested pension interest
may be contingent upon continued employment does not ‘degrade that right to an
expectancy (because) (t)he law has long recognized that a contingent future interest is
(continued . . . )
                                            18
entitled to half of the DROP sum; she would only be entitled to one half of the marital

share of that sum based on calculation set forth in the EDRO.

       Second, Appellant claims that the Dennis Court relied on the fact that the DROP

was not in existence at the time the wives negotiated their property rights, meaning that it

could not be considered part of the Judgments of Divorce, whereas here, the DROP was

in existence at the time of the parties’ divorce, so Appellee could have negotiated for it.

Although this is an accurate factual distinction between Dennis and the case sub judice,

the Court of Appeals did not decide Dennis on that ground; its conclusion hinged on the

IRS’s treatment of the DROP, not that the DROP was not in existence at the time of

divorce.

       In sum, based on the applicable DROP statute and Dennis, we conclude that the

DROP benefits are part of the LEOPS pension as a matter of law for purposes of the

parties’ EDRO and, therefore, are subject to division pursuant to the parties’ consent

judgment and accompanying EDRO.

                                            C.

                                    Survivor Benefits

       Appellant also lodges a blanket argument that because survivor benefits are

considered separate from the pension and must be negotiated separately, the DROP

benefits should be treated similarly. We disagree.

       LEOPS survivor benefits take two forms: “pre-retirement death benefits” and

property.’” (quoting with approval In re Marriage of Brown, 15 Cal.3d 838, 847 n.8
(1976) (en banc))).

                                            19
“post-retirement survivor benefits.” As to the first category, upon the pre-retirement

death of a member (not involving willful negligence) who has more than two years of

eligibility service, the Board must pay the allowance of 50% of the member’s average

final compensation in the following priority, depending on survivorship: the member’s

surviving spouse, children under the age of 18, or a dependent parent.17 § 29-204(a). If

the member is not survived by a spouse, minor child, or dependent parent, the death

benefit goes to a designated beneficiary or, if none, to the member’s estate. § 29-

204(a)(2)(ii); § 29-202. As to the second category, upon the post-retirement death of a

member, the Board must pay 50% of the retiree’s retirement allowance to the surviving

spouse (assuming the member, in the context of divorce, remarries either before or after

retirement) or minor child. § 26-402. If a member is unmarried at the time of retirement,

the member may elect to receive either his or her basic allowance or, alternatively, a

reduced allowance in order to obtain one of the benefit options provided by § 21-402,

which would be payable to a designated beneficiary. § 26-401(a)(1)-(2)(i).

       Although similar to a pension, survivor benefits constitute marital property in their

own right. Potts v. Potts, 142 Md. App. 448, 466 (2002). As a separate piece of marital

property, “[a] spouse seeking to recover an interest in the survivor benefit attached to the

other spouse's pension must request the survivor benefit in addition to any request for the

pension benefit itself.” Whittington v. Whittington, 172 Md. App. 317, 348 (2007). This

17
         If the member has at least one year of eligibility service, the Board shall pay an
amount equal to the member’s annual earnable compensation to a designated beneficiary,
or, if there is none, to the member’s estate. § 29-202(a).

                                            20
rationale is sound, as survivor benefits address to whom the retirement payments will go

in the event of the member’s death, and a former spouse must negotiate to be the

designated beneficiary in the LEOPS context in order to receive some portion of those

benefits absent a surviving spouse, minor child, or dependent parent.

       We find no similarity in the foregoing to the DROP benefits discussed in detail

above, and Appellant does not otherwise articulate any resemblance. Unlike survivor

benefits, which address to whom retirement payments will go in the event of death, the

DROP simply provides an alternative avenue for the member to begin receiving the same

basic allowance that the member would have received had he or she retired on the start

date in the DROP.

       In fact, the DROP statute even has its own “survivor benefits” provision,

providing that if the DROP member has died, the Board shall pay the amount accrued in

the member’s DROP, sans taxes, to the designated beneficiary in the following priority,

depending on survivorship: the DROP member’s surviving spouse, all children under 18

years old, or a designated beneficiary. § 26-401.1(i)(1)-(2). The statute further provides

that after the lump sum is distributed, if the DROP member has died before his or her

participation in the DROP has concluded, the Board must proceed to pay the 50% of the

normal service retirement allowance, including the cost-of living adjustments, pursuant to

§ 26-402. § 26-401.1(h)(2). These provisions are akin to the survivor-benefit provisions

discussed above: that, if a member is not survived by a spouse or a minor child, the

DROP lump sum may go to a designated beneficiary. See also COMAR

22.01.03.02(10)(c) (providing that a “plan benefit” subject to assignment to an alternative

                                            21
payee via an EDRO does not include retirement death benefits or postretirement survivor

benefits for which payment is restricted to a surviving spouse, minor child, or dependent

parent, or the DROP amount for which payment is restricted to a surviving spouse or

minor child). Therefore, in our view, that the DROP statute contains a provision similar

to those applicable to basic pension payments afforded through the traditional retirement

route supports our conclusion that the DROP and the pension are one in the same.

Moreover, because the DROP has a “survivor benefits” provision, the DROP benefits as

a whole cannot be akin to survivor benefits in their own right.

       In the instant case, Appellee did, in fact, specifically negotiate for survivor

benefits.18 Regardless, we see no equivalence between DROP benefits and survivor

benefits, and as a result, we see no error in the EDRO.

                                                           JUDGMENT AFFIRMED;
                                                 COSTS TO BE PAID BY APPELLANT.

18
       Appellant does not argue, and we see no reason to address otherwise, the
proposition that Appellee was required to specifically negotiate rights to the “DROP
survivor benefits” in addition to the two categories of survivor benefits for the pension.

                                            22