Public employees cannot jettison ex-spouses from retirement benefits, state Supreme Court says

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Retired public employees cannot unilaterally change their retirement plan to stop their ex-spouses from receiving benefits, the Colorado Supreme Court decided last week.

Robert J. Mack of Colorado Springs, who retired from government work in 2012 and designated his then-wife as the beneficiary of his retirement benefits, argued to the Supreme Court that the trial judge overseeing his divorce was essentially compelled to honor his request to alter his retirement plan and allow the benefits to flow directly to Mack.

But in an April 11 opinion, Chief Justice Brian D. Boatright indicated that while a retiree may make the request, Colorado law “does not obligate the court to carry out the retiree’s wishes.”

There are three options under the Colorado Public Employees‘ Retirement Association for workers to choose the structure of their benefits upon retirement. Option 1 directs benefits to the retiree only, and the benefits cease upon that person’s death. Option 2 allows for the designation of a beneficiary who receives one-half of the benefit for life after the retiree dies. Option 3 is similar, except the beneficiary receives the full amount upon the death of the retiree.

In options 2 and 3, if the beneficiary dies first, the retiree’s plan converts to Option 1. If a retiree undergoes a divorce, a judge “shall have the jurisdiction to order or allow” the retiree to remove his or her spouse and convert the plan to Option 1. The judge in Mack’s divorce, however, determined the PERA benefits under Mack’s Option 3 plan were marital property to be divided between the couple. 

Mack, who took the uncommon step of representing himself before the Supreme Court, argued the trial court should either honor an agreement between spouses to change the plan or, where spouses disagree, accept the retiree’s request and issue an order for PERA to remove the ex-spouse.

“There’s nothing in the statute or anywhere else in the law that says there’s a limitation on this right as granted by the legislature to the retiree,” Mack said during oral arguments. “This is a situation where the legislature has chosen to grant a limited jurisdiction to the court to do one of two things: either allow or order the retiree to remove the spouse as beneficiary.”

“Are you saying the moment it is requested, the court shall order or allow?” asked Justice Monica M. Márquez. Mack responded in the affirmative.

The attorney for Mack’s ex-wife countered that nothing in the law gave judges a directive to rubber stamp the wishes of a retiree.

Boatright, in the court’s opinion, agreed the law’s statement that judges “shall have jurisdiction” merely indicated the courts have the discretion to order a plan change.

“If, as Husband urges,” Boatright wrote, “‘shall’ indicated that the court was obligated to do the retiree’s bidding, the statute would more naturally read, ‘Upon the retiree’s request, the court shall enter an order allowing the retiree to remove the former spouse as cobeneficiary and convert to option 1 benefits.’ That, of course, is not how the statute reads.”

The case is In re Marriage of Mack.