NO. 88-223
I N THE SUPREME COURT OF THE STATE O F MONTANA
1988
I N RE THE MARRIAGE O F
BEVERLY C . ROLFE,
Respondent and P e t i t i o n e r ,
and
O L I V E R W. ROLFE,
A p p e l l a n t and R e s p o n d e n t .
APPEAL FROM: D i s t r i c t C o u r t of t h e F o u r t h J u d i c i a l D i s t r i c t ,
I n and f o r t h e C o u n t y of M i s s o u l a ,
T h e H o n o r a b l e D o u g l a s G. H a r k i n , Judge presiding.
COUNSEL O F RECORD:
For A p p e l l a n t :
F r e d T h o n s o n , h l i s s o u l a , Montana
For Respondent:
R e b e c c a Sumrnerville; D a t s o p o u l o s , P l a c D o n a l d & Lind,
M i s s o u l a , Plontana
S u b m i t t e d on B r i e f s : Sept. 1, 1 9 8 8
Decided: October 14, 1988
Filed:
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
This is an appeal from the Fourth Judicial District
Court, Missoula County, Montana. Appellant Oliver Rolfe
appeals the District Court's denial of an award of child
support from the respondent and its valuation of his
retirement benefits. We affirm on both issues.
This case is presented to us after remand with
instructions on the property distribution. See, Rolfe v.
Rolfe (Mont. 1985), 699 P.2d 79, 42 St.Rep. 623. While our
remand instructions focused on a number of inequities in the
property division, the present appeal concerns only the
proper valuation of Oliver Rolfe's retirement benefits. A
brief set of facts will be discussed in this opinion.
Beverly Rolfe (hereinafter wife) and Oliver Rolfe
(hereinafter husband) were married in 1968 and divorced in
1983. They have two sons, Jonathan and Alexander. Sole
custody of the children was awarded to husband, with
supervised visitation for wife. The husband has a Ph.D. in
Romance Linguistics and is a tenured professor at the
University of Montana. Husband has been employed with the
Montana University System since 1971, and in conjunction with
his employment, contributes to the Montana Teachers'
Retirement System. Husband, at the time of the dissolution,
had an average yearly salary of $28,484.
Wife was a homemaker throughout the marriage. She has
a B.A. in Education and taught for several years prior to the
marriage. On remand, the District Court found that although
wife could acquire the necessary quarter credits to gain a
teaching certificate, the surplus of elementary school
teachers in Missoula and keen competition for available jobs
made such employment problematic. In wife's current job as a
medical transcriptionist she earns approximately $11,000
annually. The maximum wage available in the field is
approximately $15,288 annually. In addition, wife would like
to gain employment in the legal secretarial field. Because
of the limited teaching positions in Missoula, the greater
opportunities in the legal secretarial and medical
transcriptionist fields and insignificant wage differences,
the District Court found wife's plan for training and
employment reasonable.
On remand, the District Court heard substantial
evidence from experts regarding the proper valuation of the
retirement benefits, as per our instructions. From this
evidence, the lower court made extensive findings, concluding
the retirement benefits should be divided according to a
formula, as they are received.
The husband raises two issues on appeal. First,
husband attacks the pension valuation, asserting the trial
court impermissibly included non-marital assets in the
valuation. Second, husband argues the lower court erred in
refusing to award child support to he paid by wife.
Issue No. 1: Pension Valuation
The husband's first issue focuses on the proper
valuation for retirement benefits. It is well established in
this state that retirement benefits are a part of the marital
estate. Karr v. Karr (Mont. 198L), 628 P.2d 267, 38 St.Rep.
506. The question is what value to assign to the pension for
proper division of the marital asset. While we attempted to
give instructions in our previous decision, we recognize such
assets contain numerous contingencies, thereby avoiding
categorical formulas.
To begin our decision, an in depth review of the
specific retirement plan is in order. The Montana Teachers'
Retirement System (hereinafter MTRS) plan provides for both
employee and employer contributions, 7.044% and 7.428%
respectively, based upon the rate of salary earned each
month. The plan benefits become a vested right after five
years of full-time service in Montana for which contributions
have been made. Benefits are computed according to a
formula :
Creditable Service Average
Annual Benefit = 60 x Final
Compensation
The annual retirement benefit is paid in twelve equal monthly
installments. The average final compensation value is the
highest average of earned compensation during three
consecutive years of full-time service.
Once an employee ceases teaching in Montana, he may
apply for benefits. Benefits are payable in full after 25
years of service, regardless of age. However, an employee
with less than 25 years of service can retire as early as age
50, at a reduced benefit. The normal retirement age is 60.
The reduction is .5% for each of the first 60 months the
retirement date precedes age 60 or 25 years of service, and
.3% for each additional month. At trial, experts testified
Dr. Rolfe's benefits would be reduced 37.2% if he were to
retire at age 50. In addition, the MTRS plan does not
provide for lump sum distribution of benefits prior to age
50. An employee may, however, obtain a refund of employee
contributions upon withdrawal from the plan.
Generally, the proper test for determining the value of
a pension is the present value. In re Marriage of Bowman
(Mont. 1987), 734 P.2d 197, 203, 44 St.Rep. 488, 494. Given
the various contingencies, however, present value may not be
adequate to value the asset. For instance, our earlier
decision instructed the District Court to not only consider
the amount of husband's contributions, but also to consider
nonvested pension benefits in the form of employer's future
contributions. Rolfe, 699 P.2d at 83. These nonvested
amounts are analogous to deferred compensation which the
husband earned during the marriage. In re Marriage of Pryor
(Mont. 1986), 731 P.2d 895, 898, 43 St.Rep. 2358, 2361. The
employer's future contributions, like husband ' s
contributions, are a factor of monthly salary, an amount
which could not accurately he determined. In addition, the
plan's reduced benefit formulation varies significantly with
the individual. Numerous other contingencies associated with
retirement benefits, including early retirement or
disability, are equally elusive of accurate calculation.
Rather than attempt to project each individual
contingency, the District Court developed a formula to divide
the pension benefits:
Years of Service During Marriage x Monthly Benefit x 1/2
Years of Total Service (after taxes)
The division of retirement benefits upon receipt is
commonly known as the "time rule" and was mentioned in our
earlier decision via citation to In re Marriage of Brown
(Cal. 1976), 544 P.2d 561. See, Rolfe, 699 P.2d at 83.
Under this method, the marital interest is represented by a
fraction, the numerator of which is the length of the
employee's service during the marriage, and the denominator
is the employee's total length of service. This fraction is
then applied to each benefit payment, lump or periodic, to
determine the portion earned during the marriage. Although
the extent of the marital interest is determined as of the
date of the dissolution, the benefit factors to be applied to
the pension credits earned during the marriage are those in
effect at retirement. Thus, the non-employee spouse is
entitled to increases or accruals on her interest because of
the delay in receiving those payments. McNamara, Dividing
Pension Benefits Upon Divorce, ALI-ABA Course Materials
Journal, No. 2, 33, 42 (1983).
Husband argues this formula impermissibly includes
non-marital property in the form of future employee
contributions, and does not finally apportion the marital
estate. Husband would urge this Court to value the pension
as of the date of dissolution, yet suspend payment until he
retires. This position is flawed in three respects. First,
the monthly pension benefit is not determined by the amount
of contributions, but instead by the highest average salary
earned over three consecutive years. Therefore, the only
amounts which could arguably be called post-marital property
are possible salary increases received prior to retirement.
As the husband's expert testified at trial, Dr. Rolfe
historically received a 3% increase each year. The trial
court expressly excluded any amounts unique to husband, such
as merit pay raises. Second, each party is well aware of
their respective percentage of pension benefits: the fraction
represents the marital interest. Third, to value payments
now, without also demanding an immediate cash payment to
wife, would result in an unfair windfall to husband. Wife
could easily earn over 3% were she able to invest the money
immediately. Certainly husband recognizes the inequity in a
delay without corresponding interest.
Husband also claims the order effectively binds him to
continued employment with the University, and in turn, MTRS
plan. This Court fails to see the basis of husband's
argument. On the contrary, the judgment allows Dr. Rolfe
continued volitional choice. As part of its detailed
findings, the District Court included numerous applications
intended to illustrate possible status changes, including
early retirement, disability, death or retirement after age
60 (normal age). The formula adopted allows the parties to
share the risks while protecting wife's interest.
The judgment is not unusual. As cited above, the
California Supreme Court recognized the difficulties
associated with pension valuation, stating:
[I]f the court concludes that because of
uncertainties affecting the vesting or
maturation of the pension that it should
not attempt to divide the present value
of pension rights, it can instead award
each spouse an appropriate portion of
each pension payment as it is paid. This
method of dividing the . . . interest in
the pension renders it unnecessary for
the court to compute the present value of
the pension rights, and divides equally
the risk that the pension will fail to
vest.
Brown, 544 P.2d at 567. Additional guidelines as to division
of the pension may be found in earlier cases, including In re
Marriage of Glasser !1983), 206 Mont. 77, 85, 669 P.2d 685,
689, quoting Matter of the Marriage of Rogers and Rogers (Or.
1 9 8 0 ) , 609 P.2d 877, 882-883, stating that:
(1) The distribution should generally be
based on contributions made during
marriage. (2) The courts should
continue to strive to disentangle the
parties as much as possible by
determining, where equitable, a sum
certain to be paid rather than a
percentage based upon expected future
contingencies. (3) In determining
whether a lump sum award is appropriate,
courts should consider the burden it
would place on the paying spouse in view
of required child support, spousal
support, and other property distribution.
(4) Where courts determine that the
parties will share in the benefits on a
proportional basis, the parties should
also share the risks of future
contingencies, e.g., death of the
employe[el spouse or delayed retirement
of the employe[el spouse, and payment
should be to the receiving spouse as the
employe[e] spouse receives the retirement
pay. (5) Courts should consider, where
appropriate, an award of a portion of
retirement benefits where other property
awarded is not adequate to make an
equitable distribution.
The findings illustrate the District Court's complete
understanding of the situation. The distribution is
beneficial to both parties, providing for wife's security in
later years without a reduction in needed current income, and
suspending a burdensome cash payment. Flhile husband may
argue such continued jurisdiction is inappropriate, we point
to the much more onerous task of maintenance supervision, a
burden continually accepted by the district courts. Brown,
599 P.2d at 568. More to the point, there appears to be no
alternative to effect a division of the MTRS benefits, given
the mechanics of the plan, nature of the property and desires
of the parties. The lower court may, therefore, retain
jurisdiction to supervise the implementation of the order
when the employee retires. See, Johnson v. Johnson (Ariz.
1981), 638 P.2d 705; Shill v. Shill (Idaho 19?9), 599 P.2d
1004.
The District Court is granted substantial discretion to
devise a method to accomplish an equitable distribution. In
re Marriage of Johnsrud (1977), 175 Mont. 117, 122, 572 P.2d
902, 905. In this case, the District Court saw numerous
problems and developed a reasonable alternative supported by
very detailed findings. We see no abuse of discretion.
Issue No. 2: Child Support
Husband also challenges the District Court's denial of
child support, arguing the lower court failed to consider the
statutory criteria. Husband also points to our Uniform Child
Support Guidelines (Mont. 1987), 44 St.Rep. 828, claiming
only a parent mentally or physically incapacitated will be
excused from paying child support. Not only do the adopted
guidelines make no such conclusion, but expressly state the
guidelines are not binding on judges to prevent appeals based
on a claimed failure to observe the recommendations. Their
major purpose is to produce a uniform and equitable approach
to the statutory standard.
Section 40-4-204(1), MCA, states the factors the
District Court must consider in an award of child support,
including:
(a) [Tlhe financial resources of the
child;
(b) the financial resources of the
custodial parent;
(c) the standard of living the child
would have enjoyed had the marriage not
been dissolved;
(dl the physical and emotional condition
of the child and his educational needs;
(e) the financial resources and needs of
the noncustodial parent ...
However, if the court does not order a parent to pay child
support, it must state the reasons for doing so. Section
40-4-204 (2), MCA. From the District Court's numerous
findings, we list a few to illustrate t.he thorough
consideration given to the statutory factors:
58. Bev's monthly expenses exceed her
monthly income by $200 per month.
59. Wil is a tenured professor
currently under a ten-month
contract at the University of
Montana and earned a gross annual
salary of $28,484 at the time of
the dissolution.
60. Wil is not under contract for the
two summer months and he could seek
employment during that time.
64. Tililts yearly income is over two
times Bev's yearly income.
65. Considering the ... increase in
Wil's expenses attributable to the
children and his substantially
larger income, the needs of the
children can be met without the
payment of support by Bev. There
will not be a reduction in the
standard of living experienced by
the children and Rev will be in a
better position to meet her
financial obligations.
66. Bev has only minimal ability to
acquire future assets.
67. Wil does have the ability to
acquire future assets because of
his admitted astute business
skill. . .
In support of his argument, husband points only to the
increase in expenses attributable to his custody of the
children. But as the statute makes clear, expense is not
determinative. Considering each parties' financial
positions, current and future, and the standard living
enjoyed by the children, the District Court found an award of
child support inapplicable.
The decree of the District Court clearly indicates all
the statutory factors were considered. Child support awards
will not be disturbed on appeal unless there has been a clear
abuse of discretion resulting in substantial injustice. In
re Marriage of A l t (Mont. 1985), 708 P.2d 258, 261, 42
St.Rep. 1621, 1626. We find no abuse of discretion on this
issue.
Affirmed.
We concur: 1