New Jersey Appellate Division Addresses Post-Divorce Pension Enhancement Factors

1409593_gavel_3On September 2, 2014, the New Jersey Appellate Division published an opinion in the case of Krupinski v. Krupinski, reversing the trial court’s decision denying Mr. Krupinski’s motion to terminate alimony, and directing the trial court on remand to provide for an exchange of discovery and the possibility of an evidentiary hearing. The basis for Mr. Krupinski’s application was that his former spouse, from whom he was divorced in 1990, was receiving a large portion of this teacher’s pension through a Qualified Domestic Relations Order (QDRO). The QDRO entitled his former wife to a payout of the marital portion his pension.  At the time of the divorce, Mr. Krupinski was earning $45,000. After getting divorced, Mr. Krupinski later went on to get his Masters Degree, which allowed him to obtain work in school administration. He eventually retired with a pension based upon a salary of $132,000, which was nearly three times his salary at the time of the divorce.

N.J.S.A. 2A:34–23(b) provides that: “When a share of a retirement benefit is treated as an asset for purposes of equitable distribution, the court shall not consider income generated thereafter by that share for purposes of determining alimony.” The statute codified the trial court’s decision in D’Oro v. D’Oro, 187 N.J.Super. 377, 454 A.2d 915 (Ch.Div.1982), aff’d, 193 N.J.Super. 385, 474 A.2d 1070 (App.Div.1984), that case held that income from a pension cannot be considered as income for alimony modification purposes if the value of the marital asset had previously been equitably distributed by the court. In Krupinski, the value of his pension was distributed by way of a QDRO.  In Innes v. Innes, 117 N.J. 496, 569 A.2d 770, (1990), the New Jersey Supreme Court confirmed that the statute applied “to both initial alimony orders and modifications of earlier alimony awards.” Id. at 508, 569 A.2d 770. The Court’s intention was to prevent “double-dipping,” wherein a pension is considered an asset subject to equitable distribution and income.

Here, the Appellate Division found that the trial court erred in denying Mr. Krupinski’s motion to terminate his alimony obligation without making the threshold determination, stating “Specifically, the court must discern what part of the $1,871 monthly pension benefits plaintiff has been receiving since defendant’s retirement in 2010 is attributable to defendant’s post-dissolution efforts, and thus may be considered income to plaintiff for purposes of determining alimony, outside the bar imposed in N.J.S.A. 2A:34–23(b).”   The Appellate Division agreed with Mr.  Krupinski’s argument that the trial court had to address the fact that “his pension benefits increased significantly as a result of his post-divorce efforts to continue his education and training, which led to his promotion to high school administrator [and] [t]hus…the motion judge was required to identify which portion of his pension shared by plaintiff was a joint effort of the parties during the marriage, and which part was due to defendant’s post-divorce efforts.”

The appellate court relied upon the case of Barr v. Barr, 418 N.J.Super. 18, 41 (App.Div.2011) wherein it ruled: “[T]here are some extraordinary post-judgment pension increases that may be proven to be attributable to post-dissolution efforts of the employee-spouse, and not dependent on the prior joint efforts of the parties during the marriage. In such instances, these sums must be excluded from equitable distribution and the application of the coverture fraction may be insufficient to accomplish this purpose.  The court further cited Judge King’s ruling in Bednar v. Bednar, 193 N.J.Super. 330, 474 A.2d 17 (App.Div.1984), stating: “Accretion in value must be analyzed in terms of whether it was attributable to the personal industry of the party controlling the asset, apart from the non-possessory partner, or simply to fortuitous increase in value due merely to inflation or other economic factors.”

The Appellate Division stated that the facts of this case most clearly resemble those of Menake v. Menake, 348 N.J.Super. 442, 792 A.2d 448 (App.Div.2002). The issue in Menake concerned the valuation of a deferred distribution pension wherein the extraordinary post-divorce overtime work effort was never addressed by the trial court. In the Menake case, the Appellate Division remanded the case the trial court to address the questions of whether  it can be shown “that the post-divorce enhancing factors, i.e., here, the alleged extraordinary overtime, are entirely unrelated to plaintiff’s prior years of service? If, for instance, seniority were a dispositive factor in his ability to obtain the overtime, it would seem that would be future enhancement of the marital efforts for which it could be said both spouses looked forward to. If only partially a factor, can the post-divorce service efforts be mathematically extracted? Additionally, did plaintiff work overtime during the marital years such that enhancement of his pension benefits by post-divorce overtime efforts could have been anticipated and, therefore, would become part of the expected ‘future enjoyment’ of the marital asset?”

In Krupinski, the Appellate Division ultimately concluded that the trial court on remand should establish a discovery schedule, after which the trial court is to confer with counsel to determine whether there are material issues of fact in dispute warranting an evidentiary hearing.   It is important for a litigant have experienced counsel throughout the divorce process and in post-judgment matters seeking to modify support. The attorneys at James P. Yudes, P.C. are here to assist you for your family law needs.