Retirement Plans and Market Changes

What happens when a divorce decree orders that one of the parties will receive one-half of a retirement plan, and then the value of the retirement plan declines dramatically before the transfer? The Alabama Court of Civil Appeals wrestled with this question in Buchanan v. Buchanan, Case No. 2040226 (Ala. Civ. App. December 9, 2005).

The husband and wife reached agreement on the terms of their divorce, and the trial court incorporated their agreement in the decree. Among other provisions, it stated that the wife should receive 1/2 the husband’s retirement plan. On the date of divorce, the husband’s plan interest was worth $76,784.71, but neither party was attentive to completing the required Qualified Domestic Relations Order (QDRO), and by the time the issue was before the trial court on an enforcement petition, the value of the plan interest had dropped to $43,000.

The trial court ordered the husband to pay the wife 1/2 of $76,784.71, or $38,394, and told the husband he could pay this amount in cash to the wife or transfer it to her with a QDRO. The trial court assumed that the husband bore the risk of a loss in value of the account. Here’s a portion of the transcript:

Judge: “Well, I mean, you know, y’all can object and go through all this. I can tell you what I’m going to do. It’s going to be 1/2 of what it was July 1, 2000, $ 38,394. Wasn’t that the agreement?

[Counsel for the husband]: “No, Your Honor, that was not the agreement. The agreement was for the shares which fluctuate in value.”

The Appeals Court cited and discussed Jardine v. Jardine, Case No. 2030454 (Ala. Civ. App. June 30, 2005), which involved a similar fact pattern. The Appeals Court reversed the trial court. “From all of the foregoing, it is evident that the trial court felt bound, as a matter of law, and not because it believed it was the parties’ intent, to give effect to the valuation date in the divorce judgment. In that regard, the trial court’s decision is contrary to this court’s decision in Jardine and must be reversed. The trial court erred by awarding the wife one-half the value of the husband’s retirement account on the date the divorce judgment was entered (i.e., $ 38,394.00).”

The Appeals Court also reversed the trial court’s award of an attorney’s fee to the wife, stating that, generally, an award of attorney fees in an enforcement petition is improper in the absence of a finding of contempt. In this case, the trial court had expressly stated that it believed both parties shared the responsibility for the delay in processing the QDRO.

Although the retirement-account issue that was the subject of the wife’s contempt petition and that is addressed in this appeal was not the only issue raised or litigated below, it is clear that the trial court’s judgment requiring the husband to pay one-half of the wife’s attorney fee was based solely on “the contempt issue concerning the QDRO.” For that reason, the attorney-fee award must be reversed.

Print Friendly, PDF & Email
(Visited 18 times, 1 visits today)

Leave a Reply

Your email address will not be published. Required fields are marked *