The Florida Bar Family Law Section Commentator - December 2008
by Mark Altschuler
While it is established under Boyett (703 So. 2nd 451, Fla. 1997) and other appellate court decisions that defined benefit pensions are marital property, there have been disputes over the marital value of past payments, if a pension is already in pay status at the time of divorce. If there is no dispute as to future payments being marital property, why would there be a dispute about past payments, assuming the past pension payments were not shared by the parties? In fact, past payments have even more value than future payments.
One argument raised about past payments is that the cases do not mention past payments. That is true. However, the cases do not exclude past payments. In fact, the marital portion of each pension payment, whether past or future, is determined by the by the benefit accrued as of filing, under Boyett.
If pension payments are marital property, that applies to both past and future payments. Each pension payment has a marital component, due to the pension being acquired during the marriage, or at least partially acquired during the marriage. If the pension payment is marital property, it makes no difference when the date of retirement is. Whether that pension payment occurs in the past or future, a component of that payment, defined by Boyett, is marital property.
Marital pension payments kept by the employee are the same as dissipa- tion of a marital asset. Another way of looking at this is a 401(k) scenario. Suppose the 401(k) was acquired during the marriage, but completely dissipated by the employee after the date of filing. It would not be reasonable to say the marital value is zero, because a marital asset had been dissipated by the employee after the date of filing. By the same token, marital pension payments kept and spent by the employee spouse represent dissipation of a marital asset.
But if there were no court order to share the payments that was ignored, why would this be dissipation of a marital asset? Assuming the case is settled by reduction to present value and immediate offset, the future payments are a marital asset that has value, without court order. By the same token, the past payments also have value. There is no mathematical difference at all between past and future payments. The same equation that is used to calculate present value is used to calculate the accumulated value of past payments. Thus, there is no basis for an argument to the effect that past payments are different in kind. From a legal point of view, the employee’s keeping and spending past payments are merely dissipation of a marital asset.
Mathematically, past and future payments use the same formula for calculating today’s value of the past or future payments. Past payments are compounded forward due to past time being negative, and future payments are discounted back due to future time being positive, but the formula is the same. Suppose the interest rate is six percent. Today’s value of a single dollar payment, from two years in the past, is (1.06)2. This is six percent interest compounded for two years. Today’s value of a single dollar payment, two years in the future, is (1.06)-2, which is six percent interest discounted for two years. Thus, in either case, two years of interest is accounted for in the formula. If the value of a past payment is compounded forward in time, the two years is positive. If the value of future payment is discounted backward in time, the two years is negative.
In calculating a present value, mortality terms are also used in discounting future payments. The payment one year in the future is discounted with the probability of living one year. The payment two years in the future is discounted with the probability of living two years to collect the payment. By the same token, all the past payments are also multiplied by probability terms, except the probability of living from a past date to present is one.
The above discussion shows there is no inherent difference in valuing past or future payments. Past payments, therefore, are not a separate asset, different in kind from future payments, unless they have been used as income for support or alimony purposes. In that case, past payments cannot be counted as both income and asset, in order to avoid “double dipping.” But if past payments have not been shared or used in alimony calculations, they are valued the same way future payments are. Boyett makes no distinction between past and future payments.
Legally, each payment has a marital portion as defined under Boyett, whether past or future. The past payments did not disappear. Indeed, they have more value than the future payments. If a marital asset is dissipated by one party, it still has value, in terms of equitable distribution. The marital value of past payments dissipated by the annuitant does indeed have value, and this value is calculated using the same methodology as future pension payments.