Summary
In Coats v. Coats, 63 Ohio Misc.2d at 301, 626 N.E.2d at 708, the trial judge considered the "hypothetical Social Security" formula but declined to apply it.
Summary of this case from Neel v. NeelOpinion
No. D-202589.
Decided November 9, 1993.
Virginia Egan Fisher, for plaintiff.
Neal P. Lavelle, for defendant.
Plaintiff's motion for declaratory judgment is denied. A portion of plaintiff's civil service pension should not be exempted from the marital estate to the extent that it is in lieu of Social Security benefits.
In her motion for declaratory judgment, the plaintiff cites Cornbleth v. Cornbleth (1990), 397 Pa. Super. 421, 580 A.2d 369, and Stovall v. Stovall (Sept. 23, 1992), Summit App. No. 15335, unreported, 1992 WL 236770, both of which support the legal proposition to which plaintiff subscribes, and which plaintiff desires this court to adopt, to wit:
"In determining the present value of a public pension which is contributed to in lieu of Social Security, you must reduce said value by an amount equal to the present value of that same party's Social Security benefits, `AS IF' that party had participated in and contributed to Social Security (which in reality he/she did not do). In other words, the present value of a party's public pension must be reduced by the present value of that same party's `hypothetical' Social Security benefits."
However, in determining the present value of the plaintiff's civil service pension in this case (or for any case in which a public or government pension is exempt from Social Security, as in Cornbleth and Stovall), this court believes that it is more equitable and more appropriate to take into consideration the present value of the actual Social Security benefits of the spouse of the exempt party (in this case, the defendant), rather than the present value of the hypothetical Social Security benefits of the exempt party (in this case, the plaintiff). The exempt party is the party who is exempt from Social Security because he or she has a public or government pension plan in lieu of Social Security.
The formula which this court will use to determine the portion of the public pension to be considered as marital property is the present value of the public pension earned by the exempt spouse that exceeds the present value of the Social Security benefits actually earned by the other spouse. However, the aforementioned proposition is not being offered as a strict formula for valuation of all public pensions under all circumstances. It should only be applied on a case-by-case basis, taking into consideration the circumstances of the parties such as age, life expectancy, sex, health, income and any other relevant factors. Furthermore, the court may or may not, based upon the facts and circumstances of each particular case, actually reduce the value of the public pension by that same, or some other equitable, amount. In some cases, it clearly would be equitable to apply the setoff formula (for example, if the parties were married for a long period of time and/or either or both parties were at, or near, retirement age), whereas in other cases it clearly would be inequitable to apply the setoff formula (for example, if the parties were only married for a short period of time and/or neither party is near retirement age).
The reason that age should be considered as a relevant factor in determining whether to apply the setoff formula is because Social Security, unlike public pension benefits, may or may not ever be collected by the participant, as a result of the participant's death or disability, or even as a result of a change in the Social Security laws. In other words, the actual receipt of Social Security benefits by the participant is not guaranteed in all cases.
Public pensions, on the other hand, are generally vested after a certain period of time, and often become payable in the event of death, or at a retirement age which many times is earlier than Social Security, and may even become payable when one quits public employment, none of which applies to Social Security benefits. However, the older a party is, and the better health a party is in, the more likely it is that he or she will actually receive Social Security. Hence, it would be inequitable to apply the Social Security setoff in all cases and under all circumstances, especially in the event that it is unlikely that the other party, due to age and/or health reasons, will actually receive Social Security benefits in the near future, if at all. Furthermore, the court may, under certain circumstances, apply only a partial setoff, rather than a full setoff, in order to obtain an equitable division of property between the parties.
Last, using the present value of Social Security in some cases, where warranted, as a full or partial setoff against the present value of the other party's public pension, is not a violation of federal law insofar as it is just one factor, among many, which may or may not be considered, in order to achieve an equitable division of property when valuing and/or distributing the present value of a public pension in divorce proceedings. And although this court is placing a present value on the actual Social Security benefits of one party in order to accomplish this equitable division of the other party's public pension, this court is not, in my opinion, transferring, dividing, or assigning, either at law or in equity, the future Social Security benefits of the first party in violation of federal law.
So ordered.