State Retirement Plans in Alabama Divorces

Alabama state retirement plans are retirement plans subject to division in divorce, as the result of a ruling of the Alabama Court of Civil Appeals in Killingsworth v. Killingsworth, Case No. 2030767 (Ala. Civ. App. October 14, 2005). That may not sound much of a revelation to you, but it’s big news to the many trial courts in Alabama that have attempted to treat state retirement plans differently from other retirement plans.

Unlike typical retirement plans, those offered by Retirement Systems of Alabama (RSA) are not amenable to a Qualified Domestic Relations Order (QDRO). Consequently, many trial courts, most notably those in Jefferson County, have steadfastly maintained that they cannot be awarded as property division in a divorce. Killingsworth appears to lay that argument finally to rest in its treatment of RSA retirement plans.

In Killingsworth, both parties had RSA retirement plans. The husband was a long-time and well-paid employee of the Alabama Department of Public Health, and he enjoyed in addition an unspecified amount of retirement from his service in the Alabama National Guard. The wife was a teacher in Dale County making less money than the husband and with a shorter length of service.

The trial court ordered property division and alimony that the Appeals Court affirmed on appeal. The interesting aspect of the Appeals Court decision is its handling of the retirement plans.

The trial court ordered each party to share 30% of his or her retirement plan with the other. Because the husband’s retirement dwarfed that of the wife, this obviously worked to the benefit of the wife. The Appeals Court let stand this basic division of the parties’ retirement benefits.

The Appeals Court reversed and remanded, however, on the narrow basis of the trial court’s handling of the husband’s benefit resulting from his participation in the Deferred Retirement Option Plan (DROP). Specifically, the trial court had awarded to the wife “a portion of that part of the husband’s DROP benefits representing the return to the husband of monthly contributions to the state retirement plan (5% of his salary) during the period of his DROP service, plus interest on that amount.”

The Appeals Court concluded that, because this benefit was based on the husband’s earnings after the marriage ended, it did not constitute a division of vested benefits as permitted by Ala. Code § 30-2-51. The Appeals Court reversed the trial court’s judgment to the extent of its award of the DROP benefits the husband might accrue subsequent to the marriage. In all other respects, it affirmed the trial court’s judgment.

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