Trial Court “Drops” Ball; Didn’t Divide Retirement Plan B

 

dollars-3The Oklahoma Supreme Court decides that an Oklahoma Firefighters Deferred Retirement Option Plan, or DROP, may be divided as marital property, even though the employee has yet to enroll in the plan.

The Facts

In Marriage of Baggs, the firefighter husband was vested in what the Oklahoma Firefighters Pension and Retirement System calls Plan B.  Plan B allows public employees to turn some of their retirement benefit into a lump sum, paid up front when they retire.  As described by the Court,

“Under the traditional path to retirement, any firefighter who reaches the retirement date and retires from service, is paid a monthly pension equal to their accrued retirement benefit. . . An alternative to the traditional route is that a member may elect to. . . defer the receipts of benefits under the plan and continue working, but not continue to increase their years of creditable service. . . The day the firefighter does elect the DROP plan, their pension payments would be calculated and deposited monthly into the DROP account as long as the firefighter continues to work for up to 60 months maximum. . . Upon leaving employment, the firefighter would then receive both a lump-sum payment and a monthly pension payment (calculated as if they had retired on the day they elected to participate in the DROP plan.)”

The Issue

Public employee retirement benefits that accrue during marriage are marital property, and subject to division in Oklahoma. The problem with Plan B:  the employee’s monthly defined benefit on retirement is lower if he or she opts into Plan B.  Employees usually exercise that option well after the marriage ends.

The Decision

The wife in Baggs argued, since husband’s right to participate in Plan B accrued at least in part during marriage, and the Plan B payment is funded in part with funds earned during marriage, then the court should consider part of any lump-sum payment husband opts for after the marriage ends as marital property.  The trial court and Court of Civil Appeals disagreed. The Supreme Court of Oklahoma agreed unanimously with wife that the portion of the Plan B benefit accruing during marriage is divisible as marital property.

The Baggs decision brings Oklahoma into line with other states that have considered DROP plans.  The Court did overrule in part a prior decision of the Oklahoma Court of Civil Appeals that affirmed a decision not to divide a firefighter’s Plan B lump-sum payment.  In the 2014 case of Marriage of Ballenger, the Court declined to divide Plan B.  But the Ballenger Court did order the firefighter employee to indemnify the wife from any loss of monthly benefits she might suffer should the employee elect Plan B after the divorce.

by David A. Tracy

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