The issue of when to retire and how retirement will affect a payor’s alimony obligation is not new to family law practitioners, judges or litigants. What has evolved is the consideration of when to retire under New Jersey’s recently amended alimony statute. Under New Jersey's recently amended alimony statute, a party may seek to terminate or modify his or her spousal support obligation based upon an actual or prospective retirement. In the recent decision Mueller v. Mueller, a New Jersey trial court (Judge Jones) has clarified what “prospective retirement” means for alimony-paying spouses who are nearing retirement and for alimony-receiving spouses who may lose some or all of their spousal support when their ex-spouse retires.
In Mueller, the parties were married for twenty years and divorced in 2006. Pursuant to their matrimonial settlement agreement, the husband agreed to pay his ex-wife $300 per week in permanent alimony. The agreement contained no provision expressly addressing retirement.
At the age of 57, the husband filed a post-judgment motion regarding his alimony obligation under New Jersey’s alimony statute, N.J.S.A. 2A:34-23(j). The husband asserted that he intends to retire in five years when he turns 62 and becomes eligible for his full pension benefit.
The statute, amended in September 2014, permits an alimony-paying spouse to seek modification or termination of his support obligation by court order upon actual, early or prospective retirement. The new retirement sections are N.J.S.A. 2A:34-23(j)(1), which covers termination of an alimony obligation established in an order entered after September 10, 2014; N.J.S.A. 2A:34-23(j)(2), which covers termination of alimony based upon early retirement; and N.J.S.A. 2A:34-23(j)(3), which covers termination of an alimony obligation established in an order entered before September 10, 2014.
The law distinguishes applications for modification or termination of alimony obligations established before and after September 10, 2014. For obligations established prior to the amendments, the paying spouse's attainment of full retirement age (the age at which a person is eligible to receive full Social Security benefits) shall be deemed a good faith retirement age. At that point, a court weighs that age attainment against a series of statutory factors to determine whether alimony should be modified, terminated or left intact. For example, a court may consider the recipient spouses’ ability to have saved adequately for retirement. The following additional factors are considered to determine whether the paying spouse has demonstrated, by a preponderance of the evidence, that a change in the alimony obligation is warranted:
(a)The age and health of the parties at the time of the application;
(b)The obligor's field of employment and the generally accepted age of retirement for those in that field;
(c)The age when the obligor becomes eligible for retirement at the obligor's place of employment, including mandatory retirement dates or the dates upon which continued employment would no longer increase retirement benefits;
(d)The obligor's motives in retiring, including any pressures to retire applied by the obligor's employer or incentive plans offered by the obligor's employer;
(e)The reasonable expectations of the parties regarding retirement during the marriage or civil union and at the time of the divorce or dissolution;
(f)The ability of the obligor to maintain support payments following retirement, including whether the obligor will continue to be employed part-time or work reduced hours;
(g)The obligee's level of financial independence and the financial impact of the obligor's retirement upon the obligee; and
(h)Any other relevant factors affecting the parties' respective financial positions.
While the same statutory factors are used to determine any application based on retirement, the burdens of proof on the respective parties is different depending on whether the alimony obligation was established pre- or post-September 10, 2014. For pre-amendment obligations, reaching full retirement is deemed a good faith retirement age with the burden of proof remaining with the paying spouse to demonstrate why alimony should terminate. This can be considered a pro-recipient spouse burden of proof. For obligations established after September 10, 2014, however, there is a rebuttable presumption that the obligation shall terminate upon the paying spouse’s attainment of full retirement age, with the burden of proof shifting to the recipient to demonstrate why alimony should not terminate or be reduced. The burden of proof therefore favors alimony-paying spouses for obligations established after the amendments.
The amended statute also permits a paying spouse to seek modification or termination when he or she seeks to retire earlier than full retirement age, if he or she can demonstrate by a preponderance of the evidence that the prospective or actual retirement is reasonable and made in good faith.
In all circumstances, the law authorizes a court to consider a paying spouse’s application not only upon actual retirement, but on “prospective retirement” as well. This allows the paying spouse to avoid a Catch 22. Specifically, if the paying spouse is considering retirement, he or she logically benefits from knowing in advance whether the existing alimony obligation will or will not change prior to actually leaving the workforce. Otherwise, that spouse may find him or herself in a precarious financial position without substantial income to support the continuing obligation following retirement if the court does not terminate or significantly reduce the existing alimony obligation.
The paying spouse in Mueller made such an application, five years before his prospective retirement. The Court noted that the statute does not establish or address specific time periods for filing an advance motion based upon a prospective retirement. However, the Court held his application was premature, as it would require significant judicial speculation as to the parties’ respective financial positions in five years’ time. Without imposing specific timelines within which to make an application based on prospective retirement, the Court opined that making an application 12-18 months in advance of anticipated retirement was close enough to actual retirement to provide a court with enough certainty to determine the merits of the application, while affording the paying spouse enough time to plan accordingly.
The Court found that a reasonable interpretation of the statute allows a court to order a prospective termination or modification of alimony based upon future, prospective retirement, when: “(a) the prospective retirement will take place in the near future, rather than many years after the actual application, and (b) the applicant presents a specifically detailed, proposed plan for an actual retirement, as opposed to a non-specific, general desire to someday retire.” The Court elaborated that a detailed plan might include both a proposed specific date of retirement and details of the paying spouse’s plan for economic self-support following retirement.
The Court further noted that in shaping prospective relief, the Order does not take effect automatically upon the paying spouse’s attainment of retirement age. The spouse must actually retire before the modification or termination becomes effective.
This decision provides much needed guidance on when such applications should be made and affects anyone paying or receiving alimony where the paying spouse is approaching retirement age. It is important to remember that a paying spouse continues to enjoy the right to make a post-judgment motion for modification or termination of a present alimony obligation, irrespective of retirement, based on a change in circumstances.