On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Ocean County, Docket No. FM-15-866-05.
The opinion of the court was delivered by: Fuentes, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically argued January 26, 2007
Before Judges Cuff,*fn1 Fuentes and Baxter.
The principal issue we are required to determine in this appeal is whether a police disability pension is subject to equitable distribution without any exemption for that portion of the pension benefit intended as compensation for the disability. Defendant also argues that the Family Part erred in declining to impute a reasonable income to plaintiff, thereby improperly increasing his child support obligation; and in ordering him to obtain and maintain life insurance in plaintiff's favor in the amount of $275,000, as a means of protecting plaintiff's equitable distribution interest in his pension benefits.
After carefully considering the record before us, and in light of prevailing legal standards, we agree with defendant's position and reverse. We now reaffirm the principle we first articulated in Avallone v. Avallone, 275 N.J. Super. 575 (App. Div. 1994). In addressing an equitable distribution claim against a disability pension, a reviewing court must determine "which [portion of the pension] represents a retirement component in which plaintiff would be entitled to share, and that portion which represents compensation for defendant's personal disability and personal economic loss." Id. at 584.
Here, the trial court failed to conduct the analysis necessary to make this determination. We thus vacate that portion of the final judgment of divorce ("JOD") that subjected defendant's disability pension to equitable distribution. We also vacate the section of the JOD that set the amount of defendant's child support obligation and required defendant to maintain a life insurance policy in the amount of $275,000. We remand these issues to the Family Part for further proceedings consistent with this opinion.
We gather the following facts from the evidence presented at trial.
Defendant began working as a police officer for the Neptune Township Police Department on February 1, 1996. The parties were married on November 19, 1997. They had two children, both girls, who are now ages eight and five. The family resided in a single family dwelling in Forked River, Ocean County.
On May 1, 2004, defendant retired after becoming eligible for a monthly ordinary disability pension benefit from the New Jersey Police & Firemen's Retirement System (PFRS). At the time of his retirement, defendant's base annual salary was $81,997.83. On October 8, 2004, defendant received a net retroactive pension check of $8,905.55, and thereafter began receiving a regular monthly retirement benefit of $2,733.26, which represented forty percent of his final year's salary.*fn2
On January 4, 2005, plaintiff filed for divorce. After preliminary negotiations, the trial court ordered the following pendente lite relief:
a. Defendant to pay $186 per week in child support through Ocean County Probation, effective June 15, 2005;
b. Defendant to continue to pay roof expenses for the marital home;
c. Defendant to continue to pay [youngest daughter's] pre-school tuition of $150.00 per month;
d. Sale of the marital home to be considered a change in circumstances concerning support;
e. Finding Defendant to have ability to pay more than $600 per month in support.
The marital residence was sold on July 28, 2005, for $245,000. The net proceeds from the sale were divided equally between the parties. At the time of trial, defendant was employed full-time by the Township of Lacey Public Works Department, and was earning $30,638.40, or $14.73 per hour. The parties agreed to share joint legal custody of their two children, with plaintiff as the "parent of primary residence." Defendant had parenting time with the girls "every other weekend from Friday through Sunday, every Thursday for dinner and the Monday for dinner during the week following the weekend he does not have the children." Defendant was also responsible for providing the children with medical and dental insurance coverage; and agreed to "provide [p]laintiff with information necessary for her to obtain COBRA benefits available to her through his employment."
The case was tried over a five-day period before the Family Part. Each party presented expert testimony in the area of pension evaluation. Both sides stipulated to the experts' qualifications, and to their capability to offer opinion testimony on this issue.
William Troyan testified for plaintiff, and authored a report dated August 1, 2005, regarding defendant's pension. Troyan began his analysis by dividing the total period of time the parties were married while defendant was accruing a benefit, by the total period of service of defendant. Through this approach, he calculated that the marital coverture fraction, or the portion of the benefit attributable to the marriage, was 78.18%.
Based on a letter prepared by Peter J. Gorman, Executive Assistant, State of New Jersey, Department of Treasury, Division of Benefits and Pension, Troyan opined that defendant's pension was a "regular monthly retirement allowance" that contained no specific allocation for lost wages due to disability, and was therefore subject to equitable distribution.
Troyan acknowledged, however, that Gorman also referred to defendant's pension as an "ordinary disability retirement." He further recognized that, at the time of his retirement, defendant was not qualified for any pension other than the disability pension. Specifically, he stated that if defendant had retired at the same time without a disability, he would have only received a "refund of his contributions," which totaled $35,430.41.
Finally, Troyan specifically noted that despite his characterization of defendant's pension as a marital asset, subject to equitable distribution, plaintiff would not be entitled to a survivor benefit if the parties were divorced. He therefore suggested the use of an insurance policy as a means of protecting plaintiff's share of defendant's pension. In determining the present value of defendant's pension, Troyan used a gender-neutral mortality table, and did not take into account any disability or ...