An interesting case was recently decided regarding retirement credits involving military and civilian work.  In reversing the trial court, in this case, California’s Supreme Court held that four (4) years of additional retirement credits, which Husband was eligible for through premarital military service, are his separate property, minus the funds used to reimburse the community for funding the purchase of those credits.  The key to the court opinion in the case of In re Marriage of Green (2013) 56 Cal.4th 1130, 158 Cal.Rptr.3d) was the dates those services were rendered.

The facts of the case were determined as follows:  Prior to the parties being married, Husband served in the U.S. Air Force from July 1982 through May of 1986.  In June of 1989, he began working as a firefighter for a regional fire authority in Dublin, California.  This made him eligible to participate in CalPERS, the California Public Employees’ Retirement System, which in turn made him eligible to purchase up to four years of service credit toward his retirement benefits because of his military service.

Husband married Wife in May of 1992.  In 1997, the regional fire district Husband worked for merged with the Alameda County Fire Department, and Husband continued working for the newly created department.  He also continued his participation with CalPERS.  In August of 2002, Husband exercised his right to purchase four years of credit based on his military service, which he elected to pay through twice-monthly payroll deductions of $92.44, until July 2017.  Those deductions accrued to a total of $11,462 in community funds at the time the couple separated on October 1, 2007.

Wife filed for divorce in March of 2008.  At trial, a major issue for the court was whether it should characterize Husband’s military service credit as community property or separate property.  The trial court determined the credit to be Husband’s separate property, but it also ordered him to pay $6,699 to Wife for half of the community property payroll deductions made to purchase the credit, plus 6% interest thereon.  Wife appealed the trial court’s decision.

California’s First District Appellate Court reversed the trial court’s ruling.  It found that the service credit was community property due to the fact it had been purchased during the marriage using community funds.  The California Supreme Court granted review and reversed the First District.

In reaching its decision, the California Supreme Court considered many cases dealing with facts that differed from those in this case.  In their opinion, the justices noted that the rule to be applied to all these different legal and factual scenarios was derived from Hogoboom & King, California Practice Guide: Family Law as follows:  “Pension and retirement benefits are a form of employment compensation and thus tantamount to ‘earnings.’  As such, regardless of when the benefits ‘vest’ or are received, they are characterized in accordance with the employee’s marital status at the time the services were rendered; i.e., the benefits are community property to the extent attributable to employment during marriage.”

The key to this decision, obviously, is that retirement benefits in California are to be characterized according to the employee spouse’s marital status at the time the underlying services were rendered.