6.4 DIVISION OF RETIREMENT BENEFITS—FEDERAL LAW CONTROLS
6.401 Know the Provisions of Federal Retirement Plans.
A. Virginia Law Versus Federal Law. 327 The provisions of federal law that govern the division of retirement benefits in divorce preempt state law with a few exceptions, for example, the Virginia Retirement System and municipal plans. For the division of the federal retirement plans that are listed below, the federal statutes control the divisions of these plans. Virginia law plays a very small part in the conveyance of a federally controlled retirement plan.
B. Retirement Plans Governed by Federal Law. Federal law governs the retirement plans listed below and the division of a party's retirement fund in divorce under those plans. The footnotes for each of the plans contain contact information for the agency that controls the plan, the primary statutes and Code of Federal Regulations, and references to applicable publications
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issued by the appropriate agency. The following are the federal retirement plans that govern the division of retirement plans in divorce:
| 1. | Employee Retirement Income Security Act (ERISA); 328 | |
| 2. | Federal Employees Retirement System (FERS); 329 | |
| 3. | Civil Service Employees Retirement System (CSRS); 330 |
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| 4. | Military—Active Duty and Retired; 331 | |
| 5. | Thrift Savings Plan (TSP); 332 | |
| 6. | Railroad Retirement Act of 1974; 333 and | |
| 7. | Pension Benefit Guaranty Corporation. 334 |
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C. Creating a System. In order to grasp the concepts of the federal retirement plans, counsel should do the following:
| • | Read ancillary materials, for example, articles in legal journals, etc.; | ||
| • | Read the governmental publications that are listed in the footnote for each plan; | ||
| • | Read the federal statutes; | ||
| • | Read the Code of Federal Regulations; and | ||
| • | Prepare a summary of the major portions of the federal retirement plan. |
D. Mistakes in Property Settlement Agreements or Final Decree of Divorces. The following is a true story. This is an actual paragraph in a final decree of divorce.
The wife is awarded 50 percent of the marital share of the husband's pension plan with his employer. The wife shall be responsible for the preparation of any retirement order to carry out the terms and provisions of this paragraph.
After the attorney prepared the final decree of divorce and it was entered, he then realized that it was time to prepare the retirement order. The plan to be divided was the husband's railroad retirement. The attorney was fortunate enough to find a specialist to prepare the appropriate QDRO order.
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6.402 Division of Retirement Benefits—Property Settlement Agreements.
A. Interpretation of Property Settlement Agreements. In MacDougall v. Levick, 335 the Virginia Court of Appeals made it clear that
Property settlement agreements are contracts . . . subject to the same rules of formation, validity, and interpretation as other contracts. 336
And property settlement agreement provisions related to the division of retirement plans in divorce are no different from the interpretation of any other provision in the property settlement agreement.
Under the provisions of section 20-107.3(K)(4) of the Virginia Code, the court has the authority to
Modify any order entered in a case filed on or after July 1, 1982, intended to affect or divide any pension, profit-sharing or deferred compensation plan or retirement benefits pursuant to the United States Internal Revenue Code or other applicable federal laws, only for the purpose of establishing or maintaining the order as a qualified domestic relations order or to revise or conform its terms so as to effectuate the expressed intent of the order.
If the property settlement agreement or final decree of divorce has a provision for an award of 50 percent of the marital share, the court will likely allow the terms to be amended to conform the terms to accommodate the appropriate retirement system because of Virginia's statutory requirement permitting the judge "to revise or conform its terms so as to effectuate the expressed intent of the order."
However, the process is not easy. The case would need to be reopened if it has been stricken from the docket of the court. Then a motion to amend the order would have to be filed. The motion to amend should set forth the factual situation and all of the applicable provisions of the particular federal retirement plan. The motion to amend can be lengthy, usually about
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twenty-five to thirty pages, not including the exhibits. A hearing is necessary for the property settlement agreement to be amended. It is recommended that counsel introduce into evidence the revised paragraph that must be used for approval by the particular plan.
B. Ambiguous Language in Agreements. Recognizing an ambiguity in a property settlement agreement is a question of law. This issue is addressed in Stroud v. Stroud 337 where the Virginia Court of Appeals held
In Vilseck v. Vilseck, we noted that, "[a]n agreement should be deemed 'ambiguous if it may be understood in more than one way,'" so long as both meanings are "objectively reasonable."
Furthermore, "whether contract language is ambiguous is [a question] of law, not fact." Thus, we review the trial court's decision on a finding of ambiguity de novo.
. . .
"When the language of a contract is ambiguous, parol evidence is admissible, not to contradict or vary contract terms, but to establish the real contract between the parties . . . [and] to determine the intention of the parties." (emphasis added). The "[u]ltimate resolution of the question whether there has been a binding settlement [agreement] involves a determination of the parties' intention[s], as objectively manifested." 338
In Tiffany v. Tiffany 339 the Virginia Court of Appeals held that
Property settlement agreements are contracts; therefore, we must apply the same rules of interpretation applicable to contracts generally. . . .
In construing contracts, ordinary words are to be given their ordinary meaning. The Supreme Court of Virginia restated the applicable principles in Berry v. Klinger:
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We adhere to the "plain meaning" rule in Virginia: "[W]here an agreement is complete on its face, is plain and unambiguous in its terms, the court is not at liberty to search for its meaning beyond the instrument itself . . . This is so because the writing is the repository of the final agreement of the parties." (Citations omitted).
However inartfully it may have been drawn, the court cannot make a new contract for the parties, but must construe its language as written. (Citations omitted.) 340
As it was held in Frey v. Frey, 341 "[w]here an agreement is complete on its face, is plain and unambiguous in its terms, the court is not at liberty to search for its meaning beyond the instrument itself." 342
In Parra v. Parra, 343 the Virginia Court of Appeals noted that where an agreement was part of the divorce action a trial court is bound ". . . to incorporate such a contract into its decree if one of the parties has since repudiated its provisions" as follows:
While nothing prevents either party from challenging the validity of the contract, such determinations should be measured by the same standards used for judging the validity of any contract. The fact that the subject matter is disposition of marital property does nothing to deprive the agreement of its contractual dignity. 344
The next step for the court in analyzing the terms of the retirement provisions is determining whether the property settlement agreement was unambiguous or ambiguous. This issue was decided by the Virginia Court of Appeals in Smith v. Smith. 345 In situations where an agreement is before the trial court in a divorce action,
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[c]ontracts seeking to do this before marriage, like the prenuptial agreement in this case, should be interpreted and enforced no differently than any other type of contract. Thus, we employ "rules of construction applicable to contracts generally, including the application of the plain meaning of unambiguous contractual terms."
Under settled contract principles, Virginia courts resolve contractual vagaries in one of three ways. First, if no patent or latent ambiguities exist, a court should enforce the plain meaning of the contractual language without resort to extrinsic evidence. Second, if an ambiguity exists, a court should still enforce the contract if the real meaning of the ambiguous provision can be discerned from extrinsic evidence. Third, if an ambiguity renders the agreement too indefinite[,] even after the consideration of extrinsic evidence[,] for the court to determine the parties' intent, the contract cannot be enforced due to the absence of any discernable meeting of the minds. 346
Under Craig v. Craig, 347 courts are guided in contract interpretation by what "is the intention of the parties as expressed by them in the...
