In two landmark decisions earlier this year, the Delaware Supreme Court set forth standards and guidelines regarding the interplay between pensions and social security. In Forrester v. Forrester, the husband appealed a Family Court Order which divided his City of Wilmington police pension and accumulated compensatory time. Husband argued that his pension was a “substitute” for social security and therefore not subject to equitable division, as social security is not subject to property division.
There were conflicting Family Court trial decisions regarding the treatment of pensions that were “in lieu of” social security benefits. Under Federal Law, social security benefits are not subject to property division. The Family Court determined that the police pension was not subject to the Federal Law exempting social security from property division and that the equities of the case, including the parties’ respective economic positions, warranted dividing the pension. The trial court gave wife a fifty (50%) percent share of the portion of the pension earned during the marriage.
The Delaware Supreme Court confirmed that social security benefits are not subject to division as social security is pre-empted by Federal Law, and Federal Law prohibits their division. The Delaware Supreme Court, after reviewing decisions from other states which go both ways, determined that pensions that operate as a “substitute” for social security are marital property, and, as such, are subject to equitable division upon dissolution of the beneficiary’s marriage. The Court reviewed the statutes governing the Wilmington Police Department pensions and determined that the legislative intent was to make the police department pensions assignable.
In a decision the following month, in Stanley v. Stanley, the Delaware Supreme Court concluded that the Family Court erred in ordering husband to pay wife a portion of his social security disability benefits. In the Stanley case, husband worked for General Motors throughout the marriage, but after suffering from several serious medical conditions, retired shortly before the divorce. The husband’s pension was divided pursuant to an Agreement and Order dividing the marital assets. At the time, since husband was already retired, both parties were aware that husband was receiving in excess of $2,000 per month and based their negotiations on that amount.
A couple of years later, husband applied for social security disability benefits. Husband received these benefits retroactive to a date which was one year before the Agreement and Order dividing the martial assets. When husband began receiving the disability benefits, his GM pension payments were reduced to almost half the prior amount and both of the parties were required to repay General Motors due to the retroactive social security disability payments. Husband received the full social security plus the reduced GM pension, while wife received only the reduced GM pension. In order to correct the inequity, Family Court ordered that husband’s entire GM pension be paid to wife and that husband reimburse wife the lump sum that she owes to General Motors by paying wife half the amount of the social security disability lump sum that he received.
The Supreme Court determined that due to the Federal Prohibition against the direct division of social security benefits, the Court could not order husband to pay wife half the retroactive social security disability amount. However, the Court also determined that it was fair that husband repay wife for the debt that she owes to General Motors, but ordered the Family Court to require it to be paid from another source.
The following article is informational only and not intended as legal advice. Speak with a licensed attorney about your own specific situation. © Copyright 2011 MacElree Harvey, Ltd. All rights reserved.
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