Laing v. Laing
741 P.2d 649 (Alaska 1987)

Facts/History:

  • Kenneth and Marla Laing were married on November 16, 1964 and divorced 20 years later.
  • Kenneth had a nonvested pension.
  • The trial court awarded Kenneth his pension with a present value of $27,000 and awarded Marla offsetting marital assets.
    • Kenneth challenged the award on the grounds that there was insufficient evidence to support the $27,000 figure and that Marla’s share should not have been awarded in a lump sum.

Issues:
(1) Whether a nonvested pension is marital property.
(2) If so, what is the proper method for valuing and dividing the pension benefits?

Holdings:
(1) Yes.
(2) “Reserved Jurisdiction” approach.
Case reversed and remanded.

Reasoning:
(1) Nonvested Pension

  • “The contingent nature of a nonvested pension presents simply a valuation problem, not bearing on nonemployee spouse’s entitlement to a just share of marital assets.”
  • Thus, consistent with the public policy of “just division of marital assets,” courts should not exclude such a substantial asset.

(2) Method for Valuing and Dividing Pensions

  • Courts have used two primary methods of valuing and dividing pension benefits, whether vested or nonvested, upon divorce:
    • Present Value: The court determines a fraction of the present value representing the marital contribution to the accrued pension benefits – i.e., the number of years the pension has accrued during the marriage over the total number of years the pension accrued.
      • Here, contingencies to collection are factored in.
    • Reserved Jurisdiction: The court retains jurisdiction and orders the employee spouse to pay to the former spouse a fraction of each pension payment actually received.
      • Here, the trial court doesn’t consider the pension when it makes the initial division at the time of divorce. Instead, it returns to the issue once the pension actually vests.
  • In this case, the court adopted the reserved jurisdiction approach because the present value approach is inherently unfair.
    • Under the present value approach, “since the non-employee spouse receives his or her share in a lump sum at the time of the divorce, the method unfairly places all risk of possible forfeiture on the employee spouse.”
    • “Thus, we are willing to accept a degree of continued financial entanglement insofar as that may be necessary to effect a just division of nonvested pension rights.”
      • Note: A possible solution this entanglement is the Retirement Equity Act of 1984 (REACT). Under REACT, a “qualified domestic relations order” (QDRO) can be filed with the administrator of the employee spouse’s pension plan.
      • If and when the employee spouse’s pension vests and matures, the plan administrator makes appropriate payments directly to the non-employee former spouse in accordance with the QDRO.

Today, the vast majority of courts consider unvested pensions to be marital property if they accrued during the marriage.

Rule: Pensions accumulated during marriage are martial assets subject to equitable distribution upon divorce.

Rule: The reserved jurisdiction approach is the proper method for valuing and dividing pension benefits.