The highest court in NY, the Court of Appeals, in late October, 2024 issued a decision that can affect any person with pre-marital unvested pension service credits who then purchases during the marriage ("buying back") the service credits to enhance their future pension. (Szypula v. Szypula, 10/22/24)
The basic facts (simplified for the blog post) are that prior to marriage a person was active duty in the Navy for 9 years and then during the marriage was active for 2 additional years. After leaving the Navy there was no future pension entitlement as there was a 20 year service requirement (although there were 11 years of earned service credits). The person then worked in the private sector for many years and then later obtained a job with the federal government in the Foreign Service. The worker was able to "buy back" his prior 11 years of Navy service for $9,158 which would allow those years to now be credited toward his future government pension.
During the contested divorce the veteran claimed that 9 of his 11 years of military service were separate property as they were performed prior to marriage. That upon proper proof is still the law. However, using marital funds to pay the $9,158 created an issue regarding separate and marital property.
The trial court ruled that the 9 years became marital years because marital funds were used to create the additional pension credits. The Appellate Division reversed and said only the monies spent were marital property and excluded the 9 years.
The Court Of Appeals reversed and stated while there may have been separate property of the 9 years the fact that the veteran combined marital funds with the 9 years transformed the separate property into marital property subject to equitable distribution. The Court stated that the case needed to go back to the trial court as there was insufficient proof as to the value of the 9 years before the "buy back". The Court further indicated that assuming the calculations are performed with proper evidence the trial court still has the discretion to determine what percentage of the marital asset to distribute to the spouse, thus alluding to a possible "escape" vehicle to minimize the damage to the veteran/employee.
This case is very important as I have often had cases in which a military veteran becomes a police officer or fireman and "buys back" his/her years to count toward the New York State Police & Fire Retirement System. The source of the funds for the buy back may make a big difference as well as the timing of the purchase. Any person in the middle of a divorce with this issue must have experienced and knowledgeable matrimonial counsel since the valuation issue is complicated and not just a question of how much did you pay for the "buy back". This area of the law has now been expanded by the highest court in NY.