G. Gausman v. K. Gausman, City of Erie Officers' and Employees' Retirement Plan

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Gary Gausman :
:
v. : No. 440 C.D. 2017
: Argued: May 7, 2018
Karen Gausman, City of Erie :
Officers’ and Employees’ Retirement :
Plan :
:
Appeal of: Karen Gausman :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY
JUDGE COHN JUBELIRER1 FILED: August 16, 2018
Karen Gausman (Wife) seeks to compel the City of Erie Officers’ and
Employees’ Retirement Plan (Plan) to approve a proposed qualified domestic
relations order (QDRO) that she negotiated during her divorce from Plan participant
Gary Gausman (Participant). The Plan previously refused to approve the QDRO
because it provided, in relevant part, that Wife would be entitled to survivor benefits
upon Participant’s death. The City of Erie’s Pension Ordinance expressly prohibits
survivor benefits to ex-spouses. Wife filed a Motion for Special Relief (Motion)
asking the Court of Common Pleas of Erie County (common pleas) to order the Plan
1
This matter was reassigned to this author on July 9, 2018.
to approve the QDRO. Common pleas denied the Motion by Order dated March 9,
2017. On appeal, Wife claims common pleas erred in refusing to designate her as a
surviving spouse and challenges the Plan’s treatment of ex-spouses on constitutional
grounds. Discerning no error or constitutional violations in common pleas’ decision,
we affirm.2
I. Background
Participant and Wife married in October 1991. After 22 years of marriage,
Participant filed for divorce from Wife in January 2014 on the ground that the
marriage was irretrievably broken. Wife sought equitable distribution of the parties’
marital assets, and Participant and Wife subsequently entered into a Marital
Settlement Agreement (MSA), whereby Participant and Wife agreed, inter alia, to
equally share the marital portion of Participant’s pension by deferred distribution via
a QDRO.3 The MSA further provided that “Wife shall be entitled to a survivor
benefit for her lifetime equal to her share of the marital portion of the benefit.”
(MSA, art. IX, ¶ 6.)
In accordance with the MSA, a proposed QDRO was prepared and submitted
to the Plan for approval. The Plan responded with a number of concerns that needed
to be addressed before the QDRO was approved. Relevant to this appeal was the
Plan’s proposed changes to Paragraph 10 of the QDRO, which were as follows:4
2
The issue before us is not whether Wife is entitled to any benefit, but whether the Plan is
required to pay Wife that benefit directly based upon a privately negotiated QDRO between her
and Participant. We pass no judgment on whether Wife is entitled to the equivalent of survivor
benefits by some other means, such as an annuity purchased by Participant.
3
The MSA was ultimately approved by common pleas.
4
The language that the Plan wanted omitted is reflected by strikethrough and the proposed
additions are underscored.
2
10. If the Participant predeceases the Alternate Payee[5], either before
or after the Participant’s retirement, then the Alternate Payee shall
receive the marital portion (calculated using the fraction defined in
Section 8) of the Plan’s 50% survivor annuity. Such survivor annuity
shall be payable to the Alternate Payee for her lifetime and irrespective
of her or the Participant’s marital status. If there is any cost to provide
such former spouse survivor annuity for the Alternate Payee, the cost
shall be deducted from the Alternate Payee’s share of the Participant’s
monthly pension, and such cost shall not reduce the Participant’s
portion of the pension benefit. If the Plan pays a lump sum refund of
employee contributions or any other pre-retirement death benefit, the
Alternate Payee shall receive 50% times the marital coverture fraction
of such lump sum payment or death benefit not be entitled to payment
of any pre-retirement death benefit from the Plan. Alternate Payee shall
only be entitled to receive the percentage of the marital portion of
Participant’s undistributed contributions (see Paragraph 8 for the
formula to derive said percentage), if any, after the death of
Participant’s surviving spouse, if Participant remarried, and/or the
death of his/her/their surviving children prior to their attaining the age
eighteen (18).
(Plan Letter dated May 13, 2016, Reproduced Record (R.R.) at 35a.)
The Plan also requested Paragraph 11 of the QDRO to be omitted. Paragraph
11 originally read:
11. If the Alternate Payee dies before the Participant, the Alternate
Payee’s share of any monthly retirement pension or lump sum payment
([Deferred Retirement Option Probram] or refund of contributions)
shall be paid if, as and when the Participant receives such payment, to
the Alternate Payee’s beneficiary as designated on the form provided
by the Plan. However, if the Plan does not allow the Alternate Payee
to designate a beneficiary, then the Alternate Payee’s portion of the
assigned benefits herein shall revert to the Participant.
(Original Proposed QDRO, R.R. at 31a.) The Plan proposed replacing Paragraph 11
with the following language: “In the event Participant dies survived by Alternate
5
Wife is identified as “Alternate Payee” under Paragraph 4 of the QDRO.
3
Payee, the Alternate Payee’s interest in Participant’s retirement benefits under the
Plan shall cease.” (Plan Letter dated May 13, 2016, R.R. at 35a.)
Finally, the Plan requested the following language be added to Paragraph 12
of the QDRO:
Nothing in this Order requires the Plan to provide either the Participant
or the Alternate Payee with:
a. Any type or form of benefit not otherwise provided under
the Plan; or
b. Any increases in benefits to which the Participant is not
otherwise entitled.
(Id.)
Wife submitted a revised QDRO, which was also rejected by the Plan. As a
result of the Plan’s continued refusal to approve the QDRO, Wife filed her Motion
and subsequently joined the Plan as an additional defendant. The Plan originally
filed preliminary objections to the Motion but subsequently filed an Answer,
rendering the preliminary objections moot.
Argument on the Motion was held on December 1, 2016. Common pleas
issued its Opinion and Order denying the Motion on March 9, 2017. Common pleas
explained that the Pension Ordinance expressly provided that “a former spouse of a
Participant shall not be treated as the spouse or Surviving Spouse for any purposes
under the plan.” (Common Pleas Opinion (Op.) at 4 (quoting Pension Ordinance,
Article 145.15(f)(2)) (emphasis omitted).) Common pleas rejected Wife’s argument
that equity requires that she be entitled to survivor benefits. It also found that the
Plan did not violate the principle of equal protection because the different treatment
of current spouses and ex-spouses passes the rational basis test. (Id. at 9.) Finally,
4
common pleas determined that Wife had no property interest in the survivor benefits
and, therefore, could not prevail on due process grounds. (Id. at 10.)
Wife appeals from common pleas’ Order, raising three issues: (1) whether
common pleas erred or abused its discretion when it refused to designate Wife as a
surviving spouse; (2) whether common pleas erred in denying Wife’s equal
protection claim by finding there was a rational basis to deny an ex-spouse survivor
benefits; and (3) whether common pleas erred in concluding Wife had no property
interest in the survivor benefits, and as a result, there was no due process violation.6
Wife first argues that common pleas erred by refusing to designate her as a
surviving spouse because the survivor benefit was acquired during the couple’s 22-
year marriage and is, therefore, marital property.7 The Plan responds that a QDRO
negotiated between two divorcing spouses cannot alter the amount or form of
pension benefits available under the terms of the Plan. Based upon our precedent,
the Plan is correct.
In Maloney v. Maloney, 754 A.2d 36, 38 n.3 (Pa. Cmwlth. 2000), we held that
a QDRO “may not alter the amount or form of plan benefits.” There, an ex-wife
sought a court order directing the borough to implement a domestic relations order
(DRO) entered into between ex-wife and her ex-husband, a retired police officer,
which would entitle her to half of ex-husband’s pension benefits. Ex-husband died
before the DRO was implemented, and the borough refused to make payments to ex-
wife because, under the terms of the plan, an ex-spouse was not entitled to survivor
benefits. Ex-wife then brought the action against the borough seeking enforcement
6
Wife raises a fourth issue: whether common pleas erred in denying her Motion. This
issue appears duplicative of the others. In fact, in her brief she simply incorporates her arguments
related to the first three issues in the argument section for the fourth issue.
7
“[M]arital property” is defined, in relevant part, as “all property acquired by either party
during the marriage. . . .” Section 3501(a) of the Divorce Code, 23 Pa. C.S. § 3501(a).
5
of the DRO. The trial court granted ex-wife relief, and the borough appealed,
arguing that upon ex-husband’s death, ex-wife’s entitlement to benefits ceased. We
reversed the trial court, holding:
The trial court . . . is altering the benefit scheme of the plan and
ordering the [b]orough to pay a benefit not previously contracted for.
Specifically, the trial court is ordering the [b]orough to pay survivor
benefits to an ex-spouse when such benefits have not been provided for
in the Ordinance.
Id. at 39.
We expressed sympathy for ex-wife’s situation but noted there was no support
to “allow[] a trial court, in the context of a divorce action, to alter the benefit scheme
of a pension plan.” Id. Accordingly, we held that the trial court erred in ordering
survivor benefits. Id. at 40.
We reached a similar result in Kenney v. City of Wilkes-Barre Police Pension
Fund (Pa. Cmwlth., No. 1334 C.D. 2009, filed February 3, 2010), slip op. at 4-5,
wherein we reversed a trial court order that altered a pension plan when the pension
ordinance contained no provision granting ex-spouse survivor benefits.8 In Kenney,
the ex-wife and participant negotiated a QDRO that provided ex-wife with half of
the participant’s monthly benefit. When participant died, the plan stopped making
payments to ex-wife. The trial court found the QDRO required the payments and
ordered the pension fund to reinstate benefits. Citing Maloney, we reversed,
explaining that ex-wife’s entitlement to benefits was dependent upon participant’s
right to receive benefits. Id. Because participant’s right to benefits ceased upon his
8
Kenney is an unreported panel decision of this Court, which is cited in accordance with
Section 414(a) of this Court’s Internal Operating Procedures, which provides that an unreported
panel decision issued by this Court after January 15, 2008, may be cited “for its persuasive value,
but not as binding precedent.” 210 Pa. Code § 69.414(a).
6
death, we held ex-wife’s right to benefits also ceased. Id. at 5. “To conclude
otherwise would impermissibly alter the benefit structure of the [p]ension
[o]rdinance.” Id.
Here, Wife is similarly seeking benefits not otherwise provided under the
Plan. The Pension Ordinance defines “[s]urviving [s]pouse” as “a living individual
who was legally married to the Participant and is married to the Participant at the
time of the Participant’s death.”9 (Pension Ordinance, Article 145.02(hh).) As
Participant’s and Wife’s divorce was finalized on March 13, 2017, Wife is no longer
legally married to Participant and cannot be a “surviving spouse” under the Plan.
Furthermore, the Pension Ordinance provides that “a former spouse of a Participant
shall not be treated as the spouse or surviving spouse for any purposes under the
plan.” (Id., Article 145.15(f)(2).) Therefore, common pleas did not err in refusing
to designate Wife as a surviving spouse when the Pension Ordinance expressly stated
that ex-spouses were not surviving spouses.
Wife requests this Court to invoke its equitable power and designate her as a
surviving spouse. However, although a court has broad equitable powers, “[w]hen
the rights of a party are clearly established by defined principles of law, equity
should not change or unsettle those rights.” Cent. Storage & Transfer Co. v. Kaplan,
389 A.2d 711, 715 (Pa. Cmwlth. 1978) (quotation omitted), aff’d, 410 A.2d 292 (Pa.
1979). Here, the Pension Ordinance clearly establishes that ex-spouses “shall not be
treated as the spouse or surviving spouse for any purposes.” (Pension Ordinance,
9
This definition applies if the marriage occurred before retirement, as is the case here. If
the marriage occurred post-retirement, “surviving spouse” is defined as “a living individual who
was legally married to the Participant and is married to the Participant at the time of the
Participant’s death and for the twelve months immediately preceding the Participant’s death.”
(Pension Ordinance, Article 145.02(hh).)
7
Article 145.15(f)(2).) Therefore, as equity should follow the law, equity will not be
used to unsettle those rights.
Wife also argues that the Plan’s disparate treatment of ex-spouses and current
spouses violates equal protection. She contends it is irrational that a new spouse
married for just one year to the plan participant would be entitled to greater benefits
than an ex-spouse of 22 years. The Plan responds that rational bases exist for the
distinction, including cost savings and protecting the interests of current spouses.
The Plan also points out that the Third Class City Code makes provision of survivor
benefits discretionary. 11 Pa. C.S. § 14343(d) (“If council elects, by ordinance, to
make the payments, the surviving spouse. . . .”) (emphasis added). Because
providing survivor benefits is discretionary, the Plan argues its decision to provide
such benefits to only certain classes of individuals necessarily is rational.
The parties agree that the classification here is subject to the rational basis
test, which is the most deferential standard of review. Clifton v. Allegheny Cty., 969
A.2d 1197, 1211 n.19 (Pa. 2009). Whether a classification passes the rational basis
test involves a two-step analysis: “[f]irst, we must determine whether the challenged
statute seeks to promote any legitimate state interest or public value. If so, we must
next determine whether the classification adopted in the legislation is reasonably
related to accomplishing that articulated state interest or interests.” Curtis v. Kline,
666 A.2d 265, 269 (Pa. 1995). “[B]ecause a presumption of constitutionality
attaches to any lawfully enacted legislation, the burden is upon the party attacking a
statute to rebut the presumption of constitutionality by a clear, palpable, and plain
demonstration that the rational basis test is not met.” Probst v. Dep’t of Transp.,
Bureau of Driver Licensing, 849 A.2d 1135, 1144 (Pa. 2004). So long as “the
classification bears some rational relationship to a legitimate government end,” it
8
will be upheld. City of Phila. Bd. of Pensions & Ret. v. Bordley, 481 A.2d 690, 691
(Pa. Cmwlth. 1984). “A classification, though discriminatory, is not arbitrary or in
violation of the equal protection clause if any state of facts reasonably can be
conceived to sustain that classification.” Curtis, 666 A.2d at 268. The “[C]ourt is
free to hypothesize reasons the legislature might have had for the classification.” Id.
Importantly, even if the Court “question[s] the soundness or wisdom of the
distinction,” it “cannot declare the classification void” if the classification is
genuine. Id.
It is also important to bear in mind that “a court may not examine the
application of a statute to individual members of a class as part of its equal protection
analysis.” Bordley, 481 A.2d at 692. “The validity of a broad legislative
classification is not properly judged by focusing on the portion of the class that is
affected most harshly by its terms.” Id. Stated otherwise, equal protection is not
offended because the classification “‘in practice . . . results in some inequality.’” Id.
at 691 (quoting Dandridge v. Williams, 397 U.S. 471, 485 (1970)). Therefore, the
length of Wife and Participant’s marriage and their agreement via a privately
negotiated QDRO to modify the terms of the Plan, which otherwise does not
recognize an ex-spouse as a “surviving spouse,” is of no moment. Instead, Wife’s
equal protection claim must be judged on the distinction the Plan draws generally
between spouses and former spouses.
With the above principles in mind, we first examine “whether the challenged
statute seeks to promote any legitimate state interest or public value.” Curtis, 666
A.2d at 269. We must conclude it does. Both the United States Supreme Court and
the courts of this Commonwealth have found financial or fiscal concerns are
legitimate state interests. In Schweiker v. Wilson, 450 U.S. 221 (1981), the United
9
States Supreme Court found the exclusion of Supplemental Security Income benefits
to individuals institutionalized in public mental health facilities that do not receive
Medicaid funds toward their care did not violate equal protection. The Court held
budgetary constraints were a legitimate governmental interest for the distinction,
explaining that the “Court has granted a strong presumption of constitutionality to
legislation conferring monetary benefits . . . because it believes that Congress should
have discretion in deciding how to expend necessarily limited resources.” Id. at 238
(internal quotation and citation omitted).
Our state Supreme Court reached a similar result in Kramer v. Workers’
Compensation Appeal Board (Rite Aid Corporation), 883 A.2d 518 (Pa. 2005).
There, a claimant challenged a provision of the Workers’ Compensation Act 10 (WC
Act), which allowed an employer to take an offset against a claimant’s workers’
compensation benefits in the amount of a severance payment received by the
claimant, on the grounds it violated equal protection. The Pennsylvania Supreme
Court held there was no classification, but explained that even if there was a
classification, the provision would withstand rational basis scrutiny. In so holding,
the Court explained that “[r]easonable workers’ compensation cost containment for
employers, and the concomitant competitive benefit such cost containment offers for
Pennsylvania businesses, unquestionably is a legitimate state concern.” Id. at 535.
When faced with another offset provision in the WC Act, this Court likewise
held it satisfied the rational basis test. Caputo v. Workers’ Comp. Appeal Bd.
(Commonwealth of Pa.), 34 A.3d 908 (Pa. Cmwlth. 2012). In that case, the provision
allowed employers to offset workers’ compensation benefits by a portion of the old
age Social Security retirement benefits a claimant receives. Citing Kramer, we held
10
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2708.
10
that allowing an employer to offset workers’ compensation benefits by half of a
claimant’s Social Security retirement benefits was reasonably related to the
legitimate governmental interest of reducing an employer’s workers’ compensation
costs.11 Id. at 916-17.
What Schweiker, Kramer, and Caputo illustrate is that cost savings have been
recognized as a legitimate state objective on a number of occasions. Therefore, the
Plan’s stated reason for denying survivor benefits to ex-spouses but not current
spouses because of the savings the Plan realizes by doing so is a legitimate objective
of the Plan. This is particularly so when municipalities across the Commonwealth
are struggling with funding pension plans.
Having concluded that cost savings is a legitimate objective, we must consider
whether the Plan’s different treatment of spouses and ex-spouses “is reasonably
related to accomplishing that” legitimate objective. Curtis, 666 A.2d at 269. Again,
we hold that it is. The United States Supreme Court has addressed the differing
treatment of current spouses and former spouses in the Social Security context and
held the distinction did not violate equal protection because the classification was a
reasonable means to accomplish the desired end. In Mathews v. De Castro, 429 U.S.
181 (1976), the Court held the different treatment of current spouses and ex-spouses
for purposes of Social Security comported with the primary objective of providing
workers and their families with protection against loss of earnings caused by
disability or retirement. There, the Court explained that “Congress could have
rationally assumed that divorced husbands and wives depend less on each other for
11
We also held a second governmental interest existed, which was to encourage individuals
collecting Social Security retirement benefits to remain or reenter the workforce. Caputo, 34 A.3d
at 918. Either of these bases would have been sufficient as only one rational basis is needed.
11
financial and other support than do couples who stay married.” Id. at 188.
Therefore, it was not irrational for Congress to treat the two classes differently.
When faced with a similar situation 10 years later, the United States Supreme
Court reiterated that “it was rational for Congress to assume that divorced widowed
spouses are generally less dependent upon the resources of their former spouses than
are widows and widowers.” Bowen v. Owens, 476 U.S. 340, 348-49 (1986). In that
case, there was a challenge as to the constitutionality of a Social Security provision
that authorized payment of survivor’s benefits to a widowed spouse who remarried
after age 60 but not to divorced widowed spouses who did the same. The Court
upheld the statute, holding it satisfied the rational basis test. The Court cited
Mathews and noted “divorce normally reduces dependency on the wage earner.” Id.
at 350. The Court stated:
Presumably Congress concluded that remarriage sufficiently reduced
that lesser dependency to the point where it could conclude that benefits
no longer were appropriate. These views would be consistent with the
position Congress has taken throughout . . . that divorced spouses are
less dependent on the wage earner than spouses. Because divorced
widowed spouses did not enter into marriage with the same level of
dependency on the wage earner’s account as widows or widowers, it
was rational for Congress to treat these groups differently after
remarriage.
Id.
Here, the Plan’s differing treatment of spouses and ex-spouses is reasonably
related to achieving cost savings and providing for current families. By not having
to pay survivor benefits to ex-spouses, plans, such as the one here, can preserve their
limited resources and ensure that they have the proper funding to pay participants
and their current spouses. The United States Supreme Court has recognized that
treating spouses and ex-spouses differently is reasonably related to achieving that
12
objective because ex-spouses are less likely to be dependent upon their ex-spouse’s
benefits. Bowen, 476 U.S. at 350; Mathews, 429 U.S. at 188. It is equally rational
that the municipality here concluded that divorcees are less likely to be financially
dependent upon their ex-spouses, and in seeking to conserve costs, any disparity
should fall on former spouses. Accordingly, common pleas did not err in finding the
classification between current spouses and ex-spouses passes the rational basis test.
Wife’s final issue is whether common pleas erred in concluding she had no
property interest in the survivor benefits, and as a result, there was no due process
violation. She maintains the benefits that accrued over the 22 years of marriage are
a protected property interest, of which she is being deprived. She argues “[i]t is
irrational and unjust to deny a former spouse a survivor’s benefit, and there is no
rational basis for the [Plan’s] decision.” (Wife’s Brief at 22.) The Plan counters that
pension benefits are not a protected property right and thus not entitled to substantive
due process protection, and even if Wife had a protected property interest in the
survivor benefits, the Plan passes the due process analysis. It also points out Wife
is still entitled to the marital portion of Participant’s pension benefits, but the Plan
cannot be compelled to pay Wife survivor benefits when Participant dies.
We need not resolve whether pension benefits are a protected property right,
because, assuming they are, Wife’s substantive due process claim fails. Like Wife’s
equal protection claim, the parties agree that the rational basis test applies to Wife’s
substantive due process claim. However, unlike equal protection where the focus
of the rational basis test “is whether the law irrationally distinguishes between
similarly situated classes,” for substantive due process, the focus “is whether it was
irrational for the law to have been passed at all.” Morris v. Pub. Sch. Employes’ Ret.
Sys., 538 A.2d 1385, 1389 (Pa. Cmwlth. 1988). “To prove that a statute is irrational
13
and, therefore unconstitutional, the challenger must show, for substantive due
process purposes, that there is no relationship between the statute and a legitimate
state interest,” whereas for equal protection, the challenger must show “that the
different treatment of the groups is unrelated to a legitimate state interest.” Id.; see
also Khan v. State Bd. of Auctioneer Exam’rs, 842 A.2d 936, 946 (Pa. 2004) (“To
constitute a lawful exercise of the state’s police power, social and economic
legislation must first be directed toward a valid state objective. To withstand a
substantive due process challenge, a statute or regulation must seek to achieve a valid
state objective by means that are rationally related to that objective.”) (internal
citations omitted). The Pennsylvania Supreme Court has summarized the
substantive due process analysis as follows: “[C]ourts must weigh the rights
infringed upon by the law against the interest sought to be achieved by it, and also
scrutinize the relationship between the law (the means) and that interest (the end).”
Nixon v. Commonwealth, 839 A.2d 277, 287 (Pa. 2003) (emphasis omitted).
Substantive due process “protect[s] citizens from arbitrary and irrational actions of
the government.” Germantown Cab Co. v. Phila. Parking Auth., 171 A.3d 315, 327
(Pa. Cmwlth. 2017), petition for allowance of appeal granted, 184 A.3d 944 (Pa.
2018). Here, the Plan’s decision to deny payment of survivor benefits to ex-spouses
is neither arbitrary nor irrational. Rather, it has a rational relationship to the Plan’s
purpose, which is maximizing benefits for its participants. Therefore, common pleas
did not err in finding no substantive due process violation.
14
Based upon the foregoing reasons, we agree with common pleas that the Plan
cannot be compelled to pay survivor benefits to Wife after Participant’s death.
Accordingly, we affirm common pleas’ Order.
_____________________________________
RENÉE COHN JUBELIRER, Judge
15
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Gary Gausman :
:
v. : No. 440 C.D. 2017
:
Karen Gausman, City of Erie :
Officers’ and Employees’ Retirement :
Plan :
:
Appeal of: Karen Gausman :
ORDER
NOW, August 16, 2018, the Order of the Court of Common Pleas of Erie
County, dated March 9, 2017, is AFFIRMED.
_____________________________________
RENÉE COHN JUBELIRER, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Gary Gausman :
:
v. :
:
Karen Gausman, :
City of Erie Officers’ and Employees’ :
Retirement Plan :
: No. 440 C.D. 2017
Appeal of: Karen Gausman : Argued: May 7, 2018
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge
HONORABLE ANNE E. COVEY, Judge
HONORABLE CHRISTINE FIZZANO CANNON, Judge
OPINION NOT REPORTED
DISSENTING OPINION BY
JUDGE COVEY FILED: August 16, 2018
I agree with the Majority’s conclusions that the trial court properly
refused to designate Karen Gausman (Wife) as a surviving spouse for purposes of her
right to survivor benefits under Gary Gausman’s (Participant) Retirement Plan
(Participant’s Plan) and properly determined that Wife has no property interest in the
Participant’s Plan’s survivor benefits, and therefore the denial of those benefits does
not violate due process. However, I respectfully dissent from the Majority’s
conclusion that the trial court properly denied Wife’s equal protection claim.
It is undisputed that the rational basis test applies in the instant case.
If the rational basis test applies, then the classification in
question must be ‘reasonable rather than arbitrary and bear
a reasonable relationship to the object of the legislation. In
other words, a classification must rest upon some ground
of difference which justifies the classification and have a
fair and substantial relationship to the object of the
legislation.’
William Penn Sch. Dist. v. Pa. Dep’t of Educ., 170 A.3d 414, 458 (Pa. 2017)
(emphasis added; footnote omitted) (quoting Commonwealth v. Albert, 758 A.2d
1149, 1151 (Pa. 2000) (citation omitted)). Simply put, the classification must have a
rational relation to the objective. Here, the City of Erie Retirement Plan maintains
that the object of the legislation is saving money and the classification is former
spouses versus current spouses. The City proffered no legitimate relation between
the two, but rather asserted that the Plan will save money if it need not pay former
spouses survivor benefits. This assertion is merely a restatement of the objective and
is not a rational basis for choosing to pay one class over the other.
The Majority maintains that “[t]he United States Supreme Court has
addressed the differing treatment of current spouses and former spouses in the Social
Security context and held the distinction did not violate equal protection because the
classification was a reasonable means to accomplish the desired end.” Majority Op.
at 11. Therefore, the Majority concludes, the trial court “did not err in finding the
classification between current spouses and ex-spouses passes the rational basis test.”
Majority Op. at 13. However, a review of Mathews v. De Castro, 429 U.S. 181
(1976), and Bowen v. Owens, 476 U.S. 340 (1986), the cases the Majority relies on,
reveals that the Majority’s conclusion is not supported by either case.
In Mathews, the legislation deferred social security disability or
retirement benefits to former spouses until they reach age 62 because “[Congress]
could rationally decide that the problems created for divorced women remained less
pressing than those faced by women who continue to live with their husbands.” Id.
at 188 (emphasis added). Thus, it was reasonable to defer benefits. In the instant
case, the benefits are not deferred, they are eliminated. Clearly, less problems
cannot be interpreted as no problems. Thus, the rationale that divorced women faced
less problems than women living with their husbands, while a reasonable basis to
defer benefits because the classification is a reasonable means to accomplish the
AEC - 2
desired end, cannot justify an outright elimination of benefits. Because under the
Mathews rationale, divorced women still suffer problems, the elimination of survivor
benefits for former spouses is not a reasonable means to accomplish cost savings.
Accordingly, Mathews does not support the Majority’s assertion that “the
classification between current spouses and ex-spouses passes the rational basis test.”
Majority Op. at 13.
Similarly, in Bowen, the rational basis for the classification was
recognizing that divorce normally reduces dependency on the wage earner. However,
the classification was not spouses versus former spouses, but rather, a widowed
spouse who remarries after age 60 versus a former spouse who remarries after age 60.
Further, former spouses, whether remarried or not, had to be married to the
participant for at least 10 years to receive retirement benefits. Because Congress
incorporated other factors, such as age, length of marriage to the participant and
remarriage, when distinguishing between widowed spouses and former spouses, the
classification in Bowen was not arbitrary.1 Consequently, the United States Supreme
Court did not hold that lesser financial need and other dependence among divorced
husbands and wives as compared to couples who stay married was a rational basis for
a spouse versus former spouse classification. In the instant case, the only factor the
City of Erie Retirement Plan took into consideration was cost savings which is its
alleged objective. Length of marriage to the Participant, age of current or former
spouse and remarriage are irrelevant under the Participant’s Plan. Because the City
of Erie Retirement Plan classification is an arbitrary means for saving money and has
no rational basis for eliminating survivor benefits for former spouses, it violates the
equal protection clause. Accordingly, Bowen does not support the Majority’s
1
Notably, the classification in Bowen was eliminated prior to the Supreme Court’s decision.
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assertion that “the classification between current spouses and ex-spouses passes the
rational basis test.” Majority Op. at 13.
Remarkably, under Participant’s Plan for a current spouse who marries a
participant post-retirement to be entitled to survivor benefits, the spouse must be
“married to the [p]articipant at the time of the [p]articipant’s death and for the
twelve months immediately preceding the participant’s death.” Article
145.02(hh) (emphasis added). Clearly, there is a rational basis for distinguishing
between current spouses married under twelve months at the time of a participant’s
death and current spouses married over twelve months at the time of a participant’s
death, as the durational requirement prevents false claims by spouses who perpetrate
death bed marriages. See City of Phila. Bd. of Pensions & Ret. v. Bordley, 481 A.2d
690 (Pa. Cmwlth. 1984) (This Court ruled a similar two-year durational requirement
was rationally related to the purpose of Philadelphia’s Municipal Pension
Ordinance.). However, relative to former spouses under Participant’s Plan, all former
spouses are disqualified from receiving survivor benefits notwithstanding the length
of marriage to participant; thus, illustrating the arbitrariness of the classification in
the instant case. Expressly, under Participant’s Plan, “a former spouse of a
Participant shall not be treated as the spouse or surviving spouse for any purposes
under the [Participant’s P]lan.” Article 145.15(f) (emphasis added). Because the
only consideration under the Participant’s Plan is the fact that the spouse is no longer
married to the Participant, the classification is purely arbitrary. Consequently, there
is no rational basis for such a classification.
Importantly, even Counsel for the City of Erie Retirement Plan could not
produce a rational basis for the classification.2 Indeed, when asked at oral argument
2
In its brief, the City of Erie Retirement Plan refers to its argument before the trial court,
wherein it asserted the rationale for the classification was “to protect the [Participant’s P]lan by
lowering costs by not having to pay” and “trying to protect the participants themselves, so that if the
participant remarries, and wants their [sic] current spouse to receive their [sic] survivor’s benefit
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what is the rational basis for the classification, Counsel responded: “You can make
one up.” Oral Argument May 7, 2018. The Majority hypothesizes, as it is entitled to
do under the law, that “divorcees are less likely to be financially dependent upon their
ex-spouses, and in seeking to conserve costs, any disparity should fall on former
spouses.” Majority Op. at 13. However, the basis has to have a “fair and substantial
relation” to the objective of the legislation. William Penn Sch. Dist., 170 A.3d at 458
(quoting Albert, 758 A.2d at 1151). Here, the City of Erie Retirement Plan maintains
that the objective is saving money in that the Participant’s Plan saves money by only
paying current spouses. Specifically, “[be]cause the survivor’s benefits lasts for the
widow’s entire life, fifty percent of the pension benefit that’s being paid to the
participant[,] so only paying the benefit to current spouse protects the [Participant’s
P]lan.” Reproduced Record at 126a. Further, since “the fairly reasonable conclusion
[is] that in many cases, employees will not remarry, or remain remarried until their
death[,]” the Participant’s Plan saves money by not paying former spouses. Trial Ct.
March 9, 2017 Op. at 9. Consequently, whether “divorcees are less likely to be
financially dependent upon their ex-spouses,” Majority Op. at 13, is not fairly and
substantially related to the cost savings objective.
In sum, the classification must have a rational relation to the
objective. Here, the classification is former spouses versus current spouses, and the
objective is cost savings. The City proffered no legitimate relation between the two,
but rather asserted that the Plan will save money if it need not pay former spouses
survivor benefits. This assertion is merely a restatement of the objective and is not a
rational basis for choosing to pay one class over the other. “Ultimately, [the Dissent]
can conceive of no rational reason why those similarly situated with respect to
rather than the former spouse, that they [sic] feel that paying the benefit to the current spouse rather
than the former spouse protects the participants of the [Participant’s P]lan.” Reproduced Record at
126a (emphasis added). Under the above analysis, neither of these provides a rational basis for the
classification.
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[receiving survivor benefits], should be treated unequally.” Curtis v. Kline, 666 A.2d
265, 270 (Pa. 1995).
Accordingly, because the trial court erred by denying Wife’s equal
protection claim, determining that the City of Erie Retirement Plan’s denial of
survivor benefits passes the rational basis test, and thereby refusing to designate Wife
as a surviving spouse for purposes of her marital share of a survivor benefit in
violation of the equal protection clause, I would reverse the trial court’s order.
__________________________
ANNE E. COVEY, Judge
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