This matter comes before the court on a post-judgment motion to settle the form of qualified domestic relations order (QDRO) to be entered pursuant to the parties' interspousal agreement. Specifically, plaintiff seeks to have the court determine her rightful interest in defendant's American Airlines Pilot Pension Plan. The facts are undisputed in this case. The sole issue to be determined by the court is the method of distributing defendant's fixed income plan.
Plaintiff and defendant were married on July 30, 1966. The complaint for divorce was filed on February 6, 1987. On July 29, 1991, after one day of trial, the case settled with an agreement on the record. The agreement was reduced to writing and signed by the parties on April 25, 1991. The judgment of divorce was entered on April 26, 1991.
There were three major assets to be distributed: the marital home, cash and defendant's American Airlines Pilot Pension Plan. In accordance with the agreement, plaintiff deeded the marital home to defendant in return for a cash payment. Under Section IV of the agreement, the pension was to be distributed as follows:
1. The husband and wife agreed to consent to a QUDRO [ sic ] order providing for the payment to the wife of 50% of the entire pension plan of the husband with American Airlines. The said pension plan is divided into Plan A and Plan B and the husband agrees that the wife shall receive 50% of each plan for that period of time commencing on the date of the marriage (July 30, 1966) to the date of the filing of the complaint for divorce (March 6, 1987).
A. The wife shall be entitled to any post-retirement cost of living increases on Plan A for the time period indicated above.
B. The wife's entitlement to Plan A will continue for her lifetime.
C. The wife shall be entitled to any passive gain on her share of Plan B accruing after March 6, 1987.
Defendant entered the American Airlines Pilot Pension Plan on July 1, 1967 and anticipates retirement on July 1, 2000 at age 60.
In July 1991, plaintiff's counsel forwarded to defendant's counsel two proposed forms of QDROs, one for each plan. In the orders, Plan A is described as a "Fixed Income Plan" and Plan B as a "Variable Income Plan".
Defendant responded to plaintiff's proposed QDROs in December 1991 and apparently objected to the fixed income plan order, although he did not specify which order he was objecting to. On December 30, 1991, plaintiff replied, explaining the difference between the two orders and why they should be entered as proposed. Defendant still did not consent to the proposed QDROs but on May 27, 1992, again objected to the form of order stating that the fixed income plan should be segregated into two separate accounts. Defendant did not, however, provide an alternative form of order to be considered by plaintiff, nor did he provide any legal basis for his position.
Finally, on September 4, 1992, plaintiff filed a motion to have the court determine whether her proposed QDROs should be entered. In his response to the motion, defendant stated that he did not object to the variable income plan order; he objected only to the fixed income plan order.
The court heard oral argument on the motion and, thereafter, plaintiff requested the opportunity to submit a supplemental certification of William Troyan, the expert she had retained to evaluate the pension plans and assist in drafting the QDROs. On November 10, 1992, the court entered an order providing a time table within which defendant was to submit his proposed form of order and for the parties to make additional submissions, after which the court would render a decision. Herein is the court's decision.
The pension plan referred to in the Agreement, consists of two separate and distinct plans. Plan A, a fixed income plan, is an aggregate funded qualified "defined benefit plan" described under the Internal Revenue Code, 26 U.S.C. § 414(j):
(j) Defined Benefit Plan. For the purposes of this part [26 U.S.C.S. §§ 401, et seq. ] the term 'defined benefit plan' means any plan which is not a defined contribution plan.
Plan B, a variable income plan, is a qualified "defined contribution plan" described under the Internal Revenue Code, 26 U.S.C. § 414(i):
(i) Defined Contribution Plan. For the purposes of this part [26 U.S.C.S. §§ 401 et seq. ] the term 'defined contribution plan' means a plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant's account and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account.
The distinction between the two plans is that under Plan B, the defined contribution plan is funded by employee contributions, an individual account is maintained for each employee and the employee's benefits are based solely upon the employee's contributions to the plan, plus gain or loss on those contributions. Under Plan A, the defined benefit plan is funded entirely by contributions of the employer and the employee's benefit is calculated at the time of retirement based upon a number of factors which may include the employee's age at the time of retirement, the employee's final salary, the number of years of employment, mortality, future rates of interest and the form in which the annuity is paid. The defined benefit plan consists of an aggregate fund for all employees. There are no individual accounts for each employee.
In plaintiff's proposed form of QDRO for Plan B, the defined contribution plan, defendant's individual account is to be segregated into separate accounts for plaintiff and defendant. Plaintiff's account is fixed at 50% of the value of the plan as of February 6, 1987 and will increase only by the interest ...