Marital Portion of Pensions in New Jersey
By:Mark K. Altschuler
In New Jersey, the marital portion for purpose of immediate offset and present value calculation is the benefit accrued as of date of complaint, under the Hayden case. However, the marital portion under a deferred distribution (QDRO) is the benefit as of retirement, multiplied by the coverture fraction as of retirement, under both Risoldi and Marx. This means that while the marital portion is fixed for purpose of present value calculation, this portion keeps growing under a QDRO. This is because, in almost all cases, the benefit increases faster than the coverture fraction decreases, and so the product of the two continues to increase. This is shown graphically on the chart below:
Growth of Marital Portion
Benefit at Complaint (4,307) x C.F. (.9446) = 4,284
However, there appears to be misunderstanding in New Jersey regarding the difference in these two cases. Many property settlement agreements for QDROs and New Jersey PERS, TPAF, and PFRS DROs are based on the marital portion on the benefit accrued as of date of complaint, thus freezing the marital portion. This scheme shortchanges the Alternate Payee by a large amount, as shown in the chart. Moreover, in the Panetta case, one of the key issues was use of the benefit accrued as of date of complaint in a deferred distribution order (called a COAP, rather than QDRO, in the Federal Civil Service Retirement System). The New Jersey Appellate Court upheld the Marx formula and found the pension appraiser (identified in the case) to have incorrectly used the benefit as of date of complaint.
The other issues in Panetta were the Social Security offset, because the employee spouse did not pay into Social Security while in the Civil Service Retirement System (CSRS). In New Jersey this is accounted for under the White case by offsetting the CSRS pension by the Social Security earned by the non-employee spouse, since the employee spouse under CSRS does not earn Social Security benefits. However, in Panetta, the Appellate Court found the pension appraiser incorrectly applied the Cornbleth formula for the offset. Under Cornbleth, the offset is based on the hypothetical imputed Social Security earned by the employee spouse, as if the CSRS employee paid into Social Security. Cornbleth is a Pennsylvania case with no bearing in New Jersey.
On February 5, 2006, Mark Altschuler, MS, of Pension Analysis Consultants will be presenting at ICLE on Hayden, Risoldi, Marx, White, and Panetta, along with sample valuations and DROs under the New Jersey PERS, TPAF, and PFRS systems. The correct marital portions under New Jersey case law will be clearly explained, along with a printed handout and PowerPoint slides. Please come. The marital portion of pensions in New Jersey is not a mystery, and clarification will help you best represent your client.
 Hayden 284 N.J. Super. 418 (1995)