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Panetta v. Panetta

July 01, 2004

ANTHONY PANETTA, PLAINTIFF-APPELLANT,
v.
CAROLYN PANETTA, DEFENDANT-RESPONDENT.



On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Somerset County, Docket Number FM-18-327-94.

Before Judges Pressler, Alley and Parker.

The opinion of the court was delivered by: Parker, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 2, 2004

In this post-judgment matrimonial matter, we focus on two issues: the appropriate formula for calculating the marital share of plaintiff's federal pension and whether plaintiff is entitled to an offset against defendant's share of his pension for defendant's social security benefits.*fn1 The parties were married in 1958 and divorced in 1994. During the marriage, plaintiff, Anthony Panetta, was initially employed in the private sector. From 1977 to 2000, he was employed by the federal government. Defendant, Carolyn Panetta, is employed by AT&T. The judgment of divorce provided for equitable distribution of the parties' pensions. It specifically stated:

Both plaintiff and defendant shall execute Qualified Domestic Relations Orders for division of plaintiff's pension with plaintiff's present employer, Department of Veterans Affairs and defendant's present employer, AT&T. Both Orders shall be based on the evaluations prepared by Pension Appraisers and dated April 5, 1994. It is understood by the parties that the evaluation of plaintiff's pension reflects an adjustment for imputed social security benefits as it is a civil service pension. This reduced valuation shall be utilized for division of plaintiff's pension and the applicable Qualified Domestic Relations Order unless New Jersey Courts dictate law to the contrary prior to plaintiff's retirement.

The Pension Appraiser's Report dated April 5, 1994, valued each of the pensions as of October 1, 1993, the date the complaint was filed. Four years later, defendant moved to "amplify" the judgment and to confirm the parties' understanding of the pension distribution. Defendant also sought to amend the judgment, specifically to identify a court order approved for processing (COAP),*fn2 rather than a qualified domestic relations order (QDRO),*fn3 for distribution of the federal pension, and to apply the formula articulated in Marx v. Marx, 265 N.J. Super. 418 (Ch. Div. 1993), to allocate defendant's share of plaintiff's federal pension.

On September 22, 1998, the parties entered into a consent order settling the motion. In the consent order, they agreed to file an amended judgment that would (1) identify plaintiff's pension order as a COAP; (2) refer to the percentage allocation of the pension; (3) provide for defendant to receive survivor benefits from plaintiff's pension, "the cost of which shall be deducted from defendant's share;" (4) utilize the Marx formula for allocation of plaintiff's pension; and (5) provide for execution of a QDRO for plaintiff's share of defendant's AT&T pension.

The amended judgment, filed on March 21, 2000, stated:

1. That the Wife, Carolyn Panetta, shall cooperate with the Husband, Anthony Panetta, as may be necessary, which includes providing the Husband with all requisite information and signatures, to allow the Husband to obtain a [QDRO] for his share of the Wife's pension with AT&T. The Husband shall be allowed to elect to receive a survivor annuity the cost of which, if such election is made, will be charged solely against the Husband's portion of the benefit.

2. The Husband, Anthony Panetta, shall notify the defendant, Carolyn Panetta, immediately upon plaintiff's notice of his retirement date and election to commence receipt of social security benefits. This notice to defendant is to allow plaintiff to enter a revised COAP which will adjust defendant's portion of the pension distribution of plaintiff's pension by decreasing defendant's portion by an amount calculated by Pension Appraiser's, Inc. to be the value of plaintiff's imputed social security benefits. A revised COAP is necessary since it is impossible to calculate that portion of plaintiff's pension attributed to a social security benefits [sic] until plaintiff's true and exact retirement date, pension benefits and social security benefits become known to plaintiff.

The amended judgment did not include the provision for defendant to receive survivor benefits from plaintiff's pension as agreed in the consent order, however.

Thereafter, the parties filed numerous motions and cross-motions regarding the valuation and distribution of the pensions. Plaintiff retired from his federal employment in May 2000 and designated his new wife as the survivor beneficiary of his federal pension, irrevocably precluding defendant from the option agreed to and ordered previously.

In September 2002, a plenary hearing was conducted to determine the appropriate form of COAP. The parties' pension experts, Theodore K. Long of Pension Appraisers, Inc., for plaintiff, and William M. Troyan for defendant, testified specifically as to their differing valuations of plaintiff's federal pension and the social security offset.

On September 24, 2002, the trial judge entered an order (1) authorizing defendant to prepare a COAP in the form testified to by Troyan utilizing the Marx formula; (2) denying plaintiff's motion to have defendant's share of his federal pension reduced by an imputed social security benefit; and (3) deferring the issue of arrears in the distribution of defendant's pension to plaintiff until acceptance of the COAP. In his letter opinion dated September 24, 2002, the judge concluded "as a matter of law that [defendant's] argument with respect to imputed social security is correct" and that "it is inappropriate to make any reduction in her share of [plaintiff's] pension on account of an imputed social security benefit." The judge gave three specific reasons for his decision:

First, after the agreement was signed, but before [plaintiff's] retirement, the Appellate Division in Hayden v. Hayden, 284 N.J.Super. 418 (App. Div. 1995) ruled that under New Jersey law it was correct for a judge to refuse to reduce the valuation of a pension by the amount of the social security benefit that the husband would have received if he had been in equivalent private employment. The Appellate Division specifically rejected the Pennsylvania decision which held otherwise, Cornbleth v. Cornbleth, 397 PA Super. 421 (1990). Id. at 425. This clear statement of New Jersey law rejecting the arguments of plaintiff who, along with his expert, relied upon the Cornbleth case comes clearly within the coverage of the last sentence of paragraph 4 of the Judgment of Divorce. That is, New Jersey law did in fact dictate that the imputed social security benefit would not be used to reduce the pension valuation, and that this determination was made prior to plaintiff's actual retirement in May 2000. Second, in fact Mr. Panetta is receiving social security. He is receiving social security on the basis of his employment prior to starting with the federal government in the year 1977. A careful review of P-1, plaintiff's exhibit, shows the methodology used by the Social Security Administration to calculate social security benefits (see page 5 of P-1). The first $401 of average indexed monthly earnings yield a benefit of 90 percent of that amount or $361. The next $2,000 is multiplied by.32, and thereafter, all excess income is valued at only.15. Mr. Panetta's expert says that his hypothetical social security benefit would have been $578.26. However, it is clear that that would not be the case because Mr. Panetta is actually receiving $530 in social security benefits from his earlier employment. Because of the reduced rate applied for excess earnings, if Mr. Panetta had been employed in private employment, his social security benefit would not have been $578.26 higher. It is unfair and inequitable to reduce Mrs. Panetta's share of pension benefits by this "hypothetical social security" calculation.

If he had not worked for the federal government from 1977 until his retirement, his social security benefits would not have been increased by the purported $578.26 hypothetical. Third, Mr. Panetta did not give Mrs. Panetta the opportunity to purchase the survivor benefit as had been agreed to in the Consent Order. That was something that Mrs. Panetta was to receive, and she did not. Although it is now impossible to correct this, because his new wife has the benefits and ...


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