Couples who file for divorce have an opportunity to prepare a settlement agreement that will address and resolve all issues arising out of their marriage. This means that they may divide up the marital property in a manner suitable to both parties. Once a court issues the final judgment of divorce, this agreement may be included in the record, and the judgment will contain its terms. Under Maryland law, spouses may identify and allocate “pension benefits” as part of the settlement agreement. Like many aspects of a divorce proceeding, this phase is governed by case law and statutory provisions. In order to adhere to these laws and protect your financial interests in divorce, it is imperative that you contact an experienced family law attorney from the Maryland area.
In a recent case, Pulliam v. Pulliam, the divorcing couple disputed whether their settlement agreement and consent judgment incorporated a voluntary Deferred Retirement Option Program (“DROP”). Here, the parties married in 2005 and filed for divorce five years later in 2010. During the uncontested divorce hearing in 2012, the couple placed their settlement agreement on the record. Pertinent to this case, the agreement addressed the husband’s membership in the Law Enforcement Officers’ Pension System (“LEOPS”). Under the terms of the agreement, which purported to resolve all issues arising out of their marriage, the wife was entitled to one half of the “marital share” of the husband’s entire pension benefit. In March 2012, the court entered a judgment of absolute divorce and included the parties’ agreement as part of the order.
In August 2013, the wife moved the court, seeking an Eligible Domestics Relation Order (“EDRO”) because the husband refused to sign the order. Essentially, the wife was seeking to include the DROP benefits as part of the husband’s pension, of which she would be entitled to a share. The husband opposed the motion, arguing that at the time of the divorce, he was not even eligible to participate in the DROP program. The trial court concluded that the DROP benefits were to be considered retirement assets within the meaning of the EDRO. The husband appealed.
The court of appeals reviewed two main issues: 1) whether the parties’ consent judgment contemplated the inclusion of DROP benefits, and 2) whether DROP benefits are included in the LEOPS Retirement Plan as a matter of law. Under Maryland law, courts have the authority to identify marital property, assess its value, order the transfer of ownership of certain types of property, and grant a monetary award to ensure both parties are treated equitably and fairly. Maryland law further allows divorcing spouses to enter into an agreement to allocate their property, including retirement plan benefits. The question here was whether the parties intended to include the DROP benefits as part of the pension allocation in the settlement agreement.
The court affirmed the trial court’s decision, finding there to be no ambiguity in the portion of the consent judgment relating to this issue. The term “pension” encompasses whatever benefits are included in that pension, under applicable law. The court then looked to the Maryland Code to determine whether the DROP benefits may be included as a matter of law. After much analysis, the court found that DROP benefits are not a new type of benefit, but merely another way to begin receiving one’s pension benefits. Furthermore, the court found that the case law relied on by the trial court supported this conclusion. Therefore, the court held that the DROP benefits are part of the LEOPS pension as a matter of law for the purpose of the EDRO, and subject to division pursuant to the parties’ consent judgment.
This case illustrates the importance of understanding the myriad laws applicable to divorce cases and how each one may affect your family law proceeding. Parties anticipating a divorce are encouraged to contact Anthony A. Fatemi, an experienced Maryland family law attorney, for representation and legal guidance. Mr. Fatemi can be reached at (888) 519-2801 or (301) 519-2801.
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