Tanchick v. Tanchick, 93 N.Y.2d 505 (1999)

Post-divorce early retirement incentive packages are not marital property subject to equitable distribution, except for the portion that enhances pension benefits the employee receives.

Summary

This case addresses whether a former spouse is entitled to share in early retirement incentive benefits received by their ex-spouse after the divorce. The Eastman Kodak Company offered an early retirement package that included an enhanced retirement income benefit, a Social Security Bridge Payment, and a separation payment. The New York Court of Appeals held that only the enhanced retirement income benefit, which directly augmented existing pension benefits, constituted marital property subject to equitable distribution. The Social Security Bridge Payment and separation payment were deemed separate property because they were created after the divorce and were not forms of deferred compensation earned during the marriage.

Facts

Two former Eastman Kodak employees, Tanchick and Olivo, accepted an early retirement plan offered by Kodak in 1991. This plan included three incentives: Enhanced Retirement Income Benefit, Social Security Bridge Payment, and a separation payment. Both Tanchick and Olivo were divorced before accepting the offer, and their divorce decrees stipulated that their former wives were entitled to a pro rata share of their pension benefits from the Kodak Retirement Income Plan (KRIP), calculated based on marital years of service at Kodak.

Procedural History

Following acceptance of the early retirement plan, both parties sought judicial determination regarding their rights to the package’s components. In Tanchick, the Supreme Court amended the QDRO to exclude the Social Security Bridge Payment and separation allowance from marital property, a decision affirmed by the Appellate Division. In Olivo, the Supreme Court initially excluded all three parts of the package, but the Appellate Division affirmed, leading to an appeal based on the calculation of Mrs. Olivo’s share of the enhanced pension benefit.

Issue(s)

1. Whether the Social Security Bridge Payment constitutes marital property subject to equitable distribution.
2. Whether the separation payment constitutes marital property subject to equitable distribution.
3. Whether the enhanced retirement income benefit should be calculated based on the full pension received under the early retirement package or a hypothetical reduced pension.

Holding

1. No, because the Social Security Bridge Payment was not a form of deferred compensation earned during the marriage; it was created after the divorce.
2. No, because the separation payment was not a form of deferred compensation earned during the marriage; it was created after the divorce.
3. The enhanced retirement income benefit should be calculated based on the full pension received, because the non-employee spouse is entitled to share in the pension as it is ultimately determined, including any enhancements.

Court’s Reasoning

The Court of Appeals distinguished between deferred compensation earned during the marriage and compensation created after the divorce. Relying on previous cases like Majauskas v. Majauskas, the court reiterated that pension rights earned during the marriage are marital property. However, the Social Security Bridge Payment and separation payment were new forms of compensation offered after the divorce. The court stated, “Rather than being compensation deferred until some point after the divorce like the traditional pension in Majauskas, the two payments here were compensation created after the divorce.” Regarding the enhanced retirement income, the court reasoned that the non-employee spouse is entitled to share in the pension as it is ultimately determined. When Mr. Olivo accepted an early retirement package that enhanced his pension, it perforce enhanced Mrs. Olivo’s share in that pension as well. The court emphasized that the enhancement was a modification of an existing asset, not the creation of a new one. “What the nonemployee spouse possesses, in short, is the right to share in the pension as it is ultimately determined.”