Purchased Pension Credits Is Community Property

Wife appealed Trial Courts characterization of the military service credit. On its own motion, the California Court of Appeals sought input from Northern California Chapter of American Academy of Matrimonial Lawyers (AAML), who responded with an amicus brief. Husband and Wife filed answer briefs, and now, the Appellate Court has reversed the case and remanded it back to Trial Court. Deciding a case of first impression, the Court of Appeals finds that (1) CalPERS members with prior military service may purchase up to four years of military service credit, but must pay for the entire cost (no employer contribution); (2) Trial Court must characterize pension rights as community property or separate property of one of the parties based on the time when the spouse acquired property interest in them that was more than an expectancy; (3) Husband had no property interest in CalPERS retirement plan while he was in military service, and became eligible to purchase the military service credit only after he went to work for a CalPERS participant employer; (4) Husbands right to purchase military service credit did not become more than an expectancy until he exercised his right of purchase (Husbands abstract ability to purchase was not a property right); and (5) Husband purchased military service credit during the marriage with community property funds. Therefore, Court of Appeals has ruled that military service credit was the parties community property. As a result, Court of Appeals has reversed and remanded the case back to Trial Court to determine proper allocation of military service credit.