Social Security Benefits

Denise Fawcett, an attorney from Ann Arbor, has been a pioneer in arguing for valuation of prospective social security benefits as "property", to be divided pursuant to actuarial methods as a defined benefit plan would be valued. She may have had success in convincing (at least) one court of the viability of the theory. I can see her point, but I don’t buy it. 

First, unlike a DB plan, social security is subject to political vagaries. The amount of benefits, the date of eligibility, the terms of eligibility and even if the system will continue to exist, is a completely political matter. As in 100%. Funding for the system was based upon the "pyramid" notion of an increasing labor force in relation to the number of retirees to be supported. This predicate has long since passed and will continue to be pressured by an aging population. It is a near reality that major changes or overhauls of the system will accrue. Valuing a projected benefit is likely to be whimsical.

Second, it must be recognized that social security is not a "retirement" plan. Contributions are not "put away" for an individual’s use. It is a social welfare or benefit plan, not much different in kind from AFDC benefits. Does it make sense to value possible, prospective Social Security Disability benefits? Does it make sense to value prospective Medicaid Benefits? What about other possible government benefits? There are hundreds, after all.

I suggest that a valuation of any of these does not make sense, that the consideration of "social welfare" plans as "property" seems, to me, out of bounds. Of course, it is fair to assert that the prospectively eligible payee "contributed" to the plan. This is true. But he or she also "contributed" to the building of I-75 or some B-14 bombers or Michigan State University, or possible emergency disaster funds and no one would argue these "assets" are a divisible property item. Moreover, what was contributed was a "welfare" payment to a retiree at the time of contribution. It was not a contribution to a "pension" plan or a contribution to any future "right" of compensation.

And suppose in a case we decided to value the prospective benefit. Party A has 32 quarters of eligible work. Party B has none. After the divorce party A becomes ill and can no longer work. She never accrues the necessary work quarters. Party B finishes his education, after a 8-year run at completing his PHD, and then works for the next 20 years, maximizing his SS benefits. Meanwhile, Party A never qualifies, despite the fact that she transferred xyz dollars to Party B at the time of the divorce based upon an actuarial construction. 

OK, one can find possible anomalies in most any division. But I would draw the line here where the feds are not going to honor a QDRO for prospective benefits. And, if they do, the anomalies become more profound. All of this said, Ms. Fawcett’s argument has some relation to ordinary DB plans and it is an unknown what the appellate courts might do with this one. I suspect we will see.

An Appellate opinion that may bear on this, by analogy, is Gubin v. Lodisev, 197 Mich App 84, 92-94 (1992) where permanent resident alien status was held not to be a divisible asset on public policy grounds and since the status could be revoked by the government.

Note that government welfare benefits are always kosher in the "income" side of the equation for calculating child support or in the evaluation of an alimony claim.

Washington has directly confronted the "social security as property" argument in In Re Marriage of Zahm, 955 P 2nd 413 (Was App 1998). In that a case a party was receiving SS benefits and the court noted that while a trial court may consider SS benefits as relevant in the distribution of property, that such benefits are not property subject to being apportioned.

As to a the redemption of worker’s compensation or social security benefits, see the Worker’s Compensation listing in this index.