Retirement Benefit for Prior Military Service Was Not Community Property

Generally, under California law, all property that a spouse acquires during marriage is considered community property to usually be split equally in a divorce. This concept also applies to retirement benefits, including those under the California Public Employees’ Retirement System or “CalPERS.”

However, what if some portion of the CalPERS benefit is based on a military service credit that pre-dated the marriage? The case of In re Marriage of Green involved this issue, and went all the way to the California Supreme Court for resolution.

Credit for Military Service

The husband served in the United States Air Force for four years prior to his marriage. Later, he began working as a firefighter and participated in the CalPERS retirement plan.

Under CalPERS, an employee may receive additional credit toward their retirement allowance for military service, although they are required to contribute money in order to receive the credit. Therefore, as part of the CalPERS program, the husband had the right to “buy” up to four years of service credit toward his retirement benefits for his prior military service.

Approximately three years after becoming a firefighter, the husband was married. Ten years into the marriage, the husband did exercise his right to purchase the additional service credit in CalPERS based on his prior military service, using an installment plan to make more than $11,000 in payments. In his retirement plan, this resulted in a credit later valued by one party at about $140,000.

Six years later, the wife filed for divorce and a dispute arose as to whether the military service credit portion of the husband’s CalPERS pension was community or separate property, since his military service pre-dated the marriage, but retirement benefits under CalPERS were generally community property.

Was the Military Service Credit Community Property?

The California Supreme Court explained that regardless of when retirement benefits are received, the property is characterized based on the employee’s marital status at the time of service. In this case, the husband had rendered his military service prior to the marriage, which meant the military service credit under CalPERS was his separate property.

The wife did have an interest in the contributions the couple made via the installment payments to obtain the military service credit, so the husband did have to pay an amount representing half of the installment payments made with the couple’s funds during the marriage. But the difference in value between the $11,000 paid for the credit, and the much greater value of the credit itself, was not due to the money the couple had paid, but, rather, to the husband’s actual military service, which pre-dated the marriage.

Thus, the husband’s military credit-related benefit was his separate property in the divorce proceedings, excepting only half of the payments which contributed to the purchase of the credit for CalPERS.

Valuing and Splitting Marital Assets

Division of property and retirement accounts can become very complicated in a divorce. You should retain an attorney equipped to handle the complexities, who will guide you through the process of valuing and fairly splitting your marital assets.

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