Kelly v. Kelly

CATHELL, Judge. John M. Kelly appeals from a judgment by the Circuit Court for Montgomery County that denied his exceptions to a ⁴⁶⁵ Domestic Relations Master’s Report and Recommendations. The report of the Domestic Relations Master denied appellant’s request to modify the formula approved in Bangs v. Bangs, 59 Md.App. 350 , 475 A.2d 1214 (1984), due to the method of calculation of his pension. The sole issue raised on appeal is the proper application of this formula.

We shall affirm the trial court’s judgment. The Facts John M. Kelly currently is employed by the American Public Power Association. He has worked as an economist and the director of economics and research for the past fourteen years and for the entire duration of his marriage to Barbara A. Kelly, appellee. Pursuant to appellant’s employment with American Public Power Association, he is entitled to a pension.

He argues that under the employer’s pension plan, his annual pension is determined by taking the average of his last three years of salary, 1 multiplying it by 2%, and then multiplying that by the number of years of credited service. Under the benefit plan, appellant could retire with full pension in the year 2007. Appellant asserted at the master’s hearing that the formula approved of in Bangs, supra, should be modified due to the method by which his pension was calculated. He argued that because his pension is based on the average salary during his ⁴⁶⁶ last three years of employment, the formula must be adjusted to account for any increases or decreases in salary that could take place after the divorce.

Accordingly, appellant proposed to the master that the Bangs formula be modified by multiplying the current formula by a fraction that had as its numerator appellant’s average salary for the last three years prior to the divorce and as its denominator his average salary for the last three years of employment. The master declined to do so. In his report, the master stated: Defendant’s [here, appellant Mr. Kelly’s] Exhibit No. 1 [a chart showing, among other things appellant’s proposed salary increase] is based on speculation as to the time of defendant’s retirement and salary increases. More importantly, under defendant’s Item C, which applies his corrective fraction, plaintiff has earnings of only $61.00 of value based on 11 years of her investment part of his pension benefit.[ 2 ] This increase would not be enough to keep up with inflation.

Further, defendant’s suggested corrective fraction ignores the fact that the years 13 through 24 during which creditable time increases and salary increases; defendant continues to receive benefit from the previous 12 years of service and salary increases during which time defendant was married to plaintiff. Defendant would earn his benefit built upon the predivorce time period and not share the same with plaintiff. Based on the above findings, the Master finds that defendant’s use of a corrective fraction is inappropriate. The Master recommends that a Qualified Domestic Relations Order be prepared by plaintiffs counsel awarding plaintiff a share in the defendant’s pension pursuant to the provisions of the formula stated by the Court in Bangs v. Bangs, supra. ⁴⁶⁷ Appellant’s subsequent exceptions to this order were denied by the Circuit Court for Montgomery County.

Appellant presents one question on appeal: “Did the trial [c]ourt err in applying the formula prescribed in Bangs v. Bangs, 59 Md. App. 850 , 475 A.2d 1214 (1984), to [appellant’s] defined benefit plant?]” Discussion The Court of Appeals in Deering v. Deering, 292 Md. 115 , 437 A.2d 883 (1981), approved of three approaches that the trial court, in making a marital award, could use to value a spouse’s pension. The Court, quoting Bloomer v. Bloomer, 84 Wis.2d 124 , 267 N.W.2d 235, 238 (1978), articulated these three approaches: First, the trial court could consider the amount of [the husband’s] contributions to the fund, plus interest, and award [the wife] an appropriate share.... Second, the trial court could attempt to calculate the present value of [the husband’s] retirement benefits when they vest under the plan.... ... The third method, which has been used widely ... is to determine a fixed percentage for [the wife] of any future payments [the husband] receives under the plan, payable to her as, if, and when paid to [the husband].

Deering, 292 Md. at 130-31 , 437 A.2d 883 (citations omitted) (brackets in original). The DeeringCourt noted “whether any particular option represents an appropriate exercise of discretion depends, of necessity, upon the circumstances of the individual case.” Id. at 131 , 437 A.2d 883 . In Bangs v. Bangs, 59 Md.App. 350 , 475 A.2d 1214 (1984), we upheld the trial court’s use of this third method. In that case, the trial court granted the wife a monetary award and a portion of the husband’s future pension.

The trial court determined that the fractional share of future payments from the pension that the wife was to receive was equal to “one-half of a fraction of which the number of years and months of the marriage ... is the numerator and the total number of years and months of employment credited toward retirement is the ⁴⁶⁸ denominator.” Id. at 356 , 475 A.2d 1214 . This fraction was expressed as follows: 1 x Total Years of Marriage 2 Total Years of Employment The husband in Bangs, whose pension was calculated based on his three highest years’ earnings, asserted the chancellor erred in applying this formula because “the trial court included postdivorce earnings experience in its computation,” and further argued “[a] simple resolution would have been to provide that the payments to [the wife] pursuant to the formula could not exceed $22,500.00, i.e. the present value of the share to which the trial court found [the wife] to be entitled.” Id. at 367, 475 A.2d 1214 . We rejected the husband’s contentions, stating: It is true that [the husband’s] pension benefits could increase as a result of his post-divorce earnings. It is also true, however, that [the husband] has not directed us to any evidence which would indicate when he is planning to retire or permit a computation of the amount of his benefits when he retires.

Therefore, any “cap” or “ceiling” on [the wife’s] share of the pension funds would be based on speculation as to those matters. Id. The formula derived in Bangs v. Bangs has become known as the Bangs formula, and we have upheld its application on numerous occasions. See Scott v. Scott, 103 Md.App. 500 , 653 A.2d 1017 (1995); Pleasant v. Pleasant, 97 Md.App. 711 , 632 A.2d 202 (1993); Hoffman v. Hoffman, 93 Md.App. 704 , 614 A.2d 988 (1992).

In the case sub judice, appellant asserts that because of the method by which his pension is calculated, modification to the Bangs formula is necessary. He argues the Bangs “formula should be modified by taking the existing Bangs formula, and multiplying it by a fraction, the numerator of which is the average of [appellant’s] last three (3) years of income as of the date of divorce, the denominator of which is ⁴⁶⁹ the average of [appellant’s] final three (3) years of income when he ceases working for American Public Power Association.” In essence, what appellant requests this Court to do is to “freeze” appellee’s portion of the pension, which she will be entitled to at a later time, at its current level. We decline to do so and explain. The Bangs formula and appellant’s proposed modification may be expressed as follows: 1 * Years of Marriage x (Sdo+Sdi+Sd£) IS 2 Total Years of Employment (Sfo+Sfi+Sf¿) /& In this formula, the variable S is appellant’s salary.

The subscript variable DO represents appellant’s salary in the year of the divorce, D1 represents appellant’s salary one year prior to the divorce and D2 represents appellant’s salary two years prior to the divorce. The subscript variables FO, FI, and F2 represent appellant’s salary during his last year of employment, his salary one year prior to his last year of employment, and his salary two years prior to his last year of employment respectively. The appellant’s pension, as appellant asserts, may be calculated by the following formula: (Spo+Sfi +Sf¿)I3 x 2 x Years of Service 100 Again, the S variable refers to appellant’s salary and the subscripts FO, FI, and F2 represent appellant’s final year of employment, one year prior to the final