Tuesday, February 23, 2010
Supreme Court Overturns Ruling on Repurchased CalPERS Benefits
By Kenneth Ofgang , Staff Writer
The state Supreme Court yesterday overturned a ruling giving the ex-wife of a former sheriff a community property interest in California Public Employees’ Retirement System benefits that he earned during a previous marriage and later repurchased with community funds.
The justices, in a unanimous decision, held that the use of community funds to redeposit CalPERS contributions entitles the community to an interest only in that portion of the retirement benefit consisting of a member-funded annuity.
A Monterey Superior Court judge and the Sixth District Court of Appeal, Justice Marvin Baxter wrote for a unanimous court, erred in granting the retiree’s subsequent spouse an interest in his employer-funded pension.
The ruling is a victory for former Monterey County Sheriff Gordon Sonne, who was a deputy sheriff for 27 years and sheriff for four years before retiring in 2002. After he and his second wife, Dalia Sonne, divorced, she elected to cash out her share of the community interest in his CalPERS benefits, and he later elected to repurchase those credits, using funds that were the community property of him and his third wife.
Superior Court Judge Robert O’Farrell, hearing divorce proceedings between the former sheriff and third wife Theressa Sonne, ruled that the repurchased service credits were community property to the extent commingled community funds were used to pay for them. He calculated the community interest in the repurchased credits at more than 70 percent, equivalent to the percentage of the redeposited contributions that had come from community funds.
The Sixth District Court of Appeal held that the ruling was not an abuse of discretion.
Baxter, however, explained that under the CalPERS retirement plan, a retiree gets a monthly payment consisting of both an annuity—paid for by the employee through payroll deductions—and a pension, funded by employer contributions.
The lower court rulings were error, the justice said.
“The Court of Appeal’s commingling analysis rests on the erroneous legal assumption that Husband’s retirement benefit was a unitary and indivisible asset,” he wrote.
The redeposit—using community funds—of a portion of Sonne’s contributions, Baxter elaborated, only affected the annuity portion of the benefit.
“The obligation of the employer to contribute to the pension component, on the other hand, derived from Husband’s service during the Husband-Dalia marriage,” he wrote. “Accordingly, the community had a claim only on the annuity component relating to the time period of the Husband-Dalia marriage, and was entitled only to a pro tanto share of that portion of Husband’s retirement allowance.”
On remand, Baxter went on to say, the court may recalculate the community interest by tracing the community contributions to the annuity, and accumulated interest thereon, or by another method the court finds to be appropriate and consistent with the high court’s opinion.
The case is In re Marriage of Sonne, 10 S.O.S. 891.
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