Court Opinion

ID: 6783722
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:59:09.290316+00
Date Added: 2024-06-11T16:02:54.817229
License: Public Domain

Lundberg Stratton, J.,
dissenting. I respectfully dissent from the majority’s restrictive interpretation of R.C. 5731.09(A). I believe that funds in a qualified IRA that are directly attributed to the decedent’s employer and were paid by reason of the decedent’s employment should be excluded from the value of the decedent’s gross estate.
R.C. 5731.09(A) is intended to exclude from the value of the gross estate an employer’s contribution or payment made toward an employee’s retirement. I believe that the key component of the exclusion is the source of the funds, not their location upon death. The second paragraph of the statute, if read in its entirety and not in fragments as the majority does, supports this interpretation. *318It provides that the gross estate does not include the value of the fund that is proportionate to the part “of the purchase price of the contract or agreement contributed by the employer or former employer of the decedent, whether to an employee’s trust or fund forming part of a pension, annuity, retirement, bonus, or profit-sharing plan or otherwise, if the contributions were made by reason of the decedent’s employment.” (Emphasis added.)
The statute refers to “the purchase price of the contract or agreement” then provides qualifying examples. The majority contends that the only applicable contract is the IRA the decedent had with his brokerage company because that is where the funds are currently located and the decedent’s Pioneer account, into which the employer paid contributions, no longer exists. I do not agree with this narrow reading. The statute does not expressly require that the employer’s contribution be confined to a “contract or agreement” that is established or maintained by the employer. The statute enumerates certain applicable funds but also provides for an alternative by including the words “or otherwise.” The majority’s construction of the statute renders useless these words if “contract or agreement” must be one of the employer-established funds referred to in the statute.
I believe that a qualified rollover IRA may fall within the provision for a contribution “otherwise” made. A qualified rollover IRA is established to hold funds from an employer qualified retirement account. In many cases, including this one, the retirement account is directly rolled over into the IRA and the beneficiary never has possession of the funds. The employer’s contribution remains an identifiable source of the IRA funds.
This is a taxing statute that the General Assembly has amended through the years. The statute initially excluded only public pensions from the value of the gross estate. 1967 Am.Sub.S.B. No. 326, 132 Ohio Laws, Part I, 1942. The General Assembly subsequently expanded this to include the armed services, police and firefighters, and later both public and private employer-funded retirement funds generally. 1970 H.B. No. 865, 133 Ohio Laws, Part III, 2706; 1975 Am.Sub.S.B. No. 145, 136 Ohio Laws, Part I, 396; 1976 Am.H.B. No. 1013, 136 Ohio Laws, Part II, 3467.
I believe that the General Assembly has consistently focused on the source of the funds, not the name of the fund in which they exist at the time of death. If an employee is terminated and forced to withdraw or roll over a retirement fund, or the employee elects to move the funds out of an employer’s stock plan that is decreasing in value, the employee should not be penalized for moving the retirement assets from the employer-created fund into another fund, so long as the source of the funds is identified. I do not believe that the General Assembly intended to penalize such transfers.
McCulloch, Felger, Fite & Gutmann Co., L.P.A., and William B. McNeil, for appellant, estate of Robert Lawrence Roberts.
Betty D. Montgomery, Attorney General, and Barbara L. Barber, Assistant Attorney General, for appellee, Thomas M. Zaino, Tax Commissioner of Ohio.
This decedent rolled his Pioneer retirement account directly into an IRA opened with Edward D. Jones & Company. This dispute concerns only the amount transferred that represents his employer’s contributions and interest earned on those contributions. It is undisputed that the amount representing earnings and appreciation attributable to the decedent’s contributions is fully taxable. In fact, the decedent withdrew the funds that he contributed and paid taxes on that amount. I believe that the mere transfer of funds from one account to another should not convert the employer’s contributions into assets valued as part of the decedent’s gross estate.
I believe that a qualified rollover IRA falls within the contract or agreement referred to in R.C. 5731.09(A) under this catchall phrase. Consequently, I dissent. I would reverse the judgment of the court of appeals and reinstate the judgment of the probate court.
Resnick and Pfeifer, JJ., concur in the foregoing dissenting opinion.