Retirement Benefits Purchased During Marriage: Community Or Separate?

Here is what happened: Husband served in the United States Air Force for four years prior to marriage. Thereafter, he began working as a firefighter for a city that participated in the California Public Employees’ Retirement System (CalPERS) which allowed husband to buy up to four years of service credit towards his retirement benefits for his military service. He then married. During the marriage, husband exercised his right to buy four years of service credit for his military service. Before the parties separated, $11,000 of community funds had been used toward the purchase of the military service credit. Thus, the question at the time of dissolution was whether or not the military service credit was community or separate. The trial court found the service credit to be husband’s separate property and wife was to pay half of the community funds used to purchase the benefit. Wife appealed arguing basic community property law and that the service credit should be found to be community property because the property was acquired during the marriage. The Court of Appeal reversed the trial court and agreed with wife stating that because the military service credit was purchased with community funds during the parties’ marriage, it was community property. Of course, husband appealed. The California Supreme Court reversed the Appellate Court and agreed with the trial court. The Supreme Court stated that what matters in determining whether retirement benefits are community or separate property is the person’s marital status when the services on which the benefits are based were rendered. Since the husband rendered the military service before the marriage, the service credit is husband’s separate property.