8224573137_84fa4e6f15_zFederal law provides that Social Security benefits cannot be divided between spouses in a divorce settlement (as well as being exempt from execution, attachment, garnishment and bankruptcy distribution – virtually the only exception is spousal and child support). (42 U.S.C. § 407(a).) But if one spouse participates in an alternative pension system instead of Social Security, can a portion of that spouse’s pension be protected in the settlement to offset the other partner’s Social Security? Earlier this month in In re Marriage of Mueller, a divided Illinois Supreme Court held in an opinion by Justice Theis that the answer is “no.” Our detailed report on the underlying facts and lower court holdings in Mueller is here.

The husband and wife involved in Mueller were both employed at the time of their divorce – she in the insurance industry, he as a police officer. Although she had Social Security tax withheld from her paycheck, he participated in the police pension fund in lieu of Social Security.   At trial, the husband presented expert testimony valuing his pension. The expert offered to testify that she had included an offset, treating a portion of the police pension equivalent to her expected Social Security benefits as being exempt from division in order to place the two parties on an equal footing. The wife successfully objected to the testimony, largely on the basis of In re Marriage of Crook, in which the Surpeme Court had held that one party could not be awarded a greater share of the divisible marital property to make up for one spouse’s Social Security benefits. The Appellate Court affirmed.

In an opinion by Justice Theis, joined by Chief Justice Garman and Justices Freeman, Thomas and Kilbride, the Supreme Court affirmed. Social Security benefits are not property, the Court noted, since no participant in the system has an accrued property right to any particular benefit – the Supreme Court has said that a participant’s interest is an expectancy or a noncontractual interest which Congress can frustrate at any time. If actual Social Security benefits were not property, then certainly hypothetical future benefits – the wife being not yet retired at the time of the divorce – didn’t qualify as property either within the meaning of the Dissolution Act. The Court characterized a valuation placed on future benefits as “rank speculation.” Accordingly, the wife’s potential future Social Security benefits had to be completely disregarded in the division of property.

Justice Burke dissented, joined by Justice Karmeier. Justice Burke argued that Federal law neither expressly prohibits an offset similar to the one proposed by the husband, or that Congress had preempted the field of divorce property settlements. Nothing about the proposal threatened to reduce the wife’s future Social Security benefits at all, the dissenters claimed. Thus, the division posted no obstacle to the accomplishment and execution of Congress’ purposes and objectives in enacting Section 407(a), and preemption was not appropriate. Nor was the valuation placed on the wife’s future benefits speculative, the dissenters argued – the data had come from the Social Security administration itself.

Image courtesy of Flickr by StockMonkeys.com (no changes).