Monterey County Super. Ct. No. DR 41290. Ct. App. 6 H030110. Judge: Robert A. O'Farrell.
The opinion of the court was delivered by: Baxter, J.
Gordon Albert Sonne (Husband), the former Sheriff-Coroner-Public Administrator of Monterey County, is a member of the California Public Employees' Retirement System (CalPERS). Members of CalPERS, once vested, participate in a defined benefit retirement plan, which supplies a monthly retirement allowance under a formula comprising factors such as final compensation, service credit (i.e., the credited years of employment), and a per-service-year multiplier. The retirement allowance consists of an annuity (which is funded by member contributions deducted from the member's paycheck and interest thereon) and a pension (which is funded by employer contributions and which must be sufficient, when added to the annuity, to satisfy the amount specified in the benefit formula). (Gov. Code, §§ 21350, 21362.2, subd. (a), 21363.1, subd. (a).)
In 1995, Husband transferred to his former wife, Dalia, 8.677 years of service credit, which represented her one-half interest in the service credit Husband had earned during their marriage. Dalia subsequently exercised her right to a refund of the accumulated contributions in the account, thereby permanently waiving her rights to any further claim on Husband's retirement benefits, including any service credit. (Gov. Code, § 21292, subds. (a), (d).) Husband, who was then married to Theressa Lynn Sonne (Wife), exercised his right to redeposit the contributions (id., § 20751) and paid for it with community funds through monthly deductions from his salary. By the time Husband and Wife had separated, the community had redeposited 70.83 percent of the scheduled payments, and the question arose: What was the community's share of the service credit from the Husband-Dalia marriage?
The trial court and the Court of Appeal agreed with Wife that the community was entitled to 70.83 percent of the service credit because the community had redeposited 70.83 percent of the member contributions for that period of service. Husband contends that such an apportionment vastly overstated the community's interest, in that it accorded no weight or value to Husband's service as a deputy sheriff during that earlier period, which had supplied the consideration for the service credit. Amicus curiae Barbara A. DiFranza, Certified Family Law Specialist, contends further that since community funds contributed only to the annuity component of the retirement allowance, the community was entitled only to a pro tanto share of the annuity-and not to a share of the much larger pension component, which was funded by employer contributions.
We agree with amicus curiae. We therefore reverse the judgment of the Court of Appeal and remand the matter for reconsideration of the apportionment of the service credit arising from the Husband-Dalia marriage.
In March 1971, Husband began working as a deputy sheriff for Monterey County. He was elected Sheriff of Monterey County in 1998 and retired in December 2002. He earned 31.918 years of service credit in the CalPERS retirement system.
For present purposes, we discuss two of Husband's marriages, each of which ended in dissolution. The first marriage, to Dalia, ended in 1991 after more than 17 years. Under the original divorce settlement, Husband was awarded all CalPERS pension and retirement rights earned during the marriage. In return, Husband was to make an offsetting cash payment to Dalia.
Husband married Wife on November 12, 1994. In 1995, because Husband could no longer keep up with the equalization payments to Dalia, he transferred to her one-half of the CalPERS service credit earned during their prior marriage. Accordingly, CalPERS credited Dalia's nonmember account with 8.677 years of service credit and $42,555.64 in member contributions and interest. When Dalia withdrew the contributions and interest, Husband elected to redeposit them into his member account through a paycheck deduction over a period of years. The deduction at first was taken from his salary and then, when he retired, from his monthly retirement allowance. The redeposit ultimately restored the service credit to his member account.
Husband filed for dissolution of his marriage to Wife in January 2004, after he had retired, but the deductions from his retirement allowance for the redeposit continued. The total of the deductions taken during his marriage to Wife was $31,938.92. The member contributions and accumulated interest over Husband's entire career totaled $238,064.35. The actuarial present value of the retirement benefit at the time of trial was in excess of $2 million. The difference between Husband's total contributions and the actuarial present value of the retirement account was funded entirely by Husband's employer as a "current period expense."
In the dissolution proceeding arising from the Husband-Wife marriage, the parties disputed the character of the redeposited member contributions and the service credit arising from the Husband-Dalia marriage, among other issues.
Husband's expert, Ronald G. Reddall, opined that the service credit was Husband's separate property and that the community had a right only to reimbursement of the community funds used to make the redeposit. However, when asked whether the community would be entitled to "a pro tanto share of the appreciation," Reddall replied that he "would leave that to the lawyers."
Wife's expert, George McCauslan, did not address the issue of the redeposited member contributions or the service credit in his trial testimony. In an unsworn posttrial letter that was considered by the trial court, he articulated his understanding that the service credit should be allocated between community and separate property in the same proportion by which those estates had contributed to the redeposit. He determined that community funds had been used to redeposit 70.67 percent of the member contributions from the Husband-Dalia marriage and concluded that the community should therefore be allocated an additional 6.132 years (0.7067 x 8.677 years) of service credit. When these years were added to the service credit that was earned during the Husband-Wife marriage, McCauslan calculated the community share of the retirement allowance to be 41.22 percent.
Husband offered an unsworn posttrial letter from Reddall, who determined the community share through a different method, which assigned only an additional 0.47 years of service credit to the community. Reddall began with an estimate of the actuarial present value of the 8.677 years of service credit: $594,322. Because the community had redeposited only 5.374 percent ($31,938.92 divided by $594,322) of the actuarial value of the service ...