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A Better Partnership
January 11, 2016

COA - “Components of a pension” do not include choice in form of payment

“Components of a pension” pursuant to MCL 552.101(5) include separate benefits associated with a pension plan, but do not include the form of payment, the Court of Appeals ruled in Hudson v. Hudson, No. 322257.  In addition, the Court held that when a judgment of divorce does not specify the terms for the distribution of a pension plan, a subsequent election for the form of payment is not contrary to the judgment of divorce.
Jeanine Hudson and Alan Hudson were married in November 1999.  Jeanine worked as a school teacher, and Alan worked at a federal cemetery.  In April 2013, Jeanine filed for divorce.  Following mediation, the parties reached an agreement regarding the division of property.  With respect to the parties’ pensions, the judgment of divorce provided that Jeanine would receive 50% of Alan’s benefits pursuant to a Qualifying Court Order and Alan would receive 39.50% of Jeanine’s benefits pursuant to an Eligible Domestic Relations Order (EDRO).  Alan subsequently sent Jeanine a proposed EDRO.  The EDRO was a standardized form that allowed Alan to select from certain options.  For the form of payment, Alan selected the second option, which allowed the benefits to be paid over Alan’s lifetime, rather than over Jeanine’s lifetime.  Jeanine objected to this election, arguing that it violated the judgment of divorce because it unfairly granted Alan rights in Jeanine’s pension that were unavailable to Jeanine in Alan’s pension because of an applicable federal regulation.  The trial court disagreed and signed the EDRO.  Jeanine appealed.
The Court of Appeals first held that the trial court had improperly concluded that MCL 552.101(5) allowed Alan to select the second option for payment.  The relevant language of the statute allows rights to be assigned in a pension and “all components of the pension” unless the judgment of divorce specifically excludes certain components.  Based on the language of the statute, the Court reasoned, “components” included separate benefits associated with pension plans, such as early retirement or a death benefit, but did not include the option to choose the form of payment. 
Despite this error, however, the Court of Appeals held that the trial court correctly concluded that it was bound by court rule to enforce the terms of the judgment of divorce, and that the EDRO complied with the judgment.  Specifically, the Court noted that the parties had the opportunity to negotiate and agree to the form of payment, but did not do so before the judgment of divorce was entered.  Because the judgment of divorce did not preclude Alan’s election, the form of payment was proper under the judgment. 

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