IN RE: the MARRIAGE OF Marietta and Jack R. LEHMAN.

Reset A A Font size: Print

Court of Appeal, First District, Division 4, California.

IN RE: the MARRIAGE OF Marietta and Jack R. LEHMAN. Marietta LEHMAN, Respondent, v. Jack R. LEHMAN, Appellant.

No. A073791.

Decided: June 06, 1997

Harry L. Styron, for appellant. Bernard N. Wolf, Law Offices of Bernard N. Wolf, San Francisco and R. Ann Fallon, Whiting & Rubenstein, Richmond, for respondent.

Appellant Jack R. Lehman (Husband) appeals from a judgment awarding his former wife, respondent Marietta Lehman (Wife), a community property interest in his pension from Pacific Gas & Electric Co. (PG & E) The pension included an enhanced retirement benefit offered by PG & E to encourage Husband's early retirement.   Husband contends that the enhanced portion of the retirement benefit is his separate property.   We affirm the judgment.


Husband started working at PG & E and commenced participation in the company retirement plan in May 1962.   Husband and Wife were married in June 1960.   They separated in October 1977 and a final judgment of dissolution was filed in December 1978.   Husband continued to work for PG & E and participate in the retirement plan until he opted for early retirement in January 1995 at age 54.

At that time, Husband was eligible to participate in PG & E's voluntary retirement incentive (VRI) program in order to reduce its work force.   If an employee met age and service qualifications, the employee was credited with extra years of service and a normal actuarial reduction for early retirement would be waived.   This resulted in higher monthly pension payments than would have been paid under the normal early retirement plan if Husband had waited to retire at age 55.   However, if he worked until age 65, his monthly pension payments would be higher than both the normal early retirement plan and the VRI plan.   Husband opted for the VRI plan.

In June 1995, Wife filed an order to show cause for approval of a qualified domestic relations order to obtain a one-half community property interest in the enhanced portion of VRI benefit.   The enhanced portion of the pension amounts to $708.91 per month more than Husband would have gotten under PG & E's regular early retirement plan.   The trial court awarded Wife a community property interest in the enhanced portion of Husband's VRI benefits.


 On appeal, Husband claims that the enhanced portion of the VRI benefit is not community property.   He disputes that the enhanced portion of the VRI benefit is property at all and, even if it is, he argues that it is his separate property.   As the enhanced retirement benefit was not part of his original employment contract with PG & E and as he had no enforceable right to receive it during the period of his marriage to Wife, he contends that the enhanced benefit is not a community asset.   PG & E's purpose in offering the VRI benefit was to encourage early retirement to reduce its work force.   Thus, Husband reasons that it is not deferred compensation for past services rendered, but a severance package that is his separate property.

 Property attributable to the earnings of an employee-spouse during marriage must be divided equally.   Nonvested pensions are contingent future interests and are property subject to division on dissolution of marriage.  (In re Marriage of Brown (1976) 15 Cal.3d 838, 847-848, 126 Cal.Rptr. 633, 544 P.2d 561.)   Thus, Wife has a community property interest in Husband's normal retirement benefits.   The issue before us is whether she also has a community property interest in the enhanced portion of the monthly payments Husband will receive under the VRI plan.

 An employee-spouse has the right to change or terminate his or her employment, to agree to a modification of the terms of his or her employment, including retirement benefits, or to elect between alternative retirement programs.  (In re Marriage of Brown, supra, 15 Cal.3d at p. 849, 126 Cal.Rptr. 633, 544 P.2d 561.)   Regardless of the employment terms and benefits that the employee-spouse chooses, the nonemployee spouse retains an interest in the chosen benefits.  (In re Marriage of Gillmore (1981) 29 Cal.3d 418, 425, 174 Cal.Rptr. 493, 629 P.2d 1.)   PG & E's VRI is an alternative retirement program.   Although it was offered to encourage early retirement, we do not view it as a severance package or termination benefit because program participation was voluntary.   While Husband was free to opt for the VRI program in view of possible layoffs, the program simply allowed him to retire earlier than he normally would have.   It did not alter Wife's community property interest in his retirement plan, including the enhanced portion of it.

The California Supreme Court has not ruled on this issue.   In an appellate case that is factually indistinguishable from the case at bar, the Fourth District Court of Appeal characterized an enhanced pension plan as community property.  (See In re Marriage of Gram (1994) 25 Cal.App.4th 859, 30 Cal.Rptr.2d 792.)   Similar to the VRI plan, this enhanced pension plan was offered in order to reduce the employer's work force in anticipation of a pending merger.   Finding that the enhanced portion of the benefit was community property, the court was not persuaded by the argument that there could be no community property interest because there had not been a contractual right to receive the benefit during the marriage.  (Id. at p. 866, 30 Cal.Rptr.2d 792.)   Instead, the court found the enhanced pension to be “a reasonable version of the retirement benefit expected had the merger not threatened employment․”   The plan compressed the retirement process by immediately adding age and service credit to the employee.  (Ibid.) Therefore, the nonemployee spouse had a community property interest in the plan.  (Ibid.) We agree with the Fourth District's focus on the characteristics of the benefit as opposed to the employer's intent in offering it.

The trial court found that the VRI benefit was “entirely derivative of the employment contract” and was “an enhancement to the regular retirement benefit program․”   These findings are supported by substantial evidence.   As Wife is entitled to share in Husband's regular retirement program, there is no valid reason why she should not share in that program when it is improved or enhanced.   The fact that the enhancement to the retirement program was not offered until after separation is, in our view, inconsequential, and for this reason we decline to follow In re Marriage of Frahm (1996) 45 Cal.App.4th 536, 53 Cal.Rptr.2d 31.   Rather than focusing on when the enhancement is offered, we perceive the appropriate inquiry to be what does the enhancement represent.

The enhanced portion of the VRI benefit plan represents a reasonable version of the benefits Husband expected on retirement.   The VRI plan is an early realization of Husband's retirement benefits.   Thus, in our view, it is more like deferred compensation for past services rendered than a severance package or termination benefit.   Therefore, Wife retains a community property interest in the enhanced portion of the VRI benefit.

The judgment is affirmed.

REARDON, Associate Justice.

ANDERSON, P.J., and POCHÉ, J., concur.

Copied to clipboard