Division of Pension Benefits as Marital Property in a Marriage Dissolution Action and
Volunteer Firefighter Relief Associations

Pension benefits or pension rights acquired during the course of a marriage have been recognized as marital property available for division for decades by the Minnesota courts and specifically by state statute since 1978 (see Laws 1978, Chapter 772, Section 48).

For private section plans, federal law (Section 206(d)(3) of the Employee Retirement Income Security Act of 1974 (ERISA)) recognized pension interests as marital property subject to division by the court upon a marriage dissolution in an exception to the general prohibition on the assignment or alienation of pension benefits if a "qualified domestic relations order (QDRO)" procedure is utilized. Public pension plans are not included in much ERISA regulation and the QDRO provisions of ERISA do not apply to Minnesota public pension plans.

Before 1987, Minnesota public pension benefits divided in a marriage dissolution award were not enforceable in favor of the second payee against the pension plan because of statutory non-assignment/non-garnishment/non-alienation provisions (see Minnesota Statutes 1986, sections 3A.13; 352.15; 352B.071; 353.15; 354.10; 422A.24; 424A.02, Subdivision 6; and 490.126), so the division was enforceable by garnishment or attachment by the ex-spouse only upon the receipt of the pension benefit by the public pension plan member or upon the deposit of the benefit in the plan memberís bank account.

In 1987 (Laws 1987, Chapter 157), the Minnesota public pension non-assignment/non-garnishment/non-alienation provisions were amended to permit the enforcement of a marriage dissolution judgement dividing public pension interests against the public pension plan if the court judgment met various conditions designed to avoid the imposition of any additional unfunded liability on the pension plan and of any extended administrative burden on the pension plan administrators. The 1987 public pension plan marital property marriage dissolution division conditions were:

    1. Payment Only If No Liquid Marital Property Exists. The division of marital property is, if possible, to be effected by the sale or disposition of liquid assets (e.g. cash and securities) or of readily liquidated assets (marketable personal or real property) before the pension benefits are divided.
    2. Payment Only Upon Plan Member Retirement. The division may not occur until the plan member applies for a benefit and the benefit becomes payable.
    3. Limited To Benefit Plan Terms. The division is payable only to the extent that the benefit plan terms permit.
    4. Limited To Benefit Duration. The division may not be a benefit that is payable for a period longer than the recipientís duration of receipt (i.e. for the pension plan memberís life).
    5. No Lump Sum Payment. The division of a retirement annuity may not be in the form of a lump sum payment.
    6. Designated Trustee For Payment of Any Residual Amount. Any divided benefit payable to an ex-spouse who predeceases the plan member is payable only to a trustee designated for that purpose.

The 1987 amendments, which were drafted in large part by the staff of the Legislative Commission on Pensions and Retirement and which were reviewed and recommended by the Legislative Commission on Pensions and Retirement, also included an authorization of the division of pension rights as a survivor benefit if the pension plan by law allows the payment of a survivor benefit, included a procedure for the valuation of pension benefits or rights by an actuary, and included the directive for the provision of pension information by public pension plans to the parties of an actual or potential dissolution proceeding.

In 1988 (Laws 1988, Chapter 668, Sections 15, 16, and 20), the 1987 public pension plan marital property division provisions were broadened to include private sector pension plans.

Many practicing lawyers in Minnesota will be familiar with ERISA requirements and QDRO procedures, but will generally not be knowledgeable about public pension plan marital property division provisions.

For lump sum volunteer firefighter relief associations and defined contribution volunteer firefighter relief associations, the benefit plan is limited (service pensions are limited to a single payment or a small number of payments; survivor or funeral benefits are payable only to surviving spouses and surviving children, or a designated beneficiary if there is no surviving spouse or surviving child) and most QDROs, if otherwise adapted for the simple nature of volunteer firefighter relief association benefit coverage, will likely not exceed the limitations of Minnesota Statutes, Section 518.58, Subdivision 4. For these volunteer firefighter relief associations, an ex-spouse who has been awarded a portion of the volunteer

firefighterís service pension simply becomes an additional payee when the service pension account is payable, upon the application of the retiring volunteer firefighter, either as a dollar amount or as a percentage of the total as designated in the court order. If a deferred service pension is involved, the marriage dissolved before the deferral period started, and the domestic relations order does not specifically address the issue, the relief association should not assume that any deferred lump sum service pension interest is also payable to the ex-spouse and should seek competent legal advice on how to interpret the order.

For monthly benefit volunteer firefighter relief associations and combination volunteer firefighter relief associations, the volunteer firefighter relief association benefit plan is more complex and the requirements and limitations of Minnesota Statutes, Section 518.58, Subdivision 4, must be more carefully observed. For these relief associations, the value of the relief association benefit coverage is more difficult to determine before the dissolution order is finalized and the payment of a portion of the service pension will continue for an extended period of time. The relief association will probably need to direct the parties to the dissolution action and their attorneys to the actuary who has been retained by the relief association to obtain benefit valuation information, which should be at the partiesí expense and not at the expense of the relief association. The service pension is payable only for the lifetime of the retired firefighter, and is limited to the dollar amount or percentage of the total service pension each month as awarded by the court. For combination plans, where a retiring firefighter has a choice of the benefit form (lump sum or monthly benefit), and if the court did not mandate which benefit form, the type of pension for division will be based on the choice of the retiring firefighter.

Attachments