CALCULATING THE COMMUNITY PORTION OF A DEFINED BENEFIT PLAN (PENSION) IN TEXAS DIVORCE CASES

As a result of the decision by the Texas Supreme Court in Berry v. Berry, 647 S.W.2d 422, an alternate payee (non-participant spouse) often receives a significantly smaller portion of pension benefits than he or she would receive under the divorce laws of other states.

In the Berry decision, the Texas Supreme Court held that the community portion of a pension does not include post-divorce increase. Instead, under Texas law, the spouse's community claim is limited to the value of the accrued benefit as of the date of the divorce.

In the Berry decision, the Texas Supreme Court seemingly disregarded common sense by disregarding the fact that subsequent to the date of divorce, the value of a pension benefits that were already accrued continues to change as time goes by. In particular, the value increases as the participant spouse's actual retirement (or eligibility for retirement) draws nearer. The Supreme Court of Texas dismissed the reality of such increases in value, stating "we reject the concept of inflation as a factor for our consideration as it relates to the current value of retirement benefits." Id. at 947. Thus, through a single and (completely absurd) sentence, the Supreme Court of Texas issued a harsh and unjustifiable slap to the face of any non-participant spouse seeking their share of pension benefits in divorce.

The Berry decision, and its financial consequences, should be considered when negotiating or drafting a Texas QDRO or marital separation agreement.